There's a lot to like about BitCoin. They "just" need to solve the following:
1. Technical issues (make it more secure) 2. Economic issues (deflation) 3. "Competitor" issues (governments, banks, the powerful status quo)
1. Technical issues (make it more secure) 2. Economic issues (deflation) 3. "Competitor" issues (governments, banks, the powerful status quo)
This is actually a pretty serious problem.
The value of bitcoins always settles such that the cost of the electricity to make them is approximately their value.
But because the difficulty is adjusted such that a fixed number of bitcoins are generated per time (meaning faster or more efficient computers don't help), and that the number generated per unit time is constantly shrinking, it will cost more and more electricity over time to make bitcoins.
Deflation is built into it. And I bet the creator of bitcoins never realized that the scarce resource bitcoins track is electricity.
If you want to make a ton of money, buy bitcoins just before they switch from 50 per block to 25. I'm betting the value will double.
.. with the modern understanding of deflation. Price is not a problem if the money supply is constant. Just think about it, it is *more goods chasing the same amount money". There will be no way we can have this conversation without that kind of deflation in computer industry.
Now, money supply contraction IS painful, but so is hangover. If you have an institution with the ability to inflate the money supply almost at will, don't act surprised if from to time a correction can be in order.
So, for example, when generation switches from 50 per block to 25 per block, the value will remain the same and it will simply become uneconomic to mine. As miners leave the network, the difficulty will automatically reduce until equilibrium is reached again. (In theory. In practice, the time lag until the difficulty changes could make this an unstable feedback loop rather than stable).
So the price settles at the cost of electricity.
Then they reduce the number of coins per block. So suddenly it comes even less worth it to mine. Until the value of each bitcoin rises to match, causing people to want to mine again.
If the value of each bitcoin did not rise, no one at all would mine and the network would grind to a halt (no confirmed transactions).
Unless they have a mechanism to reduce the difficulty factor at that point. I'm not sure on that point.
This isn't true. The system has several modes of adjustment and it will always be worth it for someone to generate blocks. If the value of a coin didn't rise to match generation costs, people /should/ stop mining -- but those that remain will collect more coins or transaction fees as the difficulty drops to compensate. Overall the economy as a whole shrinks, but never grinds to a halt.
That is still enough computing power to make the network moderately secure.
Entities with a vested interest in Bitcoin being unhackable by those with too much CPU power might then run non-profitable mining setups.
More likely the inefficient miners will be forced to quit mining as they will not be able to compete with those who either don't pay for power, or are not a commercial endeavor that is doing so at a larger scale.
Whether that is two months or four years away, who knows.
I'll add that the crypto will one day be broken (even brute force will eventually work once CPU/GPU have progressed far enough). And when it is, there is no reason you couldn't just sit back cracking those wallets in secret before funneling the coins your way. A significant weakness of the anonymity of the network means no one really "owns" a wallet in the traditional sense. They are essentially communal.
Not sure what's meant by that dig, but worth pointing out that a lot of former (and some current) Magic pros do quite well in financial work. In fact, an eerie number of them seem to graduate from Magic, to poker, to finance.
This site was hacked a few days ago causing much chaos in the Bitcoin community.
Both of them moved out of country when the Poker stars crackdown happened so they could keep playing.
When I mentioned I liked Blackjack they laughed and said "...odds are terrible...you might as well play the stock market..".