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Only 5% of the currency in circulation is in cash. The rest is stored as numbers in a database somewhere. There is no "gold backed" currency anymore, which is w

Only 5% of the currency in circulation is in cash. The rest is stored as numbers in a database somewhere. There is no "gold backed" currency anymore, which is why we call it Fiat. It is simply a number at this point. So how does your criticism apply only to Bitcoin? Because this is just like Bitcoin. Except Bitcoin's data is decentralized, not centralized, and the rules for its slow release into circulation are fair (IMHO) and unchangeable (at least without 51+% agreement of the entire node network). The work miners do has 2 utilities: 1) A computer can reliably estimate how much work was done by the output. This is "proof of work." You unfortunately can't use something like folding@home for this purpose, because the latter requires a human agent deeming what good "work" in that area is, and Bitcoin can't have any centralization and most certainly can't have any human agents involved making decisions about what "worthy work" is or not. 2) The "work" is nearly the same "work" that a brute-force attacker would do if such an attacker were trying to attack the network itself. Rewarding mining therefore incentivizes mining OVER brute-force hacking because the likelihood of a mining reward (given the same computing work) is much higher than the likelihood of a brute-force "reward."

exelius 13y ago
I never implied that currencies should be gold-backed (quite the opposite, in fact!) My point in this area is that one of the big features of a modern fiat currency is the ability of the central authority to react to market changes. This leads to price stability, which IMO is a defining feature of a modern, global currency. I'm not saying that that Bitcoin was poorly designed or anything; just that there are some big challenges with issuing currency if you don't have a nation-state backing it up. Nation-states have the ability to issue currency by policy, to remove currency from circulation through taxes, and resolve international disputes (with military force, if necessary.) Bitcoin, through its decentralized nature, has none of this. And before anyone checks in saying that it's impossible to get 51+% of the Bitcoin node network... you don't understand the level of resources that banks can bring to bear if they have the right motivation. I wouldn't be surprised if we see one or more of them collude to take over the Bitcoin cloud and print money for their own purposes. If they could do it with LIBOR, they can do it with Bitcoin. Goldman Sachs has been driving up the price of Aluminum by controlling a significant portion of the global stock and keeping it out of circulation. It's naive to think that these companies couldn't/wouldn't exploit the fact that Bitcoin is almost entirely unregulated: if they can get control of the node network and print money, it's not clear there's anything illegal about it.
- lectrick 13y ago
  > one of the big features of a modern fiat currency is the ability of the central authority to react to market changes This is also its Achilles' heel if this central authority acts poorly. There are MANY worldwide currencies which are very poorly managed. > you don't understand the level of resources that banks can bring to bear if they have the right motivation The Bitcoin mining network is now more powerful than ALL of the top 500 fastest computers COMBINED. So, good luck with that! > It's naive to think that these companies couldn't/wouldn't exploit the fact that Bitcoin is almost entirely unregulated: if they can get control of the node network and print money, it's not clear there's anything illegal about it. There isn't, but consider this: If word got out that this happened, people would flee Bitcoin, eliminating any incentive to do so, unless your only goal is destruction, and that's a pretty shitty motivation to do anything by.

exelius 13y ago

I never implied that currencies should be gold-backed (quite the opposite, in fact!) My point in this area is that one of the big features of a modern fiat currency is the ability of the central authority to react to market changes. This leads to price stability, which IMO is a defining feature of a modern, global currency. I'm not saying that that Bitcoin was poorly designed or anything; just that there are some big challenges with issuing currency if you don't have a nation-state backing it up. Nation-states have the ability to issue currency by policy, to remove currency from circulation through taxes, and resolve international disputes (with military force, if necessary.) Bitcoin, through its decentralized nature, has none of this. And before anyone checks in saying that it's impossible to get 51+% of the Bitcoin node network... you don't understand the level of resources that banks can bring to bear if they have the right motivation. I wouldn't be surprised if we see one or more of them collude to take over the Bitcoin cloud and print money for their own purposes. If they could do it with LIBOR, they can do it with Bitcoin. Goldman Sachs has been driving up the price of Aluminum by controlling a significant portion of the global stock and keeping it out of circulation. It's naive to think that these companies couldn't/wouldn't exploit the fact that Bitcoin is almost entirely unregulated: if they can get control of the node network and print money, it's not clear there's anything illegal about it.

lectrick 13y ago
> one of the big features of a modern fiat currency is the ability of the central authority to react to market changes This is also its Achilles' heel if this central authority acts poorly. There are MANY worldwide currencies which are very poorly managed. > you don't understand the level of resources that banks can bring to bear if they have the right motivation The Bitcoin mining network is now more powerful than ALL of the top 500 fastest computers COMBINED. So, good luck with that! > It's naive to think that these companies couldn't/wouldn't exploit the fact that Bitcoin is almost entirely unregulated: if they can get control of the node network and print money, it's not clear there's anything illegal about it. There isn't, but consider this: If word got out that this happened, people would flee Bitcoin, eliminating any incentive to do so, unless your only goal is destruction, and that's a pretty shitty motivation to do anything by.