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Are Bitcoins The Future?

203 points by patrickod 14y ago

GigabyteCoin 14y ago
I would have titled this much differently. More along the lines of: "A Comprehensive Guide to Bitcoin". I just found it humorous that they titled the article "Are Bitcoins the future?" and then failed the ask or answer that question anywhere in mini novel they wrote following that title.
veb 14y ago
This article makes me ponder about the origins of Bitcoin. This page claims that it could be a group of people who made it, which seems a bit more likely: https://en.bitcoin.it/wiki/Satoshi_Nakamoto https://en.bitcoin.it/wiki/Satoshi_Nakamoto Does anyone else have any interesting insights into the origin of Bitcoin?
- betterunix 14y ago
  Judging by the original paper, the subsequent writings, and the kinds of things prominent members of the Bitcoin community say, it is likely that whoever created Bitcoin was an amateur. There are few references made to the work done by Chaum or Okamoto. The security proof in the Bitcoin paper considers only one specific attack strategy. ECDSA and SHA256 are referenced but little is said about whether or not they compose securely with the Bitcoin protocol, or even if the Bitcoin protocol itself is secure. It is not that I mean to insult amateurs -- amateurs can theoretically make secure cryptosystems (though Bitcoin is not secure under the security notions used by cryptographers), but it is usually pretty clear when a system was designed by someone who is not well-versed in cryptography. It is unfortunate, however, that Bitcoin's developers cannot be bothered to search Google: https://www.google.com/search?q=digital+cash+site%3Aeprint.iacr.org https://www.google.com/search?q=digital+cash+site%3Aeprint.i...
  - josephagoss 14y ago
    If you don't mind, how is Bitcoin not secure under the security notions used by cryptographers? This is interesting because if it wasn't secure I wonder why hundreds of millions of dollars have not been stolen yet? You could probably steal 100 million from some top addresses, move to MtGox and sell for a very decent rate before what you did became apparent (of course once what did became apparent Bitcoin would collapse forever) Or if the addresses are secure and its something else that is not secure what is it? I am on the bitcointalk forum a lot and I have not read anything about the crypto being not secure. Maybe I misunderstand what you mean by security?
    - DanBC 14y ago
      Cryptographers have a high standard for 'not broken'. A cryptographic algorithm could have no real world attack, but be declared broken because there's a mathematical flaw. In the case of Bitcoin there's the 51% attack, which is pretty serious flaw even if to carry it out is unfeasable. We don't know if NSA or GCHQ have broken bitcoin (although they've certainly investigated it); and we haven't seen much crypt-analysis on it; but we have seen very many people trying (sometimes successfully) to attack Bitcoin and the wallets and the exchanges.
      - arpp 14y ago
        Democracy is also vulnerable to 51% attacks ;P
      - nullc 14y ago
        > the 51% attack, which is pretty serious flaw even if to carry it out is unfeasable There isn't anything magical about the number 51, the original Bitcoin paper gives a program that can be used to compute the success probability for an attacker with a given share of the computing power to reverse transactions to a given depth... At >=50% the probability becomes one but at that point only if the attack is of infinite duration. But, for example an attacker with 40% hashpower can reverse six blocks with a 50% success rate. Any kind of consensus system is going to be vulnerable to a majority attack of some kind— otherwise you'd have "minority imposes a wrong outcome" attacks. At least in Bitcoin the "consensus" only controls transaction ordering: a majority attacker can't inflate the supply or spend other people's coins... they can only DOS and remove transactions from the fixed consensus (and thus replace their own). Which is powerful but still limited.
  - ewillbefull 14y ago
    Can you point me toward _any_ proof-of-concepts for Chaum's scheme as applied to digital currency? Hell, there's still people on Bitcointalk trying to figure out how to bootstrap off of Bitcoin with some of those ideas. I don't think it's fair to throw "amateur" around like that, Bitcoin solves separate problems entirely. Crypto-anarchists spent decades theorizing things but never solving problems. Bitcoin shipped and that shouldn't upset you so much.
    - wmf 14y ago
      Chaum shipped DigiCash back in the 90s and Lucre is an open-source Chaum-like system.
      - DennisP 14y ago
        And now the OpenTransactions people are building Chaum-like systems for trading bitcoins.
  - josephagoss 14y ago
    Also I looked at your Google search and could not find anyone talking about a block chain. I would be surprised if someone proposed a digital currency based on a blockchain before Satoshi, because that is the unique insight he is held in high regard for. - Sure some of the links in the Google search have lots of complicated schemes for a digital currency, but I think its the simplicity of the Bitcoin system that is unique. - Also I hear the system itself can only be attacked via brute force, do you claim this is not the case?
    - betterunix 14y ago
      "Also I hear the system itself can only be attacked via brute force, do you claim this is not the case?" The best known double-spending attack on Bitcoin requires work equal to the sum of all work done by the honest parties in the system. That is not a very high security margin; by comparison, attacking many of the systems from the Google search would require work that is exponential in the parameters of the system, while the honest parties only do work that is polynomial in those parameters. Forcing the attacker to do exponential work in the system parameters is the typical requirement for a cryptosystem to be "secure," and thus Bitcoin is not actually secure under the commonly accepted notions of security (at least among cryptographers).
      - josephagoss 14y ago
        Again you make a good point. It seems the 51% attack problem is glossed over a lot in the forums. I guess everyone is hoping that after a couple of years there will be millions of ASIC devices and this will be enough to ensure the 51% issues. But of course it can never be fully solved.
  - moe 14y ago
    Your arrogant tone doesn't really jive with the lack of substance in your comment. Since you're apparently a professional cryptographer who would have designed a flawless Bitcoin right off the bat; Why don't you share some of your wisdom and point out a few of the amateur problems and how you would solve them? I'm sure the Bitcoin community would be grateful for your input.
    - betterunix 14y ago
      Is it really that arrogant to point out that the Bitcoin community has basically ignored the vast body of published, publicly available research on digital cash? Even if the point of Bitcoin is to go in a separate direction and have no central authorities of any kind, that previous work is highly relevant. There is no particular need for me to design a better digital cash system; such systems have already been designed. It is not even clear that digital cash without a central authority can be provably secure, since nobody has proposed a security definition for digital cash that does not involve some currency issuing authority (no, Bitcoin's definition does not count -- it does not rule out feasible attacks). Personally, I have no real problem with having a "bank" that issues currency, as long as the bank cannot frame people for double spending or other cheating (which is the kind of protection that was described by Chaum and other researchers in the 90s). So really, the ball is in the Bitcoin community's court. The research results on digital cash and secure multiparty computation is all publicly available and mostly available at no cost. Let the Bitcoin community develop a definition of security for digital cash without any "bank" if that is their goal; all that I am saying is that the definition must rule out feasible attacks if we are expected to take it seriously.
      - gbog 14y ago
        Sorry but you really look like a scholar saying platypus don't exist because they can't exist. Or Black Swans...
      - zanny 14y ago
        Money speaks a lot louder than PHD's who haven't made a competitive currency. Bitcoin is booming - nothing else is even on the radar. Bitcoin doesn't have to play ball with anyone if they are, by magnitudes, the largest digital currency in use. So far, it works. If BTC stops working, you can expect everyone to jump ship and hopefully a more secure alternative will be developed with lessons learned from the BTC ride. But for now, unless you can produce an attack that can lose people money in the bitcoin ecosystem, ranting about theoretical cryptosecurity in digital currencies and how BTC only being as secure as the majority of the swarm allows doesn't make anyone hesitant to invest in bitcoin. > I have no real problem with having a "bank" that issues currency The problem with banks is that they can always act in their own self-interest to fuck over the holders of their currency, and by having the only right to "counterfeit" their currency they have abnormal economic power in the economy their currency drives. It is the reason the US Federal Reserve is so corrupt right now, can wildly print US dollars to their own discretion, which is effectively stealing from anyone holding dollars by devaluing the currency as a whole, and they can do it at their own whims.
  - wyager 14y ago
    >it is likely that whoever created Bitcoin was an amateur. You're kidding, right? Bitcoin is the single most impressive application of cryptography that I have ever seen in my entire life, and I get to look at a lot of cool cryptosystems. The only entity that could have created Bitcoin is some kind of savant or a group of very talented people. >ECDSA and SHA256 are referenced but little is said about whether or not they compose securely with the Bitcoin protocol, or even if the Bitcoin protocol itself is secure. By making only a few basic assumptions about the security of SHA, RIPEMD, and ECDSA, it's plainly obvious to anyone who remotely understands the protocol that the protocol is, in fact, secure. If you don't believe me personally, why don't you ask all the talented cryptographers who could lay their hands on over a billion dollars if they found a critical flaw in the Bitcoin protocol? >(though Bitcoin is not secure under the security notions used by cryptographers) You have no idea what you're talking about. Bitcoin makes very strict security guarantees and does not violate them.
    - nhaehnle 14y ago
      The GP post is perhaps a bit too dismissive of Bitcoin, but you should be very careful of hero worship as well. The pool of people who could have created Bitcoin includes almost everybody who has taken university-level courses on cryptography, and probably a whole bunch of non-academic crypto enthusiasts. After all, there are really only two cryptographic ideas in Bitcoin: One is to used public key cryptography and signatures for transactions, which is completely obvious. The other is to use hashing for proof-of-work to build the block chain. This is certainly less obvious, but it wasn't outlandishly new either. Ideas like hashcash have been around much longer than Bitcoin. Putting it all together in this way with its appeal to the goldbug mindset was certainly clever. But you are seriously overestimating the amount of intelligence required for developing Bitcoin.
      - wyager 14y ago
        >The pool of people who could have created Bitcoin includes almost everybody who has taken university-level courses on cryptography, No way. Have you looked at the whitepaper? The entire thing? Even completely ignoring the clever leveraging of cryptography, the sheer genius behind the methodology of the protocol makes me think that someone(s) extremely talented came up with it. >Ideas like hashcash have been around much longer than Bitcoin. True, but much of the genius comes from the way transactions themselves work. Right now, we're only leveraging a small portion of Bitcoin's capabilities. Because Bitcoin is really based on scripts assigned a value, the Bitcoin protocol allows for incredibly complex economic interactions in a cryptographically secure manner. The deeper I look into the protocol, the more I realize how genius some of the design decisions were. And besides, Bitcoin obviously did something right, because it's the only decentralized digital currency to take off. >But you are seriously overestimating the amount of intelligence required for developing Bitcoin. I think you're underestimating the elegance and complexity of the Bitcoin protocol. It's much, much more than a few crypto primitives strung together.
tokenadult 14y ago
This article covers a lot of interesting ground, and isn't the usual same, old same-old article about Bitcoin. I especially liked the reminders of earlier examples of online currencies. The conclusion is tentative, and reasonable. Along the way, the author brings up many interesting facts about Bitcoin, about its supporters, and about its critics. I think it is especially reasonable to assume that Bitcoin exists with the tacit consent of the United States National Security Agency, even if the NSA didn't invent Bitcoin. AFTER EDIT: Addition of my FAQ-in-progress about Bitcoin for Hacker New. 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. This prompts 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? And if the organization storing Bitcoin data held personal bank account data too, how attractive a target might it be to thieves?
- GuiA 14y ago
  >I think it is especially reasonable to assume that Bitcoin exists with the tacit consent of the United States National Security Agency, even if the NSA didn't invent Bitcoin. How so? If the NSA really hated bitcoin, what would they do? Even if it were made illegal in the US, the United States are not the world, and it would be extremely hard to enforce.
overgard 14y ago
I really like the idea of cryptographic currency, but bitcoin strikes me as a somewhat ill fated v1 of the idea. Whatever replaces it will needs some sort of more sophisticated measure for keeping the value of a coin from fluctuating wildly; because with the way the currency is wildly deflating right now, I'd be super hesitant to "spend" a bitcoin for fear that it might be worth twice what it is now, while on the other hand, I'm also terribly afraid of buying a bitcoin, because what if they drop back down to earth? Currency only really seems spendable if its value is at least somewhat predictable.
- betterunix 14y ago
  Bitcoin is not even "v1," it is just an attempt by cryptoanarchists to create a currency without any central authority. Chaum, Okamoto, and many other researchers published a large volume of work on digital cash, creating systems that supported various notions of secure and anonymous electronic payments. Unlike Bitcoin, the security of many of these designs can be proved by reductions to hard problems, much like the security of public-key cryptosystems like ElGamal. In the typical "hack it out and pay no attention to previous work" style of the Bitcoin community, none of that research was cited or even hinted at in the original Bitcoin paper. The fact that the article presents this as a choice between something like Bitcoin and something like Paypal is telling. The reason Chaum's digital cash startup failed is complicated, but it boils down to this: digital cash is poorly understood, banks have few compelling reasons to deploy it (their existing fraud mitigation measures keep them well within the realm of profitability), and the US government continues to work against the deployment of good cryptography.
  - kiba 14y ago
    The approach of Satoshi Nakamoto is not the way typical cryptographers would create cryptocurrencies. See gwern's article Bitcoin is Worse Is Better http://www.gwern.net/Bitcoin%20is%20Worse%20is%20Better http://www.gwern.net/Bitcoin%20is%20Worse%20is%20Better Satoshi's genius is the ability to combine several well known technologies and figure out the right kind of tradeoffs that would make bitcoin works. Yes, bitcoin sucks in many way such as not being able to do anonymous trade offline, being forced to store a blockchain, needing enough computation power to counter evil miners, needing the social cooperation of miners and users, and so on. But you have to admit, it works.
betterunix 14y ago
No, Bitcoin is not the future. Most people need to deal with their nation's currency to pay taxes and settle debts, most businesses need a currency that is at least reasonably stable, and that is not getting into the extremely questionable security of the Bitcoin system itself.
- drewblaisdell 14y ago
  Case closed!
- MichaelApproved 14y ago
  The difficulty in settling debts directly does not prevent Bitcoin from being the future. The Bitcoin as a currency is not a new concept. Right now, Bitcoin is almost exactly like gold. You don't pay your taxes with gold but it could be exchanged for your nation's currency to settle debts. Some people exchange gold directly for goods and services but very few things are priced in gold. People price things in their local currency so you must exchange the gold for national currency to purchase. Almost everything about gold is the same as Bitcoin and gold is a very trusted and traditional way to store value.
  - lukeschlather 14y ago
    Gold has intrinsic value. Regardless of how our economic system functions, gold is useful. Bitcoin is useless unless it is intrinsic to our economic system. Bitcoin is absolutely nothing like gold, excepting that people assign value to it.
    - lbarrow 14y ago
      Gold does not have intrinsic value.
      - gamblor956 14y ago
        Intrinsic value means the value inherent in the good itself. Gold has intrinsic value: it is one of the best semiconducting metals, and is easily malleable. Gold also demonstrates antibacterial properties. Note that palladium, another precious metal that routinely trades at high prices, also has "intrinsic" value as a catalytic agent. Platinum, which is currently trading at higher prices than gold, is one of the least corrosive heavy metals.
porter 14y ago
This is a great write up.
chris_mahan 14y ago
Bitcoins are valuable only because people are hoarding it. It's a classic case of bubble. In the end, they're just bits, and that doesn't have much value.
- gbaygon 14y ago
  Paper currency is valuable only because people agree on it. In the end, they're just green pieces of paper, and that doesn't have much value.
- Klinky 14y ago
  Paper doesn't have much value either, and precious metal values are also inflated thanks to hoarding/speculation.
  - damian2000 14y ago
    Exactly OPs point. I think they meant that in the event of a crash, you won't be left with much. Same as for the case of hyper-inflation of a currency, or a devaluation in precious metals.
    - zanny 14y ago
      Go figure : when you are using a trust relationship between parties to negotiate value instead of just trading in raw goods, you are vulnerable to the destruction of that exchange-trust system. It is why all the people aruging gold is such a better investment than BTC are nuts. If gold dropped its market value overnight by 90%, you would still lose 90% of your potential fiat exchanged currency as if BTC dropped 90%. All gold has going for it is less volitility. If gold ever stopped being a reserve resource rather than a useful metal, you would not get a fraction of what you spent on your gold selling it to industrial plants to make conductive cable out of.
- foxylad 14y ago
  Your (traditional currency) bank balance is "just bits". The only reason that a number stored on a bank's computer has value is that we have all agreed to trust the bank not to mess with that number. They are allowed to add and subtract from it in very limited circumstances, usually only when they modify another bank balance by the same amount (unless it's a bank in Cyprus!). Bitcoin replaces that trust in banks with fancy cryptography. Assuming the cryptography is up to snuff, there is no reason why people won't come to accept it's value in time, just as we now accept that the "bits" that represent our bank balance denote value.
aianus 14y ago
"If we sum up the amounts accumulated at the 609,270 addresses which only receive and never send any BTC’s [bitcoins], we see that they contain 7,019,100 BTC’s, which are almost 78% of all existing BTC’s. This suggests that 78% of bitcoins are being hoarded, waiting for prices to rise." While I'm sure many bitcoins are being hoarded, the proof presented means nothing since by default all change is sent to a fresh address. So if I had a 100 bitcoins and bought an iten worth one bitcoin I would now own a new address with 99 bitcoins and no outgoing transactions giving the impression that I had never spent any of my bitcoins. See: https://en.bitcoin.it/wiki/Change https://en.bitcoin.it/wiki/Change
- nullc 14y ago
  Funny how random HN posters seem to have better reading skills than PHD holding paper authors and their peer reviewers.
  - trhtrsh 14y ago
    One of the paper authors is Adi Shamir, the S in RSA, not just any "PHD holder".
    - nullc 14y ago
      Yes, indeed. And yet he thoroughly and aggressively misunderstands Bitcoin. They also claim that Bitcoin stores its data in HTML files and other crazy stuff that made it clear that the paper must have somehow passed review on the name alone.
- trhtrsh 14y ago
  What happens if you want to send me a $1, but your only coin is $100, and I try to steal the change by not sending you the change, sending my own address the change instead? Is it equivalent to me just running off with a $100 bill of yours? (A real problem in an anonymous street trade). I guess you could make change yourself -- splitting your $100 into $99 + $1 and then spending the $1. But for the network, that would look like you sending both $99 and $1 to new(?) addresses. Anyway, the 7M unspent BTC are all "change" that hasn't been spent yet. So your 99 BTC in your example is hoarded: You got 100 BTC somewhere, and spent 1, but you haven't spent the rest. If you eventually spend your 99 BTC change, it will be sent from the address that was formerly hoarding it. But if you get 98 BTC back in change to a fresh address, that's 98 BTC you haven't spent. But if you ever really spend that 98 BTC, then the person you send them to may be accused of hoarding -- if they use a fresh address for more anonymity. So in a sense all BTC ever recieved to privacy-defending users will always appear to be hoarded by their most recent owners. A better measure of hoarding then would be the 7M (owned by non-spenders) divided by transaction volume. But that is still weak, since the dimension of that measurement is Hertz (time^-1), and transaction volume can be boosted by churn across self-owned addresses.
stcredzero 14y ago
> Bitcoin is the first digital currency to solve the double-spending problem without needing a trusted third party. Really? Just a quick search, and I find: (2007) http://ieeexplore.ieee.org/xpl/articleDetails.jsp?arnumber=4268195 http://ieeexplore.ieee.org/xpl/articleDetails.jsp?arnumber=4... Is that the paper Bitcoin is based on? According to Wikipedia, Bitcoin was introduced in 2009. Also, the price of a 51% attack is not that high: http://www.reddit.com/r/Bitcoin/comments/17gqw0/the_price_of_a_51_attack/ http://www.reddit.com/r/Bitcoin/comments/17gqw0/the_price_of... I've seen a more recent estimate that it would be $20 million to mount such an attack. That's chump change for a power like the US, or even another major industrialized nation. It's about the price of one older fighter jet and a faction of the price of a current one.
- eof 14y ago
  That paper you link to uses a trusted third party. I highly doubt you could run a 51% attack for any significant amount of time on $20MM. Consider the coins being mined everyday are worth ~500,000USD. That is not to say it is impossible, but there is almost no way anyone in the world could pull it off for $20MM except the people who already have ASIC designs.
  - stcredzero 14y ago
    > That paper you link to uses a trusted third party. Not according to the abstract.
- DennisP 14y ago
  First one to be used, perhaps. That's not the Bitcoin paper, but it looks interesting. It says the code runs on mostly-trusted servers. I found a copy not paywalled: http://sclab.cs.umn.edu/papers/ecash_ICDCS2007_corrected.pdf http://sclab.cs.umn.edu/papers/ecash_ICDCS2007_corrected.pdf And here's the Bitcoin paper (pdf): http://bitcoin.org/bitcoin.pdf http://bitcoin.org/bitcoin.pdf
- zanny 14y ago
  > I've seen a more recent estimate that it would be $20 million to mount such an attack. The point of BTC's resistance to attack is that as it grows as an economy it becomes harder to attack. It is vulnerable now because it's market cap is in the millions while the US gov't deals in trillions. If BTC markets ever came close to rivaling a fiat currency nobody would realistically be able to mount a trillion dollar or more hardware attack on the "good" guys in the block chain.
mynameishere 14y ago
Every time I see an article about bitcoin I do a ctrl-f on the comments for the word "laundering" and come up empty. At some point, the men in black are going to make an example of someone. As soon as bitcoin transactions tend to be over 10K, the FBI and Secret Service and IRS are going to be all over it. Do what you want with your banknotes. Just be warned: The dealer on the corner taking dollar bills is much, much, much safer to deal with than any digital currency.
anologwintermut 14y ago
Its a nice write up, but it gets many points wrong. 1) Bitcoin is not anonymous. Its pseudonymous since all transactions take place in public between pseudonyms (ECDSA keys). This is a big difference, one that hasn't been examined too well, and what has been written on it is not encouraging[0]. 2) Bitcoin is not the first currency to prevent double spending without a third party. That minimally goes back to 2006 and a paper "Compact E-cash"[0] where double spending a coin reveled the user's identity and allowed for prosecution. The problem Bitcoin actually does solve is you don't have to trust the bank to not devalue your currency. 3) Bitcoin does not solve the Byzantine generals problem. Bitcoin is assumed to be correct if 51% of the computation power is honest. If everyone is equal, this means that bitcoin only requires that the majority of the generals are honest. The Bzyantine generals problem has no solution if even 1/3 of the generals are malicious[2]: this is a rather famous result. How is this possible? Bitcoin isn't dealing with a fixed n Bzyantine generals, its dealing with a peer to peer system where anyone can join and you need to prevent sock puppet accounts. It's a completely different problem. [0]F. Reid and M. Harrigan, “An analysis of anonymity in the Bitcoin system,” in Privacy, security, risk and trust (PASSAT), 2011 IEEE Third Internatiojn Conference on Social Computing (SOCIALCOM). IEEE, 2011, pp. 1318–1326. [1]http://cs.brown.edu/~anna/papers/chl05-full.pdf http://cs.brown.edu/~anna/papers/chl05-full.pdf [2]http://research.microsoft.com/enus/um/people/lamport/pubs/byz.pdf http://research.microsoft.com/enus/um/people/lamport/pubs/by...
- wyager 14y ago
  >This is a big difference, one that hasn't been examined too well, and what has been written on it is not encouraging[0]. Random numbers is just about as close as you can get to true anonymity. In fact, I'd say that it is as close as you can reasonably expect to get no matter how you try to achieve it. It's also trivial to dis-associate your Bitcoins from a particular cryptographic identity, through the use of mixing services.
  - anologwintermut 14y ago
    If I temporarily change my name to a random number and then go to 3 brothels, a drug dealer, and then my church, I can assure that after I change my name back and run for congress, it will come up. The problem is that all your transactions take place with the same public key or set of public keys. Sure, you can add more keys to that mix, but someone can probably always untagle the web. Contrast this to say Chaum style e-cash where you get complete anonymity. To withdraw a coin , you have the bank signs a serial number in a such a way that they don't know what they are signing. You can then spend the coin by providing the signature and serial number to a merchant who asks the bank if that serial number has been deposited yet. If not, then the coin is neither counterfeit nor double spent. No one in this system can de-anonymize you since they can't know the serial number you used when you withdrew a coin.
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confluence 14y ago
Bitcoins are not the future. But they're a great start. Bitcoins have two major problems stopping mainstream adoption; excessive volatility that isn't managed and the fact that is a deflationary monetary system, with the latter being a much bigger issue. Fundamentally a currency needs to move around fungible value. That's it. If it doesn't do that - it's useless. Bitcoin incentivises hoarding - the opposite of value transmission - and that's the main reason it'll remain as nothing more than a mere speculative currency, like modern day tulips, and why it won't ever become an actual alternative to actual cash. Now - this isn't a knock against crypto-currencies - which are awesome - it's merely a knock at the fact that monetary supply in the bitcoin system isn't adaptive. Bitcoin needs a central decentralized bank that will help to stabilise the system and inflate (punish hoarders) as the economy grows in fits and starts. I'm sure that one day in the not too distant future, another crypto-currency will come about that takes all the advantages provided by bitcoin, and combines them with stability/incentives of a nation-backed currency such as the US dollar. When that happens, we can finally end the monopoly held by large financial institutions that so clearly have literally no idea what they are actually doing (see Deutsche bank just recently). Bitcoins are just the beginning of a whole new financial world, free from restriction, fees and abuse (hopefully :). But they most certainly are not the end.
- 3825 14y ago
  Isn't a central decentralized bank an oxymoron?
  - deleted 14y ago
    [deleted]
  - contingencies 14y ago
    Perhaps the intended meaning was 'multi-legal-jurisdictional'.
- tensafefrogs 14y ago
  The deflation argument is brought up a lot around here, I wonder if you've read this article: http://www.forbes.com/sites/jonmatonis/2012/12/23/fear-not-deflation/ http://www.forbes.com/sites/jonmatonis/2012/12/23/fear-not-d... > Contrary to the central banking and political class insistence that deflation must be prevented at all costs, an economy with a monetary unit that increases in value over time provides significant economic benefits such as near zero interest rates and increasing demand through lower prices. Let’s look at some remarks from leading thinkers on deflation.
emin_gun_sirer 14y ago
>Bitcoin is the first digital currency to solve the double-spending problem without needing a trusted third party. This is false. Karma was a p2p currency that did this in 2004, 5 years before Bitcoin: http://www.cs.cornell.edu/People/egs/papers/karma.pdf http://www.cs.cornell.edu/People/egs/papers/karma.pdf
artumi-richard 14y ago
If bit coins are used to avoid tax, as they could easily be, and that seriously threatens a government's tax take then the government would kill bitcoin. Even if it meant shutting down the internet. If it only mildy threatens the government you might find transactions being slowly split into two, one part in local currency for tax purposes and a second part which is anonymous and digital. As far as I can tell bitcoin is a neo-conservative wet dream, if it gained mass traction anyway.
- zanny 14y ago
  If governments tried to shut down the internet they would have significantly more enemies than just currency speculators to war with. Also, any first world economy that cut off the internet today would go back into the dark ages and would suffer a more severe recession than the great depression. No government in the first world could realistically try to shut down the Internet. And if BTC gains transaction, it becomes harder and harder (eventually prohibitively so) for a gov't to disrupt the block chain or launch an attack on it.
  - artumi-richard 13y ago
    If the government has the potential of no revenue they would turn off the internet. Because they would believe, as I do, that government is good, as they do things like Schools, Roads, Defense (and in the UK HealthCare), policing, welfare, etc etc, and they collectively are more important than the internet. If all currency is traded anonymously. There will be no tax take.
forgottenpaswrd 14y ago
"Bitcoin is unknown territory. It draws praise from Silicon Valley fixture Paul Graham and simultaneous dismissal from Nobel Prize winning economist Paul Krugman. " No, No, nO!! There is no Nobel Price in economics, period. There is a "Nobel MEMORIAL price" made by a central bank to propagate their propaganda as scientific, huge difference.
aminok 14y ago
No one knows the future. They could be, and that's a pretty amazing prospect.
morphar 14y ago
I would have to say: "nopes...", on this one ;)

203 points by patrickod 14y ago

I would have titled this much differently. More along the lines of: "A Comprehensive Guide to Bitcoin". I just found it humorous that they titled the article "Are Bitcoins the future?" and then failed the ask or answer that question anywhere in mini novel they wrote following that title.

veb 14y ago

This article makes me ponder about the origins of Bitcoin. This page claims that it could be a group of people who made it, which seems a bit more likely: https://en.bitcoin.it/wiki/Satoshi_Nakamoto https://en.bitcoin.it/wiki/Satoshi_Nakamoto Does anyone else have any interesting insights into the origin of Bitcoin?

betterunix 14y ago
Judging by the original paper, the subsequent writings, and the kinds of things prominent members of the Bitcoin community say, it is likely that whoever created Bitcoin was an amateur. There are few references made to the work done by Chaum or Okamoto. The security proof in the Bitcoin paper considers only one specific attack strategy. ECDSA and SHA256 are referenced but little is said about whether or not they compose securely with the Bitcoin protocol, or even if the Bitcoin protocol itself is secure. It is not that I mean to insult amateurs -- amateurs can theoretically make secure cryptosystems (though Bitcoin is not secure under the security notions used by cryptographers), but it is usually pretty clear when a system was designed by someone who is not well-versed in cryptography. It is unfortunate, however, that Bitcoin's developers cannot be bothered to search Google: https://www.google.com/search?q=digital+cash+site%3Aeprint.iacr.org https://www.google.com/search?q=digital+cash+site%3Aeprint.i...
- josephagoss 14y ago
  If you don't mind, how is Bitcoin not secure under the security notions used by cryptographers? This is interesting because if it wasn't secure I wonder why hundreds of millions of dollars have not been stolen yet? You could probably steal 100 million from some top addresses, move to MtGox and sell for a very decent rate before what you did became apparent (of course once what did became apparent Bitcoin would collapse forever) Or if the addresses are secure and its something else that is not secure what is it? I am on the bitcointalk forum a lot and I have not read anything about the crypto being not secure. Maybe I misunderstand what you mean by security?
  - DanBC 14y ago
    Cryptographers have a high standard for 'not broken'. A cryptographic algorithm could have no real world attack, but be declared broken because there's a mathematical flaw. In the case of Bitcoin there's the 51% attack, which is pretty serious flaw even if to carry it out is unfeasable. We don't know if NSA or GCHQ have broken bitcoin (although they've certainly investigated it); and we haven't seen much crypt-analysis on it; but we have seen very many people trying (sometimes successfully) to attack Bitcoin and the wallets and the exchanges.
    - arpp 14y ago
      Democracy is also vulnerable to 51% attacks ;P
    - nullc 14y ago
      > the 51% attack, which is pretty serious flaw even if to carry it out is unfeasable There isn't anything magical about the number 51, the original Bitcoin paper gives a program that can be used to compute the success probability for an attacker with a given share of the computing power to reverse transactions to a given depth... At >=50% the probability becomes one but at that point only if the attack is of infinite duration. But, for example an attacker with 40% hashpower can reverse six blocks with a 50% success rate. Any kind of consensus system is going to be vulnerable to a majority attack of some kind— otherwise you'd have "minority imposes a wrong outcome" attacks. At least in Bitcoin the "consensus" only controls transaction ordering: a majority attacker can't inflate the supply or spend other people's coins... they can only DOS and remove transactions from the fixed consensus (and thus replace their own). Which is powerful but still limited.
- ewillbefull 14y ago
  Can you point me toward _any_ proof-of-concepts for Chaum's scheme as applied to digital currency? Hell, there's still people on Bitcointalk trying to figure out how to bootstrap off of Bitcoin with some of those ideas. I don't think it's fair to throw "amateur" around like that, Bitcoin solves separate problems entirely. Crypto-anarchists spent decades theorizing things but never solving problems. Bitcoin shipped and that shouldn't upset you so much.
  - wmf 14y ago
    Chaum shipped DigiCash back in the 90s and Lucre is an open-source Chaum-like system.
    - DennisP 14y ago
      And now the OpenTransactions people are building Chaum-like systems for trading bitcoins.
- josephagoss 14y ago
  Also I looked at your Google search and could not find anyone talking about a block chain. I would be surprised if someone proposed a digital currency based on a blockchain before Satoshi, because that is the unique insight he is held in high regard for. - Sure some of the links in the Google search have lots of complicated schemes for a digital currency, but I think its the simplicity of the Bitcoin system that is unique. - Also I hear the system itself can only be attacked via brute force, do you claim this is not the case?
  - betterunix 14y ago
    "Also I hear the system itself can only be attacked via brute force, do you claim this is not the case?" The best known double-spending attack on Bitcoin requires work equal to the sum of all work done by the honest parties in the system. That is not a very high security margin; by comparison, attacking many of the systems from the Google search would require work that is exponential in the parameters of the system, while the honest parties only do work that is polynomial in those parameters. Forcing the attacker to do exponential work in the system parameters is the typical requirement for a cryptosystem to be "secure," and thus Bitcoin is not actually secure under the commonly accepted notions of security (at least among cryptographers).
    - josephagoss 14y ago
      Again you make a good point. It seems the 51% attack problem is glossed over a lot in the forums. I guess everyone is hoping that after a couple of years there will be millions of ASIC devices and this will be enough to ensure the 51% issues. But of course it can never be fully solved.
- moe 14y ago
  Your arrogant tone doesn't really jive with the lack of substance in your comment. Since you're apparently a professional cryptographer who would have designed a flawless Bitcoin right off the bat; Why don't you share some of your wisdom and point out a few of the amateur problems and how you would solve them? I'm sure the Bitcoin community would be grateful for your input.
  - betterunix 14y ago
    Is it really that arrogant to point out that the Bitcoin community has basically ignored the vast body of published, publicly available research on digital cash? Even if the point of Bitcoin is to go in a separate direction and have no central authorities of any kind, that previous work is highly relevant. There is no particular need for me to design a better digital cash system; such systems have already been designed. It is not even clear that digital cash without a central authority can be provably secure, since nobody has proposed a security definition for digital cash that does not involve some currency issuing authority (no, Bitcoin's definition does not count -- it does not rule out feasible attacks). Personally, I have no real problem with having a "bank" that issues currency, as long as the bank cannot frame people for double spending or other cheating (which is the kind of protection that was described by Chaum and other researchers in the 90s). So really, the ball is in the Bitcoin community's court. The research results on digital cash and secure multiparty computation is all publicly available and mostly available at no cost. Let the Bitcoin community develop a definition of security for digital cash without any "bank" if that is their goal; all that I am saying is that the definition must rule out feasible attacks if we are expected to take it seriously.
    - gbog 14y ago
      Sorry but you really look like a scholar saying platypus don't exist because they can't exist. Or Black Swans...
    - zanny 14y ago
      Money speaks a lot louder than PHD's who haven't made a competitive currency. Bitcoin is booming - nothing else is even on the radar. Bitcoin doesn't have to play ball with anyone if they are, by magnitudes, the largest digital currency in use. So far, it works. If BTC stops working, you can expect everyone to jump ship and hopefully a more secure alternative will be developed with lessons learned from the BTC ride. But for now, unless you can produce an attack that can lose people money in the bitcoin ecosystem, ranting about theoretical cryptosecurity in digital currencies and how BTC only being as secure as the majority of the swarm allows doesn't make anyone hesitant to invest in bitcoin. > I have no real problem with having a "bank" that issues currency The problem with banks is that they can always act in their own self-interest to fuck over the holders of their currency, and by having the only right to "counterfeit" their currency they have abnormal economic power in the economy their currency drives. It is the reason the US Federal Reserve is so corrupt right now, can wildly print US dollars to their own discretion, which is effectively stealing from anyone holding dollars by devaluing the currency as a whole, and they can do it at their own whims.
- wyager 14y ago
  >it is likely that whoever created Bitcoin was an amateur. You're kidding, right? Bitcoin is the single most impressive application of cryptography that I have ever seen in my entire life, and I get to look at a lot of cool cryptosystems. The only entity that could have created Bitcoin is some kind of savant or a group of very talented people. >ECDSA and SHA256 are referenced but little is said about whether or not they compose securely with the Bitcoin protocol, or even if the Bitcoin protocol itself is secure. By making only a few basic assumptions about the security of SHA, RIPEMD, and ECDSA, it's plainly obvious to anyone who remotely understands the protocol that the protocol is, in fact, secure. If you don't believe me personally, why don't you ask all the talented cryptographers who could lay their hands on over a billion dollars if they found a critical flaw in the Bitcoin protocol? >(though Bitcoin is not secure under the security notions used by cryptographers) You have no idea what you're talking about. Bitcoin makes very strict security guarantees and does not violate them.
  - nhaehnle 14y ago
    The GP post is perhaps a bit too dismissive of Bitcoin, but you should be very careful of hero worship as well. The pool of people who could have created Bitcoin includes almost everybody who has taken university-level courses on cryptography, and probably a whole bunch of non-academic crypto enthusiasts. After all, there are really only two cryptographic ideas in Bitcoin: One is to used public key cryptography and signatures for transactions, which is completely obvious. The other is to use hashing for proof-of-work to build the block chain. This is certainly less obvious, but it wasn't outlandishly new either. Ideas like hashcash have been around much longer than Bitcoin. Putting it all together in this way with its appeal to the goldbug mindset was certainly clever. But you are seriously overestimating the amount of intelligence required for developing Bitcoin.
    - wyager 14y ago
      >The pool of people who could have created Bitcoin includes almost everybody who has taken university-level courses on cryptography, No way. Have you looked at the whitepaper? The entire thing? Even completely ignoring the clever leveraging of cryptography, the sheer genius behind the methodology of the protocol makes me think that someone(s) extremely talented came up with it. >Ideas like hashcash have been around much longer than Bitcoin. True, but much of the genius comes from the way transactions themselves work. Right now, we're only leveraging a small portion of Bitcoin's capabilities. Because Bitcoin is really based on scripts assigned a value, the Bitcoin protocol allows for incredibly complex economic interactions in a cryptographically secure manner. The deeper I look into the protocol, the more I realize how genius some of the design decisions were. And besides, Bitcoin obviously did something right, because it's the only decentralized digital currency to take off. >But you are seriously overestimating the amount of intelligence required for developing Bitcoin. I think you're underestimating the elegance and complexity of the Bitcoin protocol. It's much, much more than a few crypto primitives strung together.

tokenadult 14y ago

This article covers a lot of interesting ground, and isn't the usual same, old same-old article about Bitcoin. I especially liked the reminders of earlier examples of online currencies. The conclusion is tentative, and reasonable. Along the way, the author brings up many interesting facts about Bitcoin, about its supporters, and about its critics. I think it is especially reasonable to assume that Bitcoin exists with the tacit consent of the United States National Security Agency, even if the NSA didn't invent Bitcoin. AFTER EDIT: Addition of my FAQ-in-progress about Bitcoin for Hacker New. 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. This prompts 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? And if the organization storing Bitcoin data held personal bank account data too, how attractive a target might it be to thieves?

GuiA 14y ago
>I think it is especially reasonable to assume that Bitcoin exists with the tacit consent of the United States National Security Agency, even if the NSA didn't invent Bitcoin. How so? If the NSA really hated bitcoin, what would they do? Even if it were made illegal in the US, the United States are not the world, and it would be extremely hard to enforce.

overgard 14y ago

I really like the idea of cryptographic currency, but bitcoin strikes me as a somewhat ill fated v1 of the idea. Whatever replaces it will needs some sort of more sophisticated measure for keeping the value of a coin from fluctuating wildly; because with the way the currency is wildly deflating right now, I'd be super hesitant to "spend" a bitcoin for fear that it might be worth twice what it is now, while on the other hand, I'm also terribly afraid of buying a bitcoin, because what if they drop back down to earth? Currency only really seems spendable if its value is at least somewhat predictable.

betterunix 14y ago
Bitcoin is not even "v1," it is just an attempt by cryptoanarchists to create a currency without any central authority. Chaum, Okamoto, and many other researchers published a large volume of work on digital cash, creating systems that supported various notions of secure and anonymous electronic payments. Unlike Bitcoin, the security of many of these designs can be proved by reductions to hard problems, much like the security of public-key cryptosystems like ElGamal. In the typical "hack it out and pay no attention to previous work" style of the Bitcoin community, none of that research was cited or even hinted at in the original Bitcoin paper. The fact that the article presents this as a choice between something like Bitcoin and something like Paypal is telling. The reason Chaum's digital cash startup failed is complicated, but it boils down to this: digital cash is poorly understood, banks have few compelling reasons to deploy it (their existing fraud mitigation measures keep them well within the realm of profitability), and the US government continues to work against the deployment of good cryptography.
- kiba 14y ago
  The approach of Satoshi Nakamoto is not the way typical cryptographers would create cryptocurrencies. See gwern's article Bitcoin is Worse Is Better http://www.gwern.net/Bitcoin%20is%20Worse%20is%20Better http://www.gwern.net/Bitcoin%20is%20Worse%20is%20Better Satoshi's genius is the ability to combine several well known technologies and figure out the right kind of tradeoffs that would make bitcoin works. Yes, bitcoin sucks in many way such as not being able to do anonymous trade offline, being forced to store a blockchain, needing enough computation power to counter evil miners, needing the social cooperation of miners and users, and so on. But you have to admit, it works.

betterunix 14y ago

No, Bitcoin is not the future. Most people need to deal with their nation's currency to pay taxes and settle debts, most businesses need a currency that is at least reasonably stable, and that is not getting into the extremely questionable security of the Bitcoin system itself.

drewblaisdell 14y ago
Case closed!
MichaelApproved 14y ago
The difficulty in settling debts directly does not prevent Bitcoin from being the future. The Bitcoin as a currency is not a new concept. Right now, Bitcoin is almost exactly like gold. You don't pay your taxes with gold but it could be exchanged for your nation's currency to settle debts. Some people exchange gold directly for goods and services but very few things are priced in gold. People price things in their local currency so you must exchange the gold for national currency to purchase. Almost everything about gold is the same as Bitcoin and gold is a very trusted and traditional way to store value.
- lukeschlather 14y ago
  Gold has intrinsic value. Regardless of how our economic system functions, gold is useful. Bitcoin is useless unless it is intrinsic to our economic system. Bitcoin is absolutely nothing like gold, excepting that people assign value to it.
  - lbarrow 14y ago
    Gold does not have intrinsic value.
    - gamblor956 14y ago
      Intrinsic value means the value inherent in the good itself. Gold has intrinsic value: it is one of the best semiconducting metals, and is easily malleable. Gold also demonstrates antibacterial properties. Note that palladium, another precious metal that routinely trades at high prices, also has "intrinsic" value as a catalytic agent. Platinum, which is currently trading at higher prices than gold, is one of the least corrosive heavy metals.

porter 14y ago

This is a great write up.

chris_mahan 14y ago

Bitcoins are valuable only because people are hoarding it. It's a classic case of bubble. In the end, they're just bits, and that doesn't have much value.

gbaygon 14y ago
Paper currency is valuable only because people agree on it. In the end, they're just green pieces of paper, and that doesn't have much value.
Klinky 14y ago
Paper doesn't have much value either, and precious metal values are also inflated thanks to hoarding/speculation.
- damian2000 14y ago
  Exactly OPs point. I think they meant that in the event of a crash, you won't be left with much. Same as for the case of hyper-inflation of a currency, or a devaluation in precious metals.
  - zanny 14y ago
    Go figure : when you are using a trust relationship between parties to negotiate value instead of just trading in raw goods, you are vulnerable to the destruction of that exchange-trust system. It is why all the people aruging gold is such a better investment than BTC are nuts. If gold dropped its market value overnight by 90%, you would still lose 90% of your potential fiat exchanged currency as if BTC dropped 90%. All gold has going for it is less volitility. If gold ever stopped being a reserve resource rather than a useful metal, you would not get a fraction of what you spent on your gold selling it to industrial plants to make conductive cable out of.
foxylad 14y ago
Your (traditional currency) bank balance is "just bits". The only reason that a number stored on a bank's computer has value is that we have all agreed to trust the bank not to mess with that number. They are allowed to add and subtract from it in very limited circumstances, usually only when they modify another bank balance by the same amount (unless it's a bank in Cyprus!). Bitcoin replaces that trust in banks with fancy cryptography. Assuming the cryptography is up to snuff, there is no reason why people won't come to accept it's value in time, just as we now accept that the "bits" that represent our bank balance denote value.

aianus 14y ago

"If we sum up the amounts accumulated at the 609,270 addresses which only receive and never send any BTC’s [bitcoins], we see that they contain 7,019,100 BTC’s, which are almost 78% of all existing BTC’s. This suggests that 78% of bitcoins are being hoarded, waiting for prices to rise." While I'm sure many bitcoins are being hoarded, the proof presented means nothing since by default all change is sent to a fresh address. So if I had a 100 bitcoins and bought an iten worth one bitcoin I would now own a new address with 99 bitcoins and no outgoing transactions giving the impression that I had never spent any of my bitcoins. See: https://en.bitcoin.it/wiki/Change https://en.bitcoin.it/wiki/Change

nullc 14y ago
Funny how random HN posters seem to have better reading skills than PHD holding paper authors and their peer reviewers.
- trhtrsh 14y ago
  One of the paper authors is Adi Shamir, the S in RSA, not just any "PHD holder".
  - nullc 14y ago
    Yes, indeed. And yet he thoroughly and aggressively misunderstands Bitcoin. They also claim that Bitcoin stores its data in HTML files and other crazy stuff that made it clear that the paper must have somehow passed review on the name alone.
trhtrsh 14y ago
What happens if you want to send me a $1, but your only coin is $100, and I try to steal the change by not sending you the change, sending my own address the change instead? Is it equivalent to me just running off with a $100 bill of yours? (A real problem in an anonymous street trade). I guess you could make change yourself -- splitting your $100 into $99 + $1 and then spending the $1. But for the network, that would look like you sending both $99 and $1 to new(?) addresses. Anyway, the 7M unspent BTC are all "change" that hasn't been spent yet. So your 99 BTC in your example is hoarded: You got 100 BTC somewhere, and spent 1, but you haven't spent the rest. If you eventually spend your 99 BTC change, it will be sent from the address that was formerly hoarding it. But if you get 98 BTC back in change to a fresh address, that's 98 BTC you haven't spent. But if you ever really spend that 98 BTC, then the person you send them to may be accused of hoarding -- if they use a fresh address for more anonymity. So in a sense all BTC ever recieved to privacy-defending users will always appear to be hoarded by their most recent owners. A better measure of hoarding then would be the 7M (owned by non-spenders) divided by transaction volume. But that is still weak, since the dimension of that measurement is Hertz (time^-1), and transaction volume can be boosted by churn across self-owned addresses.

stcredzero 14y ago

> Bitcoin is the first digital currency to solve the double-spending problem without needing a trusted third party. Really? Just a quick search, and I find: (2007) http://ieeexplore.ieee.org/xpl/articleDetails.jsp?arnumber=4268195 http://ieeexplore.ieee.org/xpl/articleDetails.jsp?arnumber=4... Is that the paper Bitcoin is based on? According to Wikipedia, Bitcoin was introduced in 2009. Also, the price of a 51% attack is not that high: http://www.reddit.com/r/Bitcoin/comments/17gqw0/the_price_of_a_51_attack/ http://www.reddit.com/r/Bitcoin/comments/17gqw0/the_price_of... I've seen a more recent estimate that it would be $20 million to mount such an attack. That's chump change for a power like the US, or even another major industrialized nation. It's about the price of one older fighter jet and a faction of the price of a current one.

eof 14y ago
That paper you link to uses a trusted third party. I highly doubt you could run a 51% attack for any significant amount of time on $20MM. Consider the coins being mined everyday are worth ~500,000USD. That is not to say it is impossible, but there is almost no way anyone in the world could pull it off for $20MM except the people who already have ASIC designs.
- stcredzero 14y ago
  > That paper you link to uses a trusted third party. Not according to the abstract.
DennisP 14y ago
First one to be used, perhaps. That's not the Bitcoin paper, but it looks interesting. It says the code runs on mostly-trusted servers. I found a copy not paywalled: http://sclab.cs.umn.edu/papers/ecash_ICDCS2007_corrected.pdf http://sclab.cs.umn.edu/papers/ecash_ICDCS2007_corrected.pdf And here's the Bitcoin paper (pdf): http://bitcoin.org/bitcoin.pdf http://bitcoin.org/bitcoin.pdf
zanny 14y ago
> I've seen a more recent estimate that it would be $20 million to mount such an attack. The point of BTC's resistance to attack is that as it grows as an economy it becomes harder to attack. It is vulnerable now because it's market cap is in the millions while the US gov't deals in trillions. If BTC markets ever came close to rivaling a fiat currency nobody would realistically be able to mount a trillion dollar or more hardware attack on the "good" guys in the block chain.

mynameishere 14y ago

Every time I see an article about bitcoin I do a ctrl-f on the comments for the word "laundering" and come up empty. At some point, the men in black are going to make an example of someone. As soon as bitcoin transactions tend to be over 10K, the FBI and Secret Service and IRS are going to be all over it. Do what you want with your banknotes. Just be warned: The dealer on the corner taking dollar bills is much, much, much safer to deal with than any digital currency.

anologwintermut 14y ago

Its a nice write up, but it gets many points wrong. 1) Bitcoin is not anonymous. Its pseudonymous since all transactions take place in public between pseudonyms (ECDSA keys). This is a big difference, one that hasn't been examined too well, and what has been written on it is not encouraging[0]. 2) Bitcoin is not the first currency to prevent double spending without a third party. That minimally goes back to 2006 and a paper "Compact E-cash"[0] where double spending a coin reveled the user's identity and allowed for prosecution. The problem Bitcoin actually does solve is you don't have to trust the bank to not devalue your currency. 3) Bitcoin does not solve the Byzantine generals problem. Bitcoin is assumed to be correct if 51% of the computation power is honest. If everyone is equal, this means that bitcoin only requires that the majority of the generals are honest. The Bzyantine generals problem has no solution if even 1/3 of the generals are malicious[2]: this is a rather famous result. How is this possible? Bitcoin isn't dealing with a fixed n Bzyantine generals, its dealing with a peer to peer system where anyone can join and you need to prevent sock puppet accounts. It's a completely different problem. [0]F. Reid and M. Harrigan, “An analysis of anonymity in the Bitcoin system,” in Privacy, security, risk and trust (PASSAT), 2011 IEEE Third Internatiojn Conference on Social Computing (SOCIALCOM). IEEE, 2011, pp. 1318–1326. [1]http://cs.brown.edu/~anna/papers/chl05-full.pdf http://cs.brown.edu/~anna/papers/chl05-full.pdf [2]http://research.microsoft.com/enus/um/people/lamport/pubs/byz.pdf http://research.microsoft.com/enus/um/people/lamport/pubs/by...

wyager 14y ago
>This is a big difference, one that hasn't been examined too well, and what has been written on it is not encouraging[0]. Random numbers is just about as close as you can get to true anonymity. In fact, I'd say that it is as close as you can reasonably expect to get no matter how you try to achieve it. It's also trivial to dis-associate your Bitcoins from a particular cryptographic identity, through the use of mixing services.
- anologwintermut 14y ago
  If I temporarily change my name to a random number and then go to 3 brothels, a drug dealer, and then my church, I can assure that after I change my name back and run for congress, it will come up. The problem is that all your transactions take place with the same public key or set of public keys. Sure, you can add more keys to that mix, but someone can probably always untagle the web. Contrast this to say Chaum style e-cash where you get complete anonymity. To withdraw a coin , you have the bank signs a serial number in a such a way that they don't know what they are signing. You can then spend the coin by providing the signature and serial number to a merchant who asks the bank if that serial number has been deposited yet. If not, then the coin is neither counterfeit nor double spent. No one in this system can de-anonymize you since they can't know the serial number you used when you withdrew a coin.

deleted 14y ago

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confluence 14y ago

Bitcoins are not the future. But they're a great start. Bitcoins have two major problems stopping mainstream adoption; excessive volatility that isn't managed and the fact that is a deflationary monetary system, with the latter being a much bigger issue. Fundamentally a currency needs to move around fungible value. That's it. If it doesn't do that - it's useless. Bitcoin incentivises hoarding - the opposite of value transmission - and that's the main reason it'll remain as nothing more than a mere speculative currency, like modern day tulips, and why it won't ever become an actual alternative to actual cash. Now - this isn't a knock against crypto-currencies - which are awesome - it's merely a knock at the fact that monetary supply in the bitcoin system isn't adaptive. Bitcoin needs a central decentralized bank that will help to stabilise the system and inflate (punish hoarders) as the economy grows in fits and starts. I'm sure that one day in the not too distant future, another crypto-currency will come about that takes all the advantages provided by bitcoin, and combines them with stability/incentives of a nation-backed currency such as the US dollar. When that happens, we can finally end the monopoly held by large financial institutions that so clearly have literally no idea what they are actually doing (see Deutsche bank just recently). Bitcoins are just the beginning of a whole new financial world, free from restriction, fees and abuse (hopefully :). But they most certainly are not the end.

3825 14y ago
Isn't a central decentralized bank an oxymoron?
- deleted 14y ago
  [deleted]
- contingencies 14y ago
  Perhaps the intended meaning was 'multi-legal-jurisdictional'.
tensafefrogs 14y ago
The deflation argument is brought up a lot around here, I wonder if you've read this article: http://www.forbes.com/sites/jonmatonis/2012/12/23/fear-not-deflation/ http://www.forbes.com/sites/jonmatonis/2012/12/23/fear-not-d... > Contrary to the central banking and political class insistence that deflation must be prevented at all costs, an economy with a monetary unit that increases in value over time provides significant economic benefits such as near zero interest rates and increasing demand through lower prices. Let’s look at some remarks from leading thinkers on deflation.

emin_gun_sirer 14y ago

>Bitcoin is the first digital currency to solve the double-spending problem without needing a trusted third party. This is false. Karma was a p2p currency that did this in 2004, 5 years before Bitcoin: http://www.cs.cornell.edu/People/egs/papers/karma.pdf http://www.cs.cornell.edu/People/egs/papers/karma.pdf

artumi-richard 14y ago

If bit coins are used to avoid tax, as they could easily be, and that seriously threatens a government's tax take then the government would kill bitcoin. Even if it meant shutting down the internet. If it only mildy threatens the government you might find transactions being slowly split into two, one part in local currency for tax purposes and a second part which is anonymous and digital. As far as I can tell bitcoin is a neo-conservative wet dream, if it gained mass traction anyway.

zanny 14y ago
If governments tried to shut down the internet they would have significantly more enemies than just currency speculators to war with. Also, any first world economy that cut off the internet today would go back into the dark ages and would suffer a more severe recession than the great depression. No government in the first world could realistically try to shut down the Internet. And if BTC gains transaction, it becomes harder and harder (eventually prohibitively so) for a gov't to disrupt the block chain or launch an attack on it.
- artumi-richard 13y ago
  If the government has the potential of no revenue they would turn off the internet. Because they would believe, as I do, that government is good, as they do things like Schools, Roads, Defense (and in the UK HealthCare), policing, welfare, etc etc, and they collectively are more important than the internet. If all currency is traded anonymously. There will be no tax take.

forgottenpaswrd 14y ago

"Bitcoin is unknown territory. It draws praise from Silicon Valley fixture Paul Graham and simultaneous dismissal from Nobel Prize winning economist Paul Krugman. " No, No, nO!! There is no Nobel Price in economics, period. There is a "Nobel MEMORIAL price" made by a central bank to propagate their propaganda as scientific, huge difference.

aminok 14y ago

No one knows the future. They could be, and that's a pretty amazing prospect.

morphar 14y ago

I would have to say: "nopes...", on this one ;)