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The Bitcoin Lottery
- wccrawford 15y agoWait, seriously? And people trust this system?
- gburt 15y agoWhat's not to trust? It seems that the clients determine what they trust, and so long as the majority of clients agree, all is well. There are economic problems with bitcoin as a currency (its a fiat currency, effectively, except without the fiat - it has scarcity with no intrinsic value), but the algorithm component seems solid to me.
- marssaxman 15y agoAll the fiat offers is confidence that you won't be the one left holding the hot potato. Seems to me bitcoin provides the same confidence through mathematical cleverness, which is actually more trustworthy in the long run.
- cube13 15y agoBitcoin doesn't offer that confidence, though. No currency does, fiat or otherwise. The confidence in a currency comes entirely from the economy that develops around the currency. In other words, the power of a currency comes from what it can be used for, not it's scarcity. If you cannot use Bitcoins, USD, or any other currency, they are worthless. For example, if an overwhelming majority of people with bitcoins(or USD) decides tomorrow to not ever use them again, then the remainder that have them are screwed. If the places that the currency can be uses cease to exist, the currency is worthless. There isn't any technical solution to this problem, the economy just ceases to exist. Obviously, this is an extreme case, but it's entirely possible that this can happen with any currency over an extended period of time if it doesn't catch on, or if investors lose confidence in the currency itself.
- marssaxman 15y agoSure. Certainly. But that is true of any currency. The novelty in bitcoin is that it enforces scarcity, and thus limits inflation, without depending on a central issuing agent. Part of what it means to have confidence in a currency is to be reasonably sure that its inflation will be limited to a rate that allows you to exchange your currency tokens before they are drained of value. Passing the hot potato, etc. With a fiat currency that confidence is based on nothing more than your beliefs about the central issuing agent's likely future actions. What's new with bitcoin is that there is no central authority who can decide what the inflation rate should be. The inflation rate is built into the mathematical definition of the currency, and it is self-limiting: the more work people put into mining bitcoins, the longer it takes to find new ones. This is not true of any existing currency, and is in fact an improvement on existing currencies. Even if we don't all end up deciding to build an economy around bitcoin, this is an important achievement, something future currency designers ought to make note of.
- tzs 15y agoWhat's to stop some economically significant entity (like a government) from starting a new Bitcoin-like pool of coins, with different parameters? This would allow them to control the overall supply of digital currency.
- uvdiv 15y agoNo, it doesn't offer any confidence that the bitcoin remains valuable. It could collapse entirely; falling prices could scare people out of bitcoins, lowering prices further, until bitcoins become absolutely worthless. This can't happen with commodity money because it has intrinsic value -- e.g. if you have an iron ore currency (backed by a ton of iron), it is valuable as long as iron is valuable. You can always sell your iron-dollar to someone who only wants the iron it is backed by. And a fiat currency will remain valuable (as long as it's not diluted by hyperinflation) because the state requires its residents to accept it as payment -- called "legal tender". But bitcoins? They are a bizarre sociological experiment -- a pyramid scheme, an enormous speculative bubble in something that has no intrinsic value. Or perhaps negative value, since bitcoins are costly to "create" -- they consume large amounts of CPU time. What cryptography (reasonably) guarantees is that bitcoins aren't double-spent, aren't created from thin air. Not that they preserve value or are acceptable as payment.
- marssaxman 15y agoAs far as I understand it, the only value in any non-commodity-backed currency is a mutual agreement to use it as a medium of exchange for what are effectively IOUs. US dollars have no intrinsic worth, but I know that if you give me some, I can give them to someone else in exchange for something I want, and therefore I am willing to accept them in exchange for my labor. The only value in the dollar you give me is the fact that I can give it back to you later in exchange for something I actually want - but what makes it actual currency, and not just an IOU, is the fact that I can give it to anyone else in a dollar market in exchange for something I want. Part of what makes this work is our mutual knowledge that it would be very hard for either of us to game the system. I can't just print up new dollars and neither can you; this means that the dollars you give me are very likely to have been given to you by someone else, which makes it very likely that I will be able to pass them on to someone else, which makes them useful and therefore valuable. If I could just print up my own dollars out of thin air, I wouldn't actually need to do any work to acquire them, which would make me less likely to accept them in trade for whatever it is you want from me; if everyone else is in the same position, then none of us have any reason to accept dollars from each other, and the currency is no longer useful as a means for exchanging debts. So the usefulness of any currency depends on the degree to which it is difficult to create new currency units. This is what I mean by confidence that bitcoins are going to remain valuable: people can't just pull them out of thin air. It takes a lot of work to get a bitcoin. Right now the bitcoin system is new so lots of people are mining bitcoins, but once there are enough of them it will be easier to get a bitcoin by doing some other kind of work than by mining. This is all we need for bitcoins to become a useful medium of exchange for IOUs, should we decide to use it that way.
- gburt 15y agoThe fiat offers, at minimum, a requirement to do transactions in that currency to some minimal degree, as you are required by law to pay taxes (notice that taxes are applied to all exchanges, in theory at least, not just those conducted in the fiat currency) in that currency or go to jail. That is the minimum it offers. It also offers the ability to transact with the government, who is the largest sole consumer in our economy, and a whole host of other things.
- wccrawford 15y agoThe gamble. Earning bitcoins is based on -luck-. I don't gamble. This is not some religious thing, but simply because I like to have control over my fate, and gambling takes that control.
- wmf 15y agoDid you think it's ok until someone used the word "lottery"? Would you feel better if it was called a "probabilistic" system instead? In reality the payouts are pretty predictable.
- hugh3 15y agoI don't gamble. This is not some religious thing, but simply because I like to have control over my fate, and gambling takes that control Bu Interesting attitude. But of course you don't have control over your fate. One day you're going to contract the disease which kills you, and you don't have any choice over when that happens or what it is. And between now and then, dozens of major events will happen in your life which you also didn't choose. Maybe you like to have the illusion of control over your fate? Personally I like to keep my life exposed to some randomness.
- siegecraft 15y agoIf you don't want to rely on luck you can use a pooled bitcoin mining service (there's lots of them).
- aubergene 15y agoSo you can tell in advance what any given currency will be worth tomorrow, next week, a month from now? Your money is always "gambled"
- praptak 15y ago"Earning bitcoins is based on -luck-." If you invest serious computing power into that, then there's not enough variance in it to be called gambling anymore. Betting on 6-6 in a single dice throw is gambling, betting on the percentage of 6-6's in a trillion dice throws is boring.
- gburt 15y ago
- rmc 15y agoSo long as the majority of clients agree? So if someone controls 51% of the BitCoin clients they can do anything they want?! Sounds like a flaw. Once lots of money is involved, it would make sense for people to start throwing botnets at this to hack it.
- zby 15y agoWell - the protocol is published and everyone can verify it for himself, the implementations are also open-source. This is not like someone is drawing a lot for you and you need to trust that he is doing that fairly - it is your computer that is doing that and it also checks that the others play by the rules.
- watmough 15y agoFor those interested in an interesting take on how money really works, Steve Keen wrote this amazing article: http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/ http://www.debtdeflation.com/blogs/2009/01/31/therovingcaval...
- gburt 15y agoBitcoin should be rewritten to be some function of something "useful" like the SETI@Home project. Consider if you could have "solving sha256 problems" be simultaneously "computing the next largest prime" (arguably useful, at least, more so than what its currently doing) or "computing patterns in DNA".
- weavejester 15y agoThe difficulty is that the problem must be of a predictable complexity. In other words, you must know ahead of time how long it takes a given amount of processing power to find the solution.
- dodo53 15y agoWould predictable statistical distribution of complexity not be enough? As in, you get a randomly assigned job, that takes on average a given amount of processing power, and is proven to not need more than some upper limit - or even, you time out after a given amount of processing power and request a new job. And ideally have each unit small enough that mining will completing multiple jobs so difference in complexity starts averaging out.
- weavejester 15y agoYou'd also need to be pretty certain that no-one's going to come up with a faster algorithm for solving the problem. I can't think of any real-world problems to which all these criteria would apply.
- amackera 15y agoIt is doing something useful, it's computing and keeping track of transactions that occur across the network.
- Groxx 15y agoAnd providing security against attacks. The more legitimate miners, the harder it is to gain control of the system.
- ivankirigin 15y agoSomeone please do the math on the energy lost in GPUs calculating hashes compared to the dollar value of the bitcoin rewards. The average miner might be better off just powering down their machines.
- siegecraft 15y agoThis math has already been done (see https://en.bitcoin.it/wiki/Power_Calc https://en.bitcoin.it/wiki/Power_Calc). Right now it's (theoretically) profitable to generate bitcoins; that would change if the exchange rate goes down.
- Unseelie 15y agoThat's making the assumption that the exchange rate goes down. If, (big if) the currency finds demand..the exchange rate goes up. I saw it pointed out somewhere that bitcoins are meant to be rare, and that once the final bitcoin is generated, as there's meant to be a set ammount, there will be many orders of magnitudes less of them than dollars, euros, or the etc. So, even if the cost right now is high, having a hash of them could become worth a great deal. That is of course speculative, but when there's going to be 1 bitcoin for every 600,000 of today's dollars...assuming the sum of bitcoins becomes worth a thousandth of that of dollars, each bitcoin will be worth 600 dollars...run a mining op for one coin a day for a year(365 coins), hold onto it for a while, average the price down to 300 dollars a coin...sell for a hundred grand... So running a bitcoin mining opp, or even buying the coins at current market value, is a feasible long term high risk investment. I wouldn't suggest putting all your eggs in that basket, but I would suggest adding the purchase of the occasional bitcoin (or the cost of mining) to your list of high risk investments.
- akkartik 15y agoFor the value of bitcoins to go up the world at large has to have a reason to leave conventional currencies and jump to it. When bitcoins become rare why won't someone else start a new bitcoin2? I think there's an asymptotic max price that can't be crossed.
- Jetlag 15y agoThere I stood in front the infernal machine. Crumbled, soggy paper in hand. It fell to pieces before I even had the thought to preserve it somehow. Sixteen random characters, gone in the wash. My thesis, gone in the wash. A decade, gone in the wash. I could try to rewrite it. But I wouldn't even know where to start. Of course all my research was encrypted too! I'm no idiot! This was work, this was hard work. I'm not even sure I could remember it all. "I wrote them down in my diary so I wouldn't have to remember." I did the calculation. Brute forcing the password would take more than my lifetime with all the machines in the lab. Would Moore save me? Could I stand the wait? Later on, I stood on the roof of the math building (a quiet escape a few grad students shared) contemplating my next move. Looking out, late at night, it came to me. I couldn't do it, but the they could. Even just a fraction of the computers out there could get me my thesis back. But how? I could create a distributed computing project, it was something I had worked on before. But there was no way to attract the required users. I needed something as least as big as the largest projects that already existed. I needed to give people something. A bounty isn't enough, the prime project has a great bounty, but I need more users. They all want money. But I had no money. So, I gave them the next best thing: the promise of money.
- mrcharles 15y agoWhat's your pen name so I can buy your books.
- gwern 15y agoSounds like the start of an older Neal Stephenson novel (eg. _Snow Crash_ or _The Big U_).
- nicpottier 15y agoSeriously.. have you written larger works? Would love to read them.
- rilkeanheart 15y agoAnyone care to adapt this system for e-voting, in general?
- Unseelie 15y agoWhy on earth would you want to base votes on who has the most computing power?
- scarlson 15y agoAssuming Hardware = Wattage Output = Voting power; US power sources overlayed on 2008 Electoral Map. Too close to call. http://i.imgur.com/d1Fyf.jpg http://i.imgur.com/d1Fyf.jpg I was too lazy to fix Alaska and Hawaii. Source: http://www.npr.org/templates/story/story.php?storyId=110997398 http://www.npr.org/templates/story/story.php?storyId=1109973...
- Unseelie 15y agoPlease explain the intent of that graphic? Or, rather, what does where the electicity is have to do with voting power, aside from the congruence with cities?
- gwern 15y agoNo. There are already vastly superior anonymous e-voting schemes. The only usecase would be if you wanted to put some restriction on voting but still leave it open to everyone in the world, so it'd be kind of like Namecoin but paying for votes rather than DNS.
- anigma 15y agoSounds like the people running large botnets could just farm the crap out of this.
- Tichy 15y agoRelated: here is how to calculate the expected number of days. Though I did not add in BitCoin specific parameters. But suppose you need to have zeros in the first k bits, I suppose the probability for each lottery ticket/number is (256-k)/256 (I assume that SHA256 has 256 bits, too lazy to look it up). http://blog.blinker.net/2011/02/08/expected-number-of-coin-tosses-until-you-get-tail/ http://blog.blinker.net/2011/02/08/expected-number-of-coin-t... At the moment I generate about 5BTC/day with my dual-core ATI graphics card. Two months ago (when I started), it was twice that.
- mikecane 15y agoCountdown to Goldman Sachs and then all of Wall Street jumping in ... 5... 4... 3...
- wmf 15y agoNah, there isn't enough money to be stolen here.
- maqr 15y agoTo me, at least, bitcoin isn't about a lottery and it isn't about winning. It's about laying the framework for the foundation of an open and secure currency. Who cares, in the long run, who won the most coins right now? I don't think many people have large stakes of bitcoins that they're hoping to get rich off of. The mining cost should eventually be reflective of the value of the features of the cryptocurrency. In other words, if you want pseudoanonymous secure p2p transactions, buying bitcoins is like paying for that service. Who's providing the service? The miners, which are just the people keeping the network running so that others can use it.
- sethg 15y agoWho cares, in the long run, who won the most coins right now? In the long run, people with a lot of coins tend to get even more coins. I don’t see why I should participate in an “open and secure currency” that benefits people who let their hardware run wild doing mathematical operations which, outside the currency system itself, are pointless. At least gold has some aesthetic and industrial value.
- tectonic 15y agoEvery post hyping Bitcoin increases the value of the Bitcoin held by those making the posts.
- phamilton 15y agoBut every new miner decreases the output of each mining rig. Posts about spending and using bitcoins benefit those who have bitcoins far more than "Free money" posts do.
- tobylane 15y agoIs there a point to these hashes? Does bitcoin just encourage people as a whole to make a trillion trillion hashes? I hope there'll never be a green bitcoin, it would be such a lie. Can't someone adapt it to look for md5/sha clashes?
- gmartres 15y agoThe whole point is to verify that transactions are legitimate: https://en.bitcoin.it/wiki/Category:Mining https://en.bitcoin.it/wiki/Category:Mining
- tobylane 15y agoI think I get it, but it could be a lot more accessible. Law-makers (not lawyers) would be less wrongly opposed to something they understand.