Also, from the link, "Donations are accepted at 1Nqr3MqVyUp6k3o3QPePAdn4Yg4tzgB9kw." Somehow I think that's going to present an obstacle for most people.
Is this something that is really targeted at the general public, or at programmers who are bored of dollars?
They could make that one step less confusing by just attaching a protocol scheme (coin://1Nqr...), so that users could click on a labelled link instead. They could make it two steps simpler by making it work like OpenID, where a URL can defer its bit coin "alternate" using a <link> tag—so you could just enter someone's web address in your bit coin client, and be able to push coins to them that way.
You could use DNS to map from a domain to a bitcoin address. In the Bitcoin forums people are actually working on a way to map email addresses to a bitcoin address.
However, using IP addresses for Bitcoin transfers is insecure because you are vulnerable to MITM attacks (you wouldn't do online banking over a non-SSL connection, would you?) and because the IP addresses of the sender and the receiver will be known by each other.
Not sure how I missed BitCoins, but I'm trying to get a read on whether this is a real currency or not. As in: something to watch or something to ignore.
I also don't understand why the # of coins is limited to 21M. Given that there are going to be 10B people on the planet that means that, on average, a person will have about 0.002 coins. Maybe I'm just too used to having thousands of units of currency, but it seems odd to consider that prices will be in milli- or nano-BitCoins...
There is a finite amount of gold on the planet as well, and in all of human history we've only mined something like $7-8 trillion dollars worth.
That's only half the GDP of the entire U.S. for 2009, and we don't even control most of it (something like 12-15% in various reserves).
Look at the price of gold now, it's over $1,000 an ounce. Either the USD has inflated dramatically since 1970 when an ounce of gold was only worth $40, or gold has skyrocketed because of scarcity (or both).
Point being, bitcoins could very well end up being worth $10 or even $100 each as the years go by, or higher. At a factor of 100 that's $2.1 billion USD worth of bitcoins.
Are they worth that much? Maybe, gold and USD aren't worth anything at all until someone is willing to accept them in trade, and people are definitely accepting bitcoins in trade right now.
I guess I would be paying 0.001 ounce of gold for a candy bar, so why be concerned about paying 0.001 bitcoin.
w.r.t. worth: gold is backed by being shiny, pretty, desirable; USD is backed by the US Government (cue cries of "fiat money! fiat money!") which provides huge implicit inertia; Bitcoins would be backed only by inertia. I guess the answer to my question is: Bitcoins will be interesting if they get transaction inertia. Of course, as an entrepreneurial minded fellow, the next question would be: would it make sense to help build that inertia?
Technically, a Bitcoin can be divided down to 8 decimals, so 0.00000001 BTC is the smallest possible amount. For convenience, the program currently accepts only 2 decimal places.
BitCoin is certainly a real currency in the sense that it is traded by people, even in exchange for real goods and services. As for whether it is something to watch depends on where you're coming from.
The problem of BitCoin is that of adoption. The US$ is a viable currency because the US government is able to force a US$-denominated debt onto people via taxation. This creates demand for US$, which causes people to offer goods and services in exchange for US$. Of course, once a currency is established, the circular/recursive reasoning of "you work for US$ because you can use them to buy groceries at your favourite supermarket, because the supermarket must pay its suppliers in US$, because the suppliers pay their employees, i.e. you, in US$" largely takes over. Take the base case of enforced debt away and the currency keeps working a while longer in Wile E. Coyote fashion, but at the first sign of serious doubt as to the currency's value it will inflate into worthless paper, even when the "total amount" of paper remains unchanged.
There is nobody who can force BitCoin-denominated debt onto anybody, and so it's unclear how BitCoin could ever take off. It certainly has appeal to a fringe group of libertarians, but I see no mechanism by which it could possibly spread beyond that.
It is true that BitCoin has some appealing feature through its distributed nature. Making small transactions between peers easier is definitely appealing - it's what makes services like M-PESA sell like sliced bread. However, BitCoin has the enormous disadvantage of not being convertible to US$ in the sense that when you want to use BitCoin, you are dealing with exchange rate risks. I would bet that this makes it too inconvenient for the majority of the population to ever take off.
We can spin this further and ask what would happen if, despite all difficulties, BitCoin would ever find widespread adoption. If all prices are denominated in BitCoin, then the exchange rate risk is no longer a problem for average people. But then the economy would face the same problems that plagued gold-based economies, in particular frequent recessions. The historical cycle of monetary development would be likely to repeat itself: People would start introducing paper moneys that leverage BitCoins, frequent bank run would happen until the establishment of a new, BitCoin-based central bank. Eventually, convertibility of the new de facto currencies to BitCoin would be dropped, reverting to pure fiat money.
From a public policy perspective, it is desirable to skip that cycle and just stick with fiat money. Most likely though, the question won't even come up, because BitCoin cannot really gain traction without government intervention in the first place.
From a hacker perspective, the more interesting question is: What problem do people actually face in their daily lives? I am sure there are payment-related problems that can be fixed, but my feeling is the solution is more along the lines of M-PESA, working within the currencies that people are already used to.
From a monetary economics perspective, it is an interesting experiment that may one day be used as empirical evidence for one or the other theory on money.
Yes. I can't find the link, but I read an analysis a few weeks ago. IIRC: Six months ago you could easily build a machine to mine enough to pay for itself relatively quickly. Today it is probably still possibly but more difficult (you need to use GPUs or you can't compete) and the margins are quickly narrowing.
It takes about 3 months to pay off a $1200 - $1600 mining machine, nearly 4 if you have to pay for electricity. That all assumes the market stays in it's current state for that whole time. Highly unlikely.
By which you mean: this bitcoin thingy is analogous to the gold rush in which the miners make no money. Is this an educated assessment or a quick bit of sarcasm? Happy either way, just trying to understand whether Bitcoins are worth paying attention to...
Gold's a pretty good analogy. We're not quite to the point where it's impossible to make money mining, but you have to plan carefully to break even.
The real usefulness, though, of bitcoins/gold isn't to make money mining, but rather as a secure medium of exchange. Bitcoins are a bullion currency that you can spend online.
If you were generating bitcoins, and wanted to make them worth more so as to increase the value of your own CPU-time investment, you could always back them with real money—i.e. establish yourself as a micro-exchange where a certain number of bitcoins will be accepted and a certain number of real USD/EUR/whatever else given back. This would increase the stability and trustworthiness of the bitcoin network as a whole, meaning bitcoin demand would increase—meaning their exchange rate would increase.
Thus, a good second-order solution would be to realize people will inevitably want to build such micro-exchanges—and sell them software that builds them! (Or give it to them for free, but make it charge them transaction fees, etc.) Remember to make it SaaS, though—otherwise, you're just asking for a 100% piracy rate on this sort of thing.
And if you think the government could shut your SaaS down for breaking some trade regulation—well, stop running the SaaS, and instead run a third-order company that allows other, likely non-US-based companies run SaaS exchange-providers. Then build an aggregator with trust-metrics.
Liberty Dollar was busted for counterfeiting, because their coins looked too much like legal tender.
e-gold was busted for violating Know Your Customer money laundering regulations.
Alternative currencies can be legal-- see, for example, Disney Bucks (paper currency issued by Disney) or Ithaca Hours (oldest local currency in the US, going since 1991).
Raid what? There is no central authority with bitcoins that can be shut down. They could go after exchanges I suppose, but exchanges aren't really necessary for there to be a functional economy built around bitcoins.
This has come up many times on the bitcoin forums/IRC. There's a few hardcoded nodes that the client will initially connect to, but you can also grab a third party list. The client is open source. The USA fortunately does not have jurisdiction everywhere, though they would like to think they do.
By the time it pops up on their radar, it will be too late anyways.
Shutting down the bitcoin.org domain/website would be as effective as the attempts to block distribution of the DeCSS software and keys to combat DVD piracy in the late 1990s. It would be unlikely to hamper development of the Bitcoin network.
United States coins and currency (including Federal reserve notes and
circulating notes of Federal reserve banks and national banks) are legal
tender for all debts, public charges, taxes, and dues.
As I wrote three months ago, ( http://bbot.org/blog/archives/2010/12/11/encrypting_a_better... ) the Americans may make it hard on Bitcoin to operate for a variety of other reasons, (for one, it's inherently hard to track the movement of money in the Bitcoin network, making it great for laundering money) but Bitcoin does not appear to be prima facie illegal, on the basis of being an alternative currency.
You have to pay taxes in USD, but simply doing business in another currency is not illegal.
As for "raiding and shutting it down"; difficult, but not entirely impossible. There's only one primary developer, and the network is coordinated through a single irc channel. (#bitcoin @ irc.lfnet.org) You could order him to shut down bitcoin.org, and close the irc channel; but Bitcoin is open source, and a more censorship-resistant client could be hacked together.
Really? There are plenty of southern towns that have their own currency in addition to the USD. I suspect the situation is more complex than you imply.
I was about to post the same thing. However, the USA is not the only jurisdiction in the world -- are there others that would allow something like this?
You can ask around in the #bitcoin-otc channel on Freenode to get an idea of who's considered reputable. I understand Bitcoin4Cash is generally well-regarded.
"All generating nodes of the network are competing to be the first to find a solution to a cryptographic problem about their candidate-block, a problem that requires repetitious trial and error."
i wonder whether this "cryptographic problem" is vulnerable to quantum computing, in the same way asymmetric schemes like rsa are.
The cryptographic problem is finding a nonce that, when concatenated with current transactions, gives a SHA256 hash below a certain value. Not sure about quantum vulnerabilities.
I had the idea of suggesting to Reddit a while ago that they should start their own currency (i would name it the Karmarian)
Reddit is a very large closely nit community, that is world wide. If the internet has a chance of forming its own open form digital currency, its going to need the backing of a large community such as Reddit or 4chan.
Personally I'd really wish something would take off. It pisses me off that the only way to do business online is via another private business. It would be awesome if our government created digital cash for online transactions, and it would be even better if a non government entity created a world currency to handle digital transactions.
Also, from the link, "Donations are accepted at 1Nqr3MqVyUp6k3o3QPePAdn4Yg4tzgB9kw." Somehow I think that's going to present an obstacle for most people.
Is this something that is really targeted at the general public, or at programmers who are bored of dollars?