Bitcoin

Mantel

Stamply wrote: »

Imagine a future where you can literally "busk" on YouTube, where fans can send micro-payments to musicians as easily as sending and IM!

We're already there. Make a youtube account and become popular and you'll get paid, as long as your interesting.

srsly78

Yes but that's money from youtube from ads, not tips from viewers. There is no way to throw someone a small tip of money right now, the fees make it uneconomical.

AtomicHorror

CelticRambler wrote: »

Like Stamply, I've been considering the pros and cons of bitcoin for a while, and had time during the last week to really dig into the detail. My conclusion? Thanks, but no thanks. I see one major problem and one severe flaw. The major problem is that more than half the total number of bitcoins have already been mined and we've only just seen dedicated mining hardware come on the market this year.

Once someone has mined the 21,000,000th coin, what then? If the Bitcoin organisation decides to generate additional coins, the value will inevitably fall because if they can do this once, they can do it any number of times. If they don't, then the notional value depends entirely on what you can do with this digital gold. What can you do with it, apart from online payments?

And therein lies the severe flaw. It is presented as a near-perfect currency for online payments because of its negligible transaction charges. BUT - and this is a big BUT - each and every transaction is being validated by the miners who receive a payout for their effort (and investment in hardware and the electricity consumed in running that hardware). What happens when there are no more bitcoins to be found, or the rate of discovery becomes unreasonably small. At a rough estimate, I estimate this to be within five years. So come Year 6, who is going to pay for the validation of a million penny transactions every day?

If we go back to your man who (supposedly) had 7500 BTC on a hard drive that he dumped in a landfill site. If that was real gold, sooner or later, someone would dig through the rubbish and find it; but because it's a digital currency, if the rats have peed on his disk and the methane has vaporised his data, that's it. Even Satoshi Nakamoto can't get them back. Eventually a huge quantity of BTC will be buried in various institutional investors' vaults, another sizeable chunk will be lost on dead hard-drives, USB keys and forgotten Dropbox accounts, and a relative handful circulating in the way they were intended.

All-in-all, even though I like the principle of a global alternative currency, I think BTC is too exposed to digital competition and not anchored enough in the real world.

Others have dealt with the issue of the mining rate, who gets paid for processing and the idea that the powers that be could somehow raise the BTC limit without consent of the community.

On the point of lost BTC in hard drives, dropboxes etc. This is similar to the issue of the bitcoin limit and the solution is the same; divisibility. Bitcoins can currently be subdivided to 8 decimal places. This means that, if needed, the current 12 million BTCs could have a market cap in the tens of trillions of dollars before we hit practical problems with exchanging currencies or representing values. So even if we lose millions of BTC, we still shouldn't run into practical problems.

If needed, BTC can actually be infinitely subdivided.

Stamply

Mantel wrote: »

We're already there. Make a youtube account and become popular and you'll get paid, as long as your interesting.

Thats not even close to what I am suggesting is possible.

CelticRambler

AtomicHorror wrote: »

If needed, BTC can actually be infinitely subdivided.

Which, in the real world, we call "devalutation". It's happenning in Zimbabwe during this century, just as it happened in France and Germany in the last one.

I have no problem with the validity of the code nor the concept of an alternative currency. I live in a community that runs more on barter and traded hours than Euros ... but we are organic beings and have to interact with the physical world sooner or later.

What I see in Bitcoin (2013-2018) is an institution-driven bubble that will, inevitably, intensify the search for new bitcoins. The formula making it harder to find them won't stop people pouring resources into the search (most likely including hackers "borrowing" other people's electricity and PC power) eventually creating a situation where there is no reasonable expectation of a return on investment because a crop of equally valid alternatives will come onto the market and drag the value of BTC down as miners and investors switch to the new unit.

To those who say I misunderstand the validation process, explain to me then who validates the newly created hash? Because every article I've read on the subject says it's the miners who provide the computational power and get a bitcoin payout for their effort.

srsly78

There is a hard cap on the number of coins, not an infinite amount. You are also confusing mining with validation of transactions. It's very difficult to "mine" a coin, but very easy to see if it's valid. This asymmetry is a common feature of many crypto algorithms.

You are right about the bubble bit, but it's not large institutions - it's the fact that anyone can participate across the whole world. No barrier to entry means everyone is free to speculate! In particular chinese people were using it to bypass capital controls...

Your last question: Just forget about mining. If I send you a coin this has nothing to do with mining, it's just a transaction.

Stamply

CelticRambler wrote: »

Which, in the real world, we call "devalutation".

No its not, its the exact opposite... Zimbabwean currency is not divided, then it would be becoming MORE valuable, as you would be able to get the same product one week for a fraction of the currency you used the previous week... In Zimbabwe the currency is exponentially multiplying the amount of currency required to buy things... EXACT OPPOSITE!

AtomicHorror

CelticRambler wrote: »

Which, in the real world, we call "devalutation". It's happenning in Zimbabwe during this century, just as it happened in France and Germany in the last one.

I have no problem with the validity of the code nor the concept of an alternative currency. I live in a community that runs more on barter and traded hours than Euros ... but we are organic beings and have to interact with the physical world sooner or later.

What I see in Bitcoin (2013-2018) is an institution-driven bubble that will, inevitably, intensify the search for new bitcoins. The formula making it harder to find them won't stop people pouring resources into the search (most likely including hackers "borrowing" other people's electricity and PC power) eventually creating a situation where there is no reasonable expectation of a return on investment because a crop of equally valid alternatives will come onto the market and drag the value of BTC down as miners and investors switch to the new unit.

To those who say I misunderstand the validation process, explain to me then who validates the newly created hash? Because every article I've read on the subject says it's the miners who provide the computational power and get a bitcoin payout for their effort.

Stamply has responded on the devaluation/subdivision point, so I'll leave that be.

I don't mean to seem dismissive, but you're pretty hazy on the role of authority in the bitcoin economy and the difference between mining and transaction processing etc... so you'll forgive me if I take what you "see" with a big pinch of salt.

Whether BTC can survive the escalating cost of mining (are we sure it will escalate and if so will that be linear?) depends on whether the currency sees growing adoption, which is primarily influenced by whether it has utility. Obviously, if the value of BTC can make mining attractive, it will continue to happen.

srsly78

If mining were to stop today it would make no difference to the utility of bitcoin. The mining mechanism is just a way to get the ball rolling, but many people seem to obsess about it - probably because of the "money for nothing" aspect. Or maybe because they think it's physically analagous to mining for gold.

alb

CelticRambler wrote: »

Which, in the real world, we call "devalutation". It's happenning in Zimbabwe during this century, just as it happened in France and Germany in the last one.

I have no problem with the validity of the code nor the concept of an alternative currency. I live in a community that runs more on barter and traded hours than Euros ... but we are organic beings and have to interact with the physical world sooner or later.

Debasement of a currency by creating more of it, and dividing a unit of currency so smaller units of it can be used in transactions are completely different things. Bitcoin allows subdivision of Bitcoins, but not debasement beyond the eventual 21 million coins.

Lets say for example all 21 million coins were lost in harddrives in dumps except for 2 remaining bitcoins in the whole world, lets say you owned one of them, and were saving it. You would have half the worlds Bitcoin. Now, if the remaining Bitcoin is divided into 100 pieces so 0.01 (like a penny) could be spent or 1 million pieces so 0.000001 could be spent makes no difference to you, you would still have 1 whole Bitcoin which would be half of all bitcoin. This is divisibility, it would not affect your proportion of the Bitcoin wealth.

Debasement would be if new Bitcoins were created, so that now you had 1 of 10, or 1 of 100. This would dilute your relative wealth. This is what happened in Zimbabwe, France, Germany and is happening pretty much every fiat currency we have today (86 billion new dollars created per month!). Bitcoin was designed to offer an alternative to this.

CelticRambler wrote: »

What I see in Bitcoin (2013-2018) is an institution-driven bubble that will, inevitably, intensify the search for new bitcoins. The formula making it harder to find them won't stop people pouring resources into the search (most likely including hackers "borrowing" other people's electricity and PC power) eventually creating a situation where there is no reasonable expectation of a return on investment because a crop of equally valid alternatives will come onto the market and drag the value of BTC down as miners and investors switch to the new unit.

Both of these things already happened, mining equipment has at times been unprofitable (it depends on the current Bitcoin price) and there are already loads of alternative currencies. Bitcoin stands unaffected. Note that the mining difficult can adjust downwards as well as upwards, if some miners realise it is unprofitable for them and stop mining, and the overall network power decreases, hashing difficulty decreases also, so it becomes more profitable for the remaining miners. This way the system always reaches a balance where mining is profitable.

Let me be super clear about this, no matter how many people are mining or what the hashing speed of their equipment is, new Bitcoin will be created when a block is solved, and a block will be solved on average every ten minutes. The amount of coins rewarded to the finder is currently 25 and this halves every four years (next halving in 2016).

CelticRambler wrote: »

To those who say I misunderstand the validation process, explain to me then who validates the newly created hash? Because every article I've read on the subject says it's the miners who provide the computational power and get a bitcoin payout for their effort.

It's hard to find the hash that solves the block, but it's easy to verify. The miner finds it, the rest of the network nodes all verify it.

alb

Further to my last post, I find it's easiest to teach things by example, so I'll do so with mining.

Here's a hash function you can try out: http://www.movable-type.co.uk/scripts/sha256.html

You put a message in the message box, press the generate hash button and the hash of the message appears.

If I ask you to tell me a message that will generate a hash that ends in "1c38ead" the only way you can do it is by trial and error of trying different messages in the box - this is the 'work' miners do.

If I tell you that I solved the work, and the answer is "Homer Simpson" you can verify it by just doing one single hash of that message. Go ahead try it verify my work.

So the work is difficult for miners to do and easy for someone else to verify. The difficulty adjustments to work are done by changing how specific the answer must be. For example if I said give me a message with a hash ending in "d" it would be much easier to find one than ending in "ad" or "ead" as there are more possible solutions.

Stamply

alb wrote: »

It's hard to find the hash that solves the block, but it's easy to verify. The miner finds it, the rest of the network nodes all verify it.

Now, here is me being dumb, but if all mining stops tomorrow, who verifies the transactions? Is this verified by the successive transactions after that? Where does the computational power for verifying transactions come from?

alb

Stamply wrote: »

Now, here is me being dumb, but if all mining stops tomorrow, who verifies the transactions? Is this verified by the successive transactions after that? Where does the computational power for verifying transactions come from?

The network needs miners, at least one miner is essential, but as long as Bitcoin has value it will have miners.

srsly78

Transactions get verified by your client whenever you download the blockchain. If you leave the client running new data comes in and gets verified all the time.

Mining is only the initial introduction of a new block to the chain, a special case. It is not the same as verifying transactions.

The network does not need miners!! When the limit gets hit there will be no more mining, and it won't matter.

alb

srsly78 wrote: »

Transactions get verified by your client whenever you download the blockchain. If you leave the client running new data comes in and gets verified all the time.

Mining is only the initial introduction of a new block to the chain, a special case. It is not the same as verifying transactions.

The network does not need miners!! When the limit gets hit there will be no more mining, and it won't matter.

Yeah but only transactions in blocks are verified by the clients, so without miners there are no new blocks and therefore no new transactions would be verified. It doesn't matter anyway though, as if we ever got to the stage where there was no miners, it would mean Bitcoin was worthless and had even lost enthusiasts who mine at a loss or to support the network so Bitcoin would be dead.

srsly78

No. Transactions get appended onto existing blocks.

The system is designed with a cap - one day there will be no more mining. Are you saying that it will just stop working then? Better mail the lads and tell them about the fatal flaw you have discovered!

alb

srsly78 wrote: »

No. Transactions get appended onto existing blocks.

The system is designed with a cap - one day there will be no more mining. Are you saying that it will just stop working then? Better mail the lads and tell them about the fatal flaw you have discovered!

One day there will be no more block reward for mining blocks, but there will still need to be miners. That day, which will be around 2140 will mean that only transaction fees are the reward for miners. The value of Bitcoins rises over time, so the reduced reward, even to the extent of just transaction fees will always give miners an incentive, unless of course Bitcoin, for whatever reason, fails completely. It will be a free market situation, where the miners and people making transactions will find a meeting point for fees.

Blocks cannot be changed btw, this is why transactions are irreversible once in the blockchain. The input to the hashing function is three things: the transactions, the hash of the previous block and the solution the miner found, so if any of these things change, a different hash would come out and clients won't find it valid when they process the blockchain.

(Also there are no lads to email)

srsly78

I concede you seem to be right. In the future the new blocks won't have any "coins" in them it seems, but rather be just transactions. So no new mining of coins, but the miners do provide the machinery to keep things ticking over. And the transaction fee makes it worth their while.

https://en.bitcoin.it/wiki/Transaction_fees

There is the bitcoin foundation you can mail by the way

The Corinthian

Stamply wrote: »

My favourite aspect of a Bitcoin future is how it affects the arts & music industry... Imagine a future where you can literally "busk" on YouTube, where fans can send micro-payments to musicians as easily as sending and IM!

How does one send a micro-payment using Bitcoins? Last time I checked there were no subdivisions to a Bitcoin, and it's trading for around 700 USD.

Ironically, the currently inflated value of the Bitcoin is precisely what has in practical terms destroyed its ability to be transferable without the use of third-party clearing houses and charges...

...unless, you're using it to buy large quantities of heroin or enriched plutonium, in which case the numbers still crunch

srsly78

You can send someone 0.0000001 bitcoins. There are as many subdivisions as you want (but most clients only do millionths right now).

alb

The Corinthian wrote: »

How does one send a micro-payment using Bitcoins? Last time I checked there were no subdivisions to a Bitcoin, and it's trading for around 700 USD.

Ironically, the currently inflated value of the Bitcoin is precisely what has in practical terms destroyed its ability to be transferable without the use of third-party clearing houses and charges...

...unless, you're using it to buy large quantities of heroin or enriched plutonium, in which case the numbers still crunch

The price makes no difference whatsoever to the usability. As value rises smaller amounts can be used. For example many are already using millibits (1 mBTC = 0.001 BTC) commonly instead of Bitcoin as a unit, for example the prices on http://bitcoinity.org/ . Less than $1 per mBTC sounds cheap if you ask me The only practical problem it has caused is a bit of a lag in the default fee in some of the clients, where what used to be a negligible fee such as 0.001 become a bit more significant as the price rose so quickly. I believe the Bitcoin QT client at least will in future set a sensible default fee based on the current price.

It's a bit of a different concept to grasp as we're used to money with a hard limit on divisibility. A penny is the smallest amount of Euro we can spend physically.

Stamply

The Corinthian wrote: »

How does one send a micro-payment using Bitcoins? Last time I checked there were no subdivisions to a Bitcoin, and it's trading for around 700 USD.

Ironically, the currently inflated value of the Bitcoin is precisely what has in practical terms destroyed its ability to be transferable without the use of third-party clearing houses and charges...

...unless, you're using it to buy large quantities of heroin or enriched plutonium, in which case the numbers still crunch

Ugh

AtomicHorror

The Corinthian wrote: »

How does one send a micro-payment using Bitcoins? Last time I checked there were no subdivisions to a Bitcoin, and it's trading for around 700 USD.

When was the last time you checked? As far as I know, bitcoin was divisible to 8 places from the outset.

The Corinthian

Yup. My bad. I stand corrected.

SteelyDanJalapeno

No post on the massive nosedive it took today?

alb

TiltedBrain wrote: »

No post on the massive nosedive it took today?

Bought some more. Still not sure exactly what the future holds for BTC in China, yesterdays news seems bad, but I'm not yet sure how bad.

Stamply

TiltedBrain wrote: »

No post on the massive nosedive it took today?

Was reading about it there this morning... Seems like the Chinese Government is getting concerned about people moving their money out of the currency through BTC. That could mean two things for the future:

1) If BTC is a serious concern for the Chinese government then it obviously has a utility so trade in BTC in China could increase dramatically as more people figure out ways around the restrictions. If BTC proves a more efficient way to exchange Yuan for Dollars/Pounds for average Chinese people who can't afford property abroad then the Bitcoin price could hit the roof again.

2) The restrictions & crackdown is so tight & fierce due to the Chinese surveilance society that trade effectively ceases and normal rich Chinese keep using other mechanisms like buying property abroad to get their hands on international currency.

Also, lucky I didn't buy last weekend!

relaxed

TiltedBrain wrote: »

No post on the massive nosedive it took today?

The volatility shows its suited to speculative investors and its not something mainstream business needs to worry about.

Maybe some day it will start moving in tight daily bands like all other currencies but for now its just a speculative punt for people.

pedroeibar1

relaxed wrote: »

The volatility shows its suited to speculative investors and its not something mainstream business needs to worry about.

Maybe some day it will start moving in tight daily bands like all other currencies but for now its just a speculative punt for people.

It is an accident waiting to happen. The gobdaws will be taken for a ride, the smart guys already have taken their profit and can afford to lose whatever they have left in there. Nobody ever admits to being a gobdaw, which is why we have had Tulip bulbs, South Seas Bubble, sites at several hundred million an acre in D4 and shoddy boxes in Leitrim at €450k.:rolleyes:

CelticRambler

srsly78 wrote: »

So no new mining of coins, but the miners do provide the machinery to keep things ticking over. And the transaction fee makes it worth their while.

https://en.bitcoin.it/wiki/Transaction_fees

From the above link: the typical transaction fee for low-priority transactions is 0.1 mBTC (0.0001 BTC) and at today's "half price" exchange rate that's 0.049627€. At the 1k€/BTC rate of earlier this month, which presumably the investors would hope to see again in the near future, that's near-enough 10ct/transaction. Bearing in mind this is subsidised by the allocation of new BTC-mining and most references suggest that it will rise to make it worth while providing the computing power to process BTC transactions in the future, we could be looking at 15ct/transaction.

Well, a few months ago, the US Fed decided 21 US cts, i.e. 15 EUR cts was "excessive" for debit card transactions, and a BTC payment is essentially the same, drawing on funds that you already have, so where is the cost saving?

As a digital concept, BTC works great, but when you add in normal human greed, speculation, misplaced trust and a host of other rational and irrational behaviours, it remains very exposed to future changes in digital or real-world direction. Just think how much commerce and currency has changed since 1888 - as far back in the past as the projected "end point" of BTC.