10 ms·

Bitcoin hits US$ 4, after being mentioned on CNN yesterday

144 points by TheCoreh 15y ago

TheCoreh 15y ago
Here's the article on which it was mentioned: http://globalpublicsquare.blogs.cnn.com/2011/04/29/4-trends-shaping-the-emerging-superfluid-economy/ http://globalpublicsquare.blogs.cnn.com/2011/04/29/4-trends-... It was also mentioned on Forbes recently: http://www.forbes.com/forbes/2011/0509/technology-psilocybin-bitcoins-gavin-andresen-crypto-currency.html http://www.forbes.com/forbes/2011/0509/technology-psilocybin...
kiba 15y ago
This is either a bubble or probably the most awesome J-curve of the decade. Either way, I am waiting to see what happens. I have more than enough bitcoin for a black swan hedge. I am also going to be with bitcoin to the bitter end or the ultimate victory over state-controlled monetary system.
- Alex3917 15y ago
  "This is either a bubble or probably the most awesome J-curve of the decade." The average American isn't smart enough to understand what bitcoin is, how it works, how to buy them, how to spend them, etc. In five years bitcoin is going to be just another failed standard like i-names or GPG, something that doesn't ever get used except for in very niche enterprise usecases or when nerds are trying to impress other nerds.
  - TheCoreh 15y ago
    The average person isn't smart enough to understand what a stock market is, how it works and how to buy/sell stocks, either. That doesn't mean they're not used.
    - Alex3917 15y ago
      The reason they are used is that there is an entire abstraction layer around it, all you have to do is give your money to the guy whose face is on the billboard. As a crypto currency, bitcoin is fundamentally incompatible with this model.
      - paulgb 15y ago
        There's nothing to prevent that level of abstraction being built around bitcoin. The average credit card user doesn't understand what's going on in the background, just that money from their bill is transferred to the merchant.
  - kiba 15y ago
    Why would bitcoin stays hard to use and hard to learn?
  - viraptor 15y ago
    1. Average person knows how to use paypal (or thinks they know). 2. Setup paypal like web-interface for bitcoin e-wallets. 3. ... 4. Profit! Have a look at the official bitcoin application and the paypal panel. There is not much difference and bitcoin panel actually is simpler since you can do less actions there.
  - scythe 15y ago
    If GPG is a failure, I'd say failure is looking pretty good.
- keith_erskine 15y ago
  Must mean it's time for me to write that "Get in on the Bitcoin Revolution" book.
Osiris 15y ago
It looks like had I know the article was going to air, I could have doubled my money almost overnight. I would expect the price to stop dropping any time now.
- zackattack 15y ago
  My friend used this strategy to make tremendous amounts of money during the Dot Com bubble.
JCB_K 15y ago
So say I'd have a blog with a huge reach. I hear about bitcoins. I buy a million for $4 each. I blog about it. Next day it's at $8. I'd sell the bitcoins, maybe 10000 a day to not let the market crash, and in 3.5 months I've got $4 million more than I used to.
- TheCoreh 15y ago
  It's a still small, unregulated market, so yeah, you could probably do that.
  - JCB_K 15y ago
    Unfortunately I neither have a blog with big reach nor $4 million. :)
- dalore 15y ago
  > Dark pools allow you to trade large quantities without moving the market.
  - Gaussian 15y ago
    I doubt there's much liquidity to be had in these dark pools. More likely they're dark deserts.
- zbanks 15y ago
  To be fair, the same happens in the stock market: http://en.wikipedia.org/wiki/Penny_stock#Artificial_Inflation_of_Penny_Stocks http://en.wikipedia.org/wiki/Penny_stock#Artificial_Inflatio...
  - JCB_K 15y ago
    ha! that reminds me of my Economy class in high school. We used to do a weekly game, where in the beginning of the year we'd have a certain amount of money, and we'd have to buy stock. The teacher would every week update us with the latest stock information, and based on that we'd have to make decisions. The person with the biggest amount of money at the end of the year won. So I picked stock of a company which was basically bankrupt already, but was still on the stock market (why I don't know, I'm not an expert.) I think the stock was £0.02. So I waited a few weeks, and it happened to be at £0.05. I sold everything, didn't do anything for the rest of the year, and won. Didn't make the game very exciting, but at 15 years old I mainly cared for winning :)
patrickod 15y ago
I've been watching the price of BTC rise pretty steadily in the last few days but I can't bring myself to believe that this price range is in any way sustainable. $4 per bitcoin? Not even the EUR and GBP have ever reached that in my recollection. I guess it if does stay like this mining is going to become pretty lucrative and certainly financially worth it.
- DavidSJ 15y ago
  $4 per bitcoin? Not even the EUR and GBP have ever reached that in my recollection. Keep in mind that the exchange rate is a function of several inputs, one of which is the rather arbitrary fact of how much total currency is in circulation. There are many fewer BTC than USD, EUR, GBP, etc. (about one million times fewer, to be precise). And conversely, there are many more JPY in circulation, which is part of the reason the yen is much cheaper than the US dollar. That doesn't mean there's not a BTC bubble. There may very well be. But you can't do the comparison you just did and expect it to be meaningful. If the BTC protocol had specified the decimal point one place to the left, BTC would be trading at 0.40 USD right now, not 4.00 USD. There'd just be 10 times as many. What you have to do is ask how much total wealth the world will want to store in BTC, and then divide that by how many BTC there are. The answer to the first question is a huge unknown. The answer to the latter is specified by the protocol: 21 million.
  - patrickod 15y ago
    Given the current valuation though of $3.5 and the fact that there are approximately 6M bitcoin in circulation, that gives quite a large valuation on what seems to be a very limited market at the moment. You are right though, my initial simple comparison of numbers leads only to inaccuracies
  - csomar 15y ago
    You seem to be knowledgeable in this field. I have no idea about it and would like to get a small insight. Can you recommend a tutorial (Preferably less than 40 pages) that explains some of the main concepts?
waterlesscloud 15y ago
On a volume of 53,896 btc since midnight. For some perspective.
- erikig 15y ago
  Here's a quick realtime view of the markets Mt. Gox included. http://bitcoincharts.com/markets/ http://bitcoincharts.com/markets/ There's pretty decent volume and the bid/ask spread is gradually tightening. Just for some perspctive, the US Dollar index futures trade about 15,000 contracts a day, (granted they are much easier to convert). I'll keep an eye on this...
  - DavidSJ 15y ago
    A US dollar futures contract represents 1,000 dollars. So that's $15 million per day.
    - Gaussian 15y ago
      I think it's the value of the index X $1,000. So the notional value traded per day is more like $1.1 billion because the index is now around 73.
Construct 15y ago
Four days ago, Bitcoin was under $2 USD. Now it's over $4 USD (depending on when you refresh the page). There are 6 million bitcoins in existence, and trade volume is only about 54,000 according to the biggest exchange. There aren't enough bids/asks to soak up more than about $100 USD without throwing the exchange rate one direction or the other. For example, right now (as I write this) exchanging $1000 USD for some Bitcoins is all it takes to push the exchange rate up $0.10 from $3.77 to $3.87. What a lot of Bitcoin newcomers don't realize is that Bitcoin depends on 'mining' to generate new bitcoins. Computers run cryptographic hashes to find the 'winning' has which is less than the current difficulty target number. The computer that finds this hash is awarded 50 BTC. The difficulty target is automatically adjusted upward to keep new bitcoin generation at a constant pace. Some quick research shows a handful of big players in the mining market who have invested heavily in high-end GPUs for dedicated bitcoin mining, some with over 50 GPUs running 24/7 for months now. These guys are bound to have huge quantities of bitcoin they are eager to unload when the price is right. Meanwhile, news coverage is driving exploding popularity, which appears to be pulling the exchange rate sky high. On paper, many of these guys have become overnight millionaires just by running a bunch of computers 24/7. Of course, as these players cash out the exchange rate will fall. These guys are too smart to sell all at once and flood the market, but with volatility like this I'm willing to bet a lot are eager to pull their bitcoin out of the game before the bubble pops. Meanwhile, hardware enthusiasts all over the internet are rushing to buy GPUs to dedicate to mining. They don't seem to realize that the bitcoin system automatically adjusts to keep the bitcoin generation rate constant at 50 BTC per 10 minutes. As the mining market becomes flooded with new 'miners' the difficulty will climb rapidly, until it becomes unprofitable to run a GPU if you have to pay for electricity. Finally, bitcoin is highly illiquid. My research was brief, but I couldn't find an easy way to exchange small amounts of BTC for USD that didn't look terribly sketchy or involve a lot of fees. Stores aren't eager to accept bitcoin because the exchange rate at the moment can easily swing 10% between when the user presses 'check out' and the transaction is processed. The bitcoin system is a very interesting concept, and it was clearly implemented by some very intelligent people. But as it currently stands it's just a playground for speculators and market manipulators. Expect some carnage in the coming months.
- kiba 15y ago
DavidSJ 15y ago
If anyone's in SF and wants to stop by Noisebridge, we're having a BitCoin party today until 5 pm.
- FlemishBeeCycle 15y ago
  What exactly goes on in a BitCoin party?
  - DavidSJ 15y ago
    I'm not totally sure. I hear there will be BitCoin-shaped cookies and some games.
    - gwern 15y ago
      Maybe also run it as a key-signing party? http://en.wikipedia.org/wiki/Key_signing_party http://en.wikipedia.org/wiki/Key_signing_party
sabat 15y ago
How can the SEC not be all over this? It's amazing to me that it has either escaped its attention or -- possibly -- it has absolutely no idea what to do about it.
- sgornick 15y ago
  Does the SEC regulate baseball cards? If bitcoin were an equity, then the U.S. Securities and Exchange Commission might be looking at it. But even if they did ... if you are in Brazil, Russia, India, China, or wherever, ... how would what the SEC does be relevant? (yes, I'm being purposely obtuse, but remember that bitcoin is data, and as such it knows no borders.)
  - arohner 15y ago
    There are lots of kinds of data that are illegal to possess. Classified documents, insider information, copyrighted music, etc. And remember certain US agencies have huge power outside the US. The DEA and the IRS come to mind. I don't know which US agency will flip out when bitcoin becomes popular, but I'm quite certain one of them will, once it becomes widespread to exchange for illegal items, and used for money laundering.
    - sadfsa 15y ago
      It's already widespread enough to use for some forms of money laundering. If you want to secretly move money from the US to Europe, just buy BTC in the US, deposit them on Mt. Gox (whose domain is registered in Japan, so I assume the servers are also in Japan), and from there sell the BTC and deposit the resulting money in your Swiss bank account. It's also widespread enough to use instead of a Swiss bank account to hide money. Just move the money into a Bitcoin wallet, encrypt the wallet, and store copies of it on as many computers, in as many countries as possible.
  - sabat 15y ago
    Hmmmm. This is a cash-equivalent -- or perhaps the SEC could see it that way.
nwmcsween 15y ago
And I thought bitcoin wasn't going to go anywhere, I made about 3000BTC back in 2009 and just over time forgot about it and lost my 'wallet' id (a hash), kicking myself in the ass now.
geuis 15y ago
Just as a quick reminder, since most people commenting don't understand how bitcoin generation works. It is not possible to "corner the market" by having more gpu power than other people. The btc algorithm was designed to only produce bitcoins at a constant rate. Adding a million more systems trying to calculate the answer to the next hash block only makes it a million times slower. If the bubble were to pop tomorrow and it went back to being a network with only a few hundred low power systems, the btc network will auto correct to produce new bitcoins in relation. It is not possible to game the system this way.
- forensic 15y ago
  It's very easy to game the system. You need roughly 30% of the network's total computing power and you can "steal" bitcoins from others. The creator of bitcoin outlines a strategy for stealing bitcoins in the FAQ. In it, he claims that 50% of the computing power is necessary to do this. Later improvements to the technique (and simulations by various people) have shown that you can do it in much less, possibly as low as 15% of the computing power. Bitcoin is highly vulnerable to a nation state or intelligence agency that wants to own it. It is also highly vulnerable to rich entrepreneurs who want to make a profit by cornering the market. The NSA could destroy bitcoin in the blink of an eye with only a tiny fraction of their supercomputer power. Likewise for botnet operators and other professional extortionists who no doubt have their eye on bitcoin. The fact that bitcoin hasn't been destroyed yet is just a demonstration that the currency is not really worth anything right now.
  - jimrandomh 15y ago
    My (non-expert) understanding of the issue is that a having majority of the mining computation gives you the power to roll back transactions, but not to forge transactions that transfer money to you; and that the risk of having a transaction be rolled back on you can be reduced just by waiting for the block chain to get longer.
    - forensic 15y ago
      rolling back a transaction and claiming it yourself is a kind of stealing more advanced ways of stealing bitcoins have been developed and successfully simulated, for instance the dominant cartel can actually go several blocks ahead of everyone else but not advertise them, and then only roll back other people's finds when those people advertise them. For instance the cartel using superior cpu power actually solves 2 blocks ahead of everyone else but does not tell the other nodes that it has solved it. It waits until someone else advertises that they have solved the block and then releases their own and rolls back the other person's. There are many optimizations that can be made to improve this exploit. The exploit completely ruins any hope for bitcoins being an unmanipulated currency. Even in the base case scenario where multiple cartels compete to dominate the bitcoins, the average person will be squeezed out and all the advantage will go to the cartels. It will end up WORSE than other currencies based on the credibility of the various governments. The bitcoin concept is inherently flawed because cpu power is not democratic. Especially when it comes to the implementation details of bitcoins, which are actually very inefficiently computed on a regular person's computer. Purpose-built bitcoin computers are orders of magnitude more effective than normal computers, compounding the other issues with bitcoins. The fact that most people's CPU cycles are migrating toward mobile battery powered devices does not help either. How many people do you know who still have bulky desktop computers plugged into the network 24/7 rather than mobile battery powered devices that spend more time offline than online?
mmaunder 15y ago
There's this received wisdom among sociologists that three prerequisites for a stable country are laws, someone to enforce them and a judiciary. I mention this since Bitcoin is creating it's own economy which is analogous to a virtual country. The major benefit of Bitcoin, it's lack of jurisdiction, may also be a disadvantage. As the first disputes arise, hopefully a body of precedent will be developed that strengthens the currency rather than destroys it.
- cgerard 15y ago
  An economy is based more on the trust between the actors within it than on its medium of exchange or the goods and services being exchanged. Bitcoin doesn't address this aspect. Because fraud and collusion are still possible in a Bitcoin economy there exists the possibility of both currency instability and the creation and enforcement of monetary policy. An irrational public can be just as damaging to a currency's value as an unwise central bank or government. Regardless, I find Bitcoin to be a very interesting system and I'll keep tabs on its development.
joeyh 15y ago
Check this out: 200,000 bitcoins transferred in one transaction today. http://blockexplorer.com/address/1MqsETo2t6W61QUCL9KRdw2P1PWTXQFnYm http://blockexplorer.com/address/1MqsETo2t6W61QUCL9KRdw2P1PW... That's roughly 4% of all bitcoins ever minted, if my math is right.
xbryanx 15y ago
Oh goodie, another part of our economy that ignores the true cost of energy creation. Has anyone looked at models of how this system might work if the miners had to pay significantly more money for electricity?
- jsilence 15y ago
  With the term "energy creation" you are ignoring the first law of thermodynamics. But apart from nitpicking I agree with your point. In the end the whole economy thing boils down to "having the capacity to actually do stuff.", which ultimately requires energy. Giving a unit of currency to someone is like giving a promise that he can actually DO something later. In the case of bitcoin, the energy is used (dissipated to heat) during the creation of the currency itself. No substantial backing of the curency beyond that. But then again this is true for any other currency floating around right now. -jsl

144 points by TheCoreh 15y ago

Here's the article on which it was mentioned: http://globalpublicsquare.blogs.cnn.com/2011/04/29/4-trends-shaping-the-emerging-superfluid-economy/ http://globalpublicsquare.blogs.cnn.com/2011/04/29/4-trends-... It was also mentioned on Forbes recently: http://www.forbes.com/forbes/2011/0509/technology-psilocybin-bitcoins-gavin-andresen-crypto-currency.html http://www.forbes.com/forbes/2011/0509/technology-psilocybin...

kiba 15y ago

This is either a bubble or probably the most awesome J-curve of the decade. Either way, I am waiting to see what happens. I have more than enough bitcoin for a black swan hedge. I am also going to be with bitcoin to the bitter end or the ultimate victory over state-controlled monetary system.

Alex3917 15y ago
"This is either a bubble or probably the most awesome J-curve of the decade." The average American isn't smart enough to understand what bitcoin is, how it works, how to buy them, how to spend them, etc. In five years bitcoin is going to be just another failed standard like i-names or GPG, something that doesn't ever get used except for in very niche enterprise usecases or when nerds are trying to impress other nerds.
- TheCoreh 15y ago
  The average person isn't smart enough to understand what a stock market is, how it works and how to buy/sell stocks, either. That doesn't mean they're not used.
  - Alex3917 15y ago
    The reason they are used is that there is an entire abstraction layer around it, all you have to do is give your money to the guy whose face is on the billboard. As a crypto currency, bitcoin is fundamentally incompatible with this model.
    - paulgb 15y ago
      There's nothing to prevent that level of abstraction being built around bitcoin. The average credit card user doesn't understand what's going on in the background, just that money from their bill is transferred to the merchant.
- kiba 15y ago
  Why would bitcoin stays hard to use and hard to learn?
- viraptor 15y ago
  1. Average person knows how to use paypal (or thinks they know). 2. Setup paypal like web-interface for bitcoin e-wallets. 3. ... 4. Profit! Have a look at the official bitcoin application and the paypal panel. There is not much difference and bitcoin panel actually is simpler since you can do less actions there.
- scythe 15y ago
  If GPG is a failure, I'd say failure is looking pretty good.
keith_erskine 15y ago
Must mean it's time for me to write that "Get in on the Bitcoin Revolution" book.

Osiris 15y ago

It looks like had I know the article was going to air, I could have doubled my money almost overnight. I would expect the price to stop dropping any time now.

zackattack 15y ago
My friend used this strategy to make tremendous amounts of money during the Dot Com bubble.

JCB_K 15y ago

So say I'd have a blog with a huge reach. I hear about bitcoins. I buy a million for $4 each. I blog about it. Next day it's at $8. I'd sell the bitcoins, maybe 10000 a day to not let the market crash, and in 3.5 months I've got $4 million more than I used to.

TheCoreh 15y ago
It's a still small, unregulated market, so yeah, you could probably do that.
- JCB_K 15y ago
  Unfortunately I neither have a blog with big reach nor $4 million. :)
dalore 15y ago
> Dark pools allow you to trade large quantities without moving the market.
- Gaussian 15y ago
  I doubt there's much liquidity to be had in these dark pools. More likely they're dark deserts.
zbanks 15y ago
To be fair, the same happens in the stock market: http://en.wikipedia.org/wiki/Penny_stock#Artificial_Inflation_of_Penny_Stocks http://en.wikipedia.org/wiki/Penny_stock#Artificial_Inflatio...
- JCB_K 15y ago
  ha! that reminds me of my Economy class in high school. We used to do a weekly game, where in the beginning of the year we'd have a certain amount of money, and we'd have to buy stock. The teacher would every week update us with the latest stock information, and based on that we'd have to make decisions. The person with the biggest amount of money at the end of the year won. So I picked stock of a company which was basically bankrupt already, but was still on the stock market (why I don't know, I'm not an expert.) I think the stock was £0.02. So I waited a few weeks, and it happened to be at £0.05. I sold everything, didn't do anything for the rest of the year, and won. Didn't make the game very exciting, but at 15 years old I mainly cared for winning :)

patrickod 15y ago

I've been watching the price of BTC rise pretty steadily in the last few days but I can't bring myself to believe that this price range is in any way sustainable. $4 per bitcoin? Not even the EUR and GBP have ever reached that in my recollection. I guess it if does stay like this mining is going to become pretty lucrative and certainly financially worth it.

DavidSJ 15y ago
$4 per bitcoin? Not even the EUR and GBP have ever reached that in my recollection. Keep in mind that the exchange rate is a function of several inputs, one of which is the rather arbitrary fact of how much total currency is in circulation. There are many fewer BTC than USD, EUR, GBP, etc. (about one million times fewer, to be precise). And conversely, there are many more JPY in circulation, which is part of the reason the yen is much cheaper than the US dollar. That doesn't mean there's not a BTC bubble. There may very well be. But you can't do the comparison you just did and expect it to be meaningful. If the BTC protocol had specified the decimal point one place to the left, BTC would be trading at 0.40 USD right now, not 4.00 USD. There'd just be 10 times as many. What you have to do is ask how much total wealth the world will want to store in BTC, and then divide that by how many BTC there are. The answer to the first question is a huge unknown. The answer to the latter is specified by the protocol: 21 million.
- patrickod 15y ago
  Given the current valuation though of $3.5 and the fact that there are approximately 6M bitcoin in circulation, that gives quite a large valuation on what seems to be a very limited market at the moment. You are right though, my initial simple comparison of numbers leads only to inaccuracies
- csomar 15y ago
  You seem to be knowledgeable in this field. I have no idea about it and would like to get a small insight. Can you recommend a tutorial (Preferably less than 40 pages) that explains some of the main concepts?

waterlesscloud 15y ago

On a volume of 53,896 btc since midnight. For some perspective.

erikig 15y ago
Here's a quick realtime view of the markets Mt. Gox included. http://bitcoincharts.com/markets/ http://bitcoincharts.com/markets/ There's pretty decent volume and the bid/ask spread is gradually tightening. Just for some perspctive, the US Dollar index futures trade about 15,000 contracts a day, (granted they are much easier to convert). I'll keep an eye on this...
- DavidSJ 15y ago
  A US dollar futures contract represents 1,000 dollars. So that's $15 million per day.
  - Gaussian 15y ago
    I think it's the value of the index X $1,000. So the notional value traded per day is more like $1.1 billion because the index is now around 73.

Construct 15y ago

Four days ago, Bitcoin was under $2 USD. Now it's over $4 USD (depending on when you refresh the page). There are 6 million bitcoins in existence, and trade volume is only about 54,000 according to the biggest exchange. There aren't enough bids/asks to soak up more than about $100 USD without throwing the exchange rate one direction or the other. For example, right now (as I write this) exchanging $1000 USD for some Bitcoins is all it takes to push the exchange rate up $0.10 from $3.77 to $3.87. What a lot of Bitcoin newcomers don't realize is that Bitcoin depends on 'mining' to generate new bitcoins. Computers run cryptographic hashes to find the 'winning' has which is less than the current difficulty target number. The computer that finds this hash is awarded 50 BTC. The difficulty target is automatically adjusted upward to keep new bitcoin generation at a constant pace. Some quick research shows a handful of big players in the mining market who have invested heavily in high-end GPUs for dedicated bitcoin mining, some with over 50 GPUs running 24/7 for months now. These guys are bound to have huge quantities of bitcoin they are eager to unload when the price is right. Meanwhile, news coverage is driving exploding popularity, which appears to be pulling the exchange rate sky high. On paper, many of these guys have become overnight millionaires just by running a bunch of computers 24/7. Of course, as these players cash out the exchange rate will fall. These guys are too smart to sell all at once and flood the market, but with volatility like this I'm willing to bet a lot are eager to pull their bitcoin out of the game before the bubble pops. Meanwhile, hardware enthusiasts all over the internet are rushing to buy GPUs to dedicate to mining. They don't seem to realize that the bitcoin system automatically adjusts to keep the bitcoin generation rate constant at 50 BTC per 10 minutes. As the mining market becomes flooded with new 'miners' the difficulty will climb rapidly, until it becomes unprofitable to run a GPU if you have to pay for electricity. Finally, bitcoin is highly illiquid. My research was brief, but I couldn't find an easy way to exchange small amounts of BTC for USD that didn't look terribly sketchy or involve a lot of fees. Stores aren't eager to accept bitcoin because the exchange rate at the moment can easily swing 10% between when the user presses 'check out' and the transaction is processed. The bitcoin system is a very interesting concept, and it was clearly implemented by some very intelligent people. But as it currently stands it's just a playground for speculators and market manipulators. Expect some carnage in the coming months.

kiba 15y ago

DavidSJ 15y ago

If anyone's in SF and wants to stop by Noisebridge, we're having a BitCoin party today until 5 pm.

FlemishBeeCycle 15y ago
What exactly goes on in a BitCoin party?
- DavidSJ 15y ago
  I'm not totally sure. I hear there will be BitCoin-shaped cookies and some games.
  - gwern 15y ago
    Maybe also run it as a key-signing party? http://en.wikipedia.org/wiki/Key_signing_party http://en.wikipedia.org/wiki/Key_signing_party

sabat 15y ago

How can the SEC not be all over this? It's amazing to me that it has either escaped its attention or -- possibly -- it has absolutely no idea what to do about it.

sgornick 15y ago
Does the SEC regulate baseball cards? If bitcoin were an equity, then the U.S. Securities and Exchange Commission might be looking at it. But even if they did ... if you are in Brazil, Russia, India, China, or wherever, ... how would what the SEC does be relevant? (yes, I'm being purposely obtuse, but remember that bitcoin is data, and as such it knows no borders.)
- arohner 15y ago
  There are lots of kinds of data that are illegal to possess. Classified documents, insider information, copyrighted music, etc. And remember certain US agencies have huge power outside the US. The DEA and the IRS come to mind. I don't know which US agency will flip out when bitcoin becomes popular, but I'm quite certain one of them will, once it becomes widespread to exchange for illegal items, and used for money laundering.
  - sadfsa 15y ago
    It's already widespread enough to use for some forms of money laundering. If you want to secretly move money from the US to Europe, just buy BTC in the US, deposit them on Mt. Gox (whose domain is registered in Japan, so I assume the servers are also in Japan), and from there sell the BTC and deposit the resulting money in your Swiss bank account. It's also widespread enough to use instead of a Swiss bank account to hide money. Just move the money into a Bitcoin wallet, encrypt the wallet, and store copies of it on as many computers, in as many countries as possible.
- sabat 15y ago
  Hmmmm. This is a cash-equivalent -- or perhaps the SEC could see it that way.

nwmcsween 15y ago

And I thought bitcoin wasn't going to go anywhere, I made about 3000BTC back in 2009 and just over time forgot about it and lost my 'wallet' id (a hash), kicking myself in the ass now.

geuis 15y ago

Just as a quick reminder, since most people commenting don't understand how bitcoin generation works. It is not possible to "corner the market" by having more gpu power than other people. The btc algorithm was designed to only produce bitcoins at a constant rate. Adding a million more systems trying to calculate the answer to the next hash block only makes it a million times slower. If the bubble were to pop tomorrow and it went back to being a network with only a few hundred low power systems, the btc network will auto correct to produce new bitcoins in relation. It is not possible to game the system this way.

forensic 15y ago
It's very easy to game the system. You need roughly 30% of the network's total computing power and you can "steal" bitcoins from others. The creator of bitcoin outlines a strategy for stealing bitcoins in the FAQ. In it, he claims that 50% of the computing power is necessary to do this. Later improvements to the technique (and simulations by various people) have shown that you can do it in much less, possibly as low as 15% of the computing power. Bitcoin is highly vulnerable to a nation state or intelligence agency that wants to own it. It is also highly vulnerable to rich entrepreneurs who want to make a profit by cornering the market. The NSA could destroy bitcoin in the blink of an eye with only a tiny fraction of their supercomputer power. Likewise for botnet operators and other professional extortionists who no doubt have their eye on bitcoin. The fact that bitcoin hasn't been destroyed yet is just a demonstration that the currency is not really worth anything right now.
- jimrandomh 15y ago
  My (non-expert) understanding of the issue is that a having majority of the mining computation gives you the power to roll back transactions, but not to forge transactions that transfer money to you; and that the risk of having a transaction be rolled back on you can be reduced just by waiting for the block chain to get longer.
  - forensic 15y ago
    rolling back a transaction and claiming it yourself is a kind of stealing more advanced ways of stealing bitcoins have been developed and successfully simulated, for instance the dominant cartel can actually go several blocks ahead of everyone else but not advertise them, and then only roll back other people's finds when those people advertise them. For instance the cartel using superior cpu power actually solves 2 blocks ahead of everyone else but does not tell the other nodes that it has solved it. It waits until someone else advertises that they have solved the block and then releases their own and rolls back the other person's. There are many optimizations that can be made to improve this exploit. The exploit completely ruins any hope for bitcoins being an unmanipulated currency. Even in the base case scenario where multiple cartels compete to dominate the bitcoins, the average person will be squeezed out and all the advantage will go to the cartels. It will end up WORSE than other currencies based on the credibility of the various governments. The bitcoin concept is inherently flawed because cpu power is not democratic. Especially when it comes to the implementation details of bitcoins, which are actually very inefficiently computed on a regular person's computer. Purpose-built bitcoin computers are orders of magnitude more effective than normal computers, compounding the other issues with bitcoins. The fact that most people's CPU cycles are migrating toward mobile battery powered devices does not help either. How many people do you know who still have bulky desktop computers plugged into the network 24/7 rather than mobile battery powered devices that spend more time offline than online?

mmaunder 15y ago

There's this received wisdom among sociologists that three prerequisites for a stable country are laws, someone to enforce them and a judiciary. I mention this since Bitcoin is creating it's own economy which is analogous to a virtual country. The major benefit of Bitcoin, it's lack of jurisdiction, may also be a disadvantage. As the first disputes arise, hopefully a body of precedent will be developed that strengthens the currency rather than destroys it.

cgerard 15y ago
An economy is based more on the trust between the actors within it than on its medium of exchange or the goods and services being exchanged. Bitcoin doesn't address this aspect. Because fraud and collusion are still possible in a Bitcoin economy there exists the possibility of both currency instability and the creation and enforcement of monetary policy. An irrational public can be just as damaging to a currency's value as an unwise central bank or government. Regardless, I find Bitcoin to be a very interesting system and I'll keep tabs on its development.

joeyh 15y ago

Check this out: 200,000 bitcoins transferred in one transaction today. http://blockexplorer.com/address/1MqsETo2t6W61QUCL9KRdw2P1PWTXQFnYm http://blockexplorer.com/address/1MqsETo2t6W61QUCL9KRdw2P1PW... That's roughly 4% of all bitcoins ever minted, if my math is right.

xbryanx 15y ago

Oh goodie, another part of our economy that ignores the true cost of energy creation. Has anyone looked at models of how this system might work if the miners had to pay significantly more money for electricity?

jsilence 15y ago
With the term "energy creation" you are ignoring the first law of thermodynamics. But apart from nitpicking I agree with your point. In the end the whole economy thing boils down to "having the capacity to actually do stuff.", which ultimately requires energy. Giving a unit of currency to someone is like giving a promise that he can actually DO something later. In the case of bitcoin, the energy is used (dissipated to heat) during the creation of the currency itself. No substantial backing of the curency beyond that. But then again this is true for any other currency floating around right now. -jsl