Bitcoin?

Factual Questions
41

BlackKnight is right that I was dismissive of the mining/hoarding government entity. Only time will tell if it was too dismissive. Let’s say government take control of the network right now and use their wily ways to obfuscate the fact that control is in the hands of one entity. If they choose to not destroy the network, they could conceivably own every Bitcoin produced between now and the end of production. So what we have now is all we’ll ever have. Actually, of the 7 million odd BTC, there might be spillage and lost wallets of say 2 million so we can drop the total usable supply down to 5 million. Each Bitcoin is divisible down to 8 decimal places. If 5 million was all we had to play with after the bubbles pull the other accessible hoards into the market, we would end up having 5e13 in circulation. If each of those smallest units was worth .01USD then the circulated supply would represent 5 trillion USD which could still rival the money supply of any other currency around. Perhaps the NSA could pump and dump and play silly games with their stash but all that volatility would just make options traders very rich. It would be like the biggest welfare system ever and all to the benefit of computer geeks and anarchists. Which might make a nice change to the current situation.

If you ask on a forum what people’s biggest regret with Bitcoin is, the most popular answer is that they wish they had never started mining and spent the money on playing markets or setting up businesses that take Bitcoin instead. If you just happen to have a computer with a mid-range to high end ATI card, cheap power and little need for cooling then go ahead. You will probably make money at the current difficulty. Anything else will mean grinding away for a long time before you break even.

There is another implementation that I am much more excited about than Bitcoin. Ripple networks are to banking what Bitcoin is to currency. Bitcoin is easy to understand conceptually although some of us are hung up what we see as failure modes and disadvantages. However, Ripple is harder to grasp even at the most basic level but it’s something I wanted to throw out there because most of the readers here will never hear about it otherwise. Whereas with Bitcoin, you won’t be able to get away from the spam, hype and drama in the coming months.

I’ve never really taken BlackKnight’s ne’er do well, penny grifting scumbag scenario very seriously. Maybe it’s something else I’m too dismissive about but when the objection comes up, my stock answer is the implementation of Ripple which would address exactly that problem along with a few other problems with our current financial system.

Here’s an open invitation to anybody interested based on the link I provided. If you’re prepared to get set up with OpenPGP I’ll make a preliminary offer to set up an account with you.

42

Jenga would you mind starting a thread on Ripple networks? I have some questions and some thoughts but don’t want to hijack this thread.

43

Is it possible to make loans with Bitcoins?

44

Yes, I’d be interested in that too.

45

I am a computer guy and some of the scripting and stuff pushes my skills.

but take a look here

http://www.bitcoinplus.com/generate

totally java based one, still need an account on bitcoin and all but the miner is childs play. for a payout just click the payout and copy/paste your wallet ID from bitcoin into it.

if you feel like sending me some love you can generate for my account here

http://www.bitcoinplus.com/generate?for=1912030

46

Yes but you want to conduct negotiations and the transaction using GPG signed emails and verified Bitcoin addresses that have good standing in the web of trust. I maintain that earning about GPG is a must before dealing with Bitcoin.

It must be said that volatility makes it dangerous for both parties and the generally deflationary tendency doubly so for the borrower. Usually when I meet an implacable skeptic of an idea I support, my final word is to agree to disagree. With Bitcoin, my answer is that a confident skeptic ought to put his money where his mouth is and short Bitcoin. They need to be able to borrow that to do so. Check out bitoption.org and bitcoin-otc.com for places to do just that.

Sunspace and DocCathode, since you asked, I’ll try and have something up tonight in GD. I’ll post the link here straight away.

47

I should have been more specific. By loan, I mean fractional reserve banking. If it is possible, how are the newly create Bitcoins tracked?

48

BitCoins are divisible to eight decimal places. So yeah, they are very divisible.

49

Hmmm, according to that site with a payout of 0.00008549 BTC, and a price of about $20 per bitcoin (someone mentioned that above, though cursory googling reveals it’s closer to $19 now) that’s only $0.0017098 per payout.

My computer is somewhat old, but it’s not terrible (can run modern games no problem) and it says just under 2 hours per payout. 12x$0.0017098 = about 2 cents per day.

Why does anyone even bother with that? it would have to be 100x more profitable just to pay for the electricity to run the computer, and even if you ignore that and pretend it’s free money (run the computer anyway, etc) it’s just such an insignificant amount as to be laughable.

… or is my computer just much slower and more terrible then I think?

In any case, I generated a single payout for you while researching/typing/making a sandwich so… don’t spend the 0.0017098 cents all in one place :stuck_out_tongue:

50

Depends on your computer.

Using dual AMD 5970 (or better) cards I have seen claims of a bit better than 3 bit coins per day.

Frankly the claims out there are a bit broad. But 1-3 BitCoins with a good GPU (or two) should be doable.

That said the more BitCoins produced the harder it is to produce them. Keep that in mind.

51

You’re approaching this the wrong way.

There is no way to increase the value of bitcoins except by demand. An increase in supply –- all else equal –- will always decrease the value of each coin. The miners are making themselves richer (they hope), but only at the expense of all other bitcoin holders. That’s exactly identical to real gold mining. The value they “create” isn’t so much from the gold itself, but rather from robbing a little piece of value from all the previous gold owners. The same is true of government inflation, which is essentially a “tax” on people who hold currency. The big question of bitcoin is: Will demand increase to keep pace with the tax that results from the increase in supply? If we assume there are no tech or legal problems, demand is the only relevant consideration.

The limited supply might make bitcoin an attractive savings vehicle. The fact that supply is ultimately limited, the tax from mining destined to end, could be the only thing that stabilizes long-term demand in the project.

Again, this is looking at things backwards.

The size of the bitcoin economy is not related to the bitcoin money supply. The choice of 21 million is completely arbitrary. Same for dollars, actually. If we woke up tomorrow morning, and everyone had half as many dollars as before -– half as many bucks in our bank accounts, half as many in our wallets, half as many coins in the cushions of our sofas –- but the prices of everything in the world also dropped by half (including the numbers in our salaries, contracts, mortgages, and so forth), then… nothing happens. The economy doesn’t change. People just become accustomed to using numbers half as big.

If bitcoin were limited to 100 coins, it wouldn’t change things in the slightest, as long as the program can accommodate very small prices. And it does. The program goes eight decimal places, and I’ve read that it can potentially be jiggered with to go out to even more decimal places. There is no real problem with a limited bitcoin supply. The lack of long-term inflationary pressure is likely to turn out a feature, not a bug. The world already has inflationary fiat moneys, and it doesn’t need another, but there could maybe be a place for a deflationary electronic money with zero storage fees. It would be a supplement only. Bitcoin won’t replace government-issued stuff.

We’ve been talking about bitcoin like it’s a regular currency. It’s not. Bitcoin is much closer to gold than it is to dollars. Except it’s actually better than gold.

Gold is expensive to ship, store, protect, insure, and measure. Bitcoin -– again, assuming the system works -– is better than gold for practically any conceivable monetary/savings use because the only cost involved in saving a bunch of bitcoins is reliable computer memory and a password. No safes, vaults, commissions, or anything else. It’s essentially free to store. The problem with a small number of miners hoarding the vast majority of bitcoin is only the potential price volatility. If demand is too weak, a major sale of a bitcoin hoard could potentially drown all available demand and drive the price of bitcoin to near nothing. It’d be like a major central bank selling off all of its gold reserves, except much worse for the market. Scary thing there for savers, maybe scary enough that demand for the currency might not develop.

52

Thanks :smiley:

anyway, the java one is slow as hell my 2.4ghz quadcore is running 1.2million hashes a second. If I found a miner I could get going tapping the CUDA chipset on my video card I could probably be running 20x faster than that.

interestingly enough after looking at my logs there was a spot around 3am where there was 3 payouts in like a 30 min period.

the cute thing for me is also I own a computer shop. I could easily set customer PC’s sitting on the bench to this site and have 5-7 machines chewing steadily.

I could actually see where nonprofits would love this, use your excess CPU time to donate. Considering the guy also has a website imbedded version…I see a business opportunity.

53

Guys, I just posted this thread to Great Debates.
Ripple: P2P banking

treis, I don’t know a lot about fractional reserve banking and haven’t been interested enough to read up on it lately. Just what I learnt from economics in the 11th grade actually. Without checking, I can’t see how it would work. Who would be the lender of last resort when there is a run on the bank? I can imagine there might be a central bank somewhere, some day that says fuck it, we’ll go with Bitcoin as legal tender but it’s inconceivable to me that they would agree to prop up banks with a currency they can’t print and control. Anyway, that’s just my off the cuff assessment. I’m sure I’ve seen it suggested (in my peripheral vision admittedly) on the Bitcoin forums that it was possible but some of those guys were Ayn Randbots and right wing libertarians so I take what they say with a grain of salt.

Anyway, is the consensus that we’re back in the stone age without fractional reserve banking? Would its absence be as bad as the deflationary tendency of the currency? Worse? Just so my position is clear, I don’t particularly want a world rid of fiat currency but I would like a lot of strong, competing alternatives, including competing crypto-currencies ultimately. If FRB is an essential element of a healthy economy then I see no reason why it can’t remain with our current fiat currencies.

54

The hilarious answer to the lender of last resort for fractional banking with Bitcoin is on the bitcoin bitcoin web site. Essentially it says that voter pressure will ensure that the federal government will bail out the bitcoin banks. Not only that, the bail out will occur after the “inevitable” failure of some of these banks.

Just why the any government would bail out these banks without imposing the same conditions it has to any other bailout (i.e. significant government oversight of operations) remains unsaid. Given that the bitcoin model to avoid national boundaries, just why the any individual government would bother to bail one out is also not clear. Rather the converse.

55

The payout seems to vary with the amount of processor power you are contributing on this, not totally sure yet. Tonight will be a test run with the shop machines to see what happens with like 10 PC’s

56

I’m gonna watch the price of coins for a while as well, might be fun to try accepting bitcoins at my computer shop, especially since its a hardware hungry crowd.

(holds up will work for bitcoins sign)

57

Bitcoin user allegedly hacked, 25,000 bitcoins stolen: http://gawker.com/5811868/a-500000-geek-cyberheist.

Here’s the actual thread from the bitcoins forum: http://forum.bitcoin.org/index.php?topic=16457.0

As if bitcoin needs any more negative PR, this can only be a blow to people’s confidence for the currency. Even with all the assurances of bitcoin’s strong cryptography and security, your active wallet.dat file is still currently unencrypted and just sitting there, vulnerable to hundreds of ways someone can copy files from your computer.

There are lots of posts in that thread blaming the OP for this incident, saying he had weak security and should have had a dedicated, unnetworked laptop running Linux to store his coins, and should have generated his wallet in a mounted TrueCrypt drive and not letting it ever touch the internet and on and on. The victim was probably wearing a mini-skirt and hooker boots in a dodgy neighborhood and was just asking for it.

Why would anyone use bitcoins if they had to go to such ridiculous lengths to use the basic functionality of the technology?

58

So is this a problem with the currency itself? Those stolen bitcoins will still work, won’t they?

Sounds more like it’s a cash-style vulnerablility. It might mean that the client programmers will have to build better and easier-to-use wallets, and rethink the user interface. USB-drive cash tokens that are bitcoin network clients, maybe? If we physicalize the wallet, it might make it better for people to keep track of by putting it into the same mental compartment as banknotes and cards.

59

If that guy really did get hacked, that’s not BitCoin’s fault any more than it’s the US Treasury’s fault when someone breaks in and steals the cash under your mattress.

That said, I think that the difficulty in properly securing the wallet file is something that will keep normal people away from BitCoin. Or, people will make secure servers that not only handle BitCoin transactions but also store people’s BitCoins; essentially, a BitCoin banking system. Of course, you then lose much of the distributed nature of BitCoin that appeals to many early adopters.

60

There are 3rd party wallet services that you can store your bitcoins in precisely so they are the ones who have to worry about security. Not storing your bitcoins in one of them is like storing cash under the mattress instead of inside a bank vault.