5 ms·

What'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 problem

by gburt 15y ago

What'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 ago
All 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 ago
  Bitcoin 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 ago
    Sure. 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 ago
      What'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 ago
  No, 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 ago
    As 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 ago
  The 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 ago
The 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 ago
  Did 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 ago
  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 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 ago
  If you don't want to rely on luck you can use a pooled bitcoin mining service (there's lots of them).
- aubergene 15y ago
  So 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 ago
So 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.

by gburt 15y ago

marssaxman 15y ago

All 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 ago
Bitcoin 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 ago
  Sure. 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 ago
    What'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 ago
No, 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 ago
  As 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 ago
The 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 ago

The 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 ago
Did 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 ago
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 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 ago
If you don't want to rely on luck you can use a pooled bitcoin mining service (there's lots of them).
aubergene 15y ago
So 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 ago

So 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.