"Wanna trade Bitcoins?" (A decentralized virtual currency)

[FaithlessThinker]

Just stumbled upon something called a Bitcoin which is a new form of currency. It is a decentralized, inflation-proof currency. Here are some pages and videos on it:

Read:

• Bitcoin Main Site
• WeUseCoins.com - Official introduction to Bitcoin
• Wikipedia on Bitcoin
• Bitcoin P2P Currency: The Most Dangerous Project We've Ever Seen

Watch:
A brief animated introduction on Bitcoin concept:

A talk on Bitconis that explains it a little bit more: (has interesting analogy to an ancient real world currency)

How people can go crazy over mining Bitcoins*:

* Eventually mining will get computationally more and more expensive as there are only 21 million Bitcoins available (a "natural" limit imposed by the artificially created Bitcoin mining algorithm) and half will be mined by 2013. The total amount of Bitcoins mined increases like a geometric series, stepping every 4 years, i.e. 3/4 in 2017, 7/8 in 2021, etc. eventually stabilizing at 21 million coins.

So what do you think? Is this a workable idea or something that will doom the world?

Also: Do you have a Bitcoin account? Have you used Bitcoins to buy or sell something?

 

[Case]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

Interesting idea,... how to set up a distributed computing network without anyone realising it.

 

[FaithlessThinker]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

If you have an hour to spare:
[showmore=Description and Break-down of video]TWiST #140: Bitcoin, with Gavin Andresen and Amir Taaki

What if--instead of whipping out your VISA card--you could pay just as safely and much more anonymously with bitcoin, a growing open-sourced international currency. Never heard of it? Then it's a must you watch this episode of TWiST, where Jason talks to Gavin Andresen, the bitcoin technical lead, and Amir Taaki, founder of BitcoinConsultancy.com about exactly what bitcoin is, how you can use it--and why it will be illegal in under a decade.

Support This Week in Startups and independent media by joining our new Producer Program at twistlist.co!

1:00-5:00 Welcome and discussion of Forbes article by TJ Walker on Jason as the host of TWiST.
5:00-7:00 Thank you go GoToMeeting for sponsoring the show.
7:00-7:15 Go to TWiSTList.co and choose a level of support that works for you.
7:15-8:00 Bitcoin: Open-source, peer-to-peer currency.
8:00-9:00 Gavin, tell the audience in simple terms, what is bitcoin? (Watch the clip.)
9:00-10:15 You actually lead the open-source project to make this software? When did it start?
10:15-10:45 Is it as simple as installing the software?
10:45-11:15 So if I throw my computer out, my bitcoins go with it?
11:15-13:00 Where did the money come from and how many bitcoins are out there? Are bitcoins backed by silver or some other asset?
13:00-13:30 So I just set my software to generate bitcoins. What now? (Watch the clip.)
13:30-14:15 How long would it take for me to make a bitcoin?
14:15-15:00 What's the current value of the bitcoin?
15:00-15:30 How many bitcoins are there in existence and how many will there be in existence?
15:30-16:45 Amir, you have a biz called BitcoinConsultancy.com. What do you do?
16:45-17:45 You built the exchange software piece of this?
17:45-18:30 If I want to create my own exchange, and I want to charge 1%, I can just use your software for free and set it up?
18:30-19:15 How are people buying bitcoins?
19:15-19:45 What's the largest bitcoin exchange in existence today? Who owns it and how do they make money?
19:45-20:00 Why is it illegitimate?
20:00-23:00 Having an exchange of virtual currencies seems illegal in the US. But how does someone enforce trading laws if bitcoins are invisible?
23:30-24:45 Who is Satoshi, the founder of bitcoin? (Watch the clip.)
24:45-26:30 Gavin's evaluation of Satoshi's involvement.
26:30-27:30 Were they eventually put out of business because it was illegal?
27:30-29:00 Is that as inspiring as having a global currency?
29:00-31:00 So there's a privacy angle here. If I want a consumer product, you don't get to know everything about me, is that the point?
31:00-32:00 In a way, it's taking power away from governments who would manipulate currencies and it's giving consumers protection. Is it impervious to inflation and manipulation?
32:00-33:10 Gavin, are you really the creator of bitcoin?
33:10-35:15 Tyler: Why are you motivated to promote this? How does anyone benefit?
35:15-36:30 Bitcoins are divisible to eight decimal places, so do you see it as a micro-currency?
36:30-37:15 As an investment property, theoretically, bitcoins are going to go up in value and to what pace will that happen? Is this an investment?
37:15-40:15 Ad for Squarespace.
40:15-43:00 Amir, you're a poker player. What are your thoughts on the poker economy and bitcoins?
43:00-43:45 Are people actually playing poker for bitcoins right now? (Betco.in is one site.)
43:45-45:00 Is it hackable? Have people tried? (Watch the clip.)
45:00-46:00 Is this on the radar of any governments yet? Have you been contacted by the FBI or the CIA?
46:00-47:00 How did the CIA contact you? (Bonus fact: Did you know the CIA has a VC arm? It's called In-Q-Tel.)
47:00-48:00 Amir: Regarding regulation, in the beginning, we spoke to lawyers and they hadn't heard anything about bitcoins.
48:00-49:15 Jason's prediction: This will be illegal in the US within 24 months.
49:15-50:45 Have the anonymous guys embraced this yet? If people mess with bitcoin, will anonymous take them out?
50:45-53:00 If bitcoins are made illegal in the US, how difficult does that make it for everyone else?
53:00-54:00 Disussion of the Humble Indie Bundle.
54:00-55:15 Tyler, do you agree that anonymous has a tremendous amount of power?
55:15-56:15 Thank you to both Gavin and Amir.
56:15-57:00 Thank you to all of the TWiST List members and producers.
57:00-58:15 Tyler: Will bitcoin be able to circumvent government attempts to shut it down after it's deemed illegal?
58:15-1:00:00 Let's say the US goes insane and some idiot is in charge and they attempt to block bitcoins. It won't work, am I right?
1:00:00-1:00:30 Thank you to new TWiST List producers.
1:00:30-1:02:15 This is one of the most interesting thing I've seen in my 20 years in the technology business.
1:02:15-1:04:00 Thank you to everyone, guests and sponsors.
1:04:00-1:05:00 Remember to check out Skweal.com.[/showmore]

 

[Master_Ghost_Knight]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

Here is my opinion on this. !!! IT'S A SCAM !!!
This is equivalent to a bunch of people writing down on a piece of paper that they have money and feel entitled to go shop for real items that comes from real people's work, which cost rel money and try to pay it with the piece of paper that you wrote yourself and says that it worths money. There are several levels of wrong with this thing, and I can't believe that there are people dumb enough to fall for this shit.

 

[Nashy19]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

I find the deflation model interesting. Using fractions of pennies can also be used too, since it's mostly digital and will be completely digital relatively soon. It's not right now though, obviously.

This is equivalent to a bunch of people writing down on a piece of paper that they have money and feel entitled to go shop for real items that comes from real people's work, which cost rel money and try to pay it with the piece of paper that you wrote yourself and says that it worths money.

Different currencies convert at whatever rate people collectively decide. Both are the same in being inherently worthless (Bitcoin and the usual one's), but they can be obtained from the source by different types of people.

 

[FaithlessThinker]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

Here is my opinion on this. !!! IT'S A SCAM !!!
This is equivalent to a bunch of people writing down on a piece of paper that they have money ...

I hope you're not too quick in making your opinion. If it was that easy to use bitcoins, I could get a Bitcoin wallet this instant and say that I have all the 21 million Bitcoins in it with me. Or 1 billion. As far as I have seen, Bitcoins need to be "mined and found" and cannot be simply created by writing on a piece of virtual paper (a computer file).

I don't necessarily disagree that this could be a scam or an idea bound for failure, but I just think you're too hasty in your opinion. Besides, real money has value only because a bunch of lawmakers wrote down on (special) pieces of paper that these pieces of paper are money.

 

[borrofburi]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

If it's a scam, it's got a large open source community fooled...

It'll probably fail, if for no other reason than that the US government will shut them down if it's successful.

 

[scalyblue]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

Slashdot also covered this

In the end a fiat currency is a fiat currency. The fact that the distributed networking potential is worth more than the balance of the currency is promising for the bitcoin, but I can definitely see governments banning this in short order, just think currency that you can't put a freeze or levy on.

 

[Master_Ghost_Knight]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

Bitcoins need to be "mined and found" and cannot be simply created by writing on a piece of virtual paper (a computer file).

The method by witch you write on a piece of paper that you have money doesn't make any diference what so ever, you can call it "mining" the matter of fact that people are getting themselves entitled to money without any real assets giving it any form of value. In the end of the day it is still a couple of people in a blackbox with nothing but a computer, they haven't made any output out of that blackbox and yet they get out of there trying to pay for real goods (i.e. felling entitled to other peoples stuff by having done nothing et all).

On a side note, they say that 1 bitcoin worth 5$. How have they reached that number and not pulled it out of their ass? What kind of investors in the global economy in their right mind are giving 5$ dolars for each unit of fake money that can't even be used in trade?
And how can the data of how much money you have be stored on your own copyable computer with an open source encryption be safe? What prevnts me from making me millions of bitcoins a second?
This raises many many warnings.
How can you not see this is a scam?

 

[scalyblue]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

The method by witch you write on a piece of paper that you have money doesn't make any diference what so ever, you can call it "mining" the matter of fact that people are getting themselves entitled to money without any real assets giving it any form of value. In the end of the day it is still a couple of people in a blackbox with nothing but a computer, they haven't made any output out of that blackbox and yet they get out of there trying to pay for real goods (i.e. felling entitled to other peoples stuff by having done nothing et all).

On a side note, they say that 1 bitcoin worth 5$. How have they reached that number and not pulled it out of their ass? What kind of investors in the global economy in their right mind are giving 5$ dolars for each unit of fake money that can't even be used in trade?
And how can the data of how much money you have be stored on your own copyable computer with an open source encryption be safe? What prevnts me from making me millions of bitcoins a second?
This raises many many warnings.
How can you not see this is a scam?

RTFM, your concerns are invalidated. This is clearly not a scam.

Aside from that, why do you feel that open source encryption is less secure?

We have proposed a system for electronic transactions without relying on trust. We started with
the usual framework of coins made from digital signatures, which provides strong control of
ownership, but is incomplete without a way to prevent double-spending. To solve this, we
proposed a peer-to-peer network using proof-of-work to record a public history of transactions
that quickly becomes computationally impractical for an attacker to change if honest nodes
control a majority of CPU power. The network is robust in its unstructured simplicity. Nodes
work all at once with little coordination. They do not need to be identified, since messages are
not routed to any particular place and only need to be delivered on a best effort basis. Nodes can
leave and rejoin the network at will, accepting the proof-of-work chain as proof of what
happened while they were gone. They vote with their CPU power, expressing their acceptance of
valid blocks by working on extending them and rejecting invalid blocks by refusing to work on
them. Any needed rules and incentives can be enforced with this consensus mechanism.

 

[FaithlessThinker]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

Slashdot also covered this

They're the first to cover it actually. It's because of Slashdot that Bitcoin gained its popularity.

The method by witch you write on a piece of paper that you have money doesn't make any diference what so ever, you can call it "mining" the matter of fact that people are getting themselves entitled to money without any real assets giving it any form of value.

If you read on "bitcoin mining" a bit more, you'd realize you have a limited amount of bitcoins. It's kind of similar to gold in real world. And I have studied in mathematics that certain problems can have more than one solution, but a limited number of solutions. Bitcoins are based on a certain mathematical problem which has around 21 million solutions (if my understanding is correct). [FAQ]. Basically, each solution is a bitcoin.

Besides, what you describe is how fiat money works. The US dollar bills only have their value because the US government said so (after the Nixon Shock, at least). Without the government, they are worthless pieces of paper. Bitcoins actually don't work this way. Their value is driven by the market demand and supply, and also their scarcity, and not dictated by any central authority.

On a side note, they say that 1 bitcoin worth 5$. How have they reached that number and not pulled it out of their ass? What kind of investors in the global economy in their right mind are giving 5$ dolars for each unit of fake money that can't even be used in trade?

I have the same question myself, actually. What I found is that Bitcoin's value is determined by its demand. When it first started, it was totally worthless due to negligible demand. But when Slashdot wrote about it, a lot more people started learning about it and trying it out. This demand drove its value up to half a dollar almost instantly. I have seen from the graphs (can't remember where) that as demand grew further the value grew as well. The FAQ has an answer but it's not very clear. From other questions I understand that losing bitcoins can also drive their value up.

And how can the data of how much money you have be stored on your own copyable computer with an open source encryption be safe? What prevnts me from making me millions of bitcoins a second?

I wondered that too. But as explained, each bitcoin is a unique solution, so no matter how many copies you make of it, all of them are the same bitcoin. It's the same as making many exact copies of the same file. If you do an MD5 hash on all of them, they will all have the exact same hash value. Although this poses another question. What if two people have the same bitcoin? From the FAQ question 1.11, (again it's not clear) I understand that there's some form of confirmation mechanism that makes sure your bitcoins are yours. I don't know how this confirmation mechanism works or whether it's reliable, but 6 blocks / 1 hour time will ensure that transactions are not reversible (that is, if you spend bitcoin by sending it to someone, you can't recall the money after this interval).

Although the official client stores the coins in your computer (which makes them vulnerable to loss and theft), there are cloud-based online services that stores your coins for you. Bitcoins are vulnerable to threats

How can you not see this is a scam?

*shrugs* I guess I'm not so quick to label anything slapped with 'money' all over as a scam. Bitcoin looks legitimate to me so far. Legitimate in the sense that the founder and people behind it have good intentions and did not invent it with the objective of scamming people. Legitimate in the sense also that the system do not seem to be designed to scam people or help scammers scam people, but seem to be designed to replace or complement government-supported fiat money systems.

Yes, people are afraid of bitcoins because they are virtual, and anything virtual is open to attacks of the virtual world like hacking and piracy. Also, even with the advent of Internet technology, people tend to view money as a real object so it's going to be a little harder to grasp the concept of "virtual money". But think about this: people do trade in gold, right? The main difference between bitcoins and gold is that one is real, the other is virtual. Both are an exhaustible resource. Both are scarce. Therefore both are non-fiat. Both will not see inflation the same way fiat money can see. Nobody can inject bitcoins into the bitcoin market the same way nobody can inject gold into the gold market. But the US government can (and has in the past) inject(ed) money into the dollar market driving its value to insanely low levels. Now they can even do it with the click of a button. That's a problem with fiat money that bitcoin is trying to solve with technology. This could be done with gold, but gold is a heavy metal that's hard to transfer but bitcoin is just bits of data that's easy to transfer.

Also about bitcoin being open-source, it's only open-source in the sense that clients can be created freely without the troubles of closed-source systems. The mathematical problem itself is fixed, and the solutions found must be solutions for the problem. You can't fake bitcoins because if you modify or create another mathematical problem, find solutions for it, and then claim they are bitcoins, the bitcoin network will simply reject your solutions because they are not solutions of the bitcoin mathematical problem.

Also to note: scalyblue's recent reply.

 

[Master_Ghost_Knight]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

@scalyblue: How come my concerns are invalidated? You yourself present a "conceptual work" for the problem that doesn't solve the problem at all and relies on "good faith" something I taught was already out the window when you have duplicated your money.

@FaithlessThinker: How is it the same thing as gold? Or comparable to what we call "money by fiat"?
If it is something that it is not, is a system based on material assestes. When money was based on gold, people did want gold, there were people that went trough real work to get it, and when they trade that bond for commodities it is equivalent to trading the efforts of the gold miner to get gold with the efforts of the comodity provider to provide you with the comodity. And what you call "fiat money" didn't come out of the air, it was traded with gold bonded money, you may not get gold (and nobody wants gold that much now a days), but the efforts and comodities that people went trough to get that money (and what gives it a real value) physically exist and can be traded.
You can call it "mining" whatever you like, but the guys who are generating bitcoins haven't produce any tradable asset what so ever to make them entitled to any real value of anykind, the fact that they are rare is irrelevant, my tooth pick statues are rare but that doesn't make it worth the equivalent of millions of dolars. It literaly is writing on a piece of paper that you have money and give that has payment, there is nothing that prevents people from taking it and use my scriblings as payment, yet the fact that my scriblings are worthless is not because people won't take it but because I haven't made any tradable commodity to back that up.


On the other hand, those that created bit coins are the ones that most have of them, and despite of not making any asset they effectively want people to take it as money and get real stuff. They are effectively getting stuff with money that materializes out of thin air. It has scam writen all over it.

 

[borrofburi]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

You can call it "mining" whatever you like, but the guys who are generating bitcoins haven't produce any tradable asset what so ever to make them entitled to any real value of anykind, the fact that they are rare is irrelevant, my tooth pick statues are rare but that doesn't make it worth the equivalent of millions of dolars. It literaly is writing on a piece of paper that you have money and give that has payment, there is nothing that prevents people from taking it and use my scriblings as payment, yet the fact that my scriblings are worthless is not because people won't take it but because I haven't made any tradable commodity to back that up.

The federal government prints money... People who find gold haven't produced any tradeable asset... All these arguments go against all fiat currencies.

According to you, Ithaca Hours are a scam...

On the other hand, those that created bit coins are the ones that most have of them, and despite of not making any asset they effectively want people to take it as money and get real stuff. They are effectively getting stuff with money that materializes out of thin air. It has scam writen all over it.

It's not a scam. It's a silly system that will fail (capped currency = eventual deflation; non-government currency = government shuts it down if it gets large), but it's not a scam.

 

[scalyblue]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

Bitcoins aren't capped, they're algorithmically designed to multiply their quantity until around 2140, thereby obviating the deflation problem until that time. There are other problems that will likely make it unsuccessful, but it certainly isn't a scam.

MGK, someone whose client makes a bitcoin isn't making it for themselves, it is just the way that they are released into the pool. The only way a 'false' bitcoin could be made is if more of the network is dishonest than honest.

 

[FaithlessThinker]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

According to you, Ithaca Hours are a scam...

Nice find. Yup, Bitcoins is like virtual Ithaca Hours on an international scale. Not a scam.

I find bitcoins to be capped in a way that there are only a limited number of solutions to the given Bitcoin mathematical problem. The computational power that is used for the "mining" is used to solve the problem and find the solutions for it which have not been found before. This is where the analogy of gold mining comes in. Just as the miner puts in the effort of digging up gold, the "bitcoin miner" puts in the computational power of his hardware to dig up bitcoins. It's not simply writing on a file that "I have bitcoins". It's actually giving new solutions to a problem that requires tremendous computational power to solve (hence the use of a distributed network system similar to SETI@home).

The effort bitcoin miners put in is their hardware and its computational power.
The tradable asset these miners find (as far as Bitcoin community is concerned) are the new solutions to the Bitcoin math problem.

 

[ArthurWilborn]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

Eh... this really seems more analogous to collecting then currency. A small circle of people who's interested in this will trade them among themselves, but I doubt it will achieve any sort of wide-spread use.

 

[scalyblue]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

According to you, Ithaca Hours are a scam...

Nice find. Yup, Bitcoins is like virtual Ithaca Hours on an international scale. Not a scam.

I find bitcoins to be capped in a way that there are only a limited number of solutions to the given Bitcoin mathematical problem. The computational power that is used for the "mining" is used to solve the problem and find the solutions for it which have not been found before. This is where the analogy of gold mining comes in. Just as the miner puts in the effort of digging up gold, the "bitcoin miner" puts in the computational power of his hardware to dig up bitcoins. It's not simply writing on a file that "I have bitcoins". It's actually giving new solutions to a problem that requires tremendous computational power to solve (hence the use of a distributed network system similar to SETI@home).

The effort bitcoin miners put in is their hardware and its computational power.
The tradable asset these miners find (as far as Bitcoin community is concerned) are the new solutions to the Bitcoin math problem.

The main difference being that we know how many bitcoins are going to be mined and how many total there shall be; they're going to be released in a geometric scale that caps around 2140ish

 

[Demojen]

Re: "Wanna trade Bitcoins?" (A decentralized virtual currenc

Different currencies convert at whatever rate people collectively decide. Both are the same in being inherently worthless (Bitcoin and the usual one's), but they can be obtained from the source by different types of people.

This is patently false.
Currencies don't convert based on popular opinion. The value of a currency exchanged is determined by the strength of each respective currency in their own countries trading resources.

While you can attempt to inflate a currency through illegal trades and manipulating market growth with naked short selling, this only poses short term effects to the value of a currency against the backdrop of the whole economy and GDP.

This bitcoin system is worse then the current fractional monetary system, because when the bottom falls out of the barrel on this currency, there are no resources to dampen the economic blow. There is no system for restructuring and there are no assets to protect your investment.

I don't agree with the fractional monetary system. Never did. It relies on debt to pay for development, then on debt to pay for debt.
I don't agree with this bitcoin system even more.

I prefer that society restore a resource based economy like it was when I was growing up and was able to trade tomatoes for milk. The government never supported a resource based economy, and if it had supported it before throwing so much money into the infrastructure for a fractional monetary system, I believe we'd be much better off today.