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It is a speculation bubble. People are betting that Bitcoin will become world money and be worth millions of products in many countries. Anything can become mon

It is a speculation bubble. People are betting that Bitcoin will become world money and be worth millions of products in many countries. Anything can become money only when it has value and acceptance which are created by speculators. Such bubble can pop only if some other, more promising thing may become money, or if there's a flaw in the currently hyped thing. http://unqualified-reservations.blogspot.fr/2013/04/bitcoin-is-money-bitcoin-is-bubble.html http://unqualified-reservations.blogspot.fr/2013/04/bitcoin-...

Lerc 13y ago
Bubbles pop because people lose confidence. The ways in which that can happen are infinitely varied. While the reasons you list can cause that, people also can lose confidence for irrational reasons or decide that their confidence was not rational. Most commonly their confidence will just align with what they perceive other people's confidence to be, causing feeback. Remember there were people who dumped a lot of money into bitcoin at $200 last bubble and then bailed at $100 an extremely short time later. Something like that will probably happen again with the current rise. The long term probably doesn't really care about the blips along the way though.
- zamalek 13y ago
  > Bubbles pop because people lose confidence. Or, in the case of cryptocurrencies, when something goes wrong with the underlying encryption. We are very far away from that eventuality (SHA256 is pretty damn secure and ECC is in the realm of "we don't think this will ever be broken unless the NSA curve weakness is real"). Still, one day. Still, bubbles really worry me on a psychology level. All it takes on journalist to write an ignorant article on Bitcoin (which they never do) and then a whole bunch of other journalists then cite without research (which they never do) and POP!
  - Lerc 13y ago
    >Or, in the case of cryptocurrencies, when something goes wrong with the underlying encryption. I think it is actually exclusively confidence. Something could go horribly wrong with the underlying encryption and the perceived value would not drop until people recognised the implications of the problem and consequently lose confidence.
  - XorNot 13y ago
    We are on the verge of functional quantum computers. Encryption could die very suddenly.
    - Lerc 13y ago
      That is not a specific weakness of bitcoin. If encryption stops working, most of the worlds economic systems run into serious issues. Transferring money by _any_ electronic mechanism becomes problematic.
      - oleganza 13y ago
        Correction: the only money that is being transferred by electronic means is Bitcoin. All the other payment channels do not transfer ownership, but promises. When your bank sends 100 bucks to another bank, there's no hard ownership being transferred, only an agreement between a bunch of people. That's why the current system is so fragile and so abused to no end.
      - XorNot 13y ago
        Not really, just more risky. With a regulated financial sector and overwatch of ISP data retention, you still need to somehow gain knowledge of the encrypted bits to deploy a quantum computing attack against them. Governments have an interest in ecommerce continuuing, and there's a limited time-horizon where you can actually mount an attack - so provided you route your transactions over "known trusted" paths, everything basically continues - especially while the only quantum computers are controlled by governments to start with. BitCoin on the otherhand almost immediately runs into trouble, because it's entire basis is centered on the difficulty of cryptography problems. It can't function without distributing it's content widely (and indeed, completely), which means its immediately valueless - even if someone doesn't attack it, it's immediately known that at any point in time someone can simply create every coin that will ever exist and credit it to them.
    - zamalek 13y ago
      > quantum computers ECC would break[1] (funnily enough I was under the false impression that ECC was quantum-resilient until I did research for this comment), SHA wouldn't[2]. As far as I know the end-of-the-world attack against Merkle hashing algorithms are mathematical proofs. However, the combination of quantum computers and advances in mathematical attacks against Merkle-Damgard hashing algorithms is almost guaranteed to happen eventually. Honestly, when it comes to security, using SHA256 was a major oversight. SHA512 would have given much more longevity to the currency - considering that you are talking about an algorithm that encapsulates wealth; nothing is overkill. The only semi-confirmed usage of quantum computers, to date, is finding minima/quantum annealing (DWave). Shor's algorithm (which would be used to attack RSA and ECC) has been demonstrated on a very small scale, although many doubt that it was a true demonstration[3] (read: unentangled particles means that Shor's algorithm wasn't truthfully demonstrated by IBM). [1]: http://en.wikipedia.org/wiki/Elliptic_curve_cryptography#Quantum_computing_attacks http://en.wikipedia.org/wiki/Elliptic_curve_cryptography#Qua... [2]: http://bitcoin.stackexchange.com/questions/6062/what-effects-would-a-scalable-quantum-computer-have-on-bitcoin http://bitcoin.stackexchange.com/questions/6062/what-effects... [3]: http://prl.aps.org/abstract/PRL/v83/i5/p1054_1 http://prl.aps.org/abstract/PRL/v83/i5/p1054_1
  - sentenza 13y ago
    Or if one of those people that hold massive amounts of bitcoins decides to sell 10% of their holdings, thus accidentally flooding the market. There is no need for the crypto to be broken to have a crash.
  - aliston 13y ago
    Wouldn't it be possible to change the hashing algorithm if SHA-2 wer compromised?

Lerc 13y ago

Bubbles pop because people lose confidence. The ways in which that can happen are infinitely varied. While the reasons you list can cause that, people also can lose confidence for irrational reasons or decide that their confidence was not rational. Most commonly their confidence will just align with what they perceive other people's confidence to be, causing feeback. Remember there were people who dumped a lot of money into bitcoin at $200 last bubble and then bailed at $100 an extremely short time later. Something like that will probably happen again with the current rise. The long term probably doesn't really care about the blips along the way though.

zamalek 13y ago
> Bubbles pop because people lose confidence. Or, in the case of cryptocurrencies, when something goes wrong with the underlying encryption. We are very far away from that eventuality (SHA256 is pretty damn secure and ECC is in the realm of "we don't think this will ever be broken unless the NSA curve weakness is real"). Still, one day. Still, bubbles really worry me on a psychology level. All it takes on journalist to write an ignorant article on Bitcoin (which they never do) and then a whole bunch of other journalists then cite without research (which they never do) and POP!
- Lerc 13y ago
  >Or, in the case of cryptocurrencies, when something goes wrong with the underlying encryption. I think it is actually exclusively confidence. Something could go horribly wrong with the underlying encryption and the perceived value would not drop until people recognised the implications of the problem and consequently lose confidence.
- XorNot 13y ago
  We are on the verge of functional quantum computers. Encryption could die very suddenly.
  - Lerc 13y ago
    That is not a specific weakness of bitcoin. If encryption stops working, most of the worlds economic systems run into serious issues. Transferring money by _any_ electronic mechanism becomes problematic.
    - oleganza 13y ago
      Correction: the only money that is being transferred by electronic means is Bitcoin. All the other payment channels do not transfer ownership, but promises. When your bank sends 100 bucks to another bank, there's no hard ownership being transferred, only an agreement between a bunch of people. That's why the current system is so fragile and so abused to no end.
    - XorNot 13y ago
      Not really, just more risky. With a regulated financial sector and overwatch of ISP data retention, you still need to somehow gain knowledge of the encrypted bits to deploy a quantum computing attack against them. Governments have an interest in ecommerce continuuing, and there's a limited time-horizon where you can actually mount an attack - so provided you route your transactions over "known trusted" paths, everything basically continues - especially while the only quantum computers are controlled by governments to start with. BitCoin on the otherhand almost immediately runs into trouble, because it's entire basis is centered on the difficulty of cryptography problems. It can't function without distributing it's content widely (and indeed, completely), which means its immediately valueless - even if someone doesn't attack it, it's immediately known that at any point in time someone can simply create every coin that will ever exist and credit it to them.
  - zamalek 13y ago
    > quantum computers ECC would break[1] (funnily enough I was under the false impression that ECC was quantum-resilient until I did research for this comment), SHA wouldn't[2]. As far as I know the end-of-the-world attack against Merkle hashing algorithms are mathematical proofs. However, the combination of quantum computers and advances in mathematical attacks against Merkle-Damgard hashing algorithms is almost guaranteed to happen eventually. Honestly, when it comes to security, using SHA256 was a major oversight. SHA512 would have given much more longevity to the currency - considering that you are talking about an algorithm that encapsulates wealth; nothing is overkill. The only semi-confirmed usage of quantum computers, to date, is finding minima/quantum annealing (DWave). Shor's algorithm (which would be used to attack RSA and ECC) has been demonstrated on a very small scale, although many doubt that it was a true demonstration[3] (read: unentangled particles means that Shor's algorithm wasn't truthfully demonstrated by IBM). [1]: http://en.wikipedia.org/wiki/Elliptic_curve_cryptography#Quantum_computing_attacks http://en.wikipedia.org/wiki/Elliptic_curve_cryptography#Qua... [2]: http://bitcoin.stackexchange.com/questions/6062/what-effects-would-a-scalable-quantum-computer-have-on-bitcoin http://bitcoin.stackexchange.com/questions/6062/what-effects... [3]: http://prl.aps.org/abstract/PRL/v83/i5/p1054_1 http://prl.aps.org/abstract/PRL/v83/i5/p1054_1
- sentenza 13y ago
  Or if one of those people that hold massive amounts of bitcoins decides to sell 10% of their holdings, thus accidentally flooding the market. There is no need for the crypto to be broken to have a crash.
- aliston 13y ago
  Wouldn't it be possible to change the hashing algorithm if SHA-2 wer compromised?