Bitcoin’s Collusion Problem
timothyblee.com
timothyblee.com
That's a threat to any monetary system. With Bitcoin, as soon as nodes start breaking the rules, they are ejected from the system. The fact that a bunch of them could leave together and start a new system can hardly be considered a real criticism of the protocol itself.
The best way to guarantee that this threat manifests is to just poo-poo it as an impossibility, and not prepare for it. No matter how you slice it, BitCoin faces an uphill battle to get to the point where it has enough acceptance to dodge the laundering charge, and a quasi-religious denial of the problems because "BitCoin is just too awesome to be affected by anything bad!" is a quick path to total failure.
One entity dominating the network may not be a serious threat. A cartel damn well is. The article is correct, the resources are not centrally distributed and you don't need anything like 50% of the humans to cooperate to end up possession 50%+ of the network power, especially if you've got the men-with-guns backing you and even modest cleverness.
I've seen a couple of dismissals of this possibility, linked elsewhere in this comment section, but it's like the BitCoin proponents suddenly forget they're up against men with guns, despite starting out with this understanding, not just some people who want to play modestly unfairly and merely "collaborate when they shouldn't", but otherwise follow the rules. Effort bent towards breaking BitCoins will be proportionate to the size of the BitCoin economy.
Men-with-guns haven't brought down p2p file sharing yet.
But they have brought down or kept down every single digital currency to date, save for those that were merely scams to begin with.
P2P file sharing is not perceived as a threat to the revenue model of government, and is not especially attractive to mobsters and scammers. P2P currencies are.
If other people are happy with whatever features of BitCoin remain under centralized control, more power to them. I see no problem.
But you're saying we have to fear that someone will start effectively issuing p2p dollars. I think it kind of defeats the purpose, but I can't see why that's a more of a threat to the principles of Bitcoin than plain old USD.
If the new network implemented inflationary logic, as a modern state is wont to do, I can't exactly see people rushing to convert their old (relatively stable, perhaps deflationary) money to the new one. Therefore, I can't see many businesses stopping to accept the old bitcoin.
And after whatever adjustments are made, it will be business as usual. Bitcoin will remain the network for people that want a decentralized currency. Not necessarily of libertarians, but of anyone with distrust or disillusion with their governments and the banking system. Which I don't think is such a small demographic.
Rushing to convert "old network" BitCoins into the new network (or dollars, or whatever), and businesses stopping acceptance of them is exactly what will happen. Don't forget the primary function of money is to allow people to trade it for things they want. Unless you're a staunch ideological libertarian you will want as much of your "money" as you can get in whatever system offers the most goods and services. Otherwise you have lost value. That system will certainly not be the one containing only sparsely geographically spaced libertarians.
I think one option is to accept that the bitcoin protocol will be forked massively and design it from the ground up to support exchanges between various versions of the protocol. That way, libertarians could avoid versions with inflationary policies. In this setup, would there be any reason for an entity to choose an inflatable flavor of bitcoin? Perhaps certain businesses and banks would be coerced to through regulation and that would create more widespread demand for those forks. It seems possible that most users would use the regulated bitcoins and the libertarian version might become a black-market currency.
All this feels not too different from the current situation where you can invest in gold or leave your money in a fiat currency. I guess the main difference is that the "gold" (i.e., the non-inflating bitcoin forks) might be less traceable and more liquid than true gold is today. I'm beginning to suspect that, while bitcoin is a damned-cool technical idea, it isn't likely to massively change the world other than, perhaps, to grease the wheels of black-market transactions.
And to do this, that means that you need some trusted way to determine the price of Bitcoin 1.0 versus Bitcoin 2.0.
Which means you need a centralized place, let's call it an exchange, to determine the rates between the two version. Since you probably want the rates to be consistent across the entire network at any given time(otherwise, what's the point of a non-inflationary currency), it's probably a decent idea to maintain a centralized location for that that decides the rates. A decentralized method may be possible, but I sincerely doubt that it will work in a way that would actually encourage people to convert to the other currency to purchase things.
In either case, you still need something that can regulate the transactions to make sure that everyone is behaving correctly. If people aren't(which should be the first assumption you make about anything), you'll need some method of dealing with it.
So... yeah. You just created the Federal Reserve and money markets.
Realistically, given that it's a democratically run, the current Bitcoin implementation is in the same boat, if the biggest users decide to change their policies, the entire network can end up in a similar situation where a Bitcoin from X is worth a different amount from a Bitcoin from Y.
I don't really understand how Bitcoin is better than the current currency system. It's just different because it's on the internet.
A decentralized version is virtually guaranteed in the absence of a centralized one. If you have many exchanges, and they offer different rates, arbitrageurs will exploit this and make the rates match.
This is why, for example, the price of RIM is virtually identical on both TSX and NASDAQ.
But to make the change stick in the bitcoin network, the change would have to be made to all peers, network-wide, in the time it takes to calculate a few blocks. Otherwise the fork doesn't succeed.
What does the OP's elaborate, hostile, expensive plan buy you over plan B? That users will have to opt-out of your branch, rather than opt-in? Is that wise PR?
Essentially, if we had a mature Bitcoin network, then we'd all have some money in it. And we obviously have an interest in keeping that money valid.
Sure, half the people could fork off with new rules for Bitcoins, but they leave behind everybody's old bitcoins in the process. As others have commented, it is a fork of the currency, but you don't get to keep your old bitcoins.
So although the rules can change, you start from scratch again. Your old bitcoins won't work in the new world of 100 bitcoins / 10 mins, and those new bitcoins won't work in the old world.
So we'd all have to start over. Ergo, it doesn't seem very likely.
If they fork the block chains, my understanding is that your old bitcoins will work alright in either network. People that stick to the old network won't accept any money from the new one, but nothing keeps them from spending their money in the new one. Thus the adopters of the new economy would be subsidizing the members of the old one.
[Edit] And now my own semi-rebuttal: sure enough, the people who move to the new economy can similarly spend their old credit in the old one. But considering that the original Bitcoin currency is deflationary in nature, they have less incentive to do so, at least immediately.
But I'd like it much better if the massive amount of computing power being poured into the hashes was actually being used for a good cause like folding, seti, etc. and the bitcoins were still the reward
If you can design a system that generates a cryptographic secure chain of the collective transactions of volunteers computing unrelated problems... you should publish the design.
90% of the commenters failed a pretty basic reading comprehension test, maybe I shouldn't be surprised (it's the internet) but I figured a bitcoin related blog conversation would be substantially different from youtube comments.
TL;DR: Other BitCoin-like currencies could be used to grow the money supply - which might lead to bubbles of such currency or perhaps solve the growth issues BitCoin will deal with.
As has been pointed out copiously today, that's a convention that BTC clients and users all claim to agree to. It seems likely to me that they will continue to agree to it, and it also seems likely to me that the major hurdle will be the first '25 BTC/block' downgrade. If the community survives that, the others will likely follow easily.
If P = NP Bitcoin breaks down. Interesting.
If P = NP, that doesn't mean there are practical algorithms in P for the problems in NP. It could turn out that for all the problems in NP that we currently think aren't in P, the solutions in P are O(n^100000).
Also, it can go the other way. Just because a problem is NP complete doesn't mean that if P != NP we can't solve it efficiently in practice. It just means we can't get an efficient algorithm that will work in every single case. It may turn out that the problem instances that actually come up in real life are amenable to fast solutions.
Already discussed months ago. Bitcoin critics are for some reason less knowledgeable about potential weakness of bitcoin than bitcoiners who are enthusiastic about bitcoin.