Ask Amir Taaki About Bitcoin 768
"Bitcoin," says the project's website, "is a peer-to-peer currency. Peer-to-peer means that no central authority issues new money or tracks transactions." Wikipedia offers a readable explanation of the underlying technology. In (very) short, Bitcoin uses a distributed database and public key encryption to allow users to reassign ownership of units of Bitcoin currency (BTC), and does so in a way that can keep the user's identity private. Bitcoin isn't yet accepted the way credit cards are, but it's more than theoretical. You can buy (some) things with Bitcoin, and trade the currency itself.
Now, you can ask question about Bitcoin of Amir Taaki, a developer of client interfaces and stock trading software for Bitcoin, and owner and operator of trading exchange Britcoin.co.uk. Amir requests that questions focus not "so much on the mining (too many people get focused on that
when it's a minor aspect of Bitcoin) nor simple technical questions (people can
go find that info themselves on Wikipedia/the forums/sourcecode)," but rather on the harder-to-answer questions. Reading some of the related stories listed below may give you ideas on what those are. Standard Slashdot Interview rules apply: ask as many questions as you want, but please keep them to one per comment. Amir will get back with his answers.
My question. (Score:5, Insightful)
Re:My question. (Score:5, Insightful)
Yet another advertisement (Score:5, Insightful)
Good grief, yet another advertisement for bitcoin?
Enough, already!
it's more insidious than you think (Score:2, Insightful)
They are paying in bitcoins, so the slashdot editors HAVE to keep plugging the crap for their payment to be worth anything.
Re:Yet another advertisement (Score:5, Insightful)
Re:Is the gold rush over? (Score:5, Insightful)
BitCoin seems to have a lot of the properties of a pyramid scheme, mainly:
- First adopters have an inherent advantage since they could create large amounts of BitCoins.
- BitCoins have no inherent value. The only value they have is that which is attributed to them by those whose trade in them.
- The more people that can be convinced to trade in BitCoins, the higher the pool of real money available to exchange for BitCoins.
- Creation of BitCoins has now reached a level where the items being created for a given unit of time represent a small percentage of the total number of items in circulation: it is now essentially a trader's market.
Re:Is the gold rush over? (Score:5, Insightful)
See? You are thinking about this wrong. Think about using a botnet to distribute the processing load. Now you are using someone else's computing cycles and electric power. And you know what? I have said this before and so far, I haven't been wrong. I'm not that "original" of a thinker, it turns out. Without fail, every time I think of an idea, someone else has already thought of it and has likely already implemented it. So if I just thought about it, there is a reasonable amount of certainty that it is already out there being done.
And using someone else's resources is what spam and similar things have been about for the people most annoyed by the problem. But using someone else's resources are quite often the way things are done these days.
Will governments let it survive? (Score:3, Insightful)
Re:Is the gold rush over? (Score:5, Insightful)
It's actually a classic Ponzi.
Re:Yet another advertisement (Score:5, Insightful)
Someone must be getting paid for all of these bitcoin ads that are showing up as "stories"
Considering that 4/5 of the related Bitcoint stories are posted by timothy, and this one as well, I'd say he has a vested interest in peddling this crap.
Question: Economic expertise: (Score:4, Insightful)
Here's my question:
Do you ever regret not having had access to some economic expertise when you set this up, in order to prevent deflation, and possibly even create a working Bitcoin economy? Or has your initial investment already paid off so much that you have no regrets whatsoever?
It's not a well thought-out timeline (Score:4, Insightful)
I don't know what the optimum curve for the increase in the BitCoin supply would have been, but an asymptotic curve isn't it. They were not thinking very well at all. The asymptotic curve limits the total size of the "BitCoin economy" because of guaranteed massive deflation if the economy increases in size at all. This renders it quite useless as a viable currency. (The current value of all currency in circulation is currently far too small to be viable, and the deflation required to get the BitCoin economy to a size where it would be a viable currency is far too high, leading to hoarding that would exacerbate the problem.) At the very least, it should have at least leveled out to a linear slope to account for increase in gross economic output.
So yes, this is a tulip craze, and I wish Slashdot would stop wasting their time on these things. (I also have serious doubts about scalability... once you start subdividing the BitC's down to make them usefully liquid, the amount of tracking required quickly becomes ridiculous and makes BitC's no more non-trackable than my Visa card due to issues with data and bandwidth portability.)
It's sort of an interesting idea, and the concept of a non-trackable currency is an interesting one which raises far-reaching economic and social questions, but this particular currency isn't going to answer them.
It's even worse than a lack of inflation (Score:4, Insightful)
The BitCoin system has guaranteed deflation because lost hashes disppear from the monetary system forever. (Lost, destroyed or hoarded US currency can be replaced by the Federal reserve with a few keystrokes.) In addition, the current total value of the BitCoin currency (expessed in any normal monetary unit you'd care to name) is far too small to be a viable currency. It would have to deflate by several thousand percent to be any more than a niche currency. Since no one would volunteer to be the victims of such deflation, BitC's are doomed to irrelevancy.
Re:Is the gold rush over? (Score:5, Insightful)
Shiny rock is real value because it has real uses. Gold doesn't tarnish in air, and is a good electrical conductor. For this reason, it's used for connections on a lot of PCBs. It was used for plating on things that were exposed to the air long before then (via gold leaf before electoplating was invented), for the same reason: unlike copper or brass, it did not need regular cleaning to remove corrosion.
If you have gold, or any other commodity, then there are people willing to pay you for it. This is not the case with BitCoin. The cryptographic hashes have no value because there's nothing that you can do with them. It would be possible to create a currency backed by the promise of future computational work, where you could gain currency units by doing useful work (e.g. protein folding, running MapReduce operations for Google, and so on), but that's not what BitCoin does.
Even fiat currencies like the US dollar have more value. They are not backed by a commodity, but they are backed by the promise that the US government will accept them in payment for all debts, including taxes, which means that they can be traded for commodities easily. There is no such guarantee with BitCoin.
Re:Bitcoin (Score:4, Insightful)
What do you really mean by "backed by a government"?
I think the fundamental thing is that the government pledges to accept tax payments in that currency, and from that, inherent value results.
Re:Bitcoin (Score:4, Insightful)
Re:Bitcoin (Score:4, Insightful)
The ability to pay taxes in a certain jurisdiction merely confers a usefulness to the currency as a whole, it places no bounds on the value of any specific unit of that currency. It implies neither more or less fixed value than any medium of exchange that anyone at all accepts.
Re:Is the gold rush over? (Score:5, Insightful)
But is gold worth more than it would be otherwise, because of its historical use as a currency?
Gold is a commodity. Just like any other commodity, it is susceptible to fluctuations in the market that move it away from the price that would be optimal in a simple supply and demand economic model.
This is demonstrably false. There are people willing to pay real dollars for Bitcoins.
Sorry, to clarify I mean that there are only speculators in the market, there are no consumers. In a commodity market, you have three kinds of actors: producers, consumers, and speculators. Producers create the commodity. In the case of gold, they dig it out of the ground, or possibly recycle it (I used to know a scrap dealer who bought old computers to get gold out of the circuit boards, for example). These people insert the commodity into the market.
Consumers take the commodity out of the market. In the case of gold, they are people who have a use for the metal, such as jewellers or board makers. In the case of wheat, they are typically people who make flour (itself a commodity, for which these same people are a supplier).
Speculators are somewhere in the middle. They buy and sell without consuming. Their goal is to make money from the noise. They are allowed in the market because a small number of them can insulate producers and consumers from spikes in supply or demand.
Without speculators, someone growing wheat (which takes a significant fraction of a year to produce) would not know how much they could sell it for when it was grown. They'd be taking a significant risk: if the demand for wheat dropped significantly, then there would be problems. To insure against this, they offer wheat futures at a price that they consider fair. These are a promise to sell wheat at a fixed price in (for example) a year's time. Similarly, someone with a need of wheat in a year might buy a wheat future, insulating them against changes in the price in the opposite direction. Speculators are allowed in the market as buffers. Their presence means that there will always be someone willing to buy or sell wheat futures, and people looking at planting wheat now can look at the market price to decide whether it's worthwhile.
If there are too many speculators, then the price stops being set by the price that speculators expect to be able to sell the commodity to consumers for, and starts being set by the price that they expect to be able to sell it to other speculators. This causes wildly unstable markets (see the wheat market since about 2007, when the US removed the constraints on the number of speculators allowed in the market, for example).
In the case of BitCoin, the market contains an increasingly small number of producers, no consumers, and a lot of speculators. My comment was meant to say that there were no consumers in the market, and I thought this would be understood without the need for Market Economics 101.
Re:Bitcoin (Score:5, Insightful)
It seems like the system is gamed towards early adopters who've practically just printed money, and all this hype is mostly for their benefit and not newcomers. -> Isn't Bitcoin just a scam being hyped by early adopters who've amassed amounts that current newcomers cannot hope to match given the ever-lowering drop rate of Bitcoins so they can cash in? It was very easy to print Bitcoins in the beginning by these early miners. There's no way in hell newcomers to the game can match them.
It's like trying to get into the Top 100 brag list [progressquest.com] of Progress Quest [progressquest.com], a parody game infinitely more fun and productive than Bitcoin mining which works by having it run automatically in the background where your character will auto-attack, loot, level-up and go on fetch quests.
Re:Bitcoin (Score:4, Insightful)
You can't just "print" off money with BitCoin.
Cash has no inherent value, just ask someone who lived through the great depression.
Gold has no inherent value either. Gold only has value because it is hard to come by which makes it a great object to use for currency as it's hard to "duplicate".
BitCoin is the same. A currency is only as useful as it's ability to not be duplicated. It's much harder to create a bit coin than it is for the government to print off more money and deflate the USD.
The problem that occurred is someone artificially increased the exchange rate of bitcoin by creating artificial demand. A newly create currency is going to be volatile for a while before it stabilizes.
As bitcoin gains more monetary value, a single person's influence will drop. After a while, a single person won't be able to make a noticeable difference.
It's a great idea, but the question is if it will take off. It's been doing quite well so far.
Re:Is the gold rush over? (Score:5, Insightful)
Which is why you're seeing all the bitcoin stories spamming news sites lately.
Err, I guess I should put that in the form of a question...
Amir, what do you know about all these stories appearing on news sites lately? Are they a result of early adopters trying to monetize on their investment and realizing that the only way they can is if they get enough buy-in from popular opinion? Would you consider starting a new bitcoin database now that the code is stable and letting new mining start from scratch now that it's relatively well known and the code is stable? Or would that hurt your bottom line too?
Ooops, I guess it's just one question per post. Sorry, I guess this one won't get picked...