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Ask Amir Taaki About Bitcoin 768

Posted by timothy
from the does-george-selgin-approve? dept.
"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.
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Ask Amir Taaki About Bitcoin

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  • Bitcoin (Score:5, Interesting)

    by cgeys (2240696) on Tuesday June 14, 2011 @11:06AM (#36436204)
    There's one interesting thing about Bitcoin that I think most geeks haven't either understood or havent thinked about. Both stock and forex markets are secured against all kinds of foul play. Doing a pump and dump scheme or various other schemes isn't easy. With Forex the sheer amount of transactions and money changing hands makes it impossible and the law protects against such schemes with stocks. If stock markets flunctuate much they also close down automatically. Bitcoin doesn't offer any protection against this. Anyone with the know-how and cash can come in to play with the market. This makes Bitcoin seriously vulnerable to losing huge amounts of money. Last friday we saw probably the first such scheme taking place [slashdot.org]. Someone slowly build up the value of Bitcoin and on an instant cashed out lots of money. That lowered the overall value of Bitcoin significantly, which made others join it and sell it. Whoever was playing Bitcoin market probably was thinking he had now got Bitcoin to the most high value possible and decided to cash out. Many people lost significant amount of money.

    This all works wonderfully for the people who have the financial understanding of markets and such schemes. Geeks generally do not. All they see is this program that they can use to make money with their hardware. They forget that all the traditional pump and dump schemes and others still apply. Actually not only do they apply, they're safe to pull of with Bitcoin because it's legal, the market is really vulnerable to it and most people using it do not understand what is happening. Those who trade stocks or forex generally have even some understanding of how the market works. Bitcoin users generally do not, as they're just normal users.
    • Re:Bitcoin (Score:4, Interesting)

      by petermgreen (876956) <plugwashNO@SPAMp10link.net> on Tuesday June 14, 2011 @11:22AM (#36436496) Homepage

      mmm, anyone who puts money they can't afford to lose into bitcoin is an idiot. Bitcoins do not have intrinsic value, they do not have tax value and they do not have any gauranteed exchange rate to anything else. If everyone decides to cash out then the value of bitcoins could drop through the floor very quickly.

      That doesn't mean bitcoin doesn't have it's uses. They provide a way to make transactions without government interference and they previously provided a way of making small transactions without the high fees of things like paypal and international bank transfers (unfortunaly the current high value of bitcoins means that under current transaction fee rules this is getting less true).

      • by cgeys (2240696)
        Most people I talked about this after the drop just said they're not really interested about it and said they don't care because they haven't "bought" bitcoin with real money and that they could always just sell their GPU's later. In my opinion that just shows people don't understand what's going on. The money you lose is very real. If you mainly use US dollars, but had some cash in lets say chinese yuan and it would lose 30% of its value, that's a real loss. If your Bitcoins lose 30% of their value, that's
        • by MightyYar (622222)

          If you mainly use US dollars, but had some cash in lets say chinese yuan and it would lose 30% of its value, that's a real loss. If your Bitcoins lose 30% of their value, that's a very real loss too.

          Either way, cash is a terrible investment. One should try to use cash for exchanges, and it is prudent to have some cash on hand, but the bulk of one's savings should not be in dollars or bitcoins.

      • Bitcoins do not have intrinsic value

        Isn't that true for most currencies? You know, being off the gold standard and all that. I'm not saying it's a good thing - I just note it.

        they do not have any gauranteed exchange rate to anything else.

        Again, that's common for currencies, right?

        • by Kenja (541830)
          Nope. Most currencies are backed by a government and not just some guy on the internet. Go on, just try printing your own Fun Bucks and try spending them. Thats more or less what happened with Bitcoin but the guy managed to get other people to buy into it.
          • Re:Bitcoin (Score:4, Insightful)

            by Bengie (1121981) on Tuesday June 14, 2011 @01:46PM (#36438742)

            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:Bitcoin (Score:5, Interesting)

          by Serious Callers Only (1022605) on Tuesday June 14, 2011 @12:28PM (#36437642)

          Isn't that true for most currencies? You know, being off the gold standard and all that. I'm not saying it's a good thing - I just note it.

          The value of gold on the free market is also far above the intrinsic value - if fewer people saw gold *purely as a medium of wealth storage* then the value would plummet. Gold is in fact very like a fiat currency, right down to the production and distribution being controlled and manipulated by just a few big players, so its not as if the supply of it is constant or finite. It's not quite as vulnerable as a fiat currency to devaluation, but it is still only as valuable as people think it is.

          Bitcoin is an interesting idea, in that it tries to provide a finite supply of coins (once the initial period of production is over) which will mean it cannot be devalued by issuing more - that would make it an ideal currency for a government and/or a public which valued fiscal responsibility. Unfortunately no-one does.

      • Re:Bitcoin (Score:4, Insightful)

        by Dalambertian (963810) on Tuesday June 14, 2011 @12:33PM (#36437722)
        The default transaction fee was lowered with the most recent update. Also, money isn't supposed to have intrinsic value. That's one reason bills are made out of paper.
  • by curunir (98273) * on Tuesday June 14, 2011 @11:08AM (#36436226) Homepage Journal

    With BitCoin limited to a pre-determined amount and the difficulty of mining new BitCoins, it seems that this gives a huge advantage to people who got into BitCoin early and have already amassed a considerable amount of BitCoins. Is this true and, if so, do you think this disincentive will undermine BitCoin's ability to become more popular since the majority of the population will have to work so much harder to obtain the currency?

    • by alen (225700) on Tuesday June 14, 2011 @11:12AM (#36436314)

      at this point it's not even worth mining for it. i looked at the exchange rates to real money and by the time you invest in a dual GPU system and pay the electric bills you don't make any profit

      • by curunir (98273) * on Tuesday June 14, 2011 @11:18AM (#36436410) Homepage Journal

        That was the point...BitCoin is great for people who got in early and mined a lot. But for everyone else, adopting it means essentially giving those early adopters stuff for free.

        • by MoonBuggy (611105)

          Which is not really any different to the people who got the gold in California, the land in Manhattan, the best .com names, or the IPO stock in Google.

          • by mcvos (645701)

            They have some real value backing it. Bitcoin doesn't.

        • by DrXym (126579)

          That was the point...BitCoin is great for people who got in early and mined a lot. But for everyone else, adopting it means essentially giving those early adopters stuff for free.

          It's also the point of most pyramid schemes. Get in early and get the hell out before it all collapses and let some other poor bastard be the one out of pocket.. I don't see any fundamental difference with Bitcoin. The funny part is the whole "get in early" aspect may be what seals its doom, once Bitcoin matures, it's bound to spur a pile of Bitcoin wannabes which promise easy mining potential and the whole cycle will repeat, burning the people still stuck on the old system.

        • by Eponymous Bastard (1143615) on Tuesday June 14, 2011 @02:11PM (#36439088)

          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...

      • by erroneus (253617) on Tuesday June 14, 2011 @11:26AM (#36436560) Homepage

        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.

      • by AmiMoJo (196126)

        I think the point he was making is that people who got in early got loads of free money by mining, where as the rest of us have to buy it at the going exchange rate. It seems unfair that the opportunity to exchange computer cycles for currency at a very favourable rate is denied to us because we came to the party late.

        • by dpilot (134227)

          On the other hand, the early adopters are the ones who made bigcoin into something sufficiently viable that you're even thinking of getting involved. They have performed a service, and they've been compensated for it. Of course now they have to mine under the same conditions as you, so their extra incentive has ended.

          Seems fair to me.

    • by Aceticon (140883) on Tuesday June 14, 2011 @11:24AM (#36436538)

      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: (Score:2, Troll)

        by DriedClexler (814907)

        US Government bonds seem to have a lot of the properties of a pyramid scheme, mainly:

        - First adopters have an inherent advantage since they could buy lots of Treasury bonds in the early days of the Republic when they still traded at a discount.
        - US Government bonds 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 US Government bonds, the higher the pool of real money available to exchange for

  • by conner_bw (120497) * on Tuesday June 14, 2011 @11:09AM (#36436254) Homepage Journal

    I argue that bitcoin is interesting because it's a locked currency, with a known maximum, and a timeline for that maximum based on contemporary crypto math and radical ideas. There is clearly well thought out timeline for adoption and disruption. It's not just "Cool, new money!"

    My question: Are you a crypto anarchist, or similar?

    If not, then is this another Tulip craze [wikipedia.org] and all these news stories and bitcoin currency exchange services being hyped heavily the last month machinations for profiteering?

    • by sirwired (27582) on Tuesday June 14, 2011 @12:00PM (#36437138)

      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.

  • the idea that if you lose or destroy or whatever your computer and lose all your money isn't going to make the general public accept this

    • the idea that if you lose or destroy or whatever your computer and lose all your money isn't going to make the general public accept this

      That's not how it works. If you lose your hash, then you lose your money. But that's no different than any other data loss because you didn't back up your data.

      • by alen (225700)

        if my computer crashes and i lose my kids photos it doesn't mean i suddenly lose all my life savings

        • Re: (Score:3, Informative)

          by slim (1652)

          Yeeees. But if you kept your life savings in a suitcase of cash, and it got burnt, you'd lose your life savings. A bitcoin wallet is like a suitcase of cash.

          A Bitcoin wallet is also like your folder of photos of your your kids -- you can take a backup of it, and should do so.

          Or keep your Bitcoins in a Bitcoin bank. There probably is one now -- I've not looked. If there isn't one, there's no technical reason for there not to be one.

          Or, use Bitcoins to buy and sell, trading them for "real" money in order to k

    • Perhaps you can store your BitCoins inside a safe deposit box of a real bank.
      • by vlm (69642)

        Perhaps you can store your BitCoins inside a safe deposit box of a real bank.

        There is absolutely no theoretical reason your wallet file cannot be printed out using crude uuencode/uudecode or something more modern like par2 or SSSS and converted into QR codes or whatever and stashed in a safe deposit box.

        My wallet file with 95 BTC in it is about 112K right now. Not megs, not gigs, just K. I'm thinking, 80 characters per line, 60 lines per page, results in ten or so double sided pages of data. Since you can't realistically print out more than alphanumerics in the text, you have to

  • i can't see everyone having to drag a laptop to every transaction

  • accidentally the verb.

    You can (some) things with Bitcoin

    Aside from this, my question is as follows: what's the contingency plan in the event that the currency is undermined, either by means of the PKI being broken or some other vulnerability being uncovered?

  • Quantum Computing? (Score:5, Interesting)

    by SanityInAnarchy (655584) <ninja@slaphack.com> on Tuesday June 14, 2011 @11:12AM (#36436306) Journal

    Are there plans to deal with quantum computing, or with any of the algorithms used being compromised?

    I understand that the hashes wouldn't be terribly devastating for Bitcoin -- worst case, I would think, you roll the entire network back to a snapshot of the transaction history before the first quantum computer started screwing stuff up, and start using a new hashing algorithm. It'd be very bad, but not catastrophic.

    But for actual accounts, it looks like we rely on ECDSA -- and it looks like even if Bitcoin offers a quantum-ready algorithm, my wallet is still likely compromised unless I move everything to it before the first viable quantum computer. Still, there doesn't seem to be much noise about this other than a few forum posts, largely dismissed by saying things like "DWave is vaporware."

    • by PhilHibbs (4537)

      "Roll the entire network back"? No, I managed to take your bitcoin off you by using a quantum computer to predict your crypto, and I refuse to roll back my bitcoins to you. There is no central bank that tracks who owns which bitcoins.

  • My question. (Score:5, Insightful)

    by Beelzebud (1361137) on Tuesday June 14, 2011 @11:13AM (#36436322)
    How much real money are you paying the Slashdot editors for the constant stream of stories about this worthless new "money"?
    • Re:My question. (Score:5, Insightful)

      by datapharmer (1099455) on Tuesday June 14, 2011 @11:14AM (#36436356) Homepage
      I wish I had mod point. Seriously, this bitcoin spam is getting really old.
      • I wish I had mod point. Seriously, this bitcoin spam is getting really old.

        What? You want another Apple article?

    • by Anonymous Coward

      They are paying in bitcoins, so the slashdot editors HAVE to keep plugging the crap for their payment to be worth anything.

    • They don't need to pay the editors a thing. The editors just need to have been early adopters. You can bet your bottom bitcoin that anyone raving about it has a stash of them saved up.

  • by Geoffrey.landis (926948) on Tuesday June 14, 2011 @11:16AM (#36436376) Homepage

    Good grief, yet another advertisement for bitcoin?

    Enough, already!

    • by Nidi62 (1525137) on Tuesday June 14, 2011 @11:21AM (#36436482)
      Someone must be getting paid for all of these bitcoin ads that are showing up as "stories"
      • by Raenex (947668) on Tuesday June 14, 2011 @11:43AM (#36436846)

        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.

        • by TheRaven64 (641858) on Tuesday June 14, 2011 @12:32PM (#36437718) Journal
          Last I checked, the laws related to pump and dump scams are not limited to official markets, only to things that can be traded for real currency. If Timothy owns BitCoins, is writing articles that inflate its value, and then makes a profit as a result, then he could be facing jail time.
          • by ddt (14627)

            I find it hard to believe how much vitriol geeks are showing for a major step forward in currency technology.

            You'd really prefer to stick with central bank currencies where the banks can instantiate money out of thin air whenever they please? You honesty think that's a better solution? Have you not noticed the trouble it has gotten us into?

            I am a game producer, and one of the things you learn early on is that you need to reward early adopters, because there is a default stigma against all things new. In

    • by Kjella (173770)

      Yep, this is starting to get as bad as the second life hyping. Seriously, you're not building credibility when it seems like the only thing you do is troll for more bitcoin buyers.

  • by lga (172042) on Tuesday June 14, 2011 @11:19AM (#36436430) Homepage Journal

    If we eventually use Bitcoin in everyday life, say, in the supermarket, how will we deal with prices in fractions of a Bitcoin? What terminology might we use for something priced at 0.00000005 Bitcoins?

    • by vlm (69642)

      If we eventually use Bitcoin in everyday life, say, in the supermarket, how will we deal with prices in fractions of a Bitcoin? What terminology might we use for something priced at 0.00000005 Bitcoins?

      A twentieth of a microBTC or uBTC (looks better in UTF-8)? More likely you'd call that "fifty nanoBTC"

  • by DriedClexler (814907) on Tuesday June 14, 2011 @11:20AM (#36436448)

    Not a question, but I thought I'd point to this explanation [blogspot.com] as a good introduction, not so much to Bitcoin, but to the cryptographic background you need to even make sense of how something like Bitcoin can work in the first place. (Wikipedia is a way too verbose and doesn't answer a lot of what's on people's minds.)

    Remember, people are uneasy about using something without a decent level of understanding about it, and it's hard enough for the average person to understand public key cryptography -- so you first have to accomplish that herculean task as a substep in explaining the specifics of bitcoin.

  • Aspirations (Score:4, Interesting)

    by slim (1652) <john AT hartnup DOT net> on Tuesday June 14, 2011 @11:21AM (#36436464) Homepage

    My question is, what are your aspirations for the currency. Do you hope for it to be near-ubiquitous -- used by corner shops and mainstream merchants like Amazon? Or are you happy to see a parallel economy grow, as a niche thing? Or something else?

    • by Kenja (541830)
      At a guess its "make a bunch of real money off of internet idiots and then fade into the background".
  • Some "benefits" of Bitcoin, from one perspective, appear to be that its cash-like properties lend themselves to tax avoidance (making transactions without declaring them), illicit trading (e.g. drugs or prostitution) and money laundering.

    Do you view this as a positive, a negative, or neutral? If you view it as a problem, how can the problem be mitigated?

  • by algorimancer (2266264) on Tuesday June 14, 2011 @11:24AM (#36436534)
    One thing that concerns me is the fixed maximum number of bitcoins. Lets say people acquire bitcoins, but the amount isn't enough to worry about, so they never use them, or perhaps their computer crashes and they don't have a backup. My understanding is that these bitcoins are permanently lost from the economy of bitcoins. Over time, the total supply would begin to dwindle, presumably pushing up the value of those that remain, until people become frustrated at the small supply and are motivated to move to a new system, then bitcoin is abandoned. In the real world this happens with dollar bills, but the government can compensate for this by creating more. Is this issue addressed in some fashion.
    • by vlm (69642)

      One thing that concerns me is the fixed maximum number of bitcoins. Lets say people acquire bitcoins, but the amount isn't enough to worry about, so they never use them, or perhaps their computer crashes and they don't have a backup. My understanding is that these bitcoins are permanently lost from the economy of bitcoins. Over time, the total supply would begin to dwindle, presumably pushing up the value of those that remain, until people become frustrated at the small supply and are motivated to move to a new system, then bitcoin is abandoned. In the real world this happens with dollar bills, but the government can compensate for this by creating more. Is this issue addressed in some fashion.

      Floating point BTC, essentially. Technically its actually fixed point with lots -o- decimal places.

      At an instantaneous level, the whole "economy", at least as a trade good, could function using a billion nano-BTC. or 10 ** 12 picoBTC.

      At a long term level, its a bigger problem because all of our modern financial systems are organized around eternal debt-based growth and massive generational-scale central bank inflation. BTC inherently has an entirely different financial system, not just a way to toss virt

  • Is there any way to make the calculations more useful (i.e. Boinc) and still maintain the same level of difficulty in the computations? It just seems so wasteful to run Bitcoin at this time.
  • Is there any serious development underway to make the privacy more robust? There has been talk of "Bitcoin laundry", where large pools swap their coins around between each other to make it harder to connect a coin/address with an owner.

    But for this to seriously work, it needs a lot more people to be involved in it, and it has to be integrated in a way that's secure (against someone just keeping coins in the middle of a shuffle) and transparent to the user (so they don't have to think about the new addresse

  • I have found that the Austrians [wikipedia.org] have a hard time accepting the idea of a digital currency. The core of their argument seems to be that digital currencies are not made up of something that had value before being a medium of exchange, such as gold and silver. When I counter to them that BitCoin is made up of code and people pay money for things like video games, they argue that the video game would have to be the thing valued, not the computer code. How do you deal with these kinds of objections?
    • Ja, ja! Die Oesterreicher haben echt Probleme mit der Idee von Bitcoin! Was fuer ein Geld ist das? Man kann es nicht mit den Haenden beruehren!

  • by Animats (122034) on Tuesday June 14, 2011 @11:27AM (#36436580) Homepage

    Convince me it's not a Ponzi scheme.

    The BitCoin ecosystem is composed of very flaky entities. The biggest "exchange", Mt. Gox, seems to be one person reachable only on IRC. They're a depository institution, and people have substantial balances with them. Not only are they not regulated, they don't even seem to have a business address.

    The "exchanges" all seem to transfer funds in and out through even flakier services, like Liberty Reserve (somewhere in Costa Rica) and Dwolla (run out of a hackerspace in Des Moines). Neither is registered as a money transfer agency. What we're not seeing is some bank in Switzerland or Luxembourg, handling Bitcoins.

    All these organizations are acting as depository institutions without a license to do so. None of them guarantees contractually that they will pay out funds within a set time. All are uninsured and unaudited. Most of them seem to be having some problems delivering cash lately now that there's been a crash in Bitcoins.

    On top of this, the whole Bitcoin system is set up like a Ponzi scheme, where there's an advantage to getting in early.

    It's probably already too late to get in, and it may be too late to get out.

    • by alen (225700)

      and don't forget that to "mine" this currency you have to spend real money on a computer and the resources to keep it powered on and working 24x7

      • by slim (1652)

        It's expected that the market value of Bitcoins will settle at just above the cost of mining, if you mine very efficiently. So if you're willing to innovate, and work at scale, it will be worth mining. Otherwise, you'll be better off trading. This makes perfect sense. Why would I give you $10 worth of product for n Bitcoins, when I could just make n Bitcoins myself for $10 worth of computation?

        This is just like gold. It doesn't make economic sense to dig for gold, unless you intend to do it on a large scale

    • by vlm (69642) on Tuesday June 14, 2011 @11:52AM (#36436994)

      Convince me it's not a Ponzi scheme.

      Break out ye olde wikipedia and be enlightened. Basically a Ponzi scheme involves one individual taking in periodic money deposits from many people and spending that income on overhead or paying out as faked interest/income. See Bernie Madoff.

      Since there is no one individual, no regular periodic deposits/investments, no statements with made up balances, no interest payouts... I guess it fails to meet all criteria of a Ponzi scheme.

      It may in fact be a massive investment "bubble" much like .com stocks / homes / social media / higher education. But its not a Ponzi.

      I will give you credit that in modern American English, Ponzi has become null. Kind of like prefixing a question with "but that begs the question", when it means nothing in context, or at least certainly not what actually begging the question means. Similar to illiterate youngsters saying the word "like" every other word as a placeholder or time-filler.

      It's probably already too late to get in, and it may be too late to get out.

      As an investment scheme, yeah. For mining-for-profit, yeah. However, I "get in" by mining about 200 BTC back when the "difficulty" parameter was about two digits. I think I can "get out", if I please, with no loss.

      Basic rule of investing is you bake your return in when you select your "buy" price. Mine was installing and compiling some software and having an enjoyable time reading the code and math behind it. Its pretty interesting. No downside means I have an excellent rate of return regardless of whatever market manipulations are going on.

  • How does bitcoin prevent forgery? What's to stop someone from modifying their local database to give themselves lots of money, and how do you verify that money coming to you is real?

  • by merdaccia (695940) on Tuesday June 14, 2011 @11:32AM (#36436652)
    We live in a world where the supply and movement of money are controlled by governments, central banks, money laundering laws, and financial institutions. How can BitCoin survive in this world? Middle men like banks stand to lose a fortune in fees and exchange rates, governments stand to lose a fortune in taxes if they can't track money movement, and the black market stands to gain a silent way to move value. For BitCoin to gain adoption, some major retailers need to start supporting it, but given the above risks, what stops a government from telling companies in its jurisdiction that they can't accept it?
  • 5-step formula (Score:4, Informative)

    by Nidi62 (1525137) on Tuesday June 14, 2011 @11:32AM (#36436662)

    1. Create new "currency"

    2. Make new "currency" progressively harder to acquire as time goes on

    3. Get new people to buy into the "currency"

    4. Sell off your easily gained currency holdings to new adopters

    5. Profit!

    Hey guys, I found Step 4!

  • by Limerent Oil (1091455) on Tuesday June 14, 2011 @11:33AM (#36436674)
    My question: Why would any merchant IN THEIR RIGHT MIND want to deal with Bitcoin? With the insane USD-to-Bitcoin exchange-rate gyrations happening lately, why would any serious retailer even bother, when the value of Bitcoin vs. USD could change by 50% or more in just a few hours?
    • by Zerth (26112)

      Any merchant accepting bitcoin will treat it like paypal(an equally unreliable payment method): as often as you can, sweep it into a real bank.

      • WTF? BitCoins are like PayPal? At least PayPal (unreliably) collects the local currency, the value of which is internally consistent. PayPal does NOT collect "PayPal Bucks" which are then worth widely varying amounts of currency you can actually carry out non-niche transactions in.

        If you don't understand what I just said, let me know, because I'd like to dig up some Flooz to sell you.

  • How many early adopters were there, or in other words: how many people were involved in mining the first one million Bitcoins?

  • by Cyberax (705495) on Tuesday June 14, 2011 @11:36AM (#36436726)

    What about the lack of inflation?

    It's long known that economic growth is severely stunted without some measure of inflation. Adopting bitcoins for the global economy would mean that policymakers lose control on money supply, and while there are advantages in this, disadvantages far outweigh them. Additionally, adopting a global currency standard will deny governments ability to influence currency rates robbing them of yet another way to control the economy.

    Is there any plan to solve this? Maybe a system of independent bitcoin 'roots' operated by governments would help?

    • by sirwired (27582) on Tuesday June 14, 2011 @12:11PM (#36437352)

      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.

  • with the regulations of trading when you get big enough?

    As someone who create a smart card system that allowed merchants to put on and take off units of currency on a smart card, I knos first hand how fast the regulations will change so that a bank must be included.

    seriously, undermining the relative stability of an economic environment will not go well, and that's exactly what would happen if bitcoin where to get huge.

  • How will your business change when countries regulate exchanges?

    How do you ensure your exchange isn't being used for illicit purposes (to avoid being shut down by government authorities)?

    e.g., http://wnflam.com/news/articles/2011/jun/08/senators-seek-crackdown-on-bitcoin-currency/ [wnflam.com]

  • by mcvos (645701) on Tuesday June 14, 2011 @11:53AM (#36437004)

    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?

  • So far, in the bitcoin community, you see miners, speculators and marketplaces. The system is well designed to attract greedy people, but not to perform useful transaction.

    In money history, metal coins are successful for trade when there metal value is weak. If they contains too much gold or silver, people tend to keep them. It's the same for bitcoin: the built-in deflation encourage actors to accumulate bitcoins, not trade them.

  • by naoursla (99850) on Tuesday June 14, 2011 @12:24PM (#36437574) Homepage Journal

    The US shuts down people who attempt to print their own currency in competition with the US Dollar. This creates a moat to competition for currency in the US which keeps people using the US Dollar.

    Does Bitcoin have a moat? What prevents someone from starting a Bitcoin clone currency and devaluing Bitcoin through creation of competing digital money?

  • by ThatsNotPudding (1045640) on Tuesday June 14, 2011 @01:15PM (#36438328)
    What happens when China decides to dedicate swathes of supercomputers to generate BitCoins - and how could anyone possibly know until the market is destroyed?
  • by ThatsNotPudding (1045640) on Tuesday June 14, 2011 @01:18PM (#36438374)
    In Dutch, I believe BitCoin is pronounced Tulip Bulb
  • by bcrowell (177657) on Tuesday June 14, 2011 @02:00PM (#36438934) Homepage

    Why would any individual gain any advantage by participating in bitcoin, except that some early adopters may have been able to realize profits at the expense of later adopters? The closest the bitcoin FAQ [bitcoin.it] seems to come to answering this is:

    Is Bitcoin a Ponzi scheme? [...] Bitcoin has possible win-win outcomes. Early adopters profit from the rise in value. Late adopters profit from the usefulness of a stable and widely accepted p2p currency.

    The final sentence is what is supposed to make it not a Ponzi scheme. Let's break that down into pieces:

    Stable: I live in the US, so this doesn't do much for me. The dollar has had a relatively low inflation rate for decades now, whereas bitcoin could become completely worthless at any time. Even if I was living in a country like Venezuela, which has crazy inflation, I would be foolish to hold any significant portion of my assets as bitcoins. I'd be much better off stuffing US currency in my mattress. If I was the type of libertarian who gets upset about "fiat currency," I could put my money in real estate or gold coins.

    Widely accepted: It's not widely accepted, and I don't think it's plausible that it ever will be.

    P2P: Why is this a good thing?

  • by wired_parrot (768394) on Tuesday June 14, 2011 @06:13PM (#36442992)
    Full and open disclosure: how many bitcoins do you currently own?
    Also, as this is a fiat currency, trust is fundamental. Therefore, what kind of ethical standards do you have in place to prevent conflicts of interest in having the developers / promoters of this currency being potentially some of the largest holders of the currency and potentially the most likely to profit in it?

Everything that can be invented has been invented. -- Charles Duell, Director of U.S. Patent Office, 1899

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