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Charlie Stross writes in the article kindly submitted here: "Bitcoin violates Gresham's law: Stolen electricity will drive out honest mining. (So the greatest b

• gst 13y ago
  Technology doesn't move backwards in time. Or in other words: As long as there isn't (from a technical point of view) a better thing than Bitcoin (for all of its current use cases) Bitcoin won't die.
  • tokenadult 13y ago
    Or in other words: As long as there isn't (from a technical point of view) a better thing than Bitcoin (for all of its current use cases) Bitcoin won't die. I've studied the history of technology formally as part of my undergraduate education, and there is no such general principle of how technologies are adopted in a society. Bitcoin could quite readily die. Whether it will or not remains to be seen, but people betting real money that Bitcoin will not die are best advised to diversify their investments.
  • stephencanon 13y ago
    Actual money is "a better thing than Bitcoin for all of its current uses" other than speculation (for which we have tulips) and crypto-anarchist fetishism (for which no better solution is available). Bitcoin may someday be better than existing currencies for some of the tasks we use them for, but it isn't yet.
    • sanxiyn 13y ago
      Personally I think http://www.reddit.com/r/Bitcoin/comments/1mavh9/trustless_bitcoin_bounty_for_sha1_sha256_etc/ http://www.reddit.com/r/Bitcoin/comments/1mavh9/trustless_bi... is pretty cool. I am not aware of other systems which can do that.
    • baddox 13y ago
      That's factually incorrect. For example, several months ago I was owed some money (around 500 USD) by a friend, and we decided to exchange the funds via Bitcoin, not for speculation or your delightfully pejorative "crypto-anarchist fetishism," but because it was by far the easiest and fastest way for us to do so. Cue your reply, justifying your original universal quantification by retroactively redefining it with new exceptions.
      • revdinosaur 13y ago
        I think the argument against your anecdote is that it was the best solution for you--no doubt a technologically literate person who has confidence in their mental model of what bitcoin is. For the general populace, it's a distant novelty still which reduces its general practicality greatly.
        • gst 13y ago
          It doesn't need to work for the "general populace". As long as it's useful to a small set of people it will be used by this small set of people.
          • revdinosaur 13y ago
            I think that it does, to some degree, in order to fulfill some of the promises that proponents claim will be delivered in the near future. There are ceaseless calls by BTC advocates for retailers of all kinds to accept bitcoin payments. For this to happen on a large enough scale there needs to be distributed demand by a great number of consumers, not frequent demands by a few edge cases.
  • smacktoward 13y ago
    Of course it does; or it can, at least. We invented SSTs but still plod about on sub-sonic airliners, for instance. The key isn't whether a particular technology is the latest and greatest, it's whether it's the latest and greatest that can economically be used.
• AndrewDucker 13y ago
  "It makes sense that mining-by-theft will eventually displace mining-by-buying-hardware" I don't really understand why - if something is legal, and there are legal reasons to invest in it, then generally legal investment has been higher than illegal investment. Sure, some people will use malware to mine, but they won't be doing so with ASICs, so it won't bring in much money. So we're talking about people doing it with _actually_ stolen electricity, and you'd hope that the electricity companies were good at spotting that nowadays...
  • awjr 13y ago
    Well most illegally grown marijuana uses large amounts of stolen electricity (absolute control of temperature and lighting is a must to get the highest yield). I'm guessing it would not be profitable to grow it otherwise (or not as profitable). Similar issues will affect Bitcoin mining in the long run however I expect this to be more something that is achieved through mining bots and not through setting up server farms in houses with diverted electrical trunking. As to electricity companies finding out, the issue here is that the 'noise' from loss of electricity in the network masks a specific house consuming huge amounts of electricity. I'm guessing there must be some sort of profiling going on to determine if an occupied house is using too little electricity.
    • wrongc0ntinent 13y ago
      >> most illegally grown marijuana uses large amounts of stolen electricity Source? Reasoning?
      • walshemj 13y ago
        pretty much any report of a cannabis farm getting busted and ofgem (the Uk electricity regulator) estimated that a third of the stolen electricity is used for this purpose http://www.mirror.co.uk/news/weird-news/cannabis-farms-responsible-third-electricity-2022730 http://www.mirror.co.uk/news/weird-news/cannabis-farms-respo...
      • DanBC 13y ago
• makomk 13y ago
  The part about stolen electricity is not actually true, though, at least the way it's justified there. The paper argues that botnets will drive out honest mining, but at this point they can't can't because custom-made hardware is so much faster at mining than general PCs. The current global hashrate is currently about 10 petahashes/sec and your average computer can manage around 10 megahashes/sec. Doing the maths, in order to achieve that through a botnet and drive out all honest mining you'd need a billion computers - that's roughly every PC in the world, running 24/7! (Computers with high-end AMD cards can do better - up to 1.2 gigahashes/sec on AMD's top-of-the-range card but they're also a lot rarer so shouldn't drive up the average much.)
  • cscheid 13y ago
    You don't need to drive out all honest mining. All you need is not to have to pay for any costs. The issue he's pointing out is that the rational, amoral actor will have to decide between a saturated market of ASICs with extremely long time to ROI, and a quick buck off of grandma's draining laptop battery.
    • nathas 13y ago
      The problem is that the difficult rate increases based on the hashing power put into the network, and the reward for mining is cut in half as more coins are mined until there are none left. http://www.bitcoindifficulty.com/ http://www.bitcoindifficulty.com/ You'd need a LOT of regular PCs to match even one simple asic. A butterfly lab's jalapeno does ~5 gigahash/sec. You'd have to infest 500 decent PCs to achieve that, and then wait about a month for about a tenth of a bitcoin. So to get 1 btc in a month, you'd need to infect 5k PCs without them noticing that "damn, my machine is really pegged" and "golly, this laptop is awfully hot and my battery dies really fast...". It has happened, but realistically you could just buy a miner and be done with it. https://krebsonsecurity.com/2013/07/botcoin-bitcoin-mining-by-botnet/ https://krebsonsecurity.com/2013/07/botcoin-bitcoin-mining-b... They were able to get ~240 machines, at a time when CPU mining was making them ~$350/day. Decent, but worth all the time to write the software and distribute it? Eh, probably not.
• jessaustin 13y ago
  ...The Gini coefficient of the Bitcoin economy... Is this a thing? I mean, there are all sorts of fungible assets floating around the world, but I've never heard anyone talk about e.g. "the molybdenum economy" or "the Gini coefficient of the hard red winter wheat economy". Aren't economies usually located in actual places?
  • Jtsummers 13y ago
    If bitcoin becomes a currency and not a commodity, it will matter to a lot of people. Wheat and molybdenum are not currencies or used as currencies (certainly not at any large scale) so speaking of their "economies" is a nonsensical statement. > Aren't economies usually located in actual places? We have a global economy, and bitcoin advocates seem (or used to) interested in establishing BTC as a global currency with its own markets for buying and selling a variety of goods.
  • deleted 13y ago
    [deleted]
  • rahimnathwani 13y ago
    The reason it sounds strange to talk about 'the Gini coefficient of the Bitcoin economy' is that the Gini coefficient is usually used as a measure of income (or sometimes wealth) distribution among a _population_. As your comment suggests, those populations are usually defined by being located 'in actual places'. However, they could equally be defined by some demographic factor. You could look at the Gini coefficient of income for people with blue eyes. However, I don't see the sense in singling out just a single asset or asset class, and looking at its distribution among the whole human population of the earth UNLESS the total value of that asset is some large %%% of the total assets in the world.
  • metaphorm 13y ago
    Gini coefficient is applicable because bitcoin is a currency (or aspires to be one anyway). Sometimes commodities become money-ish, for a short time period, but they don't generally aspire to permanent status as currency.
  • gwern 13y ago
• jagermo 13y ago
  Thanks, done.
• rayiner 13y ago
  I don't know why so many people are in love with the idea of deflationary nature of bitcoin. Consider one important asset in the world that shares the key feature with Bitcoin that there is a fixed amount of it: land. If you look out at the world, land possession is not just unequal, but also exhibits extremely low turnover. In Britain, 0.6% of the population owns 69% of all the inhabited land in the country, and they come mostly from the same families that owned the country in 1872 (the last time a major survey of land ownership was performed): http://www.independent.co.uk/voices/commentators/johann-hari/britains-land-is-still-owned-by-an-aristocratic-elite--but-it-doesnt-have-to-be-this-way-483131.html http://www.independent.co.uk/voices/commentators/johann-hari.... If you look at say Manhattan, you see the same phenomenon. All the land is owned by old people and established families. It's a place where kids have to be much more successful than their parents to be able to afford to buy property in the same place. Who can take a look at the deflationary nature of land, and think "gee, I'd like everything to be like this!"
  • sanskritabelt 13y ago
    """Who can take a look at the deflationary nature of land, and think "gee, I'd like everything to be like this!"""" People who think they're going to come out on the long end of the stick.
  • beat 13y ago
    Interesting point on deflation... the 2008 economic collapse was marked by a brief moment of deflation. Just little deflation nearly destroyed the world economy. A preference for deflationary models is one of the reasons I don't take libertarian economics seriously.
    • cbr 13y ago
      Just little deflation nearly destroyed the world economy I don't think you can interpret the causation as going that direction.
      • squozzer 13y ago
        In simpler English it wasn't the deflation that nearly destroyed the world economy, it was the near-destruction of the world economy that triggered the deflation.
• Perceval 13y ago
  > Charlie Stross writes in the article kindly submitted here: "Bitcoin violates Gresham's law: Stolen electricity will drive out honest mining. (So the greatest benefits accrue to the most ruthless criminals.)" I try to follow most of the Bitcoin threads here on HN, but I've missed that argument before. You've missed this argument because it's an awful argument. It's a misunderstanding and misapplication of Gresham's law. It seems like the author simply wanted to use the phrase "bad X drives out good X" without bothering to understand what Gresham's law actually applies to. Even if the greatest benefits of mining accrue to botnet operators, that doesn't affect the incentives faced by other individuals or groups weighing whether or not to invest in mining rigs. The incentives are: are the fixed cost of hardware and variable costs of power and labor outweighed by the value of the bitcoins mined. Does not matter what other miners are doing. Because of the fixed supply of bitcoins and the increasing difficulty, botnets may have an advantage. However, because bitcoin is deflationary, the rising price of an increasingly supply-constrained asset might offset the diminishing returns. That's a risk investors are going to have to weigh. But that still isn't a case of Gresham's law.