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People behave economically. People take risks according to their preferences and perception of risks and chances. So, if they are willing to invest and hold bi

by Zafolo 14y ago

People behave economically. People take risks according to their preferences and perception of risks and chances. So, if they are willing to invest and hold bitcoins, they will be holding some amount which balances chances and risks accordings to their perception - this can be as little as 10 $ or tens of thousands of dollars. Behaving rationally, they do not take efforts and go lengths to buy bitcoins, only to spend them for something they can buy otherwise more easily and with less hassle. But, Bitcoins also have advantages in costs, speed, safety and privacy. For example, due to creditcard costs for backcharges etc., goods paid in bitcoins could be 5 % cheaper. Because margins in online trade are small and costs matter, this is a very significant advantage. Also, time matters. Once these savings are larger than the cost and effort needed for refilling their bitcoin wallet, people will use them for sure.

betterunix 14y ago
"Bitcoins also have advantages in costs, speed, safety and privacy" I think "cost" is the only place Bitcoin is actually a winner. Banks can clear transactions far more rapidly than Bitcoin will. Bitcoin does not meet the formal definition of security and there is a known polynomial time attack on Bitcoin (this is another way of saying "broken crypto"). Bitcoin has been repeatedly shown to not offer the anonymity or privacy that people think it offers. I am a big fan of digital cash. The problem is that Bitcoin is not a secure digital cash system, and it should not be advertised as such.
- jl6 14y ago
  What attack are you referring to?
  - betterunix 14y ago
    This attack: https://en.bitcoin.it/wiki/Double-spending#Brute_force_attack https://en.bitcoin.it/wiki/Double-spending#Brute_force_attac... The description dances around the issue, but what they are basically saying is this: the work needed to successfully attack Bitcoin is proportional to the total work done by all Bitcoin participants. That is an amount of work that is polynomial in the parameters of the system.
    - deleted 14y ago
      [deleted]
    - jl6 14y ago
      Seems odd to describe this as a polynomial-time attack, and I would argue incorrect to describe the result as "broken crypto", as this has little to do with the cryptographic components of Bitcoin, and is more a fundamental design limitation. As a workaround, merchants will just demand more confirmations for higher-valued transactions, like waiting for a check to clear. Checks and physical cash also wouldn't meet your definition of formal security, but seem to work in practice.
      - betterunix 14y ago
        "Seems odd to describe this as a polynomial-time attack" Is there some part that does not run in polynomial time in the parameters of the system? "I would argue incorrect to describe the result as "broken crypto", as this has little to do with the cryptographic components of Bitcoin, and is more a fundamental design limitation." Cryptography is not limited to hash functions and digital signatures (the two primary cryptographic primitives used in Bitcoin). The "broken crypto" refers to the fact that Bitcoin fails to meet the security definition for digital cash, a type of cryptosystem. Moreover, Bitcoin is not secure as a multiparty computation protocol (also a kind of crypto) against malicious parties, as the attacker's work is polynomial in the system's parameters. One should not make the mistake of trying to separate the security of cryptographic building blocks from the security of a system as a whole. My "pet" example of this fallacy is "robust" encryption. In a nutshell, an encryption system is "robust" if only the intended recipient can receive a valid message. Using PGP to sign and then encrypt a message is not robust, even though the signature system, hash functions, and ciphers in PGP are secure as signature systems, hash functions, and ciphers. The reason is pretty clear: if you send a signed+encrypted message to me, I can decrypt it, encrypt the signed message for someone else, and then send them a valid message. For most PGP users, robustness is not an important security property; usually, the recipient's name or some other identifying detail will be clearly written in the message. On the other hand, for Bitcoin, the protection against double spending is absolutely necessary; a polynomial time double spending attack on Bitcoin is very bad. "As a workaround, merchants will just demand more confirmations for higher-valued transactions" Which only forces the attacker to make a polynomial increase in their work. An attacker only needs to do as much work as the sum of the work done by all other participants in the system to remove any workaround. Right now, that is well within the reach of governments, banks, and perhaps the larger criminal enterprises of this world. "Checks and physical cash also wouldn't meet your definition of formal security, but seem to work in practice." It would not be the first time someone has proposed that digital cash go beyond what is possible with physical cash (see Page 2, Property (e)): http://pdf.aminer.org/000/120/358/universal_electronic_cash.pdf http://pdf.aminer.org/000/120/358/universal_electronic_cash....
- aminok 14y ago
  Banks cannot clear transactions more rapidly than Bitcoin. Waiting a few seconds and confirming that most nodes on the network have received the bitcoin transaction is safe enough for most transactions (those involving values less than $100) to be considered cleared. Waiting 1 hour makes transactions with values in the tens of thousands of dollars safe to consider cleared. These transactions can be done 24 hours a day, 7 days a week. In contrast, bank transactions can only be cleared during bank operating hours. For international wire transfers, it's usually necessary to physically visit a bank branch too. When the average wait time of waiting for banks to open and the time it takes to physically arrive at a bank teller's counter is added up, it's much longer than the maximum 1 hour one would wait for a very large bitcoin transaction to clear. The actual transfer of funds sent in an international wire transfer usually takes several hours or days too, so it can be reversed without the cooperation of the receiving bank long after the funds have been credited to the receiving party's account, within that window of time. The time it takes for a transfer of funds from the sending bank to the receiving bank to cleared is analogous to the one hour wait for six confirmations that one would wait for extremely large bitcoin transactions, so really, even under the worst conditions (when banks are open and the person is already physically at the bank branch and when six confirmations are needed for a very large bitcoin transaction), Bitcoin is much faster than traditional banking. " Bitcoin does not meet the formal definition of security and there is a known polynomial time attack on Bitcoin" When you discover a way to create a provably safe decentralized digital currency, please let us know. Bitcoin is the best that is possible given the features it has.

by Zafolo 14y ago

betterunix 14y ago

"Bitcoins also have advantages in costs, speed, safety and privacy" I think "cost" is the only place Bitcoin is actually a winner. Banks can clear transactions far more rapidly than Bitcoin will. Bitcoin does not meet the formal definition of security and there is a known polynomial time attack on Bitcoin (this is another way of saying "broken crypto"). Bitcoin has been repeatedly shown to not offer the anonymity or privacy that people think it offers. I am a big fan of digital cash. The problem is that Bitcoin is not a secure digital cash system, and it should not be advertised as such.

jl6 14y ago
What attack are you referring to?
- betterunix 14y ago
  This attack: https://en.bitcoin.it/wiki/Double-spending#Brute_force_attack https://en.bitcoin.it/wiki/Double-spending#Brute_force_attac... The description dances around the issue, but what they are basically saying is this: the work needed to successfully attack Bitcoin is proportional to the total work done by all Bitcoin participants. That is an amount of work that is polynomial in the parameters of the system.
  - deleted 14y ago
    [deleted]
  - jl6 14y ago
    Seems odd to describe this as a polynomial-time attack, and I would argue incorrect to describe the result as "broken crypto", as this has little to do with the cryptographic components of Bitcoin, and is more a fundamental design limitation. As a workaround, merchants will just demand more confirmations for higher-valued transactions, like waiting for a check to clear. Checks and physical cash also wouldn't meet your definition of formal security, but seem to work in practice.
    - betterunix 14y ago
      "Seems odd to describe this as a polynomial-time attack" Is there some part that does not run in polynomial time in the parameters of the system? "I would argue incorrect to describe the result as "broken crypto", as this has little to do with the cryptographic components of Bitcoin, and is more a fundamental design limitation." Cryptography is not limited to hash functions and digital signatures (the two primary cryptographic primitives used in Bitcoin). The "broken crypto" refers to the fact that Bitcoin fails to meet the security definition for digital cash, a type of cryptosystem. Moreover, Bitcoin is not secure as a multiparty computation protocol (also a kind of crypto) against malicious parties, as the attacker's work is polynomial in the system's parameters. One should not make the mistake of trying to separate the security of cryptographic building blocks from the security of a system as a whole. My "pet" example of this fallacy is "robust" encryption. In a nutshell, an encryption system is "robust" if only the intended recipient can receive a valid message. Using PGP to sign and then encrypt a message is not robust, even though the signature system, hash functions, and ciphers in PGP are secure as signature systems, hash functions, and ciphers. The reason is pretty clear: if you send a signed+encrypted message to me, I can decrypt it, encrypt the signed message for someone else, and then send them a valid message. For most PGP users, robustness is not an important security property; usually, the recipient's name or some other identifying detail will be clearly written in the message. On the other hand, for Bitcoin, the protection against double spending is absolutely necessary; a polynomial time double spending attack on Bitcoin is very bad. "As a workaround, merchants will just demand more confirmations for higher-valued transactions" Which only forces the attacker to make a polynomial increase in their work. An attacker only needs to do as much work as the sum of the work done by all other participants in the system to remove any workaround. Right now, that is well within the reach of governments, banks, and perhaps the larger criminal enterprises of this world. "Checks and physical cash also wouldn't meet your definition of formal security, but seem to work in practice." It would not be the first time someone has proposed that digital cash go beyond what is possible with physical cash (see Page 2, Property (e)): http://pdf.aminer.org/000/120/358/universal_electronic_cash.pdf http://pdf.aminer.org/000/120/358/universal_electronic_cash....
aminok 14y ago
Banks cannot clear transactions more rapidly than Bitcoin. Waiting a few seconds and confirming that most nodes on the network have received the bitcoin transaction is safe enough for most transactions (those involving values less than $100) to be considered cleared. Waiting 1 hour makes transactions with values in the tens of thousands of dollars safe to consider cleared. These transactions can be done 24 hours a day, 7 days a week. In contrast, bank transactions can only be cleared during bank operating hours. For international wire transfers, it's usually necessary to physically visit a bank branch too. When the average wait time of waiting for banks to open and the time it takes to physically arrive at a bank teller's counter is added up, it's much longer than the maximum 1 hour one would wait for a very large bitcoin transaction to clear. The actual transfer of funds sent in an international wire transfer usually takes several hours or days too, so it can be reversed without the cooperation of the receiving bank long after the funds have been credited to the receiving party's account, within that window of time. The time it takes for a transfer of funds from the sending bank to the receiving bank to cleared is analogous to the one hour wait for six confirmations that one would wait for extremely large bitcoin transactions, so really, even under the worst conditions (when banks are open and the person is already physically at the bank branch and when six confirmations are needed for a very large bitcoin transaction), Bitcoin is much faster than traditional banking. " Bitcoin does not meet the formal definition of security and there is a known polynomial time attack on Bitcoin" When you discover a way to create a provably safe decentralized digital currency, please let us know. Bitcoin is the best that is possible given the features it has.