9 ms·

Ask HN: What would kill Bitcoin?

17 points by et 13y ago

littlecritter 13y ago
I was at an event with Peter Thiel this weekend, and he seems to think that the government will eventually do them in, if anything
- jboggan 13y ago
  The U.S. government made it illegal for individuals to hold or invest in gold for quite awhile. It didn't "kill" gold as a storage of value or as a de facto currency in many parts of the world. I think Bitcoin may be "killed" in a subset of national jurisdictions, but I do not think it is going anywhere.
  - littlecritter 13y ago
    IF you want an example, of how the US govt could completely kill a digital currency, look up e-gold.
    - oleganza 13y ago
      E-gold had a central provider. Bitcoin has anonymous miners all over the world. Has anyone shut down Bittorrent or The Pirate Bay?
      - Element_ 13y ago
        Bittorrent/TPB ticked off a small number of industries (media,software, etc...) their persecution was largely a function of how well those industries could lobby the government. If bitcoin ever got large enough to be perceived as a threat to USD (which is a long ways off) the bitcoin community would not have the resources to take on the US gov. Being geographically spread out is irrelevant. For a small fraction of one of its many defense institutions annual budgets the US gov could easily build an ASIC cluster larger than the entire bitcoin mining network. They could even just start maliciously buying/selling large quantities of btc to keep the btc market volatile. To put it into perspective: btc current total market cap is ~4billion, and the NSAs annual budget is ~12billion.
        oleganza 13y ago
        Here's my version :) Bittorrent is used to download fucking movies while a lot of serious people invest millions in Bitcoin. Federal armies will have to deal with a lot of vested interested. In addition, some bankers and regulators may look seriously into Bitcoin and realize how good it is for storing their own bribes and bonuses and thus buy it. Then "fight" against it only to confiscate for themselves even more. By the time anyone would seriously decide to throw billions to fight anonymous miners and billion of smartphones, Bitcoin monetary base will be a trillion USD and hashrate will be boosted by Chinese government protecting and taxing their miners.
        Element_ 13y ago
        The US government took down egold when it reached ~2 billion in annual transactions. I suspect they will take action against bitcoin before it reaches a trillion dollar monetary base, but only time will tell ;)
        oleganza 13y ago
        Like I said above, Egold was a single entity. In U.S. feds must shut down multiple very different service providers related to Bitcoin and even then there are other countries with their own companies and legislation. Also, it's one thing to say that some company helped Osama bin Laden to launder his money - there will be evidence and no one would make a big story out of it. Another thing is to say that "we cannot do anything about this protocol, so we will shut down every single company just because they might use it". To shut down tens of companies you'd need to show evidence that they all somehow launder tons of money. That would be an epic event and it will be well-advertised, so prosecutors would have to be even more careful in what they say, or they will look like simple bullies on every newspaper. It's just entirely different scale of action to take on everyone connected with Bitcoin. If they do things slowly and try to kill companies one by one, then each time they would create more clarity on how to be compliant with the law which will make every next case even more difficult. I have no doubt there will be war (there's one already with all this regulatory crap, seizure of funds etc.), but it sure won't be one single decision and little attention, like in case of Egold.
    - 27182818284 13y ago
      Bitcoin is decentralized, and hypothesized by many to have been created by the US or other top GDP government in the world.
jack-r-abbit 13y ago
It seems that Bitcoins keep getting stolen from the bitcoin "banks." I've not followed closely in those cases but I imagine that people don't get those bitcoins back like at a real bank with real money. I suspect THAT will kill bitcoin.
- humbledrone 13y ago
  If you hold your own gold, and it gets stolen, nobody is going to pay you back (unless you have some kind of insurance, which presumably could cover Bitcoins as well). Similarly, if you hold a gold certificate and a trusted party actually stores your gold, and it is stolen from them, you're in the same boat. Maybe they have a refund policy and enough capital to cover the loss. Maybe they don't. The point is, equal protections could be offered for Bitcoin. Personally, I think that hardware wallets have the potential to solve this problem. Picture a device that contains your private key, and is capable of signing transactions (after you press a physical button). This thing could be designed such that it is physically incapable of leaking your private key via its USB port (or whatever). And maybe it has a little LCD screen that shows the transaction it's about to sign before you confirm. With something like that, there's really not a whole lot a bad guy could do to steal your Bitcoins. Of course, if a bad guys does coax you into sending them Bitcoins via some more social-engineery-type means, that could be a problem. E.g. if they briefly took over a popular website and made it show their Bitcoin address rather than the real one, there wouldn't be a whole lot of recourse.
datz 13y ago
Bitcoin will become a sentimental Gold while a more robust, efficient protocol such as Ripple will become cash
PeterisP 13y ago
I'm not sure on how mining economics will work out after the bitcoin limit is hit and miners will no longer get new bitcoins - has someone worked out the math on how much transaction fees will increase to cover mining expenses after that? The implication is that bitcoin won't function without (lots of) miners, and if miners would be getting more money in an alternative currency where they can use their hardware, they'd leave bitcoin.
bobfirestone 13y ago
People loosing confidence in it. With no one & nothing backing it there is nothing to prevent the value from going to 0. The only thing keeping the value of bitcoin from being 0 is the willingness of people to trade them for other things of value.
- notdrunkatall 13y ago
  Ultimately, that's the only thing keeping any currency from going to zero.
  - wikwocket 13y ago
    Well, on one level, yes, but in practice there are many organizations and governments that would step in if a national currency were headed towards a value of zero. Bitcoin doesn't have the same level of institutional support (yet?), and so if it's value starts crashing hard, it could turn into an unrecoverable death spiral.
notdrunkatall 13y ago
The government. It's obvious that people want to use it. Its popularity will only increase from here. The government is the biggest threat to bitcoin by far.
yen223 13y ago
Bitcoin's value comes entirely from its utility as a currency, but its deflationary nature would mean people won't be willing to use Bitcoin to buy actual stuff. It'll be interesting to see how this plays out. I suspect Bitcoin will occupy the same space that gold does now, as just another place to store your money during economic downtimes.
- mattm 13y ago
  I really think people will have the opposite view about it. Before making a purchase in bitcoin you could think "I could hold this bitcoin and it will be worth ? in the future." or "I paid X for this Bitcoin and now it is worth X+Y so buying this product now for X is a discount of Y"
- atom-morgan 13y ago
  "...but its deflationary nature would mean people won't be willing to use Bitcoin to buy actual stuff." It's all about time preference. For certain goods people have a very high time preference. For other goods, it's low. Would I forgo dinner simply because I think my Bitcoin will be worth more a week from now? Probably not since I have a high time preference for food. I need it to survive. Just think about goods in technology. They are extremely deflationary. Using the deflationary logic people use to criticize Bitcoin, why would anyone buy an iPhone 5S or Nexus 5 today when they know it's going to be cheaper 6 months from now?
- FellowTraveler 13y ago
  If you save your dollars in the bank and earn interest, you end up with more dollars than if you spend them now. Therefore, no one will ever spend their dollars to buy actual stuff.
mattm 13y ago
The big one is obviously a critical flaw being found which makes it possible to counterfeit bitcoins or steal at will from (genuinely) protected wallets.
- atom-morgan 13y ago
  Do you have a link to counterfeit bitcoins?
fit2rule 13y ago
Being able to email money to people. Somehow.
- stevejalim 13y ago
  Somehow ==> https://square.com/cash https://square.com/cash (which isn't the same at BitCoin, I fully appreciate, but it's good to see some thinking in this direction)
- atom-morgan 13y ago
  I don't doubt that this would slow the growth of Bitcoin. It most definitely would. But for the people who are really into Bitcoin, this still doesn't address the issue of money supply and centralization.
ProblemFactory 13y ago
Some potential scenarios are: * A security or encryption issue discovered in the protocol that leads to compromise of most wallets. The bug could be fixed, but existing balances and trust may be wiped out. * Government regulation that makes it illegal to exchange bitcoin for cash or goods at legal businesses. It may remain as a niche underground thing, but even drug dealers need a way to eventually buy something else with their bitcoin. * Insecure exchanges that make it impossible to exchange bitcoin for cash. Exchanges seem to get hacked and disappear even without government "help". The result is the same: people need a way to use bitcoin for it to have any value. * Another digital currency becomes more popular. * Someone with enough computing power takes over the network. This could be a government agency aiming to shut it down, or perhaps a back-door in ASIC miners.
27182818284 13y ago
I think Bitcoin will be around for a while, but even when it dies out, for whatever reason, one of several other cryptocurrencies will take over.
rajacombinator 13y ago
1) potential flaws in the logic being discovered. 2) the iron fist of the Empire.

17 points by et 13y ago

I was at an event with Peter Thiel this weekend, and he seems to think that the government will eventually do them in, if anything

jboggan 13y ago
The U.S. government made it illegal for individuals to hold or invest in gold for quite awhile. It didn't "kill" gold as a storage of value or as a de facto currency in many parts of the world. I think Bitcoin may be "killed" in a subset of national jurisdictions, but I do not think it is going anywhere.
- littlecritter 13y ago
  IF you want an example, of how the US govt could completely kill a digital currency, look up e-gold.
  - oleganza 13y ago
    E-gold had a central provider. Bitcoin has anonymous miners all over the world. Has anyone shut down Bittorrent or The Pirate Bay?
    - Element_ 13y ago
      Bittorrent/TPB ticked off a small number of industries (media,software, etc...) their persecution was largely a function of how well those industries could lobby the government. If bitcoin ever got large enough to be perceived as a threat to USD (which is a long ways off) the bitcoin community would not have the resources to take on the US gov. Being geographically spread out is irrelevant. For a small fraction of one of its many defense institutions annual budgets the US gov could easily build an ASIC cluster larger than the entire bitcoin mining network. They could even just start maliciously buying/selling large quantities of btc to keep the btc market volatile. To put it into perspective: btc current total market cap is ~4billion, and the NSAs annual budget is ~12billion.
      - oleganza 13y ago
        Here's my version :) Bittorrent is used to download fucking movies while a lot of serious people invest millions in Bitcoin. Federal armies will have to deal with a lot of vested interested. In addition, some bankers and regulators may look seriously into Bitcoin and realize how good it is for storing their own bribes and bonuses and thus buy it. Then "fight" against it only to confiscate for themselves even more. By the time anyone would seriously decide to throw billions to fight anonymous miners and billion of smartphones, Bitcoin monetary base will be a trillion USD and hashrate will be boosted by Chinese government protecting and taxing their miners.
        Element_ 13y ago
        The US government took down egold when it reached ~2 billion in annual transactions. I suspect they will take action against bitcoin before it reaches a trillion dollar monetary base, but only time will tell ;)
        oleganza 13y ago
        Like I said above, Egold was a single entity. In U.S. feds must shut down multiple very different service providers related to Bitcoin and even then there are other countries with their own companies and legislation. Also, it's one thing to say that some company helped Osama bin Laden to launder his money - there will be evidence and no one would make a big story out of it. Another thing is to say that "we cannot do anything about this protocol, so we will shut down every single company just because they might use it". To shut down tens of companies you'd need to show evidence that they all somehow launder tons of money. That would be an epic event and it will be well-advertised, so prosecutors would have to be even more careful in what they say, or they will look like simple bullies on every newspaper. It's just entirely different scale of action to take on everyone connected with Bitcoin. If they do things slowly and try to kill companies one by one, then each time they would create more clarity on how to be compliant with the law which will make every next case even more difficult. I have no doubt there will be war (there's one already with all this regulatory crap, seizure of funds etc.), but it sure won't be one single decision and little attention, like in case of Egold.
  - 27182818284 13y ago
    Bitcoin is decentralized, and hypothesized by many to have been created by the US or other top GDP government in the world.

jack-r-abbit 13y ago

It seems that Bitcoins keep getting stolen from the bitcoin "banks." I've not followed closely in those cases but I imagine that people don't get those bitcoins back like at a real bank with real money. I suspect THAT will kill bitcoin.

humbledrone 13y ago
If you hold your own gold, and it gets stolen, nobody is going to pay you back (unless you have some kind of insurance, which presumably could cover Bitcoins as well). Similarly, if you hold a gold certificate and a trusted party actually stores your gold, and it is stolen from them, you're in the same boat. Maybe they have a refund policy and enough capital to cover the loss. Maybe they don't. The point is, equal protections could be offered for Bitcoin. Personally, I think that hardware wallets have the potential to solve this problem. Picture a device that contains your private key, and is capable of signing transactions (after you press a physical button). This thing could be designed such that it is physically incapable of leaking your private key via its USB port (or whatever). And maybe it has a little LCD screen that shows the transaction it's about to sign before you confirm. With something like that, there's really not a whole lot a bad guy could do to steal your Bitcoins. Of course, if a bad guys does coax you into sending them Bitcoins via some more social-engineery-type means, that could be a problem. E.g. if they briefly took over a popular website and made it show their Bitcoin address rather than the real one, there wouldn't be a whole lot of recourse.

datz 13y ago

Bitcoin will become a sentimental Gold while a more robust, efficient protocol such as Ripple will become cash

PeterisP 13y ago

I'm not sure on how mining economics will work out after the bitcoin limit is hit and miners will no longer get new bitcoins - has someone worked out the math on how much transaction fees will increase to cover mining expenses after that? The implication is that bitcoin won't function without (lots of) miners, and if miners would be getting more money in an alternative currency where they can use their hardware, they'd leave bitcoin.

bobfirestone 13y ago

People loosing confidence in it. With no one & nothing backing it there is nothing to prevent the value from going to 0. The only thing keeping the value of bitcoin from being 0 is the willingness of people to trade them for other things of value.

notdrunkatall 13y ago
Ultimately, that's the only thing keeping any currency from going to zero.
- wikwocket 13y ago
  Well, on one level, yes, but in practice there are many organizations and governments that would step in if a national currency were headed towards a value of zero. Bitcoin doesn't have the same level of institutional support (yet?), and so if it's value starts crashing hard, it could turn into an unrecoverable death spiral.

notdrunkatall 13y ago

The government. It's obvious that people want to use it. Its popularity will only increase from here. The government is the biggest threat to bitcoin by far.

yen223 13y ago

Bitcoin's value comes entirely from its utility as a currency, but its deflationary nature would mean people won't be willing to use Bitcoin to buy actual stuff. It'll be interesting to see how this plays out. I suspect Bitcoin will occupy the same space that gold does now, as just another place to store your money during economic downtimes.

mattm 13y ago
I really think people will have the opposite view about it. Before making a purchase in bitcoin you could think "I could hold this bitcoin and it will be worth ? in the future." or "I paid X for this Bitcoin and now it is worth X+Y so buying this product now for X is a discount of Y"
atom-morgan 13y ago
"...but its deflationary nature would mean people won't be willing to use Bitcoin to buy actual stuff." It's all about time preference. For certain goods people have a very high time preference. For other goods, it's low. Would I forgo dinner simply because I think my Bitcoin will be worth more a week from now? Probably not since I have a high time preference for food. I need it to survive. Just think about goods in technology. They are extremely deflationary. Using the deflationary logic people use to criticize Bitcoin, why would anyone buy an iPhone 5S or Nexus 5 today when they know it's going to be cheaper 6 months from now?
FellowTraveler 13y ago
If you save your dollars in the bank and earn interest, you end up with more dollars than if you spend them now. Therefore, no one will ever spend their dollars to buy actual stuff.

mattm 13y ago

The big one is obviously a critical flaw being found which makes it possible to counterfeit bitcoins or steal at will from (genuinely) protected wallets.

atom-morgan 13y ago
Do you have a link to counterfeit bitcoins?

fit2rule 13y ago

Being able to email money to people. Somehow.

stevejalim 13y ago
Somehow ==> https://square.com/cash https://square.com/cash (which isn't the same at BitCoin, I fully appreciate, but it's good to see some thinking in this direction)
atom-morgan 13y ago
I don't doubt that this would slow the growth of Bitcoin. It most definitely would. But for the people who are really into Bitcoin, this still doesn't address the issue of money supply and centralization.

ProblemFactory 13y ago

Some potential scenarios are: * A security or encryption issue discovered in the protocol that leads to compromise of most wallets. The bug could be fixed, but existing balances and trust may be wiped out. * Government regulation that makes it illegal to exchange bitcoin for cash or goods at legal businesses. It may remain as a niche underground thing, but even drug dealers need a way to eventually buy something else with their bitcoin. * Insecure exchanges that make it impossible to exchange bitcoin for cash. Exchanges seem to get hacked and disappear even without government "help". The result is the same: people need a way to use bitcoin for it to have any value. * Another digital currency becomes more popular. * Someone with enough computing power takes over the network. This could be a government agency aiming to shut it down, or perhaps a back-door in ASIC miners.

27182818284 13y ago

I think Bitcoin will be around for a while, but even when it dies out, for whatever reason, one of several other cryptocurrencies will take over.

rajacombinator 13y ago

1) potential flaws in the logic being discovered. 2) the iron fist of the Empire.