Comment by mod50ack | Hacker News Reader

Comment by mod50ack | Hacker News Reader

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The idea of the ICO is ridiculous to me. It's nothing but a scam: here's why.

I think that there are three ways in which something can have some sort of "value."

(1) The object is scarce and has uses --- e.g., gold.

No matter what, people are going to want gold. It's scarce (assume you can't just produce it) and is essential to modern electronic equipment (besides its appeal as THE famous precious metal).

(2) The government backs it --- e.g., the U.S. dollar

Techno-libertarians are going to lambast me for this one, but governmental backing actually means a lot to a currency. There is a reasonable expectation that the U.S. government, for example, be around tomorrow; if they aren't, we've got bigger problems than what we're going to do with our portraits of dead presidents.

(3) Agreement within a community --- e.g., Chuck E. Cheese's tokens, bitcoins

Now we've reached the most basic level of commerce. I'm not going to explain the social structures behind bartering and tokens, but essentially, everybody in the Chuck E. Cheese's agrees that a token is worth a game (or everybody involved in bitcoin transactions agrees a token has a certain worth).

Being a computer geek, the idea of a digital transaction becomes obviously quite appealing. However, bitcoin (and ether et al.) seem to be a waste to me: just a token that a useless computation has been done on an abused piece of hardware. Perhaps it would be better to get token credit for contribution to medical research or the like.

The altcoins and these bullshit "ICO"s are the next level of dumb. Now, not only do we not have any computing value (as they're 99% perfect clones of bitcoin or ether), we don't even have the ONE thing that bitcoin did right: recognition, which led to some insane valuations in those early, early days.

Today's news story: Invest in our ICO: we're totally not a scam based around fake currency. People totally value what we sell. Yeah, right. People barely accept current coins.

I don't think #3 is spot on. Bitcoin solves the double spend problem does it not?

Banks and other settlement systems also solve that problem.... but cheaper than bitcoin.

So, what advantages does bitcoins more expensive solution to this problem give us?

Cheaper than bitcoin? I'd love to see your calculations of how Bitcoin is more expensive than the existing banking structure, including the cost of staff, buildings, etc. The banking bureaucracy is massive.

Furthermore, there is plenty of criticism that could be levied upon central banking, financing wars between nation states being chief among them. There's an enormous social cost to central banking.

$5 transaction fee for bitcoin versus [1] free (cash/checks), 30 cents + 3% for most credit cards.

Unless you are sending huge amounts of money, bitcoin is more expensive.

[1]: https://www.reddit.com/r/btc/comments/6gek0z/average_bitcoin...

> [1] free (cash/checks),

You realize there's no such thing as 'free' right? What's the saying? "If you don't know who is paying for a product you're using that's free, you're the product."

Yes. Banks give out loans. And they share a (tiny) part of their proceeds with their account holders!

And the cost of this to the end-user is the risk that if everyone simultaneously tries to withdraw their money, the bank won't have it. That's happened once in U.S history. I think it's a safe enough bet.

I do not immediately see the difference between (2) and (3). In what way supports a government a currency ? A government controls more or less the quantity but in the end a currency's value is just supply and demand. If the public does not trust a currency anymore then it looses its value. E.g. its also a community agreed value ?

Because the government compels users to use things in transactions. Actually, I should have chosen Chuck E. Cheese's in (2), as there is indeed in that case as well a more powerful entity that forces people to use that currency for the purpose (albeit tokens for games and not money for taxes). Bitcoin has no power that promotes its use in a backed sense, so it's not that kind of currency.

"No wireless. Less space than a nomad. Lame."

You don't have to be excited about this but if enough people are you'll just have to follow.

I was at a pot luck just a few weeks ago and people were gathering money for pizza. One person paid and the others just sent bitcoins to the one paying. This wasn't even a tech-related event.

Really? With a roughly $2 per transaction fee, they sent Bitcoin, suffering 50% overhead on their pizza share?

I send Bitcoin. Sometimes a lot. But Bitcoin of 2017 and small transactions do not make sense.

> a token that a useless computation has been done

You don't understand the fundamentals of Bitcoin. The computation isn't useless. Go find out why, and perhaps things will make a little more sense.

That's not a helpful answer — rather than just saying RTFM, do you understand the problem well enough to explain what inherent value the computation provides?

If you assume that there were rational designers of Bitcoin, why would they put in a useless, expensive computation?

Brute forcing a nonce value is most certainly a waste of computing power.

You, too, don't understand the fundamentals of Bitcoin.

The nonce must be brute-forced to prove that the computing power was expended. It is precisely this expenditure of computing power that makes it expensive to cheat.

> You, too, don't understand the fundamentals of Bitcoin.

> The nonce must be brute-forced to prove that the computing power was expended. It is precisely this expenditure of computing power that makes it expensive to cheat.

No, I understand why it's done. But it has no practical use outside of Bitcoin.

I'll elaborate: to me, it's akin to this:

In the real world, we pay people money for useful work (a gross oversimplification, but let's keep going).

Imagine a world where it's impossible to print money, and the only way to create money is by drawing dollar bills by hand, which is a very difficult task. Surely, people are being paid for their work here? Well, yes, but if the work is going only into the creation of the tokens, then it's useless. Why would you want an economy that revolves around the value of having wasted computing power on a nonce value? Maybe if we assigned tokens to those who expend computing power on medical research or the like, that's more useful. But Bitcoin is a waste of resources to generate.

http://primecoin.io/ is an example where the work being done is useful - it is used to discover more prime numbers.

However, regardless of the "usefulness" of the actual work, it ties the value of bitcoin to a very tangible resource: the amount of mining power available in the network. This is actually more similar to the gold standard than fiat currency, where proven reserves are needed to print more currency.

Is there any cryptocurrency that already does useful work in its mining? That seems like a great idea. You could incentivise people to do things like protein folding as long as you could also make sure the work isn't fakeable somehow (which I suspect is the big problem here).

There are three that try to find primes - Primecoin, Riecoin, and Nexus. This isn't "useful" but it's a bit more intellectually interesting than finding partial collisions in sha-2. (I wrote the miner that's now used for Riecoin.)

There have been attempts to do others but none that really work, because in part of the problem you cite. It's also very hard to have a tune-able difficulty for the mining process.

I think the OP shares my sentiment that it's a shame Bitcoin doesn't use /actual/ work (some result that is easy to check but difficult to compute) as the basis for mining.

The other thing that I feel went wrong as a direct result of this is that instead of Bitcoin using the /ability/ to do work as a lottery for handing out initial currency it has been biased towards nonce specific hardware (instead of general computing) being used; with the result that the protocol has stagnated and cabals are now able to collude to control the protocol.

It's not useless, but until the activities around it amount to more than mere speculation, its value's uncertain.

...Aaaaaaand this is exactly why you're going to miss the boat here on new forms of innovative currency that represents a flight to quality from more corrupt financial markets.

In a year or so you'll be buying cryptocurrency, especially when the Yield Curve starts dropping and we enter another downturn in the Market.

There is a generation of kids who will only know electronic gold aka cryptocurrency.

See: https://www.mixcloud.com/TheTimFerrissShow/244-the-quiet-mas...

>this is exactly why you're going to miss the boat here on new forms of innovative currency that represents a flight to quality from more corrupt financial markets.

Perhaps. Equally possible is that we're somewhere on the peak portion of the usual technology hype cycle (https://en.wikipedia.org/wiki/Hype_cycle). The part dominated by rife speculation of potential applications of the technology and overly optimistic estimations of it's benefits. That does sound a lot like the current crypto currency hubbub. Especially since as mentioned in the OP article, actual killer applications of crypto currency have yet to appear.

So when speculation and the confidence game surround it subsides, we'll enter the trough of disillusion, where if anything the technology will be undervalued for a time. Finally if practical uses emerge, the curve ticks up and levels off as a true reflection of the reality of the situation. We are certainly not there yet.

"Miss the boat" is a dead giveaway that we're in the hype phase. It's a simple appeal to the Fear of Missing Out (FOMO) which often drives investors into a bubble at it's peak. The trope of 'this time it's different' may prove right once in a blue moon, but the burden of proof definitely sits with the party making the claim.

Specific to crypto currency as a technology, there are some very real reasons to be cautious at this time. All value right now is based on the sole foundation of perceived future value. This mirrors housing market bubbles etc. Without significant real-world utility emerging, the value of bitcoins will disappear once everyone figures out that selling them to each other is not actually increasing their value.

Bitcoin is not the singleton of crypto currency, merely the first implementation to gain a significant following. This is very different to nation-based currencies and even for them, a significant portion of their value rests on the backing provided to them by their respective nation's prosperity and stability. Accordingly, expect unbacked crypto currency to be extremely unstable, over the long term.

How exactly are cryptocurrency markets less "corrupt" than our current capital markets?

To start, ever heard of Quantitative Easing or bailing out banks with billions over consumers?

Why is QE corrupt? And bank bailouts, while politically unpopular turned out to be profitable for the government.

In contrast, bitcoin exchanges have a high rate of getting hacked and losing all customers money. There is no protections against insider trading... and mining is controlled by a couple guys in China, not a body that we have democratic control over. How is that better than the current system?

Quantitative easing was an act of monetary policy. Monetary policy helps stabilize the value of a currency and the output of a country. Bitcoin has no mechanisms to stabilize aggregate supply & demand, and therefore is inherently subject to higher volatility.

I think that if there was any mistake of QE, the mistake was that it didn't go far enough. Looking back, the recession ended up being deeper and longer than initially expected, and worries over inflation ended up not proving true. With the benefit of this hindsight, it seems clear to me that more QE would have helped the country.

Wow you really drank the kool-aid did you? QE has meant huge asset inflation and huge profits for asset holders. At the expense mainly of future generations and current retirees. You know where the US-Fed balance sheet stands right now?

To add, I love Bitcoin, but this is why Proof of Stake/Ethereum is also not that great in my opinion. The DAO hardfork was nothing but a bailout.

That's a somewhat scary problem for cryptocurrencies. Basically if 51% of the network decides that they don't like you then they can essentially take all of your currency(or, rather, make it worthless)

That's false. The most that can happen in a 50% attack is that transactions are rolled backs.

If I "control 50%+" of the hash power of the network can't I write my own transaction history from a given point for the world to gobble? If that is so, can't I simply transfer all the coins to my account, and go to some exchange and get $$ for my $COINs? You can roll back the history if you want, but as long as I controlled the network long enough to get $$ out of my ill gotten $COINs, it seems like I've been able to rob the network of it's market cap. And if you roll back history, isn't the exchange (that gave me $$ for my $COINs) going to be extremely upset to have neither the coins nor the $$?

any point, yes but you'll have to play catch-up with the main chain. suppose you want to take over all the chain starting from 2 weeks ago. even if you have 51% of the network, you're at a disadvantage already because your chain is 2 weeks behind, and the main chain is constantly advancing. you only have a 1% speed advantage over the main chain, so it will take ages for you to catch up (almost 4 years to be exact, assuming the hashrate stays constant). keep in mind that getting 51% is hard as it is because it requires you to either double the current hash rate (ie. you add hashing power equal to the network's current hash rate) which is incredibly expensive, or hack 51% the pools which is easier, but also likely to be noticed. in either case, once the fork occurs, alarm bells will go off everywhere and every competent exchange/payment processor is going to shut down all withdraws/deposits until the situation is investigated. once it's discovered that a malicious actor successfully attempted a 51% attack, the price of the coin will drop to 0 and your efforts would be wasted.

if all you want to do is crash bitcoin then you'd have achieved your goal (albeit at a huge expense), but it's certainly not a good way of making money.

Thanks for the reply. Could you please elaborate on a couple of things I didn't quite understand? First, why would I want to start from "2 weeks ago"? Why can't I simply start from the tip of the chain and start "writing history" as I see fit? (in other words: why do I need to start with a handicap?) Second, you claim that it is incredibly expensive, but have you done the math? As long as the cost is smaller than the market cap, it seems there's a reasonable opportunity for a positive ROI, and I know the market cap is very very large... For sure there will be some alarm bells that go off at some point, but the question is whether the window between the attack and the "exchanges shutting down" is large enough to have a positive ROI on the cost of the attack.

>First, why would I want to start from "2 weeks ago"? Why can't I simply start from the tip of the chain and start "writing history" as I see fit

because blocks contains transactions, not balances, and transactions are validated individually (simplified: bitcoins are sent to public keys, and to spend those coins, you need to sign "send coins to public key x" with your private key), thus ensuring that if you took control right now, you can't make arbitrary transactions, and you're stuck with the current transaction state.

Maybe I didn't ask correctly. I understand that the blocks contain transactions, not balances, but what I don't understand is why there would be a 2 week lag when I start my fork. It seems like any client can get to the "tip of chain" pretty easily, which is close to the "now" point, except for the blocks that are currently being mined left and right. That's the point where a 51% mining power would be able to start writing history, by basically creating the longest chain (due to its superior mining power). Why would I be trying to fork at now minus 2 weeks? What am I missing? (I can't sign transactions for other people, but I could attack via double spending, couldn't I?)

Because if you got 51% hashing power and started mining your fork today, what you can't do are:

* mine arbitrary amounts of money, since how much you can get from each block is enforced by every node in the network

* generate arbitrary transactions (ie. stealing people's money) since those transactions would need to be signed by those peoples' private keys (which you don't have), and the validity of those signatures are checked by every node in the network.

* rewrite history (ie. saying a transaction from a year ago never happened), since your block builds on top of those blocks, and forcibly putting transactions in your block that contradict the history contained in those blocks would cause other clients to reject your block. you could get around this by building your block on top of a block that was around before that transaction occurred, but then you will be met by the "catching up" problem, since the "tip" of the chain is determined by the sum of the proof of work in all of its blocks. your chain of 7 years + 1 block would have much less proof of work than the legitimate chain of 8 years. by proof of work i'm referring to the same mechanism that controls the difficulty in mining blocks.

what you could do:

* collect the 12.5 BTC/block mining reward (but you can get this without being evil)

* block other people's transactions from being processed, essentially freezing other peoples' balances at the point when the fork started (doesn't get you any money though)

* doubling your income as a miner by not building on top of other miners' blocks, allowing you to capture all the block rewards instead of only 51%. (the ensuing panic and market crash would most likely make this move not profitable)

Thanks for the details. Yes, I agree with what you are saying. There aren't many things you can do when you have the majority of the hash power, but isn't there at least a (few?) double spend attack(s) you could attempt?

Look at what happened in the etherium hard fork because of the dao shenanigans. That's why there are two etheriums now...etherium and etherium classic

What happened was something else entirely, with a success in decentralised governance to punish the bad actor. What do you want us to look at exactly?

Isn't that exactly what I said in my original post? A majority of people in the network wanted to (effectively) take the bad actors coins, so they did.

a pull request being approved by core developers in an open source project is different than a bank being bailed out by the government, different scales as well

Let's use this as a test for your future predicting abilities. What do you think is going to happen in a year, exactly? Any concrete predictions?

My personal prediction based on the fact that there are now exchanges and hedge funds involved, is based on what happened in the 2008 financial crisis. Bitcoin rose as people viewed this new medium as safer and with tax benefits. Smart money/investors are position now, diversifying across cryptocurrencies before the next Black Swan event. I predict that on every spike down in cryptocurrencies, smart money will come in and the crypto's will make higher highs from here forward and more importantly, during a flight to quality during the next downturn.

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