After a spectacular crash, Bitcoin makes a surprising comeback
economist.com
economist.com
The Economist author only made one error: Bitcoin is not the only decentralized digital currency. Some forks exist (eg. Litecoin), although they have very little traction currently; see the Alternate Cryptocurrency board: https://bitcointalk.org/index.php?board=67.0
:(
Until that's the case I just don't see this taking off. I'm fairly motivated to buy a few just for kicks, but if I can't be bothered I can't see the general population doing so either.
I see MtGox takes wire transfers, which is almost good enough, but not quite. Didn't they also suffer a breach not so long ago?
Misspellings on your landing page don't inspire confidence.
http://blockchain.info/ is a great wallet, I use it on my iPhone and Chrome
A while ago I wrote that perhaps the greatest contribution the Bitcoin experiment will make to humankind is to teach you and me and our neighbors more about the realities of economics. And later I added that the Bitcoin experiment will also contribute to greater understanding of attack surfaces and online crime. Many of the ideas about how to mine Bitcoins, store Bitcoins, and trade with Bitcoins as a medium of exchange illustrate both the strengths and weaknesses of any other medium of exchange in a world full of human beings. Seeing the discussion of Bitcoins here on Hacker News reminds me of early online discussions in the 1990s of online payment systems such as PayPal, and the arguments beforehand that PayPal wouldn't have to invest a lot of time and effort (as it eventually did) building defenses against theft and fraud. If a weakness in a system is attached to a lot of money, the way to bet is to bet that someone will go looking for that weakness, even if you haven't thought of it.
AFTER EDIT: Here is a question for all the security-knowledgeable persons who participate here on Hacker News, a question once asked of the inventor of Pretty Good Privacy (PGP). How expensive do you think it would be for the United States National Security Agency (or a comparable organization from another national government) to crack a Bitcoin store, given that we know that some Bitcoin caches have already been cracked?
This can be compared to the Wild West times when gangs used to break into banks and steal lots of money. It is not that the money was weak, but that those storing it did not have proper security.
As bitcoins become more popular, you will have more and more competent individuals start offering storage services for these.
But, it does bring up an interesting point: as far as how I know bitcoin works, once you steal the bitcoins, they're stolen. This is different from fiat currency, at least online. If someone breaks into Bank of America's servers and figures out how to transfer a bunch of money from other people's accounts to their own, Bank of American can undo it. As long as the person does not get a cash or cash-equivalent, then it should be reversible. I invite the people who are more familiar with bitcoin to correct me, but as I understand the protocol behind it, once a bitcoin transfer from one owner to another owner is made, it's not (forcibly) reversible.
As xtracto said, there isn't something inherently insecure about Bitcoin. In fact, AFAIK, there have been no exploits to date of the actual math behind Bitcoin itself. The issue has been breaches of the various institutions dealing in Bitcoins.
When a bank is broken into and cash is stolen, you wouldn't say that dollars are insecure ― you'd say that the bank is insecure. This is no different, except it's occurring online.
On top of that, some companies are, or should be coming out with ASIC-based miners, which are orders of magnitude faster in mining bitcoins than GPU's, at lower energy usage, increasing the total mining capacity.
Does the cost of mining one BTC influence the price of one BTC? Will these events have an influence on the price (if they were not already 'priced in')?
Safely storing value while keeping it liquid, there's a problem.
Difficulty adjusts automatically to match the total mining hashrate - there's always about 10 new blocks mined per hour. So if more people are mining the difficulty goes up.
What is changing is the number of BTC you get for mining a block. Currently each block is worth 50 BTC. Soon that will drop to 25 BTC. If many people find mining to be uneconomical they will stop their mining rigs and the difficulty will drop.
What will change is the influx of new bitcoin into the market, instead of 500BTC per hour we'll get 250BTC per hour (on average). Will that make the price go up? Maybe.
That changes the economic dynamic since the cost of mining is the cost of assembling the botnet (ie. cheap)
No one really knows what the effect of halving of the mining rate will be. The currency is young, relatively small, and not yet very efficient (from an economic standpoint). However, everyone know the event is coming up. It MAY already be priced in. We won't know until the end of the year.
There is a small risk that this event may cause some disruptions in the underlying bitcoin infrastructure, however. The idea goes: Many miners are running full tilt going into the event. They know their income will half, so they want to get as much out of mining as possible before it happens. This drives up the difficultly level.
After the event, many of these miners may drop off as their operations suddenly become unprofitable (they are already running at the edge of profitability by revenue per kilowatt hour metrics).
When the miners drop off, it takes some time for the difficulty level to adjust (up to two weeks). Before the difficulty level adjusts, the time between transaction blocks will begin to grow, which slows down the confirmation of transactions. In a worse case scenario where a large volume of processing power leaves the network simultaneously, it could take several hours to get transactions confirmed for a few weeks after the event. Will this actually matter, or even be noticed? Again, noone knows for sure.
The opposite. The exchange rate determines how many miners are willing to compete for each mined BTC. You can see that difficulty tends to increase a few weeks after the price increases (keep in mind that difficulty has a 1-2 week delay built in). http://bitcoinx.com/charts/chart_large_lin.png
Displaying a prominent graph of only BTC/USD as proof of recovery, without an indication of liquidity and total market size, seems insufficient.
A lot of the recent increase can be attributed to gambling at http://www.satoshidice.com
Now that is clever.
But a better indicator that Bitcoin activity is increasing is the number of Bitcoin transactions on the network itself. Bunch of interesting charts here: http://blockchain.info/charts Especially: http://blockchain.info/charts/n-transactions-excluding-popul... showing the # of transactions has tripled in the last 4 months.
Thinking further on the risks of bitcoin, is it possible that the algorithm itself could have a yet to be discovered weakness, allowing for a trivial solution?
(similar to what happens when some forms of crypto are broken)
Isn't it a major assumption that these "extremely difficult mathematical problems" remain extremely difficult until all Bitcoins have been mined, 120-130 years in the future?
Bitcoin is also very conservatively designed. For example an address is computed with a RIPEMD160 hash of a SHA256 hash, so one would have to break both algorithms with preimage attacks to be able to generate address collisions allowing an attacker to steal coins from an arbitrary address. Because of this conservative design, it gives it a "safety cushion" to have time to anticipate cryptographic changes if they are needed.
But a better indicator that Bitcoin activity is
increasing is the number of Bitcoin transactions on
the network itself.
Admittedly the volumes themselves dictate that me moving money from one bank account to another will have less of an impact on the final number, but then again, I'm always moving money between my different bank accounts, but never between my Bitcoin addresses. I obviously can't say for certain, but I don't think there's a meaningful number of users moving BTC between their wallets for no reason.
So, yes, I argue that Bitcoin transactions are a better indicator of its activity. Sure, someone could be moving coins between his wallets, but every other indicator also confirms that Bitcoin activity is increasing (nr. of merchants, Bitpay users, etc).
If Bitcoin was annoying enough to be a real problem to the powers that be, the computing resources necessary to hijack the main chain would be online in a very short period of time.
If you want more details, I'd recommend reading the Bitcoin paper: http://bitcoin.org/bitcoin.pdf
Some of the various forks have tried to work around this by having trusted nodes and the like, but then you lose the decentralized nature and are vulnerable to the trusted nodes going rogue.
I definitely wouldn't recommend starting with the official bitcoin paper to learn about this. That would be like telling a math student to just read Newton if they want to learn Calculus :). Check out the bitcoin wiki instead: https://en.bitcoin.it/wiki/Weaknesses#Attacker_has_a_lot_of_...
Useful invention graph looked like this http://3.bp.blogspot.com/_2IAWpIwOiOc/SuvD_xiOfTI/AAAAAAAAAD... (example was IT) and graph for the passing fad dropped down to almost zero after initial peak (example was Macarena dance, if you remember that you are old ;-) ).
So far bitcoin seems like useful invention.
Another alternative is to work with a trusted server. This is used by Bitcoin Spinner for Android.
With the original client, having the appropriate port open/forwarded helps as well, and my understanding is that part of the slow sync is the inefficient database design. It's on the list of #TODOs.
> It turns out that a currency can thrive even when
> no one is making laws for it.
(Another poster pointed out that the spec is making the rules, and not a government, so it may be wrong to compare bitcoin with an un/poorly regulated currency.)
It shows bit-coin value to USD, gold, silver, and crude. It's fairly stable against the commodities but drastically spikes in value against the dollar. Our Fed at work...
This won't surprise anyone with a grasp of economic history that extends beyond 1945.
This core group of users (including me) were completely unswayed by the crash of 2011 H2. We all knew that it was nothing more than a correction of the insane valuation bubble of earlier that year.
How many people sold all their Bitcoins in the wake of that crash? It is indeed unsurprising to me too that Bitcoin recovered after a crash, because the owners of Bitcoin believe in it and so the market kept being rational post-crash.
The real test of Bitcoin has yet to happen, when Bitcoin will be popular enough that regular folks will put their life savings into it.
I would guess that in "the future", the name of currencies will become less likely to end up in the mindset of the general public. All they know is that a specific thing (a computer, a car, and so on) will cost X amount of what they have in the bank.
What planet are you from? On my planet, regular folks put their savings into 401k accounts, which invest in stocks, bonds, and sometimes commodities. If you do choose to keep your savings in a bank, you're investing in a currency (probably the US dollar.)
Instead its an trust relationship between the bank and the bank customer, like a contract.
Nope. Actually it's a trust relationship between the federal government, which insures your account up to 250,000 through FDIC, and you. You also have to trust that the federal government isn't going to inflate away your savings (spoiler alert: they are going to.)
Having a savings account is just about the dumbest thing you could do right now, since the rates are essentially 0%: http://articles.boston.com/2012-10-01/business/34178552_1_in...
Yet they still have the audacity to ask me if I want to open one every time I visit the bank. It must be hard keeping a straight face.
And your savings account is denominated in ...?
(hint1: USD EUR JPY CAD AUD) (hint2: The 'stuff' people exchange for goods and services) (hint3: Currencies!)
You're right about commodities, though. Unless you are deliberately taking positions in commodity ETFs or futures contracts (something that a person is unlikely to be doing without knowing it), you are probably not taking on commodity exposure.
As a financial market participant, yes, it is surprising that the Bitcoin market stabilised as quickly as it did since it suggests there was an influx of asset and currency owners willing to trade their value into Bitcoins despite the risk of rapidly losing that value in price level volatility. Having examined some AML flow of funds data I can say this resilience has nothing to do with the zeal of the Bitcoin community, which in terms of wealth is insignificantly tiny, and everything to do with its adoption in trades deemed, shall we say, unsavoury by the world's legal authorities. As a supporter of further sophistication in the Bitcoin markets myself, this sentiment of seeing nothing awry in the Bitcoin/USD volatility is worrying, though the faith expressed in the currency is reassuring (these are, after all, fiat currencies).
And on the "supply-side", in the US at least, federal spending is a significant portion of GDP, so you will always have a large amount of dollars floating around being used as a means of credit, exchange, and value.
And finally, having control of interest rates is a powerful tool to support economic growth - I would be fearful of a world where policymakers did not have that ability.
Tor isnt a dark corner of the web...