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Comment by tytyty | Hacker News Reader

I'm quite ecstatic about this. I invested in bitcoin early on when it was around $1-3 a coin. I try to buy goods with it at legitimate places like bitcoinstore when it's up, and buy more when it's down. I just, you know, actually believe it's a great alternative and want to see it succeed.

I do have concerns about it scaling to handle massive amounts of transactions, and what will happen with transaction fees and mining rigs as the mining reward is reduced, but it's step in the right direction for currencies.

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"I do have concerns about it scaling to handle massive amounts of transactions,"

Relevant:

https://dl.acm.org/citation.cfm?id=1754992

Of course, Bitcoin does not really have offline transactions, so this may not be all that relevant (though lacking offline transactions is a pretty serious limitation).

A bitcoin is just a signature, a string that you use to demonstrate ability to transfer it. You can hand someone a physical copy of a bitcoin signature. Of course you won't be able to verify the transaction yourself, but trusted third parties are using things like scratch off holograms to access them.

Correct me if I am wrong, but the prevailing thought when that article was written (1992) was that digital currency would resemble more of a transferred digital coin, with signatures representing each transaction. So if I had coin #12345, and I transferred it to you, I would digitally sign it to you giving your private key the spend capability.

With those architectures, a central authority would be required to prevent the double-spend. And with those architectures, the coins grow with each spend.

The difference with Bitcoin (which I think is totally misnamed) is that it's not a coin architecture, it's a ledger architecture. So no matter how many times the amount 1BTC is transferred, each transfer could be just the same length - the sender's address, the recipient's address, and an appropriate signature. Even 50 years from now and ten thousand transfers of that "coin" later, the "coin" doesn't get larger.

The ledger gets larger, but the coin does not (since really there's no such thing as a "bit COIN" - really what you have is a series of account numbers in the giant shared ledger.)

"With those architectures, a central authority would be required to prevent the double-spend"

Not necessarily; another approach, which is common in protocols that allow offline transactions, is to force cheaters (i.e. people who double spend their tokens) to reveal their identity. It helps to think of the nonce in DSA: if that nonce is used for one signature, the secret key remains secret, but if the nonce is reused in another signature then the two signatures can be used to compute the secret key. Similarly, in a digital cash system, if the same token is used in two different transactions, then the two resulting tokens can be used to compute the identity of the person who spent that token in the two transactions (and hopefully, whoever computes this will warn everyone else about it).

"with those architectures, the coins grow with each spend."

Chaum's result applies to any secure offline electronic transactions, regardless of the internal workings of the transaction. The argument is basically this: to maintain the security of the transactions, the amount of information being transferred per transaction must increase in the number of offline transactions that involved a particular "unit" or its "derived" units (e.g. if the system supports splitting the currency, as Bitcoin does). It does not make a difference whether or not the system has a central authority; all that matters is that the system allows some value to be securely transferred in an offline/peer-to-peer fashion i.e. that a transaction do not require any communication with any parties not involved in the transaction itself.

"The difference with Bitcoin (which I think is totally misnamed) is that it's not a coin architecture, it's a ledger architecture"

I read this as saying basically this: there are no offline transactions in Bitcoin; every transaction involves communicating with other nodes in the Bitcoin network. Which is well-aligned with Chaum's result, because Chaum's result boils down to a trade-off: either you support offline transactions and incur a scalability penalty (which a central authority can fix by trading "old" tokens for "new" tokens), or you only allow online transactions (or something in the middle, like "receipts," which Chaum discussed). I would call the lack of offline transactions a major technical shortcoming of Bitcoin that severely limits its utility, but I suppose not everyone agrees with that statement.

I would expect transactions to simply become expensive.

Then, people would go through trusted third parties (e.g. online wallets) for small transfers, and only use the blockchain for large transfers.

The small transfers would just be adding or subtracting "virtual" bitcoins between different users' accounts.

Clearly, such a system would optionally allow for fractional reserve banking.

I view bitcoin more as "digital gold" than "digital cash," for the above reasons.

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