10 ms·

Bitcoin is a Startup

57 points by tlrobinson 13y ago

MattyRad 13y ago
Here's a cool Bitcoin startup relevant to this article: https://robocoinkiosk.com/ https://robocoinkiosk.com/
deleted 13y ago
[deleted]
snitko 13y ago
I think this is the best way to address the issue of Bitcoin being a ponzi-scheme that some people raise. Explain that it's a software product that allows instant low-fee transactions without a centralized server, and those transactions can include complicated logic to serve various types of contracts, enforced without lawyers or authority, thus lowering the costs of business. And it's startup that you can invest into without going through the pain of hiring lawyers too.
fragsworth 13y ago
Slightly off-topic, but I don't understand how it can survive long-term. A 51% attack seems inevitable. The ability to short-sell bitcoins will eventually become widespread. Weigh the estimated cost of building a 51% attack network versus the estimated gains of short-selling all the bitcoins in the world. Suppose you can make 10% of the market cap ($1.5B) of bitcoins by short-selling the entire market - a very low estimate. That's currently $150 million dollars. Is $150 million enough money to create a mass-production effort that builds enough ASIC miners to beat out half the network? (hint: yes it is)
- fluidcruft 13y ago
  > A 51% attack seems inevitable. So, what are you going to do with your 51% of the network? Somehow double spend $150m before everyone upgrades their clients?
  - wmf 13y ago
    Just mine no transactions. After the network grinds to a halt the exchange rate will crater and then you can close out your short position.
    - ewillbefull 13y ago
      It will almost certainly cost more money to obtain 51% hashrate than you could gain from a short position, by the time mining rewards aren't enough of an incentive. Even the NSA doesn't have enough computing power to achieve 51%.
      - tlrobinson 13y ago
        I agree with the first sentence, but I'm pretty sure the NSA could do it. Until recently it would have only cost a few million dollars to fab enough ASICs for a 51% attack. I haven't seen a recent analysis, but it's probably still only in the 10s of millions (possibly 100s of millions)
        ewillbefull 13y ago
        The NSA probably specializes in general purpose computational power, they couldn't afford to compete with ASICs at this point. But they probably could destroy any alt-coin alternative to bitcoin in a heartbeat, especially Litecoin which is designed to be mined by general purpose hardware.
        dragonwriter 13y ago
        > The NSA probably specializes in general purpose computational power, I would agree that this is likely in the sense that the bulk of their expenditures on computing power are likely directed at general purpose computing power. That doesn't really mean that they couldn't have expended fairly vast amounts on special purpose computing, as well. > they couldn't afford to compete with ASICs at this point. Given that the NSA is kind of concerned about monitoring things (especially things used by people who are particularly concerned about avoiding government monitoring), and given the degree to which people with that interest have been the focus of bitcoin, on what basis do you assume that they didn't get in on the ground floor with ASICS as they became available (or earlier)?
- netwerk 13y ago
  I thought about how you would attack BitCoin and how to achieve that 51% of the work. My solution is basically to create network partitions (using some DDoS or something to prevent communication) and force a small number of good nodes to start working on your solution. Over time you can rejoin partitions where you will control 51% of the compute eventually converting all of the nodes.
- deleted 13y ago
  [deleted]
- randyrand 13y ago
  While I mostly agree with you - it's easier said than done. How exactly are you going to buy $150 million (or whatever the needed amount is) of ASICs without being noticed? The government could obviously do it - but at least in the near future that sounds far fetched. Like wise as soon as your attack is noticed your IP addresses would be blocked by the other clients preventing you from adding to the chain. Edit: after looking more into the 51% attack IP blocking wont really solve it since it only would take a handful of unique IPs to pull off. Edit2: Couldn't we prevent the double spend part of the 51% attack (or at least make it more like 90%) by doing 2 things: 1) Merchants would only accept bit coins that have been in the block chain at least 6 blocks ago (this already is the recommended case) 2) Nodes reject any blocks received if they receive it over an hour (6 blocks worth) past receiving the 'sister' block in the competing (true) chain. This would prevent an attacker from 'reversing history.' What would be the drawbacks to this? Edit3: like wise we could stop the "prevent other people from making transactions" part of it (the only other part) by doing this: http://gavintech.blogspot.com/2012/05/neutralizing-51-attack.html http://gavintech.blogspot.com/2012/05/neutralizing-51-attack... I would love it if someone responded to this.
  - deleted 13y ago
    [deleted]
  - wmf 13y ago
    There has been a lot of discussion about various heuristics to invalidate block chain reorganization. The developers have enough real problems on their plate that I don't think they're interested in working on it. Also keep in mind that a 51% attack may not rewrite history at all, in which case it wouldn't cause deep reorgs. It would cause some orphaning, but that would be mostly indistinguishable from the normal orphaning that goes on normally.
- lectrick 13y ago
  Why would you spend that much money to crash the network... only to lose the entire amount of your money? Also, knowledge about short-sells would help to stabilize the currency's value, NOT crash it. Just like it has for all other assets out there. A 51% attack would cost far more than 150 million at this point.
jhuckestein 13y ago
I love Bitcoin and own some myself, but from the title I expected this article to be about how the "founders" of Bitcoin cash out from an early financing round and spend the rest of their days rich, regardless of whether the concept survives.
- snitko 13y ago
  "Founders" don't need and probably won't cash out.
- tlrobinson 13y ago
  Hah, that's certainly one angle I missed.
- lingben 13y ago
  Given time everyone will come to realize that bitcoin is a very complex and elaborate ponzi scheme. One that will rewrite the books on scams.
  - TDL 13y ago
    How is it a ponzi scheme?
    - volaski 13y ago
      Bitcoin ecosystem by design rewards the early adopters, since the more people use Bitcoin, the higher the value will go up. I also got the feeling that if Bitcoin does fail, it will go down in history as another Ponzi scheme. Which made me rethink about Ponzi scheme. Everyone in Bitcoin community genuinely believes that Bitcoin will succeed. I am sure it was like that with Ponzi scheme too. Theoretically Bitcoin can succeed, but there are many variables in the world. Maybe it was like that with Ponzi scheme too, you never know what will happen in the future. Lastly, I think it's unfair to label bitcoin as "just another ponzi scheme" as it is not intended for any bad will and theoretically could work (however with so many chances of failing)
      - 13y ago
contingencies 13y ago
By that logic, humans are a startup.
- kevinpet 13y ago
  Indeed. If everything is a startup, then we may as well discard the word since it conveys nothing.
dcc1 13y ago
I love Bitcoin, especially after being shafted by Paypal+Ebay Anyone know any good bitcoin auction/selling sites? (i already use bitmit)
samweinberg 13y ago
This analogy can be applied to almost anything. According to this criteria, coffee could be considered a startup: the growers of the beans are the founders, the hipsters sipping their cold frappuccinos at Starbucks are the evangelists, and the price for one pound of coffee beans is its market price. The only problem here is that coffee is a commodity, not a startup. Anyone can grow it and sell it. Likewise, bitcoins can be mined and sold by anyone. Bitcoin by design is decentralized, meaning that there is no central authority, such as a bank, mining new bitcoins. There is no company or government body that officially runs Bitcoin, only individuals (but in a distributed fashion). A startup is completely different, in that it has a governing body and is usually centralized. Bitcoin in a sense is both a currency and a commodity, but is definitely not a startup.
- drewcrawford 13y ago
  > The only problem here is that coffee is a commodity, not a startup. Anyone can grow it and sell it. The better comparison is to oil. Oil is a commodity, in that anyone can buy it and sell it: but there is a fixed amount of it, and one can only acquire oil by taking oil from the fixed supply. Further, the earlier you got into oil, the more money you made, and the same is true of Bitcoin: the authors have made out to the tune of [100M or more](http://bitslog.wordpress.com/2013/04/17/the-well-deserved-fortune-of-satoshi-nakamoto/ http://bitslog.wordpress.com/2013/04/17/the-well-deserved-fo...) simply by being the first miners. So I don't know exactly what kind of definition you want to use for "startup", but bitcoin is certainly software, that was written by a small team of people, that solves a problem, that has made the authors wealthy in a very short amount of time. If someone like Rockefeller started out today, I think we would probably characterize his operation as a "startup", and the founders of Bitcoin are doing much the same thing that he did.
- gojomo 13y ago
  However, as soon as you mine (or buy) Bitcoin, and if you decide to hold them, you are now incentive-aligned with all other Bitcoin holders in desiring a future where Bitcoin is more valuable. That's much like the incentive-alignment of founding (and early-investor) equity in a startup venture. You know what your share is, and want it to be worth more. So even separate from any salaries or formal-obligations, you can be expected to improvise to help collaboratively create the world where your shares are more valuable. Other equity is similar: it's a claim on a certain package of legally-respected rights. (You can vote in board elections; you can collect dividends; you receive pro-rata value in case of liquidation.) Those rights might be worth a lot, in certain possible futures, or nothing, in others. If you're an employee-stockholder, you may be a bit more motivated that someone on a fixed salary. If you're an outside shareholder, you'll still "talk your book" and perhaps even direct other investments in ways that synergistically boost the startup. People describe Bitcoin as crypto-currency or crypto-commodity, but its biggest impact may be as crypto-equity.
nutate 13y ago
This comment is a startup.
- jafaku 13y ago
  Seems legit, I'll invest some upvotes in your comment.
  - dsuth 13y ago
    Dammit, too late to get in on the ground floor :S
    - nutate 13y ago
      My comment was just acquired by Yahoo! So yeah, sorry about that.
Ologn 13y ago
Bitcoins are worthless. They never had any value, and never will. Valueless meaning they are as worthless as Bernie Madoff fund shares, Dutch tulip bulbs, Pets.com stock and Flooz and Beanz, Reichsmarks and confederate dollars and so forth. People might have been temporarily fooled into paying money for these things, but ultimately people realized they were worthless. Like a forged painting or counterfeit dollar. Today I wrote a blog post about why they were worthless ( http://www.vartmp.com/blog/2013/08/21 http://www.vartmp.com/blog/2013/08/21 ). Some interesting things came out of it. One was I did some research on Bitcoin. I found out that some of the idea guys behind Bitcoin actually anticipated my arguments and give their refutation of them. They're well aware of the fault lines of the argument. The argument is whether the value of commodities or currencies are subjective, or whether they are ultimately derived from labor. Bitcoin partisans believe the former, I believe the latter. As the subjective theory of value (STV) is false, Bitcoin certainly will, like Dutch tulip bulbs or Webvan/Pets.com stock, ultimately collapse to become worthless or near worthless. But the collapse will not disprove the subjective theory of value by itself - STV advocates can just say people stopped subjectively valuing Bitcoin. On the other hand, if Bitcoins continue to hold value over the long-term, the labor theory of value will be disproved. It is impossible for a currency with no backing to retain value over the long term. Not to get tangential, but this includes the US dollar, which was gold backed until 42 years ago. And which has a value today - it can be considered scrip that is accepted by army PXs, post offices and the like for goods and services in kind. That is also accepted by the government for taxes and such. It has no worth beyond that however. Currencies have no inherent value, whatever the Bitcoin people believe. As I said, one thing I discovered putting my blog post together today was that Bitcoin people had anticipated the arguments of its worthlessness. Their counter is that Bitcoin value is based on their philosophical ideas, which as I said, I consider baseless, and thus, I know that Bitcoins will sooner or later, and probably sooner than later, be worth $0. I also discovered something else while putting together my blog post. I had the idea that I could financially gain from this insight. I could just short Bitcoins. So I looked into that a little. Various small hurdles are in the way of doing this, but most are navigable. Bitfinex looks like they allow this, although they may only facilitate it. Just for the principle of it, I'm going to short one Bitcoin (current worth = $122) for now, and maybe more later. Bitfinex says to short a Bitcoin I "need to [borrow] bitcoins from others lenders". Hopefully Bitfinex can arrange this for me, otherwise I guess I have to go looking myself. There is no way a Bitcoin can be worth $122 over the long term. Not that it can't temporarily - it can climb to $200, even $300. In the seventeenth century, during the Tulip bubble in Holland, 40 tulip bulbs sold for 100,000 florins, or what would be equivalent to about one million euros today. It can go up, but ultimately it must crash. As will Bitcoin. Keynes said markets can remain irrational longer than he could remain solvent, which is true. However, I feel pretty secure I could survive shorting one Bitcoin via an LLC or something. I'm looking into how to short a Bitcoin via Bitfinex or the like. If anyone knows more about Bitcoin shorting or wants to go on the other side of the deal, I'd be happy to know.
deleted 13y ago
[deleted]

57 points by tlrobinson 13y ago

MattyRad 13y ago

Here's a cool Bitcoin startup relevant to this article: https://robocoinkiosk.com/ https://robocoinkiosk.com/

deleted 13y ago

[deleted]

snitko 13y ago

I think this is the best way to address the issue of Bitcoin being a ponzi-scheme that some people raise. Explain that it's a software product that allows instant low-fee transactions without a centralized server, and those transactions can include complicated logic to serve various types of contracts, enforced without lawyers or authority, thus lowering the costs of business. And it's startup that you can invest into without going through the pain of hiring lawyers too.

fragsworth 13y ago

Slightly off-topic, but I don't understand how it can survive long-term. A 51% attack seems inevitable. The ability to short-sell bitcoins will eventually become widespread. Weigh the estimated cost of building a 51% attack network versus the estimated gains of short-selling all the bitcoins in the world. Suppose you can make 10% of the market cap ($1.5B) of bitcoins by short-selling the entire market - a very low estimate. That's currently $150 million dollars. Is $150 million enough money to create a mass-production effort that builds enough ASIC miners to beat out half the network? (hint: yes it is)

fluidcruft 13y ago
> A 51% attack seems inevitable. So, what are you going to do with your 51% of the network? Somehow double spend $150m before everyone upgrades their clients?
- wmf 13y ago
  Just mine no transactions. After the network grinds to a halt the exchange rate will crater and then you can close out your short position.
  - ewillbefull 13y ago
    It will almost certainly cost more money to obtain 51% hashrate than you could gain from a short position, by the time mining rewards aren't enough of an incentive. Even the NSA doesn't have enough computing power to achieve 51%.
    - tlrobinson 13y ago
      I agree with the first sentence, but I'm pretty sure the NSA could do it. Until recently it would have only cost a few million dollars to fab enough ASICs for a 51% attack. I haven't seen a recent analysis, but it's probably still only in the 10s of millions (possibly 100s of millions)
      - ewillbefull 13y ago
        The NSA probably specializes in general purpose computational power, they couldn't afford to compete with ASICs at this point. But they probably could destroy any alt-coin alternative to bitcoin in a heartbeat, especially Litecoin which is designed to be mined by general purpose hardware.
        dragonwriter 13y ago
        > The NSA probably specializes in general purpose computational power, I would agree that this is likely in the sense that the bulk of their expenditures on computing power are likely directed at general purpose computing power. That doesn't really mean that they couldn't have expended fairly vast amounts on special purpose computing, as well. > they couldn't afford to compete with ASICs at this point. Given that the NSA is kind of concerned about monitoring things (especially things used by people who are particularly concerned about avoiding government monitoring), and given the degree to which people with that interest have been the focus of bitcoin, on what basis do you assume that they didn't get in on the ground floor with ASICS as they became available (or earlier)?
netwerk 13y ago
I thought about how you would attack BitCoin and how to achieve that 51% of the work. My solution is basically to create network partitions (using some DDoS or something to prevent communication) and force a small number of good nodes to start working on your solution. Over time you can rejoin partitions where you will control 51% of the compute eventually converting all of the nodes.
deleted 13y ago
[deleted]
randyrand 13y ago
While I mostly agree with you - it's easier said than done. How exactly are you going to buy $150 million (or whatever the needed amount is) of ASICs without being noticed? The government could obviously do it - but at least in the near future that sounds far fetched. Like wise as soon as your attack is noticed your IP addresses would be blocked by the other clients preventing you from adding to the chain. Edit: after looking more into the 51% attack IP blocking wont really solve it since it only would take a handful of unique IPs to pull off. Edit2: Couldn't we prevent the double spend part of the 51% attack (or at least make it more like 90%) by doing 2 things: 1) Merchants would only accept bit coins that have been in the block chain at least 6 blocks ago (this already is the recommended case) 2) Nodes reject any blocks received if they receive it over an hour (6 blocks worth) past receiving the 'sister' block in the competing (true) chain. This would prevent an attacker from 'reversing history.' What would be the drawbacks to this? Edit3: like wise we could stop the "prevent other people from making transactions" part of it (the only other part) by doing this: http://gavintech.blogspot.com/2012/05/neutralizing-51-attack.html http://gavintech.blogspot.com/2012/05/neutralizing-51-attack... I would love it if someone responded to this.
- deleted 13y ago
  [deleted]
- wmf 13y ago
  There has been a lot of discussion about various heuristics to invalidate block chain reorganization. The developers have enough real problems on their plate that I don't think they're interested in working on it. Also keep in mind that a 51% attack may not rewrite history at all, in which case it wouldn't cause deep reorgs. It would cause some orphaning, but that would be mostly indistinguishable from the normal orphaning that goes on normally.
lectrick 13y ago
Why would you spend that much money to crash the network... only to lose the entire amount of your money? Also, knowledge about short-sells would help to stabilize the currency's value, NOT crash it. Just like it has for all other assets out there. A 51% attack would cost far more than 150 million at this point.

jhuckestein 13y ago

I love Bitcoin and own some myself, but from the title I expected this article to be about how the "founders" of Bitcoin cash out from an early financing round and spend the rest of their days rich, regardless of whether the concept survives.

snitko 13y ago
"Founders" don't need and probably won't cash out.
tlrobinson 13y ago
Hah, that's certainly one angle I missed.
lingben 13y ago
Given time everyone will come to realize that bitcoin is a very complex and elaborate ponzi scheme. One that will rewrite the books on scams.
- TDL 13y ago
  How is it a ponzi scheme?
  - volaski 13y ago
    Bitcoin ecosystem by design rewards the early adopters, since the more people use Bitcoin, the higher the value will go up. I also got the feeling that if Bitcoin does fail, it will go down in history as another Ponzi scheme. Which made me rethink about Ponzi scheme. Everyone in Bitcoin community genuinely believes that Bitcoin will succeed. I am sure it was like that with Ponzi scheme too. Theoretically Bitcoin can succeed, but there are many variables in the world. Maybe it was like that with Ponzi scheme too, you never know what will happen in the future. Lastly, I think it's unfair to label bitcoin as "just another ponzi scheme" as it is not intended for any bad will and theoretically could work (however with so many chances of failing)
    - 13y ago

contingencies 13y ago

By that logic, humans are a startup.

kevinpet 13y ago
Indeed. If everything is a startup, then we may as well discard the word since it conveys nothing.

dcc1 13y ago

I love Bitcoin, especially after being shafted by Paypal+Ebay Anyone know any good bitcoin auction/selling sites? (i already use bitmit)

samweinberg 13y ago

This analogy can be applied to almost anything. According to this criteria, coffee could be considered a startup: the growers of the beans are the founders, the hipsters sipping their cold frappuccinos at Starbucks are the evangelists, and the price for one pound of coffee beans is its market price. The only problem here is that coffee is a commodity, not a startup. Anyone can grow it and sell it. Likewise, bitcoins can be mined and sold by anyone. Bitcoin by design is decentralized, meaning that there is no central authority, such as a bank, mining new bitcoins. There is no company or government body that officially runs Bitcoin, only individuals (but in a distributed fashion). A startup is completely different, in that it has a governing body and is usually centralized. Bitcoin in a sense is both a currency and a commodity, but is definitely not a startup.

drewcrawford 13y ago
> The only problem here is that coffee is a commodity, not a startup. Anyone can grow it and sell it. The better comparison is to oil. Oil is a commodity, in that anyone can buy it and sell it: but there is a fixed amount of it, and one can only acquire oil by taking oil from the fixed supply. Further, the earlier you got into oil, the more money you made, and the same is true of Bitcoin: the authors have made out to the tune of [100M or more](http://bitslog.wordpress.com/2013/04/17/the-well-deserved-fortune-of-satoshi-nakamoto/ http://bitslog.wordpress.com/2013/04/17/the-well-deserved-fo...) simply by being the first miners. So I don't know exactly what kind of definition you want to use for "startup", but bitcoin is certainly software, that was written by a small team of people, that solves a problem, that has made the authors wealthy in a very short amount of time. If someone like Rockefeller started out today, I think we would probably characterize his operation as a "startup", and the founders of Bitcoin are doing much the same thing that he did.
gojomo 13y ago
However, as soon as you mine (or buy) Bitcoin, and if you decide to hold them, you are now incentive-aligned with all other Bitcoin holders in desiring a future where Bitcoin is more valuable. That's much like the incentive-alignment of founding (and early-investor) equity in a startup venture. You know what your share is, and want it to be worth more. So even separate from any salaries or formal-obligations, you can be expected to improvise to help collaboratively create the world where your shares are more valuable. Other equity is similar: it's a claim on a certain package of legally-respected rights. (You can vote in board elections; you can collect dividends; you receive pro-rata value in case of liquidation.) Those rights might be worth a lot, in certain possible futures, or nothing, in others. If you're an employee-stockholder, you may be a bit more motivated that someone on a fixed salary. If you're an outside shareholder, you'll still "talk your book" and perhaps even direct other investments in ways that synergistically boost the startup. People describe Bitcoin as crypto-currency or crypto-commodity, but its biggest impact may be as crypto-equity.

nutate 13y ago

This comment is a startup.

jafaku 13y ago
Seems legit, I'll invest some upvotes in your comment.
- dsuth 13y ago
  Dammit, too late to get in on the ground floor :S
  - nutate 13y ago
    My comment was just acquired by Yahoo! So yeah, sorry about that.

Ologn 13y ago

Bitcoins are worthless. They never had any value, and never will. Valueless meaning they are as worthless as Bernie Madoff fund shares, Dutch tulip bulbs, Pets.com stock and Flooz and Beanz, Reichsmarks and confederate dollars and so forth. People might have been temporarily fooled into paying money for these things, but ultimately people realized they were worthless. Like a forged painting or counterfeit dollar. Today I wrote a blog post about why they were worthless ( http://www.vartmp.com/blog/2013/08/21 http://www.vartmp.com/blog/2013/08/21 ). Some interesting things came out of it. One was I did some research on Bitcoin. I found out that some of the idea guys behind Bitcoin actually anticipated my arguments and give their refutation of them. They're well aware of the fault lines of the argument. The argument is whether the value of commodities or currencies are subjective, or whether they are ultimately derived from labor. Bitcoin partisans believe the former, I believe the latter. As the subjective theory of value (STV) is false, Bitcoin certainly will, like Dutch tulip bulbs or Webvan/Pets.com stock, ultimately collapse to become worthless or near worthless. But the collapse will not disprove the subjective theory of value by itself - STV advocates can just say people stopped subjectively valuing Bitcoin. On the other hand, if Bitcoins continue to hold value over the long-term, the labor theory of value will be disproved. It is impossible for a currency with no backing to retain value over the long term. Not to get tangential, but this includes the US dollar, which was gold backed until 42 years ago. And which has a value today - it can be considered scrip that is accepted by army PXs, post offices and the like for goods and services in kind. That is also accepted by the government for taxes and such. It has no worth beyond that however. Currencies have no inherent value, whatever the Bitcoin people believe. As I said, one thing I discovered putting my blog post together today was that Bitcoin people had anticipated the arguments of its worthlessness. Their counter is that Bitcoin value is based on their philosophical ideas, which as I said, I consider baseless, and thus, I know that Bitcoins will sooner or later, and probably sooner than later, be worth $0. I also discovered something else while putting together my blog post. I had the idea that I could financially gain from this insight. I could just short Bitcoins. So I looked into that a little. Various small hurdles are in the way of doing this, but most are navigable. Bitfinex looks like they allow this, although they may only facilitate it. Just for the principle of it, I'm going to short one Bitcoin (current worth = $122) for now, and maybe more later. Bitfinex says to short a Bitcoin I "need to [borrow] bitcoins from others lenders". Hopefully Bitfinex can arrange this for me, otherwise I guess I have to go looking myself. There is no way a Bitcoin can be worth $122 over the long term. Not that it can't temporarily - it can climb to $200, even $300. In the seventeenth century, during the Tulip bubble in Holland, 40 tulip bulbs sold for 100,000 florins, or what would be equivalent to about one million euros today. It can go up, but ultimately it must crash. As will Bitcoin. Keynes said markets can remain irrational longer than he could remain solvent, which is true. However, I feel pretty secure I could survive shorting one Bitcoin via an LLC or something. I'm looking into how to short a Bitcoin via Bitfinex or the like. If anyone knows more about Bitcoin shorting or wants to go on the other side of the deal, I'd be happy to know.

deleted 13y ago

[deleted]