First, I did a forum search and found almost nothing on Bitcoin. I found that strange but I doubted the search function was broken.
Second, I wasn't sure what forum was the best fit this topic but economics fits better than technology...a little.
Third, Hi!

So...
Have you heard of Bitcoin? If so, skip to The Question Below. If you haven't, let me nutshell it for you:

it is a completely virtual currency traded via peer-to-peer connections on the internet
it has no central authority and requires no [central] third party to transact
it is backed by nothing other than the effort required to obtain it (which can be extensive)
it is stored in wallet files on computers or other memory devices
it is in theory [practically] impossible to counterfeit, double spend or kite (and the theory is as secure as sha256)
coins are 'mined' (like gold, but in a virtual sense rather than physical) and spent like cash.
transactions are more anonymous than paypal/credit cards but [arguably] less anonymous than cash.

The way you use it is to
download and install a client.
get bitcoins however (mine, buy, trade, steal)
send coins to address (provided by payee)
receive coins from address (provided by you)

The Question Below!
Do you see a future in it? I do. At other forums I don't get very good opinions of it. Most of the arguments against it are pretty weak though. The one argument that holds water is that it is only a fad that is being propped up by speculators. I see it as more than that. I see it having real potential utility; the true mark of a currencies value is its utility. It's actual, current utility is still very small; the things you can actually buy with it are very limited. Speculators seem to love it; it is trading on currency exchanges for around $17 (at the time of this post). I see that as being way over-valued, but i'm no economist.

So...answer the poll.

Do You See a Future In it?

Notes:
I can't find the create poll button so you gotta do it with a post
I didn't include links because i didn't want y'all to think I was spamming (given my post count is so low)

Are you essentially touting the use of WoW gold as real currency? Any half decent programmer would be a trillionaire overnight, no?

trubble76 wrote:Are you essentially touting the use of WoW gold as real currency? Any half decent programmer would be a trillionaire overnight, no?

Well, no. Wow gold is backed by WoW, like dollars are backed by the U.S. If WoW decided to flood the market with WoWgold, the resulting inflation would destroy the market. Only 21 million Bitcoins will ever (can ever) be created. Not one bitcoin more. Currently 8 million have been mined; out there in the market. In theory, this will have a deflationary effect. And in theory, the negative impacts associated with deflation are negated by the currencies [very] high degree of divisibility (eight decimal places).

Given that, after reading the entire Wikipedia entry about Bitcoin, I STILL have no idea how to use it, or what it can accomplish that can't be done MUCH more easily using other currencies, I would say that it has no future. Not with us peasants, anyway. It appears to be more of an esoteric experiment in computer programming, and conceptual economic modelling, than anything else.

It would still seem, from a usefulness viewpoint, to be identical to existing currencies, in that it's value is entirely dependent on whether or not someone is willing to accept it in exchange for goods and services. It appears to me, that it currently has a value, but that with no notice whatsoever, it could stop being accepted by any or all who currently assign it value, and thus become effectively worthless. There fore I a myself entirely unwilling to do the TREMENDOUS amount of work required just to figure out what it actually is.

Rob Lister wrote:

trubble76 wrote:Are you essentially touting the use of WoW gold as real currency? Any half decent programmer would be a trillionaire overnight, no?

Well, no. Wow gold is backed by WoW, like dollars are backed by the U.S. If WoW decided to flood the market with WoWgold, the resulting inflation would destroy the market. Only 21 million Bitcoins will ever (can ever) be created. Not one bitcoin more.

If there is no central authority over them, how can you say this? How does one verify that they have "legitimate" bitcoins? No authority also means that there can be no penalties for counterfeiting them.

Well, BitCoin has stayed rather stable at around 1 BitCoin to $5 (USD). It's really more of a currency for maintaining anonymity. For that purpose, it's been quite successful.

So far the bitcoin concept has survived. Thieves have so far stolen coin from exchanges and wallets and obviously have manufactured (legitimate) coins but as far as I know the coins have never been counterfeited or transactions falsely confirmed. This is rather awesome really.

There is the adage though that bad money chases out good so the problem with bitcoin will be hoarding.

If I was a central bank system making money from seigniorage and using money supply and my fractional banking system to manage society then I would be worried that hoarding did not happen. If hoarding does happen then I am less worried.

I would attack bitcoin in a few ways if it becomes liquid and fungible on an international scale.

1) smear campaign. Associate bitcoins and crime.
2) attack exchanges. Fuck up anonymity by making convertibility by unknown persons very difficult.
3) make use illegal. Just simply make the use of bitcoins and possession of bitcoin wallets illegal.
4) bring in your own bitcoin-like system.
...
5) Profit.

byofrcs wrote:So far the bitcoin concept has survived. Thieves have so far stolen coin from exchanges and wallets and obviously have manufactured (legitimate) coins but as far as I know the coins have never been counterfeited or transactions falsely confirmed. This is rather awesome really.

There is the adage though that bad money chases out good so the problem with bitcoin will be hoarding.

If I was a central bank system making money from seigniorage and using money supply and my fractional banking system to manage society then I would be worried that hoarding did not happen. If hoarding does happen then I am less worried.

To be honest, I don't understand how the BitCoin system has survived and become so resilient to value fluctuations. Somebody's doing a very good job of protecting the system.

byofrcs wrote:I would attack bitcoin in a few ways if it becomes liquid and fungible on an international scale.

1) Smear campaign. Associate bitcoins and crime.
2) Attack exchanges. Fuck up anonymity by making convertibility by unknown persons very difficult.
3) Make use illegal. Just simply make the use of bitcoins and possession of bitcoin wallets illegal.
4) Bring in your own bitcoin-like system.

1. They're already associated with crime and shady dealings, which is really what they're used for.
2. Exchanges can be protected against relatively easily, so long as the hackers don't gain physical access.
3. This may change its usage, espcially its conversion into established currencies (i.e. those on the foreign exchange).
4. That would mean starting from scratch, where you're competing against the network effects and values of the established BitCoin system.

All in all, I think BitCoin has done remarkably well, though I wouldn't spend my own money on it. I guess the only reason I have for BitCoin is to pay for a anonymous VPN service, but there are established anonymous VPN services (e.g. BTGuard).

SeriousCat wrote:Well, BitCoin has stayed rather stable at around 1 BitCoin to $5 (USD). It's really more of a currency for maintaining anonymity. For that purpose, it's been quite successful.

It's the anonymous bit that will ultimately prevent it from becoming mainstream imho.

Governments are attempting to make the spending of cash less anonymous, to resist crime and terrorism. In the UK Money Laundering legislation has meant that cash is useless for big money purchases, and criminals are now setting up businesses to declare illicit income and actually pay tax on it.

I can't see Governments allowing the use of BitCoins as they are currently used, if the use becomes widespread.

SeriousCat wrote:

byofrcs wrote:So far the bitcoin concept has survived. Thieves have so far stolen coin from exchanges and wallets and obviously have manufactured (legitimate) coins but as far as I know the coins have never been counterfeited or transactions falsely confirmed. This is rather awesome really.

There is the adage though that bad money chases out good so the problem with bitcoin will be hoarding.

If I was a central bank system making money from seigniorage and using money supply and my fractional banking system to manage society then I would be worried that hoarding did not happen. If hoarding does happen then I am less worried.

To be honest, I don't understand how the BitCoin system has survived and become so resilient to value fluctuations. Somebody's doing a very good job of protecting the system.

The system was ingeniously designed and there was only one point in time that it was vulnerable by technology and that was when an attacker could have 51% of the compute power of the network. A government could have done this and completely messed with the whole concept of bitcoin by creating such bad press that no one would bother.

That didn't happen near the network birth as far as I know and now the 51% of compute power is rather large. Not impossibly large for a big country but right now I think you would need 73 PetaFLOPS (1/2 of 142) which is 7 times the fastest known Top500 supercomputer. Now possibly there are countries that could do this but it would be cheaper to just print fiat money, buy up bitcoins and destroy the bitcoins and regulate their use.

There is no "somebody" - there are many bodies and I don't see the signs of dirty float interventionism in place. Next hiccup is in December 2012 when bitcoin mining win halves from 50 to 25 coins.

Still worthwhile to go long on bitcoins as I think the post-December 2012 switch will cement bitcoins as a way of parking money rather than holding it as cash or fungibles and spreads should get tighter. In basis points today they are poor. The cost of carry for bitcoins should be lower than cash and metals but you don't earn interest.

Rob Lister wrote:get bitcoins however (mine, buy, trade, steal)

This is the bit I don't get. How are BitCoins issued? Buying, trading,stealing is simple, but how do I "mine" BitCoins? Who will "promise to pay the bearer on demand"?

Just like to point out that I don't actually have any bitcoins but if anyone has any spare change then please send me some at
16LcWwsuagkG1ZMgTABC4U7xtEz3hmtFRH lol there goes my anonymity for that address.

No also seriously the anonymity means that sites like this could run competitions and pay in bitcoins and the recipient doesn't have to reveal who they are or where they are. Equally we could pay with bitcoins and LIFE could convert them into euro on an exchange to pay for server charges or re-use bits of them as prizes and no one in Germany could ever work out where the money came from.

We have to remember that atheism/rationalism/unbelief is not legal everywhere that ratskep can be seen and even in normal sounding places like Malaysia or the Philippines unbelievers are attacked.

Bitccoins could help isolate people so they can't be attacked.

GrahamH wrote:

Rob Lister wrote:get bitcoins however (mine, buy, trade, steal)

This is the bit I don't get. How are BitCoins issued? Buying, trading,stealing is simple, but how do I "mine" BitCoins? Who will "promise to pay the bearer on demand"?

The network. Anyone (you , me, the governments) can setup a mining node. Just buy some fast GPU and join a mining operation.

The promise is because the coin is a chain of cryptographic hashes that is authenticated by the network. To abuse this you need to break 256 bit crypto and mess with a network of unknown peers.

As processor speeds grow then the system automatically makes it harder to generate a valid hash.

byofrcs wrote:

GrahamH wrote:

Rob Lister wrote:get bitcoins however (mine, buy, trade, steal)

This is the bit I don't get. How are BitCoins issued? Buying, trading,stealing is simple, but how do I "mine" BitCoins? Who will "promise to pay the bearer on demand"?

The network. Anyone (you , me, the governments) can setup a mining node. Just buy some fast GPU and join a mining operation.

The promise is because the coin is a chain of cryptographic hashes that is authenticated by the network. To abuse this you need to break 256 bit crypto and mess with a network of unknown peers.

As processor speeds grow then the system automatically makes it harder to generate a valid hash.

So the value of a BitCoin is a number of CPU cycles?

GrahamH wrote:

byofrcs wrote:

GrahamH wrote:

Rob Lister wrote:get bitcoins however (mine, buy, trade, steal)

This is the bit I don't get. How are BitCoins issued? Buying, trading,stealing is simple, but how do I "mine" BitCoins? Who will "promise to pay the bearer on demand"?

The network. Anyone (you , me, the governments) can setup a mining node. Just buy some fast GPU and join a mining operation.

The promise is because the coin is a chain of cryptographic hashes that is authenticated by the network. To abuse this you need to break 256 bit crypto and mess with a network of unknown peers.

As processor speeds grow then the system automatically makes it harder to generate a valid hash.

So the value of a BitCoin is a number of CPU cycles?

Yup - that is why you use GPUs or custom FPGA to get the most flops per joule plus the system automatically makes it harder as time goes on for a new coin to be made. The coins are limited by design to 21 million but these can be chopped up into fractions of 8 decimal places. It is a deflationary currency in the end as that is all there will ever be.

As a wide-stab-in-the-dark imagination In 100 years time when we are asteroid mining and have fusion reactors and are moving towards a post-scarcity world then bitcoins will be the only scarce currency (unless other scarce money is created).

If there is a limit of 21 million bitcoins and they are currently trading at around $5 that's a global economy of only $105m ?

When the first quantum computers start "mining" somebody gets very rich and as "the system automatically makes it harder as time goes on for a new coin to be made" every one else hits hard times and "their mines dry up".

It's an interesting idea, but....?

byofrcs wrote:Yup - that is why you use GPUs or custom FPGA to get the most flops per joule plus the system automatically makes it harder as time goes on for a new coin to be made. The coins are limited by design to 21 million but these can be chopped up into fractions of 8 decimal places. It is a deflationary currency in the end as that is all there will ever be.

It's amazing to think how far computer graphics has come. In a few short years, we have close to real-life graphics and supercomputer vendors are starting to see this. Why use a 64-bit CPU when you could use a 256-bit GPU? They're all just calculating mathematics. Cloud computing has supplanted most of the power of supercomputers, as well as being cheaper. Byofrcs, do you see cloud computing as becoming the next tool in BitCoin mining, or is it used already?

byofrcs wrote:As a wide-stab-in-the-dark imagination In 100 years time when we are asteroid mining and have fusion reactors and are moving towards a post-scarcity world then bitcoins will be the only scarce currency (unless other scarce money is created).

I don't see that happening, since scarcity can be artificially created (e.g. fiat currency, diamonds, gold). Post-scarcity would requite near unlimited power being generated, which could theoretically produce anything material that could be bought anyway. However, it still won't be able to buy certain things, such as people—unless slavery is reinstated, God forbid—only hire their time if they are putting themselves on the market. I can certainly see post-scarcity causing depreciation of physical assets, but those things that cannot be made will have relatively high economic value (e.g. real estate in the universe). I wonder if such an environment could derail any attempt at creating an artificially scarce currency, forcing the economy back into a barter system. But we're a long ways from that...

GrahamH wrote:If there is a limit of 21 million bitcoins and they are currently trading at around $5 that's a global economy of only $105m ?

When the first quantum computers start "mining" somebody gets very rich and as "the system automatically makes it harder as time goes on for a new coin to be made" every one else hits hard times and "their mines dry up".

It's an interesting idea, but....?

If there was quantum computing then someone would get rich anyway selling ..... quantum computers. There are no such things as quantum computers for such tasks and probably won't be by 2033 when the 21 million bitcoins trends to the limit.

As the bitcount can be fractioned by 100 million then that 21 million is actually 2,100,000,000,000,000 bits of a bitcoin and they will be whatever price anyone wants them to be.

Miners will still make money because there are transaction charges for doing the validation of hashes and these become more important as the mining of coins slows down. Initially there were no transaction charges but now these are in place.

SeriousCat wrote:

byofrcs wrote:Yup - that is why you use GPUs or custom FPGA to get the most flops per joule plus the system automatically makes it harder as time goes on for a new coin to be made. The coins are limited by design to 21 million but these can be chopped up into fractions of 8 decimal places. It is a deflationary currency in the end as that is all there will ever be.

It's amazing to think how far computer graphics has come. In a few short years, we have close to real-life graphics and supercomputer vendors are starting to see this. Why use a 64-bit CPU when you could use a 256-bit GPU? They're all just calculating mathematics. Cloud computing has supplanted most of the power of supercomputers, as well as being cheaper. Byofrcs, do you see cloud computing as becoming the next tool in BitCoin mining, or is it used already?

Cloud computing is about using CPUs via API that allow process migration. It isn't anything fancy from old-skool mainframes. All it is is just a cluster on the other side of a internet pipe. Clouds haven't replaced supercomputers - clouds are low-cost supercomputers.

GPUs will always remain the best bangs per bucks as it is very fast custom silicon but it is retail/commodity pricing not expensive custom silicon for point solutions.

byofrcs wrote:As a wide-stab-in-the-dark imagination In 100 years time when we are asteroid mining and have fusion reactors and are moving towards a post-scarcity world then bitcoins will be the only scarce currency (unless other scarce money is created).

I don't see that happening, since scarcity can be artificially created (e.g. fiat currency, diamonds, gold). Post-scarcity would requite near unlimited power being generated, which could theoretically produce anything material that could be bought anyway. However, it still won't be able to buy certain things, such as people—unless slavery is reinstated, God forbid—only hire their time if they are putting themselves on the market. I can certainly see post-scarcity causing depreciation of physical assets, but those things that cannot be made will have relatively high economic value (e.g. real estate in the universe). I wonder if such an environment could derail any attempt at creating an artificially scarce currency, forcing the economy back into a barter system. But we're a long ways from that...

Look outside - the sun dumps more energy on Earth in a week as we use everywhere in a century. With that energy budget we can increase our technological base massively and use even more energy and so freeing us from a lot of natural problems such as food and water scarcity.

Our problems for the past century has been basing our society on a naturally scarce resource and that is now biting us back with a vengeance. With a near unlimited energy budget then basic needs such as water and food are for free. We would just be given these needs through a process I call auto-sustainability (which is basically creating a machine slave class).

If people want to collect art made by humans then they would have to work out how to incentivize artists to do this, which given that they would have their needs met, means that you would have to barter something special that they want.

This would drive a new Renaissance for humanity and you can expect the traditionalists such as the religious to try and fuck this model because without suffering and servitude then they lose credibility and reason to be.

Bitcoins would still work in such a world and be complementary because they are artificially scarce but unlike physical goods (or fiat money which is printed like toilet paper on demand) can't easily be created.

That is why bitcoins are interesting - they work now as a currency and survive to post-scarcity.

byofrcs wrote:

GrahamH wrote:If there is a limit of 21 million bitcoins and they are currently trading at around $5 that's a global economy of only $105m ?

When the first quantum computers start "mining" somebody gets very rich and as "the system automatically makes it harder as time goes on for a new coin to be made" every one else hits hard times and "their mines dry up".

It's an interesting idea, but....?

If there was quantum computing then someone would get rich anyway selling ..... quantum computers. There are no such things as quantum computers for such tasks and probably won't be by 2033 when the 21 million bitcoins trends to the limit.

Maybe so. Still it is having a currency based on any rare resource that might suddenly become abundant to a small number of individuals. A gold coinage where a particularly rich sem of gold is discovered in somebody's field. The few who might have access to a new and powerful computer technology would have a major impact.

As the bitcount can be fractioned by 100 million then that 21 million is actually 2,100,000,000,000,000 bits of a bitcoin and they will be whatever price anyone wants them to be.

OK, I'm confused. what the minimum transferable unit is here and how does that relate to the 21 million BitCoin limit?
Can I use one BitCoin for multiple transactions to different parties or is it one BitCoin per transaction, or...?

{quote]Miners will still make money because there are transaction charges for doing the validation of hashes and these become more important as the mining of coins slows down. Initially there were no transaction charges but now these are in place.[/quote]

So, as ever, that bankers always win?

From the wiki

A. Bitcoin utilises public-key cryptography. A coin contains the owner's public key. When a coin is transferred from user A to user B, A adds B’s public key to the coin, and the coin is signed using A's private key. B now owns the coin and can transfer it further. A is prevented from transferring the already spent coin to other users because a public list of all previous transactions is collectively maintained by the network. Before each transaction the coin’s validity will be checked.

It looks like one bitcoin per transaction for fractional transactions. 21 million BitCoins look like an exceptionally small number of transaction tokens to have in circulation. What am I missing?