I can’t seem to find a clear answer to how a limit of 21 million bitcoins could work as a full currency. Does it mean there are only 21 million possible wallets? Only that many users? Or is there another layer of transaction methods I am not understanding or finding information about?
I can imagine each coin / wallet, being used as a communal storage place for multiple users. But is that inherent in it’s design or an additional layer of various methods?
Very tiny fractions of a bitcoin can be traded. Given there is a finite number of bitcoins, and wallet files are always being lost (and the creator of bitcoin has never spent a single coin he owns - he might have lost the file or be dead), it means the number of actual bitcoins available will shrink over time. (mining rates are very slow now, so most likely coins are being lost faster than new ones are being created)
I’m not an economist, but I’ve heard bad things about a currency that is always deflating. It means that simply hording bitcoins is better than spending them. In any case, as long as some bitcoins are still ‘liquid’ and being actively traded, bitcoin can work. But not as a reliable store of value - what people do with bitcoins is they purchase them, then immediately spend them to buy something illegal or untraceable. Whether it to buy drugs online (apparently, every drug imaginable is available, from genuine pharmaceuticals to coke and heroin) or weapons (can probably buy a machine gun, though I wouldn’t want to be in possession of one, the prison sentences would be very long) or just pay a ransom for malware, bitcoins work very well.
See here : What is the smallest sensible transaction? - Bitcoin Stack Exchange
Even if bitcoin fails as a viable currency, the blockchain technology is of interest for use in tracking currency and securities trading, or even for sharing information about driverless cars.
So it is as I suspected. Bitcoin itself is too limited to be full scale viable. Though the blockchain system is useful across various things. Thanks for the information. I knew it already. But wanted to know if there was a hole in my information.
Depends on what you mean by full scale. It seems to be more than adequate for keeping up with the transaction rate of crime.
I like Chronos’s pet theory that, being the most traceable currency in the history of man, Bitcoin must be the creation of some three-letter agency, designed to lure in criminals gullible enough to use it instead of Zero Halliburton cases stuffed with cash.
More to the original subject, is “blockchain technology” really of interest to anyone as opposed to modern distributed data structures which are not subject to its limitations? AFAIK real banks do not rely on it.
Bitcoins can be laundered.
From the little I have read about it. The banking systems seem to be a rather decrepit system operating on old software and technology. That seems to apply mostly to interbank transaction systems. Any particular institution may have better internal systems. Maybe blockchain is a better more streamlined approach?
Sure. But it’s pushed as being so anonymous that you don’t have to. Hence, you can get more people to use it without laundering.
Seems to be so far. Wonder how many coins the various intelligence and security entities own and use too?
Maybe all the governments should buy up bitcoins or develop and mine their own. National wallet in the hands of the IRS. They add a layer of software that allows deposits to the wallet from all the citizens.
Each country can have a wallet. Bitcoin world currency.
Can you have trillions in a wallet? Does Bitcoin and blockchain handle trillions in the negative? Oh yeah. Can you have negative bitcoin?
Every time I see someone tout how untraceable/anonymous Bitcoins are, I chuckle. The $100 in my pocket is way more anonymous than any digital currency can ever be. The thing digital currencies have going for them is that I can pay electronically while I convince myself that it is anonymous.
With as difficult as it is getting to mine new Bitcoins, will we reach a limit where the cost of equipment + electricity will push up the value of a Bitcoin?
The problem with Bitcoin is that it’s not a currency, as its supporters are always claiming. It’s a commodity.
A currency is ultimately backed by the economy and taxpayers of a nation.
Bitcoin is backed by nothing. It’s not a currency, it’s a speculative commodity with zero inherent value. It’s not even linked to anything physical like other commodities are. So its trading value can fluctuate wildly, and drop to zero any time.
A good analogy is collectibles, e.g. baseball cards. Yes, you can exchange them for money or goods… with other people who collect baseball cards. But they have no value in themselves.
Well, first of all, at the present time, there are many ways to sell bitcoins for cash without records being kept. And it was possible to obtain bitcoins without ever giving your identity, though governments were cracking down on it. So no, it’s not ideal for the governments to track - without laundering, yes, they can track the transactions, but they don’t know what they are tied to. It is a currency ideally suited for retail illegal drug sales and other such illegal transactions, where there’s a great many buyers and the sellers are cashing out overseas or even just paying their suppliers directly with bitcoin.
You do that by making transactions with a company that does it. You make a bitcoin transaction to transfer your coins to them, and they make some more conventional transaction to transfer dollars to you. In the process of doing this, they will inevitably learn valuable information about you: Your bank account info if they do a bank transfer, or your appearance if you walk up to a storefront to do it, or a mailing address if they mail the cash to you, or whatever. Now, the company you use may say that they don’t keep any of that information, but you only have their word for it. Maybe the company is actually a front for law enforcement, and passes on all of their information. Maybe they don’t share the information with other businesses, but will still release it if subpoenaed. And if the law enforcement can guess that someone’s about to unload a bunch of illicit bitcoins (like, in the wake of a ransomware attack), they can just monitor those businesses for the next short while and keep their own records.
Oh, absolutely. I’m in no way implying it’s untraceable. Buy a billion dollars worth of weapons grade uranium using bitcoin, and yeah, they are going to find a way to track you down, even if it’s by physically breaking into the offices of the intermediates on each end of the transaction. (using CIA agents in a foreign country who are doing this illegally, Mossad style. Or maybe they just have the Mossad do it)
But it’s expensive to trace, and if you used it to buy a small quantity of illegal drugs or something, they aren’t going to deploy the needed resources to catch you.
Now, yeah, the $100 bill is more untraceable still…but you have to walk into physical proximity of a drug dealer to exchange it. Numerous risks here - it’s much safer to have illegal drugs mailed to you than it is to transport them in your car, because police can search your car on very thin pretexts. Drug dealers are, well, known felons and some of them have committed murder. Not the kind of guy you want to get within 100 feet of. You have to know who they are and where to find them. It’s much easier for the police to set up a sting to bust you.
If you get caught as a buyer, basically the only way that can possibly happen is :
a. They somehow figure out which package in the mail is the drugs, and are there to arrest you when you go to the mailbox.
b. They bust the seller and get the address you gave and then get a warrant to search your house.
Neither mechanism involves backtracing bitcoin transactions. It’s too expensive to do for a drug bust.
In general, it’s far safer for the buyers and the sellers to use bitcoin - it’s been argued that sites like the Silk Road prevented more murders than the additional deaths from drug overdoses.
Expensive? The police (or anyone else) can track the bitcoins far more cheaply than they can dispatch an undercover car to a shady neighborhood.
How do you suppose they magically do that? At the present time, the endpoint financial records are not readily available to the police.
You learn the number for a drug dealer’s wallet. Then you look up all of the wallets that have made transactions with that wallet, and now you have reason to suspect those, too. Based on the amounts and directions of the transactions, you can probably figure out which wallet belongs to his supplier, and which belong to his customers. Then you look up all of the transactions with any of those wallets. From the transactions with the supplier’s wallet, you can probably find other dealers’ wallets, too. As soon as one of them has a transaction with any legitimate business, you subpoena their records, and you know who your drug offenders are. Most of this can be automated, and for none of it do you ever have to leave your chair, except for maybe finding the first wallet, which pays off well enough that it’s worth it.
In the Forbes I think there was the recent article describing how in fact the Forbes researchers had hired a cyber-banking crime specialist consulting to the criminal law agencies who with no information than the target persons names and the knowledge of potential transaction on I think the Silk Road, traced the transaction in the bitcoin.
It was a live proof of what Chronos indicates, not merely theoretical. Once a thread has been found, the embedded information I understand in the blockchain transactions ends up allowing a substantial traceability…