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I Spent A Coin (And I Liked It) — How I Bought Lunch in Manhattan with Bitcoins

189 points by sas 15y ago

Some people claim that Bitcoin isn’t a “real currency,” that it is “imaginary,” or a Ponzi scheme — for a number of reasons, but perhaps mostly because there’s no obvious way to use them in most people’s daily lives. I have a different perspective because last week I paid for lunch with Bitcoins. Here’s how it happened.

c4urself 15y ago
There's a lot to like about BitCoin. They "just" need to solve the following: 1. Technical issues (make it more secure) 2. Economic issues (deflation) 3. "Competitor" issues (governments, banks, the powerful status quo)
- ignifero 15y ago
  ... Which will lead to 4. Trust. People can only agree to use a currency if they trust it.
  - kd1220 15y ago
    I think the lack of physical tokens for Bitcoin (or any cryptocurrency) will likely be the main hurdle for public acceptance. It'll probably take another generation or two for people to get used to the idea of not having a physical representation for currency.
    - ignifero 15y ago
      People accepted credit cards decades ago. If bitcoin could work as a currency (which it can't, for other reasons), it would presumably be used via equally convenient exchange devices.
- patrickg 15y ago
  4) Legislative issues. For example Germany (I'd bet) would not accept bitcoins in one's tax form ("I have to pay 345.67 bit coins of taxes to the state"). And if you have income in a non approved currency, you get into some trouble.
  - iwwr 15y ago
    The restaurant owner was basically exchanging BTC for USD on the spot and also reporting tax income in USD.
  - csomar 15y ago
    If you consider it as a commodity, it would be no different than Gold or Oil.
- drivebyacct2 15y ago
  I'm curious. Where exactly do you see a security flaw in Bitcoin? Exchanges run by former magic the gathering admins don't count. What flaw is there is there in the security of the currency, I'm curious.
  - deleted 15y ago
    [deleted]
  - discover 15y ago
    http://nerdr.com/shutting-down-bitcoin-really-taking-down-the-bitcoin-network/ http://nerdr.com/shutting-down-bitcoin-really-taking-down-th... I'll add that the crypto will one day be broken (even brute force will eventually work once CPU/GPU have progressed far enough). And when it is, there is no reason you couldn't just sit back cracking those wallets in secret before funneling the coins your way. A significant weakness of the anonymity of the network means no one really "owns" a wallet in the traditional sense. They are essentially communal.
    - jasonzemos 15y ago
      You're right that sha256 will one day be in jeopardy, but there's no reason why the system can't update itself well before then. If sha256 is broken, all it takes is for people to update their clients and only start accepting sha3, etc.
      - discover 15y ago
        Previously, breaking a crypto was nice, but not instantly and anonymously profitable as it is with Bitcoin. It will be interesting to see how it plays out when it happens.
  - ubernostrum 15y ago
    Exchanges run by former magic the gathering admins don't count. Not sure what's meant by that dig, but worth pointing out that a lot of former (and some current) Magic pros do quite well in financial work. In fact, an eerie number of them seem to graduate from Magic, to poker, to finance.
- ars 15y ago
  > Economic issues (deflation) This is actually a pretty serious problem. The value of bitcoins always settles such that the cost of the electricity to make them is approximately their value. But because the difficulty is adjusted such that a fixed number of bitcoins are generated per time (meaning faster or more efficient computers don't help), and that the number generated per unit time is constantly shrinking, it will cost more and more electricity over time to make bitcoins. Deflation is built into it. And I bet the creator of bitcoins never realized that the scarce resource bitcoins track is electricity. If you want to make a ton of money, buy bitcoins just before they switch from 50 per block to 25. I'm betting the value will double.
  - wedesoft 15y ago
    The cost of electricity per Bitcoin in turn depends on the computing power invested in the network. The strength of the next block is adjusted so that it takes approximately 10 minutes for the network to solve it. Also there are optional transaction fees.
    - ars 15y ago
      Right, that's what I'm saying: As more people join the network it becomes uneconomic to mine bitcoins, because since it's harder now, it costs too much electricity. So those with the least efficient setups stop mining. So the price settles at the cost of electricity. Then they reduce the number of coins per block. So suddenly it comes even less worth it to mine. Until the value of each bitcoin rises to match, causing people to want to mine again. If the value of each bitcoin did not rise, no one at all would mine and the network would grind to a halt (no confirmed transactions). Unless they have a mechanism to reduce the difficulty factor at that point. I'm not sure on that point.
      - jasonzemos 15y ago
        "If the value of each bitcoin did not rise, no one at all would mine and the network would grind to a halt (no confirmed transactions)." This isn't true. The system has several modes of adjustment and it will always be worth it for someone to generate blocks. If the value of a coin didn't rise to match generation costs, people /should/ stop mining -- but those that remain will collect more coins or transaction fees as the difficulty drops to compensate. Overall the economy as a whole shrinks, but never grinds to a halt.
pieter 15y ago
Sounds like there really is a need for a standardized way to integrate bitcoin addresses into DNS. For example, just adding the address as a TXT field and using DNSSEC to sign it would make the whole experience a bit nicer already.
- ghshephard 15y ago
  The added advantage of that solution is that (with a bit of backend work on your nameserver) you could rotate your Bitcoin address for every lookup, resulting in a unique address per transaction to preserve anonymity.
- BrianGaffney 15y ago
  I recently came across a different approach to to the same problem. http://www.coinhandle.com http://www.coinhandle.com You give it a name and your bit coin receiving address. Then you can query it for the address associated with that name. It has some sort of API, would be much more useful if this was integrated with the official bit coin client though.
retube 15y ago
It seems that bank accounts are public: https://blockexplorer.com/address/1MTbKpYWnzqmsLvCjdTtwrvuX81g3HCgC https://blockexplorer.com/address/1MTbKpYWnzqmsLvCjdTtwrvuX8... Why is this?
- stuhood 15y ago
  This is why people say Bitcoin is pseudonymous: the entire transaction history of every Bitcoin is public knowledge. To achieve actual anonymity, receivers need to use a one-time-address for each sender, and senders need to not leak information about which addresses they own. https://en.bitcoin.it/wiki/Anonymity https://en.bitcoin.it/wiki/Anonymity
  - ralfd 15y ago
    Imagine all the money exchange and circulation of the world economy. 7 billion people. If hypothetically Bitcoin would be the "world currency" how much data (which is never deleted) would that generate per day? What data will amassed in 10 years? I wonder how that will hard limit the system...? I have no clue about Bitcoin but a quick google search seems to imply that the global history of all transactions is locally saved in the client as "blk0001.dat". Already this database seems to be a few hundred Megabytes big?
    - gwern 15y ago
      https://en.bitcoin.it/wiki/Scalability https://en.bitcoin.it/wiki/Scalability
      - sorbus 15y ago
        So Bitcoin's scalability relies on a mixture of writing new software when it's needed ("The core BitCoin network can scale to very high transaction rates assuming a distributed version of the node software is built. This would not be very complicated.") and in future switching to a two-tiered structure with "supernodes" transmitting data between themselves at a rate of >1GB/s. While I suppose that it's good that someone is thinking about this, it does not inspire confidence in bitcoin's ability to scale - the fact that it's theoretically possibly to write software allowing it to scale is very different from someone going off, writing this software, and demonstrating that it does scale.
ars 15y ago
The most important by far rule for currency is stability. With stability comes acceptance of the currency. You don't have that - the owner first looked up the exchange rate to US dollars. What you have is a medium of exchange, but you don't have a currency. A medium of exchange is useful, and can eventually become a currency. But bitcoins are not yet a currency. Perhaps someone can make a bank, where you store US dollars. Using that bank you can send and receive bitcoins. Only the bank can create bitcoins, but once created anyone can trade them without input from the bank. If you are familiar with history this is how paper currency actually got started - goldsmiths would store gold and give chits of paper. Those chits started getting exchanged, and a currency was born.
- dools 15y ago
  Does that mean that the Euro is not a real currency? Or that the US dollar isn't real in Canada?
  - halostatue 15y ago
    After a fashion, yes. Just because a merchant accepts a non-native currency (such as USD instead of CAD) doesn't mean that the non-native currency is inherently valuable in the native country. The merchant can't remit taxes in USD; can't pay her employees in USD. It must all be converted back to CAD before the merchant can do anything useful with it. Don't mistake what is offered as a convenience by some merchants as normal and accepted.
- retube 15y ago
  > You don't have that - the owner first looked up the exchange rate to US dollars What? Any London store that accepts euros will check the rates daily to make sure they can convert back into the GBP price. Currency rates fluctuate all the time, every second of every day. http://uk.finance.yahoo.com/q/bc?s=GBPEUR=X&t=1y&c= http://uk.finance.yahoo.com/q/bc?s=GBPEUR=X&t=1y&c=
  - ars 15y ago
    Then they aren't accepting euros as currency. At the end of the day they will immediately convert the euros to GBP. They are willing to use euros as a medium of exchange, but only because they know they can exchange them for (to them) real currency. (Currency is relative, obviously. And just as obviously it helps that somewhere in the world there are people who use that type of money, which gives you comfort that even if you don't exchange it now, you can later.) If this was the fate of bitcoins then it would be a failure. People may use it to send value over the internet, but no one will keep their savings in bitcoins. To be money you have to be willing to save it. If all you do is use it as an intermediate it's not money - yet. It may eventually become money (historically intermediates often do that - especially if the conversion is difficult), but it's not money yet. The reason it's so important for people to store the currency in savings is very simple: If no one want to keep your money long term, practically speaking there will be very little of it in circulation, which makes it hard to use.
kbd 15y ago
Excellent article. My favorite quote: > Apart from whether there is a central bank somewhere to bid against George Soros, doesn’t the difference between a real currency and an imaginary currency lie in some sense in the composure with which a customer can ask if the currency is accepted here and in the composure with which a merchant can say yes? Every currency is valuable only because other people consider it to have value.
- deleted 15y ago
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- dexen 15y ago
  > Every currency is valuable only because other people consider it to have value. Two counterarguments: - the idea of `legal tender' [1]. Usually the physical manifestation (coins and banknotes) of official currency in a given country/region/whatever is also codified by law as legal tender. Which means, when used for settling a debt, the creditor is obliged to accept it. Contrast that with gold, for example: it's considered valuable, but creditors are not required to accept it. Value of legal tender stems from both recognition and the legal framework of it being legal tender. - taxes. Country's/region's law dictates the currency persons and organizations have to use for settling taxes and other dealings with administration. A currency that people don't trust or use for any other reasons could still have well-understood value in relation to settling taxes. That having been said, I firmly believe Bitcoin has great potential. Even if this particular implementation fails at some point, other ones will follow. ---- [1] http://en.wikipedia.org/wiki/Legal_tender http://en.wikipedia.org/wiki/Legal_tender
  - mike_esspe 15y ago
    >the idea of `legal tender' This idea doesn't work in the country with hyperinflation :) As long as people don't consider that the currency is valuable, no legal force can convince them.
patio11 15y ago
So I get that Bitcoin by design keeps a global public record of every transaction. Does that have to be the HN front page?
- deleted 15y ago
  [deleted]
guelo 15y ago
If bitcoin was a currency the meal would have been denominated in bitcoins not dollars. Bitcoin is an asset like gold or a stock certificate, not a currency.
- jalada 15y ago
  No, only because Bitcoin isn't stable enough right now to know what the price should've been in BTC.
  - ars 15y ago
    You mean yes, not no. It's precisely because bitcoins are not stable that bitcoins are not a currency.
    - tftfmacedo 15y ago
      You should try living a country with high inflation. People lookup exchange rates every single day.
      - ars 15y ago
        And those people do not willingly use that currency - they are forced to by their government. Whatever currency it is that they are comparing to is the currency they really want to use, and probably do on the black market. I'm also confident that that is the currency they keep (or try to keep) their savings in.
      - ohashi 15y ago
        And you see real currencies being used in many of them as black market currencies instead of the national currency. You can also see countries trying to stop inflation by indexing to other, stable, currencies.
  - mike_esspe 15y ago
    That is not the problem of stability, that is because the restaurant is paying in USD to their contractors. This should change in the future.
ignifero 15y ago
Bitcoin is a commodity. Nobody issues it, it is mined and has a predictable, limited supply. People aspire to use bitcoin as fiat money, but that's impossible, there is no one to provide liquidity when the market runs out and there's no underlying economy it will be based upon. Commodities like gold, silver, petrol have been used or tied to money for centuries, but at some point their use was deprecated by the needs of the people. Adopting bitcoin as currency is like going back to the 19th century. It's an interesting idea for geeks, and maybe it will be used in special applications, but it's not an advancement for the economy, its a step back. He might as well have paid with (numbered) paperclips if there was an MtGox for paperclips, does that mean that paperclips are the future?
- niklas_a 15y ago
  You are building a straw man. There are plenty of reasons why paperclips are unsuitable as money. They are easy to forge and there is no guarantee of how many will ever be in existence to name a few. Trading oil or gold directly is obviously impractical. But Bitcoins are not. You can store an unlimited amount of Bitcoins on your smartphone or USB stick and you can securely and anonymously transfer them to someone else within a few seconds.
  - ignifero 15y ago
    How is it different from ordinary coins? (Obviously, in a hypothetical gold-coin economy credit cards would be in gold, too). Btw, practicality was not the reason the world abandoned the gold standard, political and economical needs obviated it. P.s. obviously, paperclips are not a good figurative example. The central banks might just give you a list of banknote numbers to exchange (and an API to verify their uniqueness)
    - niklas_a 15y ago
      Giving someone coins is similar to Bitcoin. Still, Bitcoin is more practical than carrying around a bag of coins. You can send them instantly across the globe without fees and keep as many as you want in your pockets to name a few.
csomar 15y ago
I really wander what if a country legalizes bitcoins. A small/poor country with less than 1 million inhabitants. Bitcoin supporters will found a great base where to make transactions legally and build bitcoin related start-ups without fear. All transactions take place in that country banks and then forward to the bank of choice of the company/person/start-up. Think of that country as a legal bridge to using/trading bitcoin. They can charge a small fee for doing it (say 3%). If the economy of bitcoins grows at a multi-national scale making around 1 billion USD in daily transactions, this will bring a $10.5bn income for that country, assuming the number of its inhabitants to 1 million, that's $10K per capita. It could save it from poverty and may be in the future makes it one of the richest. Just few thoughts...
- meow 15y ago
  On the other hand, that country might lose tax money - assuming that it encourages bitcoins internally. Of course, if the country is really poor they may not be collecting much tax income to start with.
- pessimizer 15y ago
  Here's another whimsy: instead of (necessarily) a poor country, how about any country that relies exclusively on land/property taxes, VATs, and tariffs? Are there any? As far as I can tell, those taxes can't be dodged by a virtual currency since they are levied on physical items.
- gvsteve 15y ago
  Everything is legal until it is made illegal. Bartering for goods and services is not illegal, at least in the US, and Bitcoin falls under that legal realm. There is no law hindering any company's ability to accept Bitcoin as payment besides the requirement to pay taxes on the fair market value of the Bitcoins.
  - sukuriant 15y ago
    Just out of curiosity, are you a tax lawyer/whatever-lawyer-is-entitled-to-make-this-claim?
benmmurphy 15y ago
the big problem with using bitcoins for real life transactions is it takes ~10 minutes to confirm the transaction. this makes it useless for buying a lot of things like fast food, stuff from the store, etc. you would need to layer a trusted third party like a credit card on top of bitcoin to use it for normal transactions.
- niklas_a 15y ago
  I wouldn't call this a big problem. It is a minor issue at worst. In the Bitcoin forums there has already been several discussion on how to solve this issue by paying a third party to facilitate the transaction while preserving anonymity.
FeelsGoodMan 15y ago
It should be noted that the only reason Meze Grill is accepting bitcoins is because Bruce Wagner, host of the 24/7 Bitcoin show (http://onlyonetv.com/?page_id=178 http://onlyonetv.com/?page_id=178), loves the restaurant and convinced the owner to accept bitcoins. The owner himself (on Bruce's show) has admitted it's basically a cute little gimmick and doesn't actually any real volume using bitcoins at his shop. Yes, the above is as ridiculous as it sounds.
- sgornick 15y ago
  Quick question for you. Who was the second astronaut to set foot on the moon?
  - deleted 15y ago
    [deleted]
  - lwat 15y ago
    Buzz Aldrin? Buzz is ridiculously famous so maybe your analogy is not the best.
  - FeelsGoodMan 15y ago
    What's the analogy you're trying to make?
    - sgornick 15y ago
      There's an old cliché, nobody remembers the second man to walk on the moon. So my point was, there is value in being the first restaurant in the world to accept bitcoins. And to be the first coffee shop. or the first plumber to do so, etc. But, of course, I got schooled by lwat who poked a hole in my argument ... Buzz Aldrin is very well known. Incidentally, the second restaurant to announce that they accept bitcoins also is in NYC ... http://twitter.com/ocrepes http://twitter.com/ocrepes
tedunangst 15y ago
Just because something works does not automatically means it's not a ponzi scheme. The original Ponzi was buying and selling real stamps. He didn't necessarily set out to defraud people. I personally don't think bitcoins are a ponzi scheme, but the fact that somebody once paid for lunch with them is not much evidence of that.
michaelochurch 15y ago
Bitcoin isn't a scam because it's "imaginary" (i.e. fiat) but because of how the currency is distributed: a proof-of-work system that is skewed heavily in favor of early adopters. There are a lot of good ideas in Bitcoin, but the truth is that its raison d'etre is to enrich early adopters-- the definition of a pyramid scheme. (It's not a Ponzi scheme; that has a technical definition and Bitcoin doesn't qualify.)
- netcan 15y ago
  Interestingly, that may be an advantage of the system. It encourages early adoption and encourages early adopters to nurture the system. Maybe it's unfair, I don't know. But, I don't see any perverse incentives.
  - ohashi 15y ago
    If you want to know how this may be perverse, it mirrors a pump and dump. Get in really cheap, hype it and dump for lots of profit on something without any basis for its value.
    - gridspy 15y ago
      Only the people who are doing the pumping are going to dump at that point. By the point it is valuable, there will be many more people who (probably) stay around - bitcoin will hopefully be well established by then.
- onedognight 15y ago
  When you are born, you have no dollars. The early adopter have them all. Does that make the dollar economy a pyramid scheme?
- Astrohacker 15y ago
  It's not a scam. You have to distribute the coins somehow. Proof-of-work is a method to ensure no cheating. You can be sure the early miners did in fact perform computational effort to get their coins.
maeon3 15y ago
Bitcoins is going to be killed one way or another, the Federal Reserve is looting our USD, and will not allow any technology to hinder that ability to dilute the USD. The question is not IF bitcoin will fail, but how this takedown will be accomplished. Anyone who sets up a "Bitcoin bank" is entering the dragons lair. You may disappear in the night, as people who oppose the IRS in legal battles, you get your assets seized and you disappear without a blip on the media narrative.
- sorbus 15y ago
  Do you have any examples of the IRS disappearing people?
  - maeon3 15y ago
    All right you caught me with some rhetoric. What I mean to say is: "if bitcoin takes off so it takes a measurable dent out of the income of the IRS, then laws will be passed in congress shutting down anything and everything causing that dent" obviously for the good of the people" of course. No people will be disappearing, only the threat to the Federal Reserve's ability to inflate the currency. Bitcoin represents a solution to the problem of governments stealing wealth from the workers right out from under their noses without taxation or representation.
- jamesgagan 15y ago
  I think your claim that people who oppose the IRS "may disappear in the night" could use some evidence to back it up.
  - uptown 15y ago
    Maybe Wesley Snipes? First as Blade ... then by the IRS for tax evasion.
mcantelon 15y ago
>It appears that their orders cost BTC 0.75 and his own meal cost BTC 0.7 and nobody has bought anything with Bitcoins at the Meze Grill since then. Or the grill owner periodically generates a new address with which to receive coins.
- sgornick 15y ago
  Probably has multiple laminated QR codes. That's not really the right way, or the best way. But it is a way that works. With only one code, the restaurant can't know for sure who the payment was from. Though at these low volumes, the amount and/or the time would probably be adequate. Even with a little more volume this method should still work fine, even if you get a second or third QR code to use.
jussij 15y ago
> me he wanted 0.52 Bitcoins for my lunch With the Bitcoin currently valued at about $0.02 (down from $17.00), I suspect the restaurant won't be accepting to many more Bitcoin orders.
- bdr 15y ago
  Where are you seeing bitcoins for $0.02? They're about $16 on TradeHill and Mt. Gox.
  - swishercutter 15y ago
    He must be thinking of the flash crash...it recovered in minutes.
dacoinminster 15y ago
If you want to buy some bitcoins, I recommend http://www.TradeHill.com http://www.TradeHill.com, which has lower fees and than MtGox, and seems more professional to me. I have a code that will get you 10% off your fees there if anybody wants to buy or sell bitcoins on TradeHill.com: TH-R1168

189 points by sas 15y ago

c4urself 15y ago

There's a lot to like about BitCoin. They "just" need to solve the following: 1. Technical issues (make it more secure) 2. Economic issues (deflation) 3. "Competitor" issues (governments, banks, the powerful status quo)

ignifero 15y ago
... Which will lead to 4. Trust. People can only agree to use a currency if they trust it.
- kd1220 15y ago
  I think the lack of physical tokens for Bitcoin (or any cryptocurrency) will likely be the main hurdle for public acceptance. It'll probably take another generation or two for people to get used to the idea of not having a physical representation for currency.
  - ignifero 15y ago
    People accepted credit cards decades ago. If bitcoin could work as a currency (which it can't, for other reasons), it would presumably be used via equally convenient exchange devices.
patrickg 15y ago
4) Legislative issues. For example Germany (I'd bet) would not accept bitcoins in one's tax form ("I have to pay 345.67 bit coins of taxes to the state"). And if you have income in a non approved currency, you get into some trouble.
- iwwr 15y ago
  The restaurant owner was basically exchanging BTC for USD on the spot and also reporting tax income in USD.
- csomar 15y ago
  If you consider it as a commodity, it would be no different than Gold or Oil.
drivebyacct2 15y ago
I'm curious. Where exactly do you see a security flaw in Bitcoin? Exchanges run by former magic the gathering admins don't count. What flaw is there is there in the security of the currency, I'm curious.
- deleted 15y ago
  [deleted]
- discover 15y ago
  http://nerdr.com/shutting-down-bitcoin-really-taking-down-the-bitcoin-network/ http://nerdr.com/shutting-down-bitcoin-really-taking-down-th... I'll add that the crypto will one day be broken (even brute force will eventually work once CPU/GPU have progressed far enough). And when it is, there is no reason you couldn't just sit back cracking those wallets in secret before funneling the coins your way. A significant weakness of the anonymity of the network means no one really "owns" a wallet in the traditional sense. They are essentially communal.
  - jasonzemos 15y ago
    You're right that sha256 will one day be in jeopardy, but there's no reason why the system can't update itself well before then. If sha256 is broken, all it takes is for people to update their clients and only start accepting sha3, etc.
    - discover 15y ago
      Previously, breaking a crypto was nice, but not instantly and anonymously profitable as it is with Bitcoin. It will be interesting to see how it plays out when it happens.
- ubernostrum 15y ago
  Exchanges run by former magic the gathering admins don't count. Not sure what's meant by that dig, but worth pointing out that a lot of former (and some current) Magic pros do quite well in financial work. In fact, an eerie number of them seem to graduate from Magic, to poker, to finance.
ars 15y ago
> Economic issues (deflation) This is actually a pretty serious problem. The value of bitcoins always settles such that the cost of the electricity to make them is approximately their value. But because the difficulty is adjusted such that a fixed number of bitcoins are generated per time (meaning faster or more efficient computers don't help), and that the number generated per unit time is constantly shrinking, it will cost more and more electricity over time to make bitcoins. Deflation is built into it. And I bet the creator of bitcoins never realized that the scarce resource bitcoins track is electricity. If you want to make a ton of money, buy bitcoins just before they switch from 50 per block to 25. I'm betting the value will double.
- wedesoft 15y ago
  The cost of electricity per Bitcoin in turn depends on the computing power invested in the network. The strength of the next block is adjusted so that it takes approximately 10 minutes for the network to solve it. Also there are optional transaction fees.
  - ars 15y ago
    Right, that's what I'm saying: As more people join the network it becomes uneconomic to mine bitcoins, because since it's harder now, it costs too much electricity. So those with the least efficient setups stop mining. So the price settles at the cost of electricity. Then they reduce the number of coins per block. So suddenly it comes even less worth it to mine. Until the value of each bitcoin rises to match, causing people to want to mine again. If the value of each bitcoin did not rise, no one at all would mine and the network would grind to a halt (no confirmed transactions). Unless they have a mechanism to reduce the difficulty factor at that point. I'm not sure on that point.
    - jasonzemos 15y ago
      "If the value of each bitcoin did not rise, no one at all would mine and the network would grind to a halt (no confirmed transactions)." This isn't true. The system has several modes of adjustment and it will always be worth it for someone to generate blocks. If the value of a coin didn't rise to match generation costs, people /should/ stop mining -- but those that remain will collect more coins or transaction fees as the difficulty drops to compensate. Overall the economy as a whole shrinks, but never grinds to a halt.

pieter 15y ago

Sounds like there really is a need for a standardized way to integrate bitcoin addresses into DNS. For example, just adding the address as a TXT field and using DNSSEC to sign it would make the whole experience a bit nicer already.

ghshephard 15y ago
The added advantage of that solution is that (with a bit of backend work on your nameserver) you could rotate your Bitcoin address for every lookup, resulting in a unique address per transaction to preserve anonymity.
BrianGaffney 15y ago
I recently came across a different approach to to the same problem. http://www.coinhandle.com http://www.coinhandle.com You give it a name and your bit coin receiving address. Then you can query it for the address associated with that name. It has some sort of API, would be much more useful if this was integrated with the official bit coin client though.

retube 15y ago

It seems that bank accounts are public: https://blockexplorer.com/address/1MTbKpYWnzqmsLvCjdTtwrvuX81g3HCgC https://blockexplorer.com/address/1MTbKpYWnzqmsLvCjdTtwrvuX8... Why is this?

stuhood 15y ago
This is why people say Bitcoin is pseudonymous: the entire transaction history of every Bitcoin is public knowledge. To achieve actual anonymity, receivers need to use a one-time-address for each sender, and senders need to not leak information about which addresses they own. https://en.bitcoin.it/wiki/Anonymity https://en.bitcoin.it/wiki/Anonymity
- ralfd 15y ago
  Imagine all the money exchange and circulation of the world economy. 7 billion people. If hypothetically Bitcoin would be the "world currency" how much data (which is never deleted) would that generate per day? What data will amassed in 10 years? I wonder how that will hard limit the system...? I have no clue about Bitcoin but a quick google search seems to imply that the global history of all transactions is locally saved in the client as "blk0001.dat". Already this database seems to be a few hundred Megabytes big?
  - gwern 15y ago
    https://en.bitcoin.it/wiki/Scalability https://en.bitcoin.it/wiki/Scalability
    - sorbus 15y ago
      So Bitcoin's scalability relies on a mixture of writing new software when it's needed ("The core BitCoin network can scale to very high transaction rates assuming a distributed version of the node software is built. This would not be very complicated.") and in future switching to a two-tiered structure with "supernodes" transmitting data between themselves at a rate of >1GB/s. While I suppose that it's good that someone is thinking about this, it does not inspire confidence in bitcoin's ability to scale - the fact that it's theoretically possibly to write software allowing it to scale is very different from someone going off, writing this software, and demonstrating that it does scale.

ars 15y ago

The most important by far rule for currency is stability. With stability comes acceptance of the currency. You don't have that - the owner first looked up the exchange rate to US dollars. What you have is a medium of exchange, but you don't have a currency. A medium of exchange is useful, and can eventually become a currency. But bitcoins are not yet a currency. Perhaps someone can make a bank, where you store US dollars. Using that bank you can send and receive bitcoins. Only the bank can create bitcoins, but once created anyone can trade them without input from the bank. If you are familiar with history this is how paper currency actually got started - goldsmiths would store gold and give chits of paper. Those chits started getting exchanged, and a currency was born.

dools 15y ago
Does that mean that the Euro is not a real currency? Or that the US dollar isn't real in Canada?
- halostatue 15y ago
  After a fashion, yes. Just because a merchant accepts a non-native currency (such as USD instead of CAD) doesn't mean that the non-native currency is inherently valuable in the native country. The merchant can't remit taxes in USD; can't pay her employees in USD. It must all be converted back to CAD before the merchant can do anything useful with it. Don't mistake what is offered as a convenience by some merchants as normal and accepted.
retube 15y ago
> You don't have that - the owner first looked up the exchange rate to US dollars What? Any London store that accepts euros will check the rates daily to make sure they can convert back into the GBP price. Currency rates fluctuate all the time, every second of every day. http://uk.finance.yahoo.com/q/bc?s=GBPEUR=X&t=1y&c= http://uk.finance.yahoo.com/q/bc?s=GBPEUR=X&t=1y&c=
- ars 15y ago
  Then they aren't accepting euros as currency. At the end of the day they will immediately convert the euros to GBP. They are willing to use euros as a medium of exchange, but only because they know they can exchange them for (to them) real currency. (Currency is relative, obviously. And just as obviously it helps that somewhere in the world there are people who use that type of money, which gives you comfort that even if you don't exchange it now, you can later.) If this was the fate of bitcoins then it would be a failure. People may use it to send value over the internet, but no one will keep their savings in bitcoins. To be money you have to be willing to save it. If all you do is use it as an intermediate it's not money - yet. It may eventually become money (historically intermediates often do that - especially if the conversion is difficult), but it's not money yet. The reason it's so important for people to store the currency in savings is very simple: If no one want to keep your money long term, practically speaking there will be very little of it in circulation, which makes it hard to use.

kbd 15y ago

Excellent article. My favorite quote: > Apart from whether there is a central bank somewhere to bid against George Soros, doesn’t the difference between a real currency and an imaginary currency lie in some sense in the composure with which a customer can ask if the currency is accepted here and in the composure with which a merchant can say yes? Every currency is valuable only because other people consider it to have value.

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dexen 15y ago
> Every currency is valuable only because other people consider it to have value. Two counterarguments: - the idea of `legal tender' [1]. Usually the physical manifestation (coins and banknotes) of official currency in a given country/region/whatever is also codified by law as legal tender. Which means, when used for settling a debt, the creditor is obliged to accept it. Contrast that with gold, for example: it's considered valuable, but creditors are not required to accept it. Value of legal tender stems from both recognition and the legal framework of it being legal tender. - taxes. Country's/region's law dictates the currency persons and organizations have to use for settling taxes and other dealings with administration. A currency that people don't trust or use for any other reasons could still have well-understood value in relation to settling taxes. That having been said, I firmly believe Bitcoin has great potential. Even if this particular implementation fails at some point, other ones will follow. ---- [1] http://en.wikipedia.org/wiki/Legal_tender http://en.wikipedia.org/wiki/Legal_tender
- mike_esspe 15y ago
  >the idea of `legal tender' This idea doesn't work in the country with hyperinflation :) As long as people don't consider that the currency is valuable, no legal force can convince them.

patio11 15y ago

So I get that Bitcoin by design keeps a global public record of every transaction. Does that have to be the HN front page?

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guelo 15y ago

If bitcoin was a currency the meal would have been denominated in bitcoins not dollars. Bitcoin is an asset like gold or a stock certificate, not a currency.

jalada 15y ago
No, only because Bitcoin isn't stable enough right now to know what the price should've been in BTC.
- ars 15y ago
  You mean yes, not no. It's precisely because bitcoins are not stable that bitcoins are not a currency.
  - tftfmacedo 15y ago
    You should try living a country with high inflation. People lookup exchange rates every single day.
    - ars 15y ago
      And those people do not willingly use that currency - they are forced to by their government. Whatever currency it is that they are comparing to is the currency they really want to use, and probably do on the black market. I'm also confident that that is the currency they keep (or try to keep) their savings in.
    - ohashi 15y ago
      And you see real currencies being used in many of them as black market currencies instead of the national currency. You can also see countries trying to stop inflation by indexing to other, stable, currencies.
- mike_esspe 15y ago
  That is not the problem of stability, that is because the restaurant is paying in USD to their contractors. This should change in the future.

ignifero 15y ago

Bitcoin is a commodity. Nobody issues it, it is mined and has a predictable, limited supply. People aspire to use bitcoin as fiat money, but that's impossible, there is no one to provide liquidity when the market runs out and there's no underlying economy it will be based upon. Commodities like gold, silver, petrol have been used or tied to money for centuries, but at some point their use was deprecated by the needs of the people. Adopting bitcoin as currency is like going back to the 19th century. It's an interesting idea for geeks, and maybe it will be used in special applications, but it's not an advancement for the economy, its a step back. He might as well have paid with (numbered) paperclips if there was an MtGox for paperclips, does that mean that paperclips are the future?

niklas_a 15y ago
You are building a straw man. There are plenty of reasons why paperclips are unsuitable as money. They are easy to forge and there is no guarantee of how many will ever be in existence to name a few. Trading oil or gold directly is obviously impractical. But Bitcoins are not. You can store an unlimited amount of Bitcoins on your smartphone or USB stick and you can securely and anonymously transfer them to someone else within a few seconds.
- ignifero 15y ago
  How is it different from ordinary coins? (Obviously, in a hypothetical gold-coin economy credit cards would be in gold, too). Btw, practicality was not the reason the world abandoned the gold standard, political and economical needs obviated it. P.s. obviously, paperclips are not a good figurative example. The central banks might just give you a list of banknote numbers to exchange (and an API to verify their uniqueness)
  - niklas_a 15y ago
    Giving someone coins is similar to Bitcoin. Still, Bitcoin is more practical than carrying around a bag of coins. You can send them instantly across the globe without fees and keep as many as you want in your pockets to name a few.

csomar 15y ago

I really wander what if a country legalizes bitcoins. A small/poor country with less than 1 million inhabitants. Bitcoin supporters will found a great base where to make transactions legally and build bitcoin related start-ups without fear. All transactions take place in that country banks and then forward to the bank of choice of the company/person/start-up. Think of that country as a legal bridge to using/trading bitcoin. They can charge a small fee for doing it (say 3%). If the economy of bitcoins grows at a multi-national scale making around 1 billion USD in daily transactions, this will bring a $10.5bn income for that country, assuming the number of its inhabitants to 1 million, that's $10K per capita. It could save it from poverty and may be in the future makes it one of the richest. Just few thoughts...

meow 15y ago
On the other hand, that country might lose tax money - assuming that it encourages bitcoins internally. Of course, if the country is really poor they may not be collecting much tax income to start with.
pessimizer 15y ago
Here's another whimsy: instead of (necessarily) a poor country, how about any country that relies exclusively on land/property taxes, VATs, and tariffs? Are there any? As far as I can tell, those taxes can't be dodged by a virtual currency since they are levied on physical items.
gvsteve 15y ago
Everything is legal until it is made illegal. Bartering for goods and services is not illegal, at least in the US, and Bitcoin falls under that legal realm. There is no law hindering any company's ability to accept Bitcoin as payment besides the requirement to pay taxes on the fair market value of the Bitcoins.
- sukuriant 15y ago
  Just out of curiosity, are you a tax lawyer/whatever-lawyer-is-entitled-to-make-this-claim?

benmmurphy 15y ago

the big problem with using bitcoins for real life transactions is it takes ~10 minutes to confirm the transaction. this makes it useless for buying a lot of things like fast food, stuff from the store, etc. you would need to layer a trusted third party like a credit card on top of bitcoin to use it for normal transactions.

niklas_a 15y ago
I wouldn't call this a big problem. It is a minor issue at worst. In the Bitcoin forums there has already been several discussion on how to solve this issue by paying a third party to facilitate the transaction while preserving anonymity.

FeelsGoodMan 15y ago

It should be noted that the only reason Meze Grill is accepting bitcoins is because Bruce Wagner, host of the 24/7 Bitcoin show (http://onlyonetv.com/?page_id=178 http://onlyonetv.com/?page_id=178), loves the restaurant and convinced the owner to accept bitcoins. The owner himself (on Bruce's show) has admitted it's basically a cute little gimmick and doesn't actually any real volume using bitcoins at his shop. Yes, the above is as ridiculous as it sounds.

sgornick 15y ago
Quick question for you. Who was the second astronaut to set foot on the moon?
- deleted 15y ago
  [deleted]
- lwat 15y ago
  Buzz Aldrin? Buzz is ridiculously famous so maybe your analogy is not the best.
- FeelsGoodMan 15y ago
  What's the analogy you're trying to make?
  - sgornick 15y ago
    There's an old cliché, nobody remembers the second man to walk on the moon. So my point was, there is value in being the first restaurant in the world to accept bitcoins. And to be the first coffee shop. or the first plumber to do so, etc. But, of course, I got schooled by lwat who poked a hole in my argument ... Buzz Aldrin is very well known. Incidentally, the second restaurant to announce that they accept bitcoins also is in NYC ... http://twitter.com/ocrepes http://twitter.com/ocrepes

tedunangst 15y ago

Just because something works does not automatically means it's not a ponzi scheme. The original Ponzi was buying and selling real stamps. He didn't necessarily set out to defraud people. I personally don't think bitcoins are a ponzi scheme, but the fact that somebody once paid for lunch with them is not much evidence of that.

michaelochurch 15y ago

Bitcoin isn't a scam because it's "imaginary" (i.e. fiat) but because of how the currency is distributed: a proof-of-work system that is skewed heavily in favor of early adopters. There are a lot of good ideas in Bitcoin, but the truth is that its raison d'etre is to enrich early adopters-- the definition of a pyramid scheme. (It's not a Ponzi scheme; that has a technical definition and Bitcoin doesn't qualify.)

netcan 15y ago
Interestingly, that may be an advantage of the system. It encourages early adoption and encourages early adopters to nurture the system. Maybe it's unfair, I don't know. But, I don't see any perverse incentives.
- ohashi 15y ago
  If you want to know how this may be perverse, it mirrors a pump and dump. Get in really cheap, hype it and dump for lots of profit on something without any basis for its value.
  - gridspy 15y ago
    Only the people who are doing the pumping are going to dump at that point. By the point it is valuable, there will be many more people who (probably) stay around - bitcoin will hopefully be well established by then.
onedognight 15y ago
When you are born, you have no dollars. The early adopter have them all. Does that make the dollar economy a pyramid scheme?
Astrohacker 15y ago
It's not a scam. You have to distribute the coins somehow. Proof-of-work is a method to ensure no cheating. You can be sure the early miners did in fact perform computational effort to get their coins.

maeon3 15y ago

Bitcoins is going to be killed one way or another, the Federal Reserve is looting our USD, and will not allow any technology to hinder that ability to dilute the USD. The question is not IF bitcoin will fail, but how this takedown will be accomplished. Anyone who sets up a "Bitcoin bank" is entering the dragons lair. You may disappear in the night, as people who oppose the IRS in legal battles, you get your assets seized and you disappear without a blip on the media narrative.

sorbus 15y ago
Do you have any examples of the IRS disappearing people?
- maeon3 15y ago
  All right you caught me with some rhetoric. What I mean to say is: "if bitcoin takes off so it takes a measurable dent out of the income of the IRS, then laws will be passed in congress shutting down anything and everything causing that dent" obviously for the good of the people" of course. No people will be disappearing, only the threat to the Federal Reserve's ability to inflate the currency. Bitcoin represents a solution to the problem of governments stealing wealth from the workers right out from under their noses without taxation or representation.
jamesgagan 15y ago
I think your claim that people who oppose the IRS "may disappear in the night" could use some evidence to back it up.
- uptown 15y ago
  Maybe Wesley Snipes? First as Blade ... then by the IRS for tax evasion.

mcantelon 15y ago

>It appears that their orders cost BTC 0.75 and his own meal cost BTC 0.7 and nobody has bought anything with Bitcoins at the Meze Grill since then. Or the grill owner periodically generates a new address with which to receive coins.

sgornick 15y ago
Probably has multiple laminated QR codes. That's not really the right way, or the best way. But it is a way that works. With only one code, the restaurant can't know for sure who the payment was from. Though at these low volumes, the amount and/or the time would probably be adequate. Even with a little more volume this method should still work fine, even if you get a second or third QR code to use.

jussij 15y ago

> me he wanted 0.52 Bitcoins for my lunch With the Bitcoin currently valued at about $0.02 (down from $17.00), I suspect the restaurant won't be accepting to many more Bitcoin orders.

bdr 15y ago
Where are you seeing bitcoins for $0.02? They're about $16 on TradeHill and Mt. Gox.
- swishercutter 15y ago
  He must be thinking of the flash crash...it recovered in minutes.

dacoinminster 15y ago

If you want to buy some bitcoins, I recommend http://www.TradeHill.com http://www.TradeHill.com, which has lower fees and than MtGox, and seems more professional to me. I have a code that will get you 10% off your fees there if anybody wants to buy or sell bitcoins on TradeHill.com: TH-R1168