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hypothetical question for someone who is knowledgeable about bitcoin: since bitcoin is an experiment, what happens if it completely fails? what does a total fa

hypothetical question for someone who is knowledgeable about bitcoin: since bitcoin is an experiment, what happens if it completely fails? what does a total failure scenario even look like, in terms of symptoms? where does all the 'real' money go? i don't understand how 6% of bitcoin can disappear when one of the supposed selling points is that you can verify all the transactions.

dobbsbob 13y ago
What happens if it fails then you have a bunch of worthless coins. It's unlikely to 'fail'. Again, there has been a chorus of bitcointalk, reddit, *chan and IRC users warning people to stay away from being Goxed since 2011 so this exchange imploding due to incompetence is not a surprise at all. The bitcoins did not disappear. They are on the blockchain just somebody used a bug in Gox's custom php wallet to pillage all the coins for themselves. The official client bitcoind/bitcoin-qt is not affected, and none of the other major sites like blockchain.info or localbitcoins who keep large escrows were affected, just Gox and a drug dealing site who also rolled their own wallet and lost everybody's money. If you want to work with the raw bitcoin protocol you should pay a Bitcoin developer to help you, then these problems would be avoided. Karpales was making 6 million per month at one point, yet did everything himself (badly). You don't even need to pay them, log into bitcointalk.org and post in the dev base your custom implementation and ask them is this fail y/n?
technotony 13y ago
Failure is just people stop believing in it and the price falling to zero. Given the buzz and investment capital, I think it's unlikely the price actually goes to zero as there will be buyers stepping in when it falls. The coin disappears because it was stolen, or possibly deleted (less likely). It's not that different from someone taking cash out of your wallet.
tlrobinson 13y ago
"what does a total failure scenario even look like, in terms of symptoms?" The value of Bitcoins is determined by what other people are willing to pay for them, which is determined by their confidence people will exchange them for tangible goods or services, or other forms of money, in the future. Total failure means people lose confidence in the system, due to technical flaws, regulation, competition, etc. The value would approach $0/bitcoin, though I don't think it would reach zero for a long long time. I'd happily pay $10 for a million bitcoins just for the hell of it.
buro9 13y ago
You don't need to be knowledgeable about bitcoin specifically to know what happens, at the last financial crisis we got the same lesson. Value is perceived, and value can evaporate. If bitcoin completely fails, the value evaporates. It's a bit like buying a house in Detroit a decade ago for a hefty price, and trying to sell it today. Your money wasn't eaten by the house, no-one ran away with it, but it's now worth significantly less than it was and effectively the value just disappeared. (PS: And I hope you bought the house with cash you could afford to lose rather than debt you now owe someone.)
- kapkapkap 13y ago
  No. Its a closed system. For every dollar that someone spent on a bitcoin, that dollar was received by someone else. Now, you can certainly say that the money was spent on things like electricity, or GPU hardware, that has little/no value now. But thats irrelevant - the money most certainly spent, rather than "evaporate" into thin air.
  - verroq 13y ago
    Oh you mean like how millions of Bitcoin market cap disappeared when people jumped off the hype train? Does that look like a closed system to you?
    - dragonwriter 13y ago
      > Does the FBI even consider bitcoin as something that actually has any value that requires investigating an accusation of theft? Market cap isn't money, its an estimate of value based on a premise that is not merely flawed but outright insane -- that every unit of an asset that exists can be liquidated at the current market price of a single unit (that is, that market clearing price is not effected by supply.) Its used because its easily calculated, and people are prone to want to believe that values that are easy to calculate are also meaningful.
  - Crito 13y ago
    Just because I can buy a bitcoin from somebody for $1000 a few months ago doesn't mean that same person is willing to buy it back from me for $1000 dollars today. The value in that bitcoin has evaporated, disappeared, gone up in smoke. Bitcoins are only worth how much people are willing to pay for them; what was spent on them in the past does not convey to them any value today.
ars 13y ago
> i don't understand how 6% of bitcoin can disappear The didn't disappear, they were stolen. Someone else has them. (Coins can disappear if the owner forgets the password. They are still there, just no one can ever spend them.)
saraid216 13y ago
> since bitcoin is an experiment I don't know where you get the notion that Bitcoin is an "experiment". It's not. This is less knowledge of Bitcoin than it is knowledge of economic theory and what the words "money" and "currency" mean. > what happens if it completely fails? what does a total failure scenario even look like, in terms of symptoms? http://en.wikipedia.org/wiki/Zimbabwean_dollar#Abandonment http://en.wikipedia.org/wiki/Zimbabwean_dollar#Abandonment
patio11 13y ago
Hardware makers who accepted dollars for graphics cards and ASICS would still have dollars. Electricity companies would still have dollars. VCs who invested $100 million of OPM in Bitcoin companies would still have dollars. Employees of those companies would, one hopes, have been paid in dollars. And then the biggie: people who sold before the pump-and-dump hit "dump" would still have dollars. Who loses? People holding hardware which 90%+ depreciates, GPs of funds investing in bitcoin companies, and a whole lot of people who bought into the pump-and-dump at or after "dump."
- beachstartup 13y ago
  all that i know, but what about the value of the bitcoins kept at the exchanges and on online wallets? i presume that since their deposits aren't denominated in usd or any other currency other than btc, there's no actual loss of dollars, right? i.e., the only thing lost is the actual bitcoin, post-facto of the conversion from a 'real' currency.
dredmorbius 13y ago
First off: money isn't "real". It is itself a representation of real property (land, minerals, houses, plant and equipment, books), subject to its own supply and demand. Part of that is based on faith in the currency itself. What provides the basis for that faith is itself interesting, and I'm increasingly drawn to the suggestion that it's payments which must be made in specific currencies, such as tax obligations and petroleum purchases, which play a huge role in supporting the US dollar. Secondly: the "real money" went at the time the BTC were bought (if they were bought and not mined). If they were mined, then the "real money" went to pay mining expenses: plant and resources, which is to say, processors and electricity. What would have vanished should BTC lose its acceptance as a currency and value store is the market in which bitcoin are traded and valued, and any significant price within that market. More specifically, if the offered price for BTC falls below the present mining costs, it's likely that few will be created, though there might exist some sort of zombie market for what bitcoin already exist, likely at a small fraction of recent prices. This is what has happened with other currency and coin whose value has disappeared. At best you have the underlying worth in specie (or CPU cycles for BTC). The question about where the coin went and whether or not they're of any use to the present holder is a good one, and my understanding of bitcoin and transaction logs isn't sufficient to answer it. But if the original coin holder could track the coins they'd at least be able to see who's transacting them. I'm not sure that this would be sufficient to have them recoverable. Seems another useful feature might be to be able to repudiate a coin: if someone steals it, publish a revocation key. Though of course, this would have to not be exploitable in legitimate, authorized, transactions, and you'd then have to be able to distinguish authorized from unauthorized transactions.

dobbsbob 13y ago

What happens if it fails then you have a bunch of worthless coins. It's unlikely to 'fail'. Again, there has been a chorus of bitcointalk, reddit, *chan and IRC users warning people to stay away from being Goxed since 2011 so this exchange imploding due to incompetence is not a surprise at all. The bitcoins did not disappear. They are on the blockchain just somebody used a bug in Gox's custom php wallet to pillage all the coins for themselves. The official client bitcoind/bitcoin-qt is not affected, and none of the other major sites like blockchain.info or localbitcoins who keep large escrows were affected, just Gox and a drug dealing site who also rolled their own wallet and lost everybody's money. If you want to work with the raw bitcoin protocol you should pay a Bitcoin developer to help you, then these problems would be avoided. Karpales was making 6 million per month at one point, yet did everything himself (badly). You don't even need to pay them, log into bitcointalk.org and post in the dev base your custom implementation and ask them is this fail y/n?

technotony 13y ago

Failure is just people stop believing in it and the price falling to zero. Given the buzz and investment capital, I think it's unlikely the price actually goes to zero as there will be buyers stepping in when it falls. The coin disappears because it was stolen, or possibly deleted (less likely). It's not that different from someone taking cash out of your wallet.

tlrobinson 13y ago

"what does a total failure scenario even look like, in terms of symptoms?" The value of Bitcoins is determined by what other people are willing to pay for them, which is determined by their confidence people will exchange them for tangible goods or services, or other forms of money, in the future. Total failure means people lose confidence in the system, due to technical flaws, regulation, competition, etc. The value would approach $0/bitcoin, though I don't think it would reach zero for a long long time. I'd happily pay $10 for a million bitcoins just for the hell of it.

buro9 13y ago

You don't need to be knowledgeable about bitcoin specifically to know what happens, at the last financial crisis we got the same lesson. Value is perceived, and value can evaporate. If bitcoin completely fails, the value evaporates. It's a bit like buying a house in Detroit a decade ago for a hefty price, and trying to sell it today. Your money wasn't eaten by the house, no-one ran away with it, but it's now worth significantly less than it was and effectively the value just disappeared. (PS: And I hope you bought the house with cash you could afford to lose rather than debt you now owe someone.)

kapkapkap 13y ago
No. Its a closed system. For every dollar that someone spent on a bitcoin, that dollar was received by someone else. Now, you can certainly say that the money was spent on things like electricity, or GPU hardware, that has little/no value now. But thats irrelevant - the money most certainly spent, rather than "evaporate" into thin air.
- verroq 13y ago
  Oh you mean like how millions of Bitcoin market cap disappeared when people jumped off the hype train? Does that look like a closed system to you?
  - dragonwriter 13y ago
    > Does the FBI even consider bitcoin as something that actually has any value that requires investigating an accusation of theft? Market cap isn't money, its an estimate of value based on a premise that is not merely flawed but outright insane -- that every unit of an asset that exists can be liquidated at the current market price of a single unit (that is, that market clearing price is not effected by supply.) Its used because its easily calculated, and people are prone to want to believe that values that are easy to calculate are also meaningful.
- Crito 13y ago
  Just because I can buy a bitcoin from somebody for $1000 a few months ago doesn't mean that same person is willing to buy it back from me for $1000 dollars today. The value in that bitcoin has evaporated, disappeared, gone up in smoke. Bitcoins are only worth how much people are willing to pay for them; what was spent on them in the past does not convey to them any value today.

ars 13y ago

> i don't understand how 6% of bitcoin can disappear The didn't disappear, they were stolen. Someone else has them. (Coins can disappear if the owner forgets the password. They are still there, just no one can ever spend them.)

saraid216 13y ago

> since bitcoin is an experiment I don't know where you get the notion that Bitcoin is an "experiment". It's not. This is less knowledge of Bitcoin than it is knowledge of economic theory and what the words "money" and "currency" mean. > what happens if it completely fails? what does a total failure scenario even look like, in terms of symptoms? http://en.wikipedia.org/wiki/Zimbabwean_dollar#Abandonment http://en.wikipedia.org/wiki/Zimbabwean_dollar#Abandonment

patio11 13y ago

Hardware makers who accepted dollars for graphics cards and ASICS would still have dollars. Electricity companies would still have dollars. VCs who invested $100 million of OPM in Bitcoin companies would still have dollars. Employees of those companies would, one hopes, have been paid in dollars. And then the biggie: people who sold before the pump-and-dump hit "dump" would still have dollars. Who loses? People holding hardware which 90%+ depreciates, GPs of funds investing in bitcoin companies, and a whole lot of people who bought into the pump-and-dump at or after "dump."

beachstartup 13y ago
all that i know, but what about the value of the bitcoins kept at the exchanges and on online wallets? i presume that since their deposits aren't denominated in usd or any other currency other than btc, there's no actual loss of dollars, right? i.e., the only thing lost is the actual bitcoin, post-facto of the conversion from a 'real' currency.

dredmorbius 13y ago

First off: money isn't "real". It is itself a representation of real property (land, minerals, houses, plant and equipment, books), subject to its own supply and demand. Part of that is based on faith in the currency itself. What provides the basis for that faith is itself interesting, and I'm increasingly drawn to the suggestion that it's payments which must be made in specific currencies, such as tax obligations and petroleum purchases, which play a huge role in supporting the US dollar. Secondly: the "real money" went at the time the BTC were bought (if they were bought and not mined). If they were mined, then the "real money" went to pay mining expenses: plant and resources, which is to say, processors and electricity. What would have vanished should BTC lose its acceptance as a currency and value store is the market in which bitcoin are traded and valued, and any significant price within that market. More specifically, if the offered price for BTC falls below the present mining costs, it's likely that few will be created, though there might exist some sort of zombie market for what bitcoin already exist, likely at a small fraction of recent prices. This is what has happened with other currency and coin whose value has disappeared. At best you have the underlying worth in specie (or CPU cycles for BTC). The question about where the coin went and whether or not they're of any use to the present holder is a good one, and my understanding of bitcoin and transaction logs isn't sufficient to answer it. But if the original coin holder could track the coins they'd at least be able to see who's transacting them. I'm not sure that this would be sufficient to have them recoverable. Seems another useful feature might be to be able to repudiate a coin: if someone steals it, publish a revocation key. Though of course, this would have to not be exploitable in legitimate, authorized, transactions, and you'd then have to be able to distinguish authorized from unauthorized transactions.