You’re exactly right BlackKnight. I got turned off by the racist trolls and Jew-bankster cabal conspiracy cranks on that forum so I haven’t read that thread. I wonder if With Rye is exaggerating or conflating some of the posts there. I’m sure all the suggestions he reports were made but did anybody say they all are required for decent security?
Look, it’s dumb to hold that much cash. You need to put it to work because of inflation. This is why I believe a little inflation is desirable. If you must hold lots of cash, there are safer alternatives than your own house like a bank backed by a central bank. This is true whether the holder has physical security like a Mexican cartel boss or mine.
On the other hand, there is nowhere safer for Bitcoins than your own house (and a couple of offsite, encrypted backups in the cloud). Even if there was a bank who would safeguard Bitcoins with the same care they take with my cash, I would be losing many of the benefits of Bitcoin in doing that. The truth is that if the victim was doing none of that stuff With Rye says was suggested then he was keeping his $500k in the equivalent of a shoebox. None of those measures are ridiculous. In the victim’s case, all of them combined wouldn’t be ridiculous although they would be overkill. I tend to think overkill is a nice thing.
If you’re of a mindset that GPG, Linux or programs like Keepass and Truecrypt are ridiculous and you’re using this thread to decide if you ought to dabble in Bitcoin, take my advice and don’t. Bitcoin is going to drive development on making GPG even more accessible than it already is. Until that time where GPG doesn’t strike you as silly, you’d be playing Russian roulette with Bitcoin.
Still have lots of mindnumbing reading to do actually get a handle on all this, but I managed to get everything downloaded and installed and have already earned a bit over one cent.
The fact that somebody had $500,000 worth of Bitcoins stolen when his laptop got hacked is pretty disturbing … but the fact that a college kid who started doing this stuff about a year ago had $500k on his laptop is pretty intriguing to me.
How much is your rig consuming when it’s doing the 1.2million hashes a second, I bet it’s consumes at least a 100 watt’s, so how much do you pay for your electricity, does it still pay?:rolleyes:
There’s not any chance of fractional-reserve Bitcoin banking working, at least not with its current deflationary set-up. Even jumping the legal/technological hurdles, the economic problem is insurmountable. Bitcoin is too much like gold. We don’t see any gold banks still hanging around, nor any clamor to start new ones. The same would be true of Bitcoin.
Banks can’t afford to pay a very high real rate of return on deposits. The cost would cut too deeply. Assume even a mild deflation rate of 1%, and also that a bank can somehow get away with paying its depositors 0% interest on their account. So the bank borrowed 100 BTC from a depositor last year, and now payment must be available because the depositor wants to withdraw. With 0% interest, it looks like the depositor is getting the same amount of money back. That’s a nominal interest rate of zero. But the real rate of interest? BitcoinBank must somehow afford to pay back the same “number” of Bitcoins, but which are actually worth about one percent more than they were worth last year (i.e. they’re 1% harder to get a hold of). The real rate of return on that BitcoinBank account is 1%, even though the depositor hasn’t been paid any additional coins at all.
But what if the depositor had kept the coins in their own wallet? The rate of return would also have been 1%.
No depositor would ever go with BitcoinBank. They would be perfectly happy to keep their Bitcoins in their own personal wallet, making a real rate of return of 1% from the deflation without the additional worry of bank failure. BitcoinBank wouldn’t be anywhere close to profitable if they had to pay an extra rate of return on top of the deflation in order to attract deposits. Pure creditors are happy with deflation, but banks are intermediaries – both debtors and creditors, earning profit from the spread – and they can’t afford to stay in business when the real interest rate for their depositors is too high.
If you had half a million in gold in your house and several people knew about it, you might consider a safe.
Most people dont have that kind of coin laying around. The failure is also not within bitcoin, his machine was compromised. When there is that kinda money flying around, it starts becoming worth trying to hack the guy.
Is the ordinary guy, who knows how to use the computer only for email, to surf the net, and maybe to use MS Word, going to be sophisticated enough to deal with bitcoins in a secure manner? Based on what I’ve read on this thread, I have my doubts. And if that guy can’t, then how can this currency ever be usable for the vast majority of the population?
You are correct this is not for the average Joe yet.
That does not mean some enterprising people won’t develop programs to securely and easily (for the end user) store their BitCoins.
I think the bigger issue for most users is making a backup of your BitCoins so if your computer fries you do not lose everything (and force them to use long passwords…IIRC even 10 character passwords are not overly hard to hack these days).
If any of you are good at programming there might even be some money to be made here if you made a very user friendly program to solve these problems.
You would be correct that this is a kinda, less than user friendly world right now. like with my gold anology, average joe only needs average security because its not worth the effort to target one person fora handful of coins.
They aren’t, because you can’t spontaneously generate new bitcoins (except through the standard mining methods).
But that’s ok. You con’t need to be able to create new currency in order to have a fractional reserve banking system, you just need to be able to track accounts. You could have a fractional reserve banking system based on chickens, if you wanted to.
10 people come in and deposit one chicken each in their account. You make a note that you owe each of them one chicken, and put the chickens in the bank vault (coop). 9 people come in and want to borrow a chicken. After haggling with them over the interest rate, you loan one chicken to each. You now have a fractional reserve chicken banking system with a 10% reserve.
You can do the same thing with bitcoins. The bank keeps a wallet (or several) with all their coins in it, and keeps track via other means who is owed what. You don’t actually increase the total number of bitcoins, but you still increase the bitcoin supply in the way that fractional reserve banking increases the money supply. Of course, there’s no lender of last resort, so there’s no way to protect against a run on the bitcoin banks.
There are other practical reasons why this sort of thing might not happen.
Pareto principle. Roughly 80% of most things are spam and noise compared to the contributions of the other 20% and that includes people. I’m not positing some Ayn Randian fantasy where a small fraction of the world are Übermensch and the rest of us parasitise off of them. Ordinary guy might be a great poet or have a wonderful golf game but if he can’t can’t handle proper security, he isn’t going to be all that important to the development or exploitation of Bitcoin. A system like this can be bootstrapped with just the involvement of the the smartest, most adaptable users. As others have said, there is an opportunity for people among that 20% to develop ways that make proper Bitcoin security accessible to ordinary guy if he continues to stubbornly refuse to learn how to protect himself. The Enigmail plugin for Thunderbird did exactly that for GPG and has made it available to anybody at a negligible expense of effort on the part of the user. “Bitcoin for Dummies” development should be even faster than GPG accessibility improvements due to the profit motive.
As soon as you’ve restored the backup, move the funds to another address. When the thief tries to move your stash to one of his addresses (through a laundry service if he isn’t completely stupid), the network won’t confirm the transaction because it will already be registered as a transaction in the block. It will be a failed double spend.
Adding transactions to the blockchain is, by design, computationally expensive. However, broadcasting a transaction is easy. Assume some number of DN begin rapid transactions amongst themselves. (E.g., A sends a bitcoin to B, who immediately sends it back to A. Or, a pool of DN swaps them amongst itself in a less obvious pattern.)
How many of the total nodes would need to be DN in order for this to have an impact on network performance? The DN would not have to be doing any actual mining computations; they could exist solely to spam the network with transactions. They might not even care about confirming the transactions; they could rely on honesty of the HNs. In short, could this work as a possible “denial of service” style attack, due to the large difference in the costs of announcing versus confirming transactions?
Does anyone know enough details of the BC protocol to take a crack at this? The technical paper linked to from the Wiki doesn’t go into enough detail.
Umm Mt Gox has been seeing some pretty serious DDOS attacks the last couple days. Perhaps they are not denying service to the bitcoin miners but they’re definitely denying service to people that want to log on and buy or sell bitcoins. Since you’re talking about transaction fees it seems pretty clear to me we’re talking about the processors. I don’t think DDOS can be used to actually steal someone’s Bitcoin file from their computer. But there are already trojans out there that will do this.
No, you’re confused and it isn’t as clear to you as it seems. I’m referring to the transactions when funds are sent from one address to another either owned by yourself or someone else. These transactions are checked and confirmed by the miners. The miners can charge a transaction fee and although you can set your client to pay a 0 tx fee, the default is .01 and miners might decline to confirm yours leaving it in limbo so to speak. It’s why you can’t shut the system down by flooding it with a torrent of micropayments between your own addresses. It has nothing whatsoever to do with the payments to and from web sites that have set themselves up as exchanges.
Mt Gox is a horrible, kludged together bunch of hacks with an ugly skin of bad web design. But it isn’t an integral part of Bitcoin. Imagine your own best effort at an exchange that you release out into the wild if you were to do it over the next few days with your current skill set and resources. Imagine it getting raided, hacked, defaced and even stolen within minutes. Now when that happened, could people say that was also a fault with Bitcoin?
The owner of Mt Gox is the luckiest guy I’ve heard of in a while but if he remains at the helm, it eventually will get washed out of the system by hackers, scammers and botnets. Others (lots of others I hope) will take his place and then we’ll be able to see a solid infrastructure start to develop around Bitcoin.
Yes, there are shit exchanges and trojans out there. That’s why the only prudent course is to have proper security procedures and hold all your own funds. Learn about GPG, how to secure a Linux system and proper password management. Until there are exchanges and wallet services that get audited by trustworthy auditors, holding onto your own money is the better option. It will always be advisable to understand security though.
