9 ms·

Bitcoins up another 42% since August 1st

64 points by SlipperySlope 14y ago

nateberkopec 14y ago
Bitcoins are still great, but until their price starts to stabilize, they'll never become cash replacements. Right now, Bitcoins cannot function as a 'store of value' in the sense of currency because they're so volatile.
- kiba 14y ago
  At the current price level and market cap, stability for bitcoin is still not possible, because bitcoin needs to increase the amount of users using it to be more useful. Inevitably, this means the price of bitcoin will rise. Hopefully, the current growth in price is not a bubble.
  - nateberkopec 14y ago
    Interesting catch-22/chicken-and-egg there. How can Bitcoin increase the number of people using it if it's still a speculative/risky investment?
    - hnolable 14y ago
      But of course, it's already proven it can do this on at least one scale. Whether or not it can do it on a larger scale is still to be seen.
    - oleganza 14y ago
      This is not a chicken-and-egg problem. Initially there is some value of doing bitcoin: some find it fun, some believe in future growth and do early investment. Sceptical people join later when they see some people already joined. As number of people slowly grows, more people join after them seeing increasing value in the system. So there is no catch-22: system is unrolling completely by itself until everybody is in. If people discover some problems with it, growth or even total demand will go down. See also my comment above about subjective value of gold.
  - w0utert 14y ago
    > [..] bitcoin needs to increase the amount of users using it to be more useful. Inevitably, this means the price of bitcoin will rise. I'm not so sure if this is 'inevitable' since bitcoins in itself have no value at all. I know the same can be said about fiat money, but at least that's what everyone agrees is legal tender, as opposed to just a bunch of idealists or people who need a way to pay for shady stuff. But bitcoins are not like commodities, or labour, or whatever else has limited supply and non-zero utility. Personally I'm not even touching bitcoins with a 10-foot pole. The day some government decides bitcoins are becoming a real alternative or even a threat to government-controlled money, they will shut the whole gig down and all your bitcoins will be worth nothing. One thing I never understood about bitcoins, is what other problem they solve besides scratching some ideological itch some people have with money controlled by central bankers and governments (which I can imagine are valid concerns for some people). Effectively bitcoins are just like fiat money; worthless tokens that have no intrinsic value besides the trust that some people have in them to hold their value. Trust that is not actually based on anything either. At least the dollar has a government with a big military behind it that can assert their influence on areas where real wealth is concentrated. I'm not saying this is a good thing, just making the observation.
    - ktizo 14y ago
      At least the dollar has a government with a big military behind it Then all you are doing is pegging your wealth to the stability of a nation, which statistically speaking is not that good a bet.
    - mattschoch 14y ago
      You are exactly right that bitcoins are exactly like fiat money, and have no intrinsic value. You actually unintentionally explained what you don't understand. Fiat currency is a problem because it can be so easily manipulated by the governments behind it. Just like the dollar, bitcoins have value only because people believe they have value. Your statement that at least the dollar has a government with big military behind it is exactly what the problem is that bitcoin solves. Bitcoin does NOT have a big government or organization controlling it, so unlike the dollar, no single party can inflate the currency. Central banks are able to create money out of nothing, therefore creating something with perceived value without offering anything of value in exchange (i.e. inflation). That leads to all kinds of problems, as we're seeing with the global economic crisis right now. While Bitcoin does not have any intrinsic value, it also does not have a way to be inflated. The system by design creates DEFLATION instead, so the currency becomes more valuable(infinite divisibility handles issues with deflation). Since there is a finite number of bitcoins that can ever be mined, it acts much more like gold than like the dollar. Gold cannot be inflated by any government. If bitcoins gain mass adoption, then they will begin to look very similar to gold. The main difference being that they are purely digital and have no intrinsic value(thus making gold still a better currency).
  - oleganza 14y ago
    One should not forget to mention what one measures the price in. That is, the price of Bitcoin in some products will become more stable over time, but USD and EUR prices may still grow just because USD and EUR will be valued less by producers and consumers. However, today Bitcoin price grows in relation to almost everything because demand for it outgrows the supply.
  - adrianwaj 14y ago
    There's one very good thing about a rising bitcoin price that in and of itself makes the rise sustainable: more hackers and bitcoin businesses with more funds to invest into the various aspects of the economy.
maartenscholl 14y ago
There are relatively low volumes but steady price gains over the past month. This could be a sign that a lot of people want to get into the market quickly without reasoning about the price. When we look in the order book of one of the larger exchanges (mtgox) we see that there is not much market depth on either side[1]. This coincides with large volume peaks when articles are published, for example August 3 when bitcoin broke the $10.00 price this was widely published about (also on HN). [1]http://bitcoincharts.com/markets/mtgoxUSD.html http://bitcoincharts.com/markets/mtgoxUSD.html
SlipperySlope 14y ago
Obviously, this bubble-like rate of growth cannot be sustained, yet the bitcoin economy has more participants than the previous price spike in June 2011.
rushabh 14y ago
The more I think about this, I get a feeling that bitcoins are solving the wrong problem. The real problem is not of currency (though it is a problem, but just not as big), but of deep flaws in society due to capitalism. Let me explain. Today there are distinct classes of society, and social mobility is decreasing in the US [1] and is frustratingly slow in the developing world. The problem we are facing is that the producers are have become extremely productive due to capital and technology and are able crush those who do not have the access to the capital and technology. The people who are not in this privileged group are caught in a vicious cycle are forced to remain consumers and are getting more and more dependent on these super producers. What money essentially does is facilitates information flow in an economy and enables complex contracts between a number of producers and consumers. The problem is not the information flow is not correct, the problem is that there is terrible inequality. Bitcoins are seen as a hedge against large scale systemic collapse or slow corrosion of the nation-state. If the collapse / corrosion happens, we really do not know what kind of alternative systems will emerge. The only way, to prevent such a collapse, in my view is to encourage local products and services in a big way. Bitcoins may not really help. [1] http://www.nytimes.com/2012/01/05/us/harder-for-americans-to-rise-from-lower-rungs.html/?pagewanted=all http://www.nytimes.com/2012/01/05/us/harder-for-americans-to...
- RickHull 14y ago
  > The problem we are facing is that the producers are have become extremely productive due to capital and technology and are able crush those who do not have the access to the capital and technology. This is a common mercantilist fallacy -- that the problem is we just have too much production. I submit that we have the opposite problem: goods and resources are too scarce, rather than too abundant. More efficient production is the solution, rather than the problem. > The people who are not in this privileged group are caught in a vicious cycle are forced to remain consumers and are getting more and more dependent on these super producers. I agree that the focus of the economy is consumption, but this is indicative of the problem as well. We need to encourage entrepreneurship. By this I do not mean subsidies -- more in terms of cultural encouragement and removal of legislative and regulatory obstacles.
  - 14y ago
shtylman 14y ago
Barring outside factors (hacking, breach of trust, etc) the price of bitcoin is naturally bullish given the current ways to trade them. Since there is no large scale operation providing a way to short bitcoins, there is no one "investing" in their price decline. This simply means that anyone buying in using USD now needs to cash out at a higher price to make a profit (on most exchanges) and anyone who has coins would not want to make the market tank since that just devalues what they have. I realize the above is a simplification and there are many other factors (and there could be malicious participants), but overall this will continue to push the price up.
- tocomment 14y ago
  Would it be hard to start a service to let people short bitcoins? You'd basically just be "lending out" the bit coins to people and making interest. Would there be a lot of regulations to deal with, or no?
  - ewillbefull 14y ago
    Services have existed with margin/option trading, but some of them have shut down because they were hacked. New ones that come out every day are too insecure to be trusted. In fact, just today a margin trading website was exposed as having tons of SQL injections and storing user passwords with unsalted MD5 hashes. Until somebody can step up to the plate stability will be an issue. Which reminds me, I have a rather nice domain name and experience with bitcoins and security, if only I had the financial/regulatory know-how...
    - shtylman 14y ago
      Stop worrying about the financial and regulatory know how and just try out your idea. You might find it goes nowhere and you will have wasted your time thinking about "regulations". No one is going to shut down your website making 10$ a month and if you do start to grow then you will be able to pay the right people to deal with the right problems.
      - 14y ago
circa 14y ago
I'm not sure if stripcoin.com is helping or hurting the situation either.
oinksoft 14y ago
Bitcoin price will continue to rise unless something happens causing confidence in the currency to collapse. It is designed to never inflate, and as more blocks are confirmed, we see that it deflates.
- Symmetry 14y ago
  Well, sort of. Its designed so that the number of bitcoins in circulation approach some constant, but that doesn't tell you anything about the value of bitcoins, because the long term value of bitcoins is going to be something like the value of the market served by bitcoins divided by the number of bitcoins. So if, say, Silkroad gets shut down by the authorities then I expect the value of bitcoins would crash. Or if banking regulations change to make using bitcoins more cumbersome, or whatever. And you'd expect to see the value to bitcoins drop during recessions.
  - oinksoft 14y ago
    I'm referring to the real inflation of the currency: There is no mechanism for new bitcoins to be created when all blocks are confirmed. You need to create new currency to avoid deflation because populations grow.
    - mckoss 14y ago
      Deflation is just another word for long periods of decreasing prices (not VALUES). What's wrong with that? Because of their infinite divisibility (it's equally easy to spend 1 millionth of a Bitcoin as it is to spend 1 Bitcoin) they do not share is the problems deflation poses to traditional money. Deflation does encourage saving over consumption, yes. But I love the fact that products in the electronics markets have had long term predictable price declines over many decades.
lorenzfx 14y ago
I believe/hope that this rise is not really a bubble, but driven by the rising difficulty, which is due to the availability of cheap(er) fpgas. Also the rise is much slower than last summer and supported by much larger trading volume.
- wcoenen 14y ago
  The bitcoin price drives the difficulty, not the other way around. http://bitcoin.stackexchange.com/questions/419/is-there-empirical-data-about-a-relationship-between-bitcoin-price-and-difficult http://bitcoin.stackexchange.com/questions/419/is-there-empi...
deleted 14y ago
[deleted]
tokenadult 14y ago
As I have written before, perhaps the greatest contribution the Bitcoin experiment will make to humankind is to teach you and me and our neighbors more about the realities of economics. Many of the ideas about how to mine Bitcoins, store Bitcoins, and trade with Bitcoins as a medium of exchange illustrate both the strengths and weaknesses of any other medium of exchange in a world full of human beings seeking personal advantage. Seeing the discussion of Bitcoins here on Hacker News reminds me of the last time that the price of gold (in United States dollars) crashed, and the arguments beforehand that such an occurrence was impossible, for instance. "The market can remain irrational longer than you can remain solvent" is still an important principle of investment. Anyone could make a steady increase of wealth trading in almost any commodity, if only one could time the market. The trick with Bitcoin trading as with all forms of commodity trading is to somehow outsmart most other investors and time the market better than everyone else who trades Bitcoins. Good luck with that. AFTER EDIT: See a somewhat related story with interesting comments http://news.ycombinator.com/item?id=4391312 http://news.ycombinator.com/item?id=4391312 posted on Hacker News today.
- illuminate 14y ago
  "perhaps the greatest contribution the Bitcoin experiment will make to humankind is to teach you and me and our neighbors more about the realities of economics" I most certainly wish this was the case, however the cycle of booms and busts rarely teach anyone anything. Think about how they were documented in the 1800s, Extraordinary Popular Delusions and the Madness of Crowds specifically, they STILL teach that book in plenty of schools, and yet the same idiots believe this time, things'll be different.
pixie_ 14y ago
Bitcoin still has some technical problems to figure out. Currently the blockchain is over 2gb and will get larger, faster as more people use it. Also the transaction speed is really low - usually like 10 minutes to really confirm payment and at least half an hour to really confirm (around 10 mins a new block is created, and to ensure that block will stay in the chain you want some more blocks on top of that as well.) Also.. the transaction rate isn't even 1 per second, if Bitcoin replaced visa for instance it'd be 2000/s, which means new blocks might contain 2000/s over 10 minutes of transactions, so new blocks are going to get huge. All in all, bitcoin is going to need some big central bitcoin banks to speed transactions, and store the blockchain which isn't necessarily bad. Your bitcoins can still be stored locally under your private key, but banks will provide processing, while multiple banks provide verification of each other's stored blockchains.
- deleted 14y ago
  [deleted]
- hnolable 14y ago
  For most small/medium value transactions, you can simply listen for a double-spend transaction for a few seconds. If you see none then you can assume all miners saw the same transaction as you did first and that is what you can assume will be included in the blockchain.
- dohko 14y ago
  And then these banks get together to form a banking system, and then this banking system decides it needs a central governing authority to be able to make important collective decisions efficient and implement them effectively and seamlessly. And then they decide to call it the Federal Reserve Bitcoin Bank
  - Torgo 14y ago
    Periodically there are proposed protocol changes. A while back I saw a proposal on creating a set of rules that allowed for crowdsourcing-style transactions. (You could send bitcoin to an address, but the transaction did not become valid until the amount at the address reached a certain amount.) I didn't hang around long enough to see the outcome of this proposal, but what I did notice was that only the major bitcoin mining pools got to vote on it. This is a factor of bitcoin being "decentralized" that I don't think many people fully internalize. Anybody could change the protocol, and all that will count toward acceptance is the number of nodes acknowledging their transactions. If a change is unpopular or made without widespread consensus, the blockchains split and now you've got two mutually incompatible currencies. In practice this will probably just mean that you're always under threat of a split unless everybody accedes to the changes that mining pools propose, since they control so many transactions. Alternately, new mining pools could be created that let members vote proportionally to the work they've done for the pool. It's both scary and interesting.

64 points by SlipperySlope 14y ago

Bitcoins are still great, but until their price starts to stabilize, they'll never become cash replacements. Right now, Bitcoins cannot function as a 'store of value' in the sense of currency because they're so volatile.

kiba 14y ago
At the current price level and market cap, stability for bitcoin is still not possible, because bitcoin needs to increase the amount of users using it to be more useful. Inevitably, this means the price of bitcoin will rise. Hopefully, the current growth in price is not a bubble.
- nateberkopec 14y ago
  Interesting catch-22/chicken-and-egg there. How can Bitcoin increase the number of people using it if it's still a speculative/risky investment?
  - hnolable 14y ago
    But of course, it's already proven it can do this on at least one scale. Whether or not it can do it on a larger scale is still to be seen.
  - oleganza 14y ago
    This is not a chicken-and-egg problem. Initially there is some value of doing bitcoin: some find it fun, some believe in future growth and do early investment. Sceptical people join later when they see some people already joined. As number of people slowly grows, more people join after them seeing increasing value in the system. So there is no catch-22: system is unrolling completely by itself until everybody is in. If people discover some problems with it, growth or even total demand will go down. See also my comment above about subjective value of gold.
- w0utert 14y ago
  > [..] bitcoin needs to increase the amount of users using it to be more useful. Inevitably, this means the price of bitcoin will rise. I'm not so sure if this is 'inevitable' since bitcoins in itself have no value at all. I know the same can be said about fiat money, but at least that's what everyone agrees is legal tender, as opposed to just a bunch of idealists or people who need a way to pay for shady stuff. But bitcoins are not like commodities, or labour, or whatever else has limited supply and non-zero utility. Personally I'm not even touching bitcoins with a 10-foot pole. The day some government decides bitcoins are becoming a real alternative or even a threat to government-controlled money, they will shut the whole gig down and all your bitcoins will be worth nothing. One thing I never understood about bitcoins, is what other problem they solve besides scratching some ideological itch some people have with money controlled by central bankers and governments (which I can imagine are valid concerns for some people). Effectively bitcoins are just like fiat money; worthless tokens that have no intrinsic value besides the trust that some people have in them to hold their value. Trust that is not actually based on anything either. At least the dollar has a government with a big military behind it that can assert their influence on areas where real wealth is concentrated. I'm not saying this is a good thing, just making the observation.
  - ktizo 14y ago
    At least the dollar has a government with a big military behind it Then all you are doing is pegging your wealth to the stability of a nation, which statistically speaking is not that good a bet.
  - mattschoch 14y ago
    You are exactly right that bitcoins are exactly like fiat money, and have no intrinsic value. You actually unintentionally explained what you don't understand. Fiat currency is a problem because it can be so easily manipulated by the governments behind it. Just like the dollar, bitcoins have value only because people believe they have value. Your statement that at least the dollar has a government with big military behind it is exactly what the problem is that bitcoin solves. Bitcoin does NOT have a big government or organization controlling it, so unlike the dollar, no single party can inflate the currency. Central banks are able to create money out of nothing, therefore creating something with perceived value without offering anything of value in exchange (i.e. inflation). That leads to all kinds of problems, as we're seeing with the global economic crisis right now. While Bitcoin does not have any intrinsic value, it also does not have a way to be inflated. The system by design creates DEFLATION instead, so the currency becomes more valuable(infinite divisibility handles issues with deflation). Since there is a finite number of bitcoins that can ever be mined, it acts much more like gold than like the dollar. Gold cannot be inflated by any government. If bitcoins gain mass adoption, then they will begin to look very similar to gold. The main difference being that they are purely digital and have no intrinsic value(thus making gold still a better currency).
- oleganza 14y ago
  One should not forget to mention what one measures the price in. That is, the price of Bitcoin in some products will become more stable over time, but USD and EUR prices may still grow just because USD and EUR will be valued less by producers and consumers. However, today Bitcoin price grows in relation to almost everything because demand for it outgrows the supply.
- adrianwaj 14y ago
  There's one very good thing about a rising bitcoin price that in and of itself makes the rise sustainable: more hackers and bitcoin businesses with more funds to invest into the various aspects of the economy.

maartenscholl 14y ago

There are relatively low volumes but steady price gains over the past month. This could be a sign that a lot of people want to get into the market quickly without reasoning about the price. When we look in the order book of one of the larger exchanges (mtgox) we see that there is not much market depth on either side[1]. This coincides with large volume peaks when articles are published, for example August 3 when bitcoin broke the $10.00 price this was widely published about (also on HN). [1]http://bitcoincharts.com/markets/mtgoxUSD.html http://bitcoincharts.com/markets/mtgoxUSD.html

SlipperySlope 14y ago

Obviously, this bubble-like rate of growth cannot be sustained, yet the bitcoin economy has more participants than the previous price spike in June 2011.

rushabh 14y ago

The more I think about this, I get a feeling that bitcoins are solving the wrong problem. The real problem is not of currency (though it is a problem, but just not as big), but of deep flaws in society due to capitalism. Let me explain. Today there are distinct classes of society, and social mobility is decreasing in the US [1] and is frustratingly slow in the developing world. The problem we are facing is that the producers are have become extremely productive due to capital and technology and are able crush those who do not have the access to the capital and technology. The people who are not in this privileged group are caught in a vicious cycle are forced to remain consumers and are getting more and more dependent on these super producers. What money essentially does is facilitates information flow in an economy and enables complex contracts between a number of producers and consumers. The problem is not the information flow is not correct, the problem is that there is terrible inequality. Bitcoins are seen as a hedge against large scale systemic collapse or slow corrosion of the nation-state. If the collapse / corrosion happens, we really do not know what kind of alternative systems will emerge. The only way, to prevent such a collapse, in my view is to encourage local products and services in a big way. Bitcoins may not really help. [1] http://www.nytimes.com/2012/01/05/us/harder-for-americans-to-rise-from-lower-rungs.html/?pagewanted=all http://www.nytimes.com/2012/01/05/us/harder-for-americans-to...

RickHull 14y ago
> The problem we are facing is that the producers are have become extremely productive due to capital and technology and are able crush those who do not have the access to the capital and technology. This is a common mercantilist fallacy -- that the problem is we just have too much production. I submit that we have the opposite problem: goods and resources are too scarce, rather than too abundant. More efficient production is the solution, rather than the problem. > The people who are not in this privileged group are caught in a vicious cycle are forced to remain consumers and are getting more and more dependent on these super producers. I agree that the focus of the economy is consumption, but this is indicative of the problem as well. We need to encourage entrepreneurship. By this I do not mean subsidies -- more in terms of cultural encouragement and removal of legislative and regulatory obstacles.
- 14y ago

shtylman 14y ago

Barring outside factors (hacking, breach of trust, etc) the price of bitcoin is naturally bullish given the current ways to trade them. Since there is no large scale operation providing a way to short bitcoins, there is no one "investing" in their price decline. This simply means that anyone buying in using USD now needs to cash out at a higher price to make a profit (on most exchanges) and anyone who has coins would not want to make the market tank since that just devalues what they have. I realize the above is a simplification and there are many other factors (and there could be malicious participants), but overall this will continue to push the price up.

tocomment 14y ago
Would it be hard to start a service to let people short bitcoins? You'd basically just be "lending out" the bit coins to people and making interest. Would there be a lot of regulations to deal with, or no?
- ewillbefull 14y ago
  Services have existed with margin/option trading, but some of them have shut down because they were hacked. New ones that come out every day are too insecure to be trusted. In fact, just today a margin trading website was exposed as having tons of SQL injections and storing user passwords with unsalted MD5 hashes. Until somebody can step up to the plate stability will be an issue. Which reminds me, I have a rather nice domain name and experience with bitcoins and security, if only I had the financial/regulatory know-how...
  - shtylman 14y ago
    Stop worrying about the financial and regulatory know how and just try out your idea. You might find it goes nowhere and you will have wasted your time thinking about "regulations". No one is going to shut down your website making 10$ a month and if you do start to grow then you will be able to pay the right people to deal with the right problems.
    - 14y ago

circa 14y ago

I'm not sure if stripcoin.com is helping or hurting the situation either.

oinksoft 14y ago

Bitcoin price will continue to rise unless something happens causing confidence in the currency to collapse. It is designed to never inflate, and as more blocks are confirmed, we see that it deflates.

Symmetry 14y ago
Well, sort of. Its designed so that the number of bitcoins in circulation approach some constant, but that doesn't tell you anything about the value of bitcoins, because the long term value of bitcoins is going to be something like the value of the market served by bitcoins divided by the number of bitcoins. So if, say, Silkroad gets shut down by the authorities then I expect the value of bitcoins would crash. Or if banking regulations change to make using bitcoins more cumbersome, or whatever. And you'd expect to see the value to bitcoins drop during recessions.
- oinksoft 14y ago
  I'm referring to the real inflation of the currency: There is no mechanism for new bitcoins to be created when all blocks are confirmed. You need to create new currency to avoid deflation because populations grow.
  - mckoss 14y ago
    Deflation is just another word for long periods of decreasing prices (not VALUES). What's wrong with that? Because of their infinite divisibility (it's equally easy to spend 1 millionth of a Bitcoin as it is to spend 1 Bitcoin) they do not share is the problems deflation poses to traditional money. Deflation does encourage saving over consumption, yes. But I love the fact that products in the electronics markets have had long term predictable price declines over many decades.

lorenzfx 14y ago

I believe/hope that this rise is not really a bubble, but driven by the rising difficulty, which is due to the availability of cheap(er) fpgas. Also the rise is much slower than last summer and supported by much larger trading volume.

wcoenen 14y ago
The bitcoin price drives the difficulty, not the other way around. http://bitcoin.stackexchange.com/questions/419/is-there-empirical-data-about-a-relationship-between-bitcoin-price-and-difficult http://bitcoin.stackexchange.com/questions/419/is-there-empi...

deleted 14y ago

[deleted]

tokenadult 14y ago

As I have written before, perhaps the greatest contribution the Bitcoin experiment will make to humankind is to teach you and me and our neighbors more about the realities of economics. Many of the ideas about how to mine Bitcoins, store Bitcoins, and trade with Bitcoins as a medium of exchange illustrate both the strengths and weaknesses of any other medium of exchange in a world full of human beings seeking personal advantage. Seeing the discussion of Bitcoins here on Hacker News reminds me of the last time that the price of gold (in United States dollars) crashed, and the arguments beforehand that such an occurrence was impossible, for instance. "The market can remain irrational longer than you can remain solvent" is still an important principle of investment. Anyone could make a steady increase of wealth trading in almost any commodity, if only one could time the market. The trick with Bitcoin trading as with all forms of commodity trading is to somehow outsmart most other investors and time the market better than everyone else who trades Bitcoins. Good luck with that. AFTER EDIT: See a somewhat related story with interesting comments http://news.ycombinator.com/item?id=4391312 http://news.ycombinator.com/item?id=4391312 posted on Hacker News today.

illuminate 14y ago
"perhaps the greatest contribution the Bitcoin experiment will make to humankind is to teach you and me and our neighbors more about the realities of economics" I most certainly wish this was the case, however the cycle of booms and busts rarely teach anyone anything. Think about how they were documented in the 1800s, Extraordinary Popular Delusions and the Madness of Crowds specifically, they STILL teach that book in plenty of schools, and yet the same idiots believe this time, things'll be different.

pixie_ 14y ago

Bitcoin still has some technical problems to figure out. Currently the blockchain is over 2gb and will get larger, faster as more people use it. Also the transaction speed is really low - usually like 10 minutes to really confirm payment and at least half an hour to really confirm (around 10 mins a new block is created, and to ensure that block will stay in the chain you want some more blocks on top of that as well.) Also.. the transaction rate isn't even 1 per second, if Bitcoin replaced visa for instance it'd be 2000/s, which means new blocks might contain 2000/s over 10 minutes of transactions, so new blocks are going to get huge. All in all, bitcoin is going to need some big central bitcoin banks to speed transactions, and store the blockchain which isn't necessarily bad. Your bitcoins can still be stored locally under your private key, but banks will provide processing, while multiple banks provide verification of each other's stored blockchains.

deleted 14y ago
[deleted]
hnolable 14y ago
For most small/medium value transactions, you can simply listen for a double-spend transaction for a few seconds. If you see none then you can assume all miners saw the same transaction as you did first and that is what you can assume will be included in the blockchain.
dohko 14y ago
And then these banks get together to form a banking system, and then this banking system decides it needs a central governing authority to be able to make important collective decisions efficient and implement them effectively and seamlessly. And then they decide to call it the Federal Reserve Bitcoin Bank
- Torgo 14y ago
  Periodically there are proposed protocol changes. A while back I saw a proposal on creating a set of rules that allowed for crowdsourcing-style transactions. (You could send bitcoin to an address, but the transaction did not become valid until the amount at the address reached a certain amount.) I didn't hang around long enough to see the outcome of this proposal, but what I did notice was that only the major bitcoin mining pools got to vote on it. This is a factor of bitcoin being "decentralized" that I don't think many people fully internalize. Anybody could change the protocol, and all that will count toward acceptance is the number of nodes acknowledging their transactions. If a change is unpopular or made without widespread consensus, the blockchains split and now you've got two mutually incompatible currencies. In practice this will probably just mean that you're always under threat of a split unless everybody accedes to the changes that mining pools propose, since they control so many transactions. Alternately, new mining pools could be created that let members vote proportionally to the work they've done for the pool. It's both scary and interesting.