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After a spectacular crash, Bitcoin makes a surprising comeback
- carsongross 14y agoSurprising? What's surprising about it? That there's no governmental issuing authority? (It is not true that there is "no issuing authority whatsoever", the issuing authority is the spec.) This won't surprise anyone with a grasp of economic history that extends beyond 1945.
- icebraining 14y agoIs it not surprising that a (almost purely) speculative commodity traded by very few people overall recovers that fast from a major crash?
- mrb 14y agoNo, it is not surprising. If you look at the Bitcoin forums to understand the community, it is very clear that a large core of users are really here for the long term. They truly believe in the concept of a decentralized digital currency. This core group of users (including me) were completely unswayed by the crash of 2011 H2. We all knew that it was nothing more than a correction of the insane valuation bubble of earlier that year.
- bad_user 14y agoAnd I think this is the actual problem with Bitcoin, the community is small and few people are owners of Bitcoins. How many people sold all their Bitcoins in the wake of that crash? It is indeed unsurprising to me too that Bitcoin recovered after a crash, because the owners of Bitcoin believe in it and so the market kept being rational post-crash. The real test of Bitcoin has yet to happen, when Bitcoin will be popular enough that regular folks will put their life savings into it.
- belorn 14y agoThat test is unlikely to happen. regular folks do not put their life savings into currencies or commodities. They put their life savings into banks. A saving account in a bank does not contain a heap of cash or gold nuggets. Instead its an trust relationship between the bank and the bank customer, like a contract. I would guess that in "the future", the name of currencies will become less likely to end up in the mindset of the general public. All they know is that a specific thing (a computer, a car, and so on) will cost X amount of what they have in the bank.
- cmccabe 14y agoRegular folks do not put their life savings into currencies or commodities. They put their life savings into banks. What planet are you from? On my planet, regular folks put their savings into 401k accounts, which invest in stocks, bonds, and sometimes commodities. If you do choose to keep your savings in a bank, you're investing in a currency (probably the US dollar.) Instead its an trust relationship between the bank and the bank customer, like a contract. Nope. Actually it's a trust relationship between the federal government, which insures your account up to 250,000 through FDIC, and you. You also have to trust that the federal government isn't going to inflate away your savings (spoiler alert: they are going to.)
- belorn 14y agoI guess it depend on where on the planet one is (or maybe its on the not-the-usa-planet). I am not sure banks where I live even have anything called 401k plans. They do have stocks and bonds, but its not something commonly talked about. pension savings are done mostly through tax but in rare occasions, addition money is added by the place you work from. In very extreme rare occasions, people sometimes add personal savings to it.
- cmccabe 14y agoEven if the government manages your pension funds, they're still going to be invested in stocks and bonds, ultimately. Having a savings account is just about the dumbest thing you could do right now, since the rates are essentially 0%: http://articles.boston.com/2012-10-01/business/34178552_1_interest-rates-low-rates-average-interest http://articles.boston.com/2012-10-01/business/34178552_1_in... Yet they still have the audacity to ask me if I want to open one every time I visit the bank. It must be hard keeping a straight face.
- JumpCrisscross 14y agoThis is not an asset, it is a currency. Asset values do well when investors buy-and-hold for the long-term. Currencies die that way - they increase in value when they are traded, i.e. transacted in. A high ratio of buy-and-hold investors to merchant activity in a currency is a sign of speculative build-up. Paradoxically, the attractiveness of a currency to trade in is partially a function of how well it holds value - price level volatility bodes badly for that cause. As a financial market participant, yes, it is surprising that the Bitcoin market stabilised as quickly as it did since it suggests there was an influx of asset and currency owners willing to trade their value into Bitcoins despite the risk of rapidly losing that value in price level volatility. Having examined some AML flow of funds data I can say this resilience has nothing to do with the zeal of the Bitcoin community, which in terms of wealth is insignificantly tiny, and everything to do with its adoption in trades deemed, shall we say, unsavoury by the world's legal authorities. As a supporter of further sophistication in the Bitcoin markets myself, this sentiment of seeing nothing awry in the Bitcoin/USD volatility is worrying, though the faith expressed in the currency is reassuring (these are, after all, fiat currencies).
- deleted 14y ago[deleted]
- icebraining 14y agoBut if it's a core group of sellers in it for the long run that's sustaining Bitcoin, who's selling the million BTCs/month on MtGox?
- relix 14y agoEstimated around the end of this year, the amount of Bitcoins mined per day will be halved according to the schedule. If I understand correctly, this means that the cost to mine one BTC will double, roughly, if the mining capacity stays the same. On top of that, some companies are, or should be coming out with ASIC-based miners, which are orders of magnitude faster in mining bitcoins than GPU's, at lower energy usage, increasing the total mining capacity. Does the cost of mining one BTC influence the price of one BTC? Will these events have an influence on the price (if they were not already 'priced in')?
- jamesaguilar 14y agoI can answer the last question easily. If the supply of bitcoins rises faster than the real value of the debt they represent, their nominal value against the dollar will fall.
- maaku 14y agoExcept that this generation rate halving in price is a predictable, known event, and therefore already factored into the price of BTC.
- elemeno 14y agoI'd qualify as =might= be factored into the price of BTC. Whether it is or not depends in (large?) part on the financial acumen of people trading BTC and if they're bothering to model what the effects will be.
- jamesaguilar 14y agoIf you assume efficient markets, yes. Nothing I've seen about the bitcoin market so far would suggest that it's efficient. Low volume, ideological motivations, unstable technologies, few really safe places to store value, etc.
- maaku 14y agoOh, safely storing value isn't a problem: bitaddress.org. Safely storing value while keeping it liquid, there's a problem.
- frozenport 14y agoIt took me about 5 days to sync a new Bitcoin wallet. Until they fix this problem Bitcoin can never be a serious player.
- AndrewDucker 14y agoDon't use the standard wallet. Multibit syncs a lot faster.
- tlrobinson 14y agoOr more likely, most "average" users won't host their own wallets, they'll use a third-party service (i.e. a bank)
- kalleboo 14y agoIt always seemed odd to me that the protocol expects everyone to always have the full blockchain (currently over 2 GB of data). The response is always "when it becomes a problem we'll fix it", but isn't it already a problem for mobile use etc? The other problem I never see mentioned is the slow speed in getting transactions confirmed (for me it takes maybe 30 minutes)
- wcoenen 14y agoThe original bitcoin paper described a "Simplified Payment Verification" which doesn't require the full blockchain. This is used by Bitcoin Wallet for android. Another alternative is to work with a trusted server. This is used by Bitcoin Spinner for Android.
- hackerboos 14y agoAs I understand you can download the latest Bitcoin transactions (the latest spend of each coin) and discard the rest of the transaction history. The problem being though is that you have to trust some third party to give you the correct information.
- Dylan16807 14y agoYou don't need the block chain to use bitcoin. Honestly, there only needs to be one complete copy in total across the entire world. It's just a quirk of the current client that it insists on such a download in an era where it takes more than a few minutes.
- scotty79 14y agoI've seen some time ago comparison of popularity of passing fads and useful inventions. Useful invention graph looked like this http://3.bp.blogspot.com/_2IAWpIwOiOc/SuvD_xiOfTI/AAAAAAAAADQ/9xFahAt33wE/s400/marketing+fad+graph.gif http://3.bp.blogspot.com/_2IAWpIwOiOc/SuvD_xiOfTI/AAAAAAAAAD... (example was IT) and graph for the passing fad dropped down to almost zero after initial peak (example was Macarena dance, if you remember that you are old ;-) ). So far bitcoin seems like useful invention.
- quorn3000 14y agoI'm old enough to have thought at the time of the Macarena that it was a fad.
- sammyo 14y agoNo one here has attended a wedding or bar mitzvah? That silly dance is far from dead, which is not all that important depending on your social set but does give some doubt on the analysis.
- Jach 14y agoAKA: http://en.wikipedia.org/wiki/Hype_cycle http://en.wikipedia.org/wiki/Hype_cycle (And for your curiosity: http://bitcoincharts.com/charts/mtgoxUSD#tgMzm1g10zm2g25zv http://bitcoincharts.com/charts/mtgoxUSD#tgMzm1g10zm2g25zv is where the chart in the article comes from.)
- mrb 14y agoThis article is surprisingly good. I like the mention of Bitcoin being the "world's first" decentralized digital currency. This is a clear way to convey to the reader that Bitcoin very is different from everything else. I use the same term in my Bitcoin introduction: http://blog.zorinaq.com/?e=66 http://blog.zorinaq.com/?e=66 The Economist author only made one error: Bitcoin is not the only decentralized digital currency. Some forks exist (eg. Litecoin), although they have very little traction currently; see the Alternate Cryptocurrency board: https://bitcointalk.org/index.php?board=67.0 https://bitcointalk.org/index.php?board=67.0
- kloncks 14y agoCorrect me if I'm wrong, but aren't the others just merely clones of the original Bitcoin, using the same source code? I would still call Bitcoin the only currency, as it's the base they all share.
- ahi 14y agoIn this case, multiple currencies can share the same code base, in the same way The pound and the dollar share most of th same rules Of fiat currency.
- mikeash 14y agoIt seems like there's a bit of terminology overloading going on. You have Bitcoin the protocol, which all these things are using, but you also have Bitcoin the currency, which is separate from the other currencies using the same protocol but with different networks (or block chains or whatever you call it).
- nollidge 14y agoTotally off-topic: the "vertical-align: top" on line 30 of your style.css is making any non-bold, non-italic body text get vertically misaligned with neighboring bold or italic text in Chrome 22 on Windows 7.
- mrb 14y agoRemoved. Thanks!
- curt 14y agoSomeone in the comment section of the article linked to a fascinating chart: http://24.media.tumblr.com/tumblr_mb77t0ygoF1qfrvjzo1_1280.png http://24.media.tumblr.com/tumblr_mb77t0ygoF1qfrvjzo1_1280.p... It shows bit-coin value to USD, gold, silver, and crude. It's fairly stable against the commodities but drastically spikes in value against the dollar. Our Fed at work...
- deleted 14y ago[deleted]
- lmm 14y agoSo bitcoins are a commodity like unto gold, silver and crude, and behave the same way. Cool, but for practical use as a currency it would be better if they were correlated with USD/EUR/JPY, food, labour and other things that normal people want to buy.
- worldsayshi 14y agoAhem: http://en.wikipedia.org/wiki/File:Gartner_Hype_Cycle_for_Emerging_Technologies.gif http://en.wikipedia.org/wiki/File:Gartner_Hype_Cycle_for_Eme...
- Synaesthesia 14y agoBitcoin has already gone through two massive crashes like that. Still kicking.
- wamatt 14y agoWhile I'm rather ambivalent on Bitcoin, I feel the article should show transaction volume as well, in order for us to make an informed assessment on its future prospects. Displaying a prominent graph of only BTC/USD as proof of recovery, without an indication of liquidity and total market size, seems insufficient.
- wcoenen 14y agoChart of transaction volume: http://blockchain.info/charts/n-transactions http://blockchain.info/charts/n-transactions A lot of the recent increase can be attributed to gambling at http://www.satoshidice.com http://www.satoshidice.com
- hollerith 14y ago>http://www.satoshidice.com http://www.satoshidice.com Now that is clever.
- mrb 14y agoYou can see the volume (and exchange rate) on the largest USD/BTC exchange (MtGox) here combined on one graph: http://bitcoincharts.com/charts/mtgoxUSD#czsg2011-01-01zeg2012-10-04ztgSzm1g10zm2g25zv http://bitcoincharts.com/charts/mtgoxUSD#czsg2011-01-01zeg20... But a better indicator that Bitcoin activity is increasing is the number of Bitcoin transactions on the network itself. Bunch of interesting charts here: http://blockchain.info/charts http://blockchain.info/charts Especially: http://blockchain.info/charts/n-transactions-excluding-popular http://blockchain.info/charts/n-transactions-excluding-popul... showing the # of transactions has tripled in the last 4 months.
- wamatt 14y agoThanks (and @wcoenen), that's interesting. Thinking further on the risks of bitcoin, is it possible that the algorithm itself could have a yet to be discovered weakness, allowing for a trivial solution? (similar to what happens when some forms of crypto are broken)
- nicpottier 14y agoAre there any digital wallets out there that are: 1) trustworthy 2) allow easy funding (credit/debit card/paypal) Until that's the case I just don't see this taking off. I'm fairly motivated to buy a few just for kicks, but if I can't be bothered I can't see the general population doing so either. I see MtGox takes wire transfers, which is almost good enough, but not quite. Didn't they also suffer a breach not so long ago?
- lewispollard 14y agoI used MtGox a month ago to see what all the bitcoin fuss was about and their UK bank was inexplicably closed during that time. They've been contacting me with updates via email but the money I wired to them still hasn't been credited to my MtGox account which is really frustrating.
- diggan 14y agoHave you bothered to contact them yourself?
- lewispollard 14y agoYes, I've contacted all three parties, just waiting for some kind of resolution which they claim will be in roughly 2 weeks.
- jerguismi 14y agoContact both your bank and mtgox.
- mrb 14y agohttps://www.bitinstant.com https://www.bitinstant.com is trustworthy and by far has the most funding options, which are the most convenient. Eg. in the US you can deposit cash in a CVS, 7-11, Walmart, and have it credited to your wallet almost instantly.
- ianpurton 14y agoI run StrongCoin e-wallet https://www.strongcoin.com https://www.strongcoin.com, which has been operating for over a year now very successfully. I also run https://www.bitcoinary.com https://www.bitcoinary.com a peer to peer site for exchanging coins in numerous ways including Paypal.
- bgaluszka 14y agoI'm wondering, what if government bans using of Bitcoin (or such a digital currency in general)? Not that it will try to block it just that it will be illegal to use it (i.e. for companies to receive Bitcoins). Will it still be used and/or useful?
- jrockway 14y agoThe government banned sharing copyrighted materials and everyone stopped sharing movies, right? (It was similar to the experience they had with banning drugs. Now nobody uses drugs, I hear.)
- bgaluszka 14y agoYeah, that is what I was thinking about. And if that would happen to Bitcoin it wouldn't be interesting that much, right?
- iwwr 14y agoYou can make bitcoin a legitimate payment mechanism. Despite the advertised anonymity it's fairly easy to track down a particular identity from the web of transactions. If people moved on mass into bitcoin it would make their financial history pretty impossible to hide.
- bgaluszka 14y agoI hope that would be the case :)
- tokenadult 14y agoThis statement from the last paragraph of the very interesting Economist magazine article submitted here is thought-provoking: "Bitcoins tend not to be very secure, says Richard Booth, a consultant at RSA, a cyber-security firm. As some users have found to their cost, hackers can sometimes steal Bitcoins from users’ online vaults. In the latest raid, on September 5th, hackers stole $250,000 in Bitcoins from Bitfloor, a large American exchange, causing it to shut down its operation." What does that say about the overall reliability of Bitcoins as a new form of currency? A while ago I wrote that 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. And later I added that the Bitcoin experiment will also contribute to greater understanding of attack surfaces and online crime. 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. Seeing the discussion of Bitcoins here on Hacker News reminds me of early online discussions in the 1990s of online payment systems such as PayPal, and the arguments beforehand that PayPal wouldn't have to invest a lot of time and effort (as it eventually did) building defenses against theft and fraud. If a weakness in a system is attached to a lot of money, the way to bet is to bet that someone will go looking for that weakness, even if you haven't thought of it. AFTER EDIT: Here is a question for all the security-knowledgeable persons who participate here on Hacker News, a question once asked of the inventor of Pretty Good Privacy (PGP). How expensive do you think it would be for the United States National Security Agency (or a comparable organization from another national government) to crack a Bitcoin store, given that we know that some Bitcoin caches have already been cracked?
- scott_s 14y agoI'm a bitcoin skeptic, but I think that the problems you mentioned in the first paragraph have more to do with the poor security of those individual vaults, not bitcoin itself. But, it does bring up an interesting point: as far as how I know bitcoin works, once you steal the bitcoins, they're stolen. This is different from fiat currency, at least online. If someone breaks into Bank of America's servers and figures out how to transfer a bunch of money from other people's accounts to their own, Bank of American can undo it. As long as the person does not get a cash or cash-equivalent, then it should be reversible. I invite the people who are more familiar with bitcoin to correct me, but as I understand the protocol behind it, once a bitcoin transfer from one owner to another owner is made, it's not (forcibly) reversible.
- gr3yh47 14y agoFTA: "On the website Silk Road, a sort of eBay for drugs hidden in a dark corner of the web known as Tor[...]" Tor isnt a dark corner of the web...
- ericb 14y agoBetter tag line: Bitcoin is the world's most ingenious botnet monetization scheme.
- jt2190 14y agoI'm curious if this last sentence from the article is true: > It turns out that a currency can thrive even when > no one is making laws for it. Were the laws were so weak or hard to enforce at one time that, effectively, there were no laws? Can we look at currencies from that period of time to give us a sense of how bitcoin will work? (Another poster pointed out that the spec is making the rules, and not a government, so it may be wrong to compare bitcoin with an un/poorly regulated currency.)
- mfringel 14y agoAll this tells me is that it hasn't hit governmental radar in any meaningful way, yet. If Bitcoin was annoying enough to be a real problem to the powers that be, the computing resources necessary to hijack the main chain would be online in a very short period of time.
- nirvana 14y agoWould you mind describing that attack in a bit more detail?
- lambda 14y agoBitcoin uses a proof of work system to determine the valid chain of transactions, as well as who gets the initial currency payout. Basically, anyone who controls more than 50% of the CPU power in the Bitcoin network can control the currency. If you want more details, I'd recommend reading the Bitcoin paper: http://bitcoin.org/bitcoin.pdf http://bitcoin.org/bitcoin.pdf Some of the various forks have tried to work around this by having trusted nodes and the like, but then you lose the decentralized nature and are vulnerable to the trusted nodes going rogue.
- jamoes 14y agoHaving greater than 50% of the computing power of the bitcoin network does not give you complete power of the currency. You would be able to prevent transactions from occurring, and double-spend recent transactions. Since the bitcoin network is effectively the most powerful supercomputer in the world, this would be a very expensive attack to sustain, without that large of a payoff. I definitely wouldn't recommend starting with the official bitcoin paper to learn about this. That would be like telling a math student to just read Newton if they want to learn Calculus :). Check out the bitcoin wiki instead: https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_computing_power https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...
- fooandbarify 14y ago
- tvladeck 14y agoOne thing that I wonder about with respect to Bitcoin is the issue of taxation. Governments can support the dominance of their currency within their borders by compelling their citizens to pay taxes in the national currency. And on the "supply-side", in the US at least, federal spending is a significant portion of GDP, so you will always have a large amount of dollars floating around being used as a means of credit, exchange, and value. And finally, having control of interest rates is a powerful tool to support economic growth - I would be fearful of a world where policymakers did not have that ability.