Bitcoin Releases Version 0.3 491
Teppy writes "How's this for a disruptive technology? Bitcoin is a peer-to-peer, network-based digital currency with no central bank, and no transaction fees. Using a proof-of-work concept, nodes burn CPU cycles searching for bundles of coins, broadcasting their findings to the network. Analysis of energy usage indicates that the market value of Bitcoins is already above the value of the energy needed to generate them, indicating healthy demand. The community is hopeful the currency will remain outside the reach of any government." Here are the FAQ, a paper describing Bitcoin in more technical detail (PDF), and the Wikipedia article. Note: a commercial service called BitCoin Ltd., in pre-alpha at bitcoin.com, bears no relation to the open source digital currency.
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Related: Crypto Tools
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Related: Crypto Tools
How secure (Score:3, Insightful)
I would like to see what sort of guarantees are in place for virtual currency
uhhh.... (Score:3, Insightful)
and the moment it's cracked the world economy collapses? Nah. Pass.
Ummmmmmm (Score:3, Insightful)
means? This sounds like something I would do in an RPG? Where does it find these 'bundles of coins'? Am I just being obtuse about all of this? O_O
With Scale Will Come Gov Intervention (Score:5, Insightful)
As someone pointed out, this article is light enough on source material that it may count as more of a slashvertizement. That said, if Bitcoin, or any micropayment and/or e-cash plan scales beyond a certain level, it's gonna attract both criminals and government interest and intervention, much as age-old Islamic halawa [wikipedia.org] got a lot more notice when used by gangs like Al-Qaeda.
kdawson strikes again! (Score:4, Insightful)
Could we just get a random reddit submitter instead? Please?
Re:How secure (Score:5, Insightful)
Given that the gold standard is gone, I'd like to see those guarantees too. Your paper money is virtual as well.
Re:uhhh.... exactly (Score:1, Insightful)
The dollars and euros are already on the verge of being virtual. Banks, corporations, and individuals rarely trade paper anymore; it's all done electronically as computer data. Even the ~1500 billion bailouts passed last year were done virtually - the Central Bank just appended a couple zeros to GMs, Bank of America's, and other private accounts. In effect they created money out of thin air.
BTW the Federal Reserve is not part of the government, just as Federal Express is not part of the government. The name is designed to deceive you but the Fed is still a private bank. It's a private corporate monopoly.
And finally, if you want to take money out of the hands of government to manipulate, inflate, or devalue, all you need to do is switch back to using precious metals - gold, silver, platinum. Governments and/or private central banks can not make metals out of thing air, thus they can not devalue your personal savings.
Anonymous virtual currencies all die off (Score:1, Insightful)
Seriously guys, it has been done to death hundreds of times.
They all died off. There's so many I don't even remember names.
Why did they die? Because whenever something like that reaches a meaningful size, something called "anti money laundering" kicks in.
This hits especially in payment processing. Companies are in practice prevented from processing anonymous payments. You cannot even go to a jewelry store with a suitcase with $20m in it and walk out of there with your pockets full of diamonds.
And if you have money to spend but nowhere that accepts it? Guess what, your money is worthless.
Re:Obvious flaw: (Score:4, Insightful)
Still creating artificial scarcity? (Score:5, Insightful)
So this system requires CPUs to burn scarce, real electricity in order to generate virtual electronic tokens whose only purpose is to simulate the scarcity of rare metals, so that we can continue to use the old 'exchange value' economic model in the realm of information where by definition, it does not apply.
This seems like basing an economy on burning one's food crops to prove wealth and using the ash to buy things. I'm sure it would 'work', for some definition of work, but it doesn't seem particularly... efficient. Or sensible. Granted, humans do indulge in self-destructive behaviour, but do we really have to port all our bad habits into the digital world?
Is there some actual upside to this system which I'm not getting?
Re:Obvious flaw: (Score:1, Insightful)
Not only that but, what's stopping someone or a group to do transactions with another "real/trusted/VIP/fake/scam" node to artificially increase its "value" and "reliability".
And what is the meaning of: "blocks are created and added ad infinitum" and in what context does that relate and fit in?
Even ignoring all those issues, what and who creates "Bitcoins". My guess is a group of scammers.
Re:Ummmmmmm (Score:2, Insightful)
Re:How secure (Score:1, Insightful)
I would like to see what sort of guarantees are in place for the value of gold. Sure, it's reasonably rare (for now; just wait until it'll be economically feasible to extract the gold from sea water!), and it's got attractive chemical properties, but beyond that, gold is every bit (no pun intended) as much a fiat currency as paper money: it works because everyone shares the belief it's valuable.
Re:How secure (Score:3, Insightful)
Agreed, but it's got thousands of years track record.
How's that for a disruptive technology? (Score:3, Insightful)
Oh that's right... It isn't. But hey, thanks for trying to post something all edgy or controversial or whatever the hell you think it is, kdawson.
Re:Obvious flaw: (Score:1, Insightful)
Did you just ignore your own quote? The part that said:
For an attacker to manipulate the record, he must outpace all of the other nodes on the network to produce the longest proof-of-work.
The "very fast machine" would have to be faster than all the combined peers in the entire network, since they are all working together to counter his fast machine.
Re:How secure (Score:3, Insightful)
this is find and dandy if it is a fixed quantity of goods and the currency is bound to that by law. eg, the gold standard.
in the current situation with the us dollar (world's "reserve currency", lol) being backed in this manner by thin air, there is nothing to stop the government simply creating more to get themselves out of debt (inflation) thus reducing the value of goods your single dollar can buy (what you SEE as inflation).
Re:How secure (Score:3, Insightful)
Re:Ummmmmmm (Score:5, Insightful)
In practice the quantity of gold/silver/etc available is not fixed.
Tomorrow someone builds better mining equipment and suddenly there's 5 times as much available.
A ship loaded with a significant quantity sinks over the mid atlantic trench?
well in practice it has gone beyond where humans can practically access it and so might as well no longer exist.
Alternatively someone might build some kind of Von Neumann machine which can extract your precious metal from seawater or mine asteroids and suddenly the value of your precious metal would drop close to zero.
Whenever someone invents a cheaper way to mine gold you're going to experience price inflation as the gold in your safe becomes less valuable.
gold is only special to people who delude themselves that it's somehow special.
Food, clean water, tools, feminine hygiene products, useful information.
If you're convinced fiat currencies are going to collapse these are what you should be filling your underground bunker with, not some shiny metal which will only be worth anything if people believe it has any intrinsic value.
Re:How secure (Score:2, Insightful)
Agreed, but it's got thousands of years track record.
So why not base/fix the currency on sex?
because then it would be just like copyright, a model of artificial scarcity that does not reflect the economic reality. that is women are about 52% of the population so there is no shortage of pussy. they selectively and deliberately withhold it to artificially inflate its value sort of like any other cartel. unless you think the RIAA is a great organization that benefits all of mankind then you can see what is wrong with this.
incidentally that is why average women are so offended at "slutty" women - not because they are so moral but because women who do not subscribe to the artificial scarcity model threaten to devalue pussy for all women, just like new competition in a monopolistic marketplace, and this cannot be easily tolerated by the members of this cartel. thus the stigma of being called a "slut" is a barrier to entry for would-be competitors who are not members of the unwritten cartel. that cartel is not a conspiracy but is arranged by the female instinct to raise the cost of sex. a little evolutionary psychology will explain most of this except that the religion of political correctness has watered it down a bit, no one wants to admit how ruthlessly manipulative women tend to be in any close relationship or how oblivious they are to this fact.
anyway you do not want to base a currency on this model of whimsical and artificial manipulation. a currency should reflect the economic reality as closely as possible and the female domination of sex makes this impossible to use sex as a basis. besides, the thing about currency is that one dollar spends just as well as any single other dollar. sex does not work this way. sex with a beautiful woman would not be as "current" (spendable) as sex with an old fat sow.
in summary, this is just a really bad idea.
Re:How secure (Score:3, Insightful)
The value of gold has not remained fixed either. It is subject to supply and demand like any other commodity. The cost to extract it is only the supply side of that equation. The demand side can fluctuate wildly. The price of gold has gone both up and down when measured in fiat currencies.
Re:How secure (Score:5, Insightful)
Tying fiscal policy to the amount of shiny stuff we can dig out of the ground is far sillier.
If the amount is fixed, then as the economy expands the available value per coin increases and prices drop: instant, guaranteed deflation, getting worse as the rate of value growth increases. If you want to sell something new into a stable economy, everyone else has to drop their prices to make room for you.
Fiat currency may require us to appoint agents to keep the money supply and the value supply roughly in sync, but at least it provides the mechanism to do it. With the ooooh-pritty-shiny-stuff system, so appealing to people who can't think when there's pritty shiny stuff in sight, money and value are absolutely guaranteed to get out of sync, badly. very fast, with no remedy at all. Unless of course the economy is totally stagnant, with no new wealth being created. Yeah, that's what we want.
Pardon Me (Score:2, Insightful)
No offense to you for trying to summarize it, but this sounds like utter horseshit.
I am still hunting for an intelligible explanation of why I can't forge money, copy money, or invalidate money, let alone why this isn't a privacy non-starter. And I'm not sure the Bitcoin "technical paper" counts.
I can create hashes, too. And I have lots of peers that will say whatever I want. Will you give me a cup of coffee for it?
All the redundant pithy comments about the real money supply aren't funny, either.
From the PDF (Score:5, Insightful)
Good luck with that...
Well it is already a bad idea (Score:4, Insightful)
If there is a hard limit to the total amount of currency that can exist, then what you have is a situation where the currency will not scale with the economy. That means deflation and there's no faster way to kill an economy than that.
To me it seems like the people who created it are the same kind of gold standard 'tards who cry on and on about inflation without understanding it. They see inflation as "eating up your savings" (which is doesn't so long as you put them in an interest bearing account) and thus think deflation would just be great. I mean you have more buying power for doing nothing! Wonderful!
Except it badly fucks over an economy. For one, it simply drives down spending. If you can get something for a dollar today, or two of that something for a dollar next week, it makes sense to wait as long as you can. Non-essential purchases are discouraged since the longer you wait, the more your money gets you. While that sounds like it encourages savings what it really does is screw over trade. Money only works if people spend it. People can have as much money as you want if nobody spends it it is worthless, regardless of the form it takes.
Then there's loans. The ability to make and receive loans goes to hell in a situation of continual deflation. Unless the loan is extremely short term, it won't work. Take a house loan. This is doable because even with minimal to no inflation, you know you can afford it. You know your cost will not go up in percentage terms. However with deflation? No such luck. In a situation of continual deflation, the amount of money you receive for work will go down with time. As such the payments on a loan will be a larger and larger part of income, growing until you can't afford them. To make it work, the loan would have to be offered with a negative interest. But nobody will do that, they'd simply not loan out their money instead as that is a higher rate of return and is guaranteed. Currently people will make loans because the risk of the loan is balanced against having a positive return.
I could go on, but deflation is an extremely bad thing in the long run, and with a fix currency supply you have guaranteed it. Sounds like your project needs less gold standard survivalist geeks and more economists. Tell you what, run your idea by Dr. Gerry Swanson, you get him to sign off on it, maybe I'll reexamine it. As it stands now it sounds like an extremely bad idea just from an economics standpoint, never mind any technical arguments.
Re:Also the way you really add value (Score:1, Insightful)
Gold would be near worthless as it has few uses in a non-industrial society (basically only as decoration) and thus would be worth fuck-all as a currency in a survivalist world.
Fail. Gold was highly valued before the industrial revolution. Further, it wasn't just western cultures who found it valuable (unless you include ancient Egypt and the Ottoman empire as either post-industrial or western states).
Re:How secure (Score:1, Insightful)
And if history shows again and again that the people in charge of keeping money supply and value supply roughly in sync can't be trusted with that much power, then is the shiny stuff silly?
Re:How secure (Score:4, Insightful)
Most people don't understand economics other than having the largest pile of money compared to their neighbors (or complaining that their neighbor has a bigger pile than they do). Wealth creation isn't generating the money itself, but rather what you can do with that money in order to get others to do things for you. If you don't understand that distinction, then it is a hopeless cause at trying to understand economics at its most basic form.
Wealth is ultimately the blood, sweat, and tears of somebody working their behind off to make something, and all of the rest of money flows from that effort. There may be physical materials involved along the way, but you are paying either directly or indirectly for somebody to extract those materials, to shape it and mold it or do something with it. The currency then becomes a more or less averaged value of whatever it is that you are doing compared to what everybody else is doing. Yes, governments can get in the way via taxes and subsidies to screw the system up and give incentives and disincentives for certain kinds of activities... and to suck up some of that wealth by the "rulers" of that society in exchange for hopefully some civil tranquility, but it all ends up being an exchange of goods (made with labor) or services (simply paying for somebody's time more directly).
It really makes no difference in the long run between a fiat currency and a commodity currency anyway. Both require acts of faith, and the medium is relatively neutral in terms of whatever it is that you are trying to obtain above and beyond the pile of money in the first place. Even gold requires faith that somebody will accept it in the future, and it has the additional problems of extreme weight and being useful only for major transactions (due to its high intrinsic value). Any concentration of gold also requires couriers and potentially body guards and other sorts of security that end up simply costing more money than it is worth. It is also placing faith that the gold won't be devalued at some point in the future.
If, for example, somebody discovers a gold nugget on an asteroid that is the size of a house and can relatively cheaply bring it to the Earth, it would cause the gold markets to crash real hard. Gold would still have some value afterward, but it wouldn't be pretty for those who have invested large amounts of their labor into gold.
Re:How secure (Score:3, Insightful)
Deflation did not "work out quite well." It absolutely sucked for farmers (which, when we had deflation, was basically everyone.) You had to take out a bank loan to purchase seed up front; you would pay your loan back with interest after harvest.
Deflation makes those loans a raw deal - you might pay $1200 on a $1000 loan, but each of those dollars is worth more after a growing season's worth of deflation. Because of deflation, you pay the bank much more in constant dollars.
I'm also not sure why massive deflation is a solution to people not knowing how to save or invest money.
Re:Also the way you really add value (Score:3, Insightful)
Gold would be near worthless as it has few uses in a non-industrial society (basically only as decoration) and thus would be worth fuck-all as a currency in a survivalist world.
Fail. Gold was highly valued before the industrial revolution. Further, it wasn't just western cultures who found it valuable (unless you include ancient Egypt and the Ottoman empire as either post-industrial or western states).
But that was based on historical tradition. There have been several generations born in which the meme of "gold=money" has not been culturally transmitted and it has extinguished. The vast majority of the world population today think of gold as a material for jewelry and electronics. Some people are trying to use modern marketing to re-inject that meme into society, with (as can be seen from the comments here on Slashdot) mostly poor results.
Re:How secure (Score:3, Insightful)
Maybe an ideal currency would be finite, but have no great value other than its value as such? That way, we aren't impeding lives by making a value item more difficult to obtain.
Scraps of paper with a certain logo on them would suffice, I suppose, if we could ENSURE the supply would remain finite.
Re:Ummmmmmm (Score:3, Insightful)
gold is only special to people who delude themselves that it's somehow special.
Yet in practice it has a more stable history than any fiat currency. You theory that gold is not fixed is correct, but that doesn't change the fact that it is far more reliable than a currency backed by the decisions people make. Gold takes energy and effort to get out of the ground. Creating bigger and better machines takes time and effort. Essentially this forces the market itself to be very slow. Compare that to a currency which has an intrinsic rarity based entirely on someone's decision to print money. Look how well that turned out for Zimbabwe, where the solution to inflation was to print a few extra zeroes on the end of the note.
Also in your post apocalyptic world Gold will always have an intrinsic value. Whoever has the food and clean water is also likely to have a wife who wants something shiny. Gold has been a desired element since 3000BC, it is still a desired element today not only for fashion (gold plated iPads), but also for its chemical properties such as resistance to acid (gold plated Hastelloy is used quite extensively in the chemical industry).
The only delusion here is not realising that gold is special because the people make it special, and that hasn't changed in 5000 years.
Re:It also helps solve a paradox (Score:3, Insightful)
Deflation is just not good for an economy. Large amounts of inflation aren't either. Really a perfectly flat lien might be the best, no inflation or deflation, but that doesn't seem possible. Looking at historical data it doesn't seem like you can hold it steady state. That being the case, a small amount of controlled inflation is by far a better choice than swings back and forth.
I believe that inflation as something good for the economy is a myth that has been perpetuated by those who take advantage of the situation and make a profit off of that inflation. Unfortunately, it has been so ingrained into modern industrial societies for so long that very few if any people really understand just what life without inflation could possibly be like, and too many people do long term financial planning on the presumption of future inflation that any other scenario is seen as foolish or not welcome.
Yes, deflation stinks if your are borrowing money from a lender that uses compound interest for repayment. With few exceptions, however, most ordinary consumers rarely if ever get any sort of loan at an interest rate which beats inflation, so to suggest that the only way a modern banking system can function is via modest inflation is sort of a red herring too.
I get the theory that inflation tends to encourage investment, while deflation tends to encourage people putting money into the bank of the master bedroom mattress. It isn't quite as simple as that either, and even with an inflationary monetary policy people still tuck money away in a cookie jar or some other place for temporary safe keeping.
Inflation tends to favor bankers and people dealing with "financial services" through a variety of means. Since they are also the ones in control of the money supply and the other fiscal management tools, it also implies why their point of view is followed. For more ordinary folks, all they are really interested in is a stable currency and even a little bit of fluctuation isn't necessarily a bad thing.
For most of the 19th Century, the U.S. Dollar stayed relatively stable compared to the labor needed to get things done. Generally speaking, a dollar paid for a full day's labor of a semi-skilled or unskilled laborer. While there certainly were periods of modest deflation, America was certainly able to grow into a mighty industrial power without the need of constant inflation of the kind that has been dominant in the 20th Century.
The only times in history when you have seen wild swings of hyper-inflation or huge deflation are usually when the government or some scam artist (often the same but not always) gets involved in the picture and tries to manipulate the currency as a way to make personal profit without having to work. The massive deflation happens usually with something like a Ponzi or pyramid scheme (and related scams) and the scam collapses. Sort of like is happening right now in the U.S. economy, other than the fact that the current U.S. President is also simultaneously spending money on a hyper-inflation model as well. I'm not convinced that those who are trying to perform this balancing act of moderating simultaneously massive deflation through hyper inflation are necessarily going to get the right balance.
Crickets... (Score:1, Insightful)
You're going to be waiting a long time before you can proclaim that gold has failed to live up to its well-deserved reputation as a safe and stable place to store a portion of one's assets. Since you're so eagerly anticipating this event and have so much riding on it, why don't you call us when it happens!
Re:It also helps solve a paradox (Score:1, Insightful)
Inflation/Deflation cycles are due solely to fractional reserve banking and deliberate market manipulation via monetary policy.
Our inflation rate (measured as the price of goods and services) from the time of the Pilgrims all the way to the very beginning of the 20th Century was nearly FLAT, with only a few bumps during times of war when the government decided to print it's own money. Before that it was all mostly copper and silver and a few gold coins. Paper money only came into force in the US during the Revolutionary war, with the printing of "Continentals". Not surprisingly, the government printed too many and the currency was absolutely worthless in a short time.