The Big Book of Bitcoin - An introduction
alvarofeito.com
alvarofeito.com
It highlights many of the risks and benefits but misses out on what I think is the Achilles' heel of bitcoin, the ability for sovereigns to shut down the exchanges.
Without the ability to convert bitcoin to fiat easily, the currency loses its usefulness as a proxy for fiat currency. Does anyone have a convincing argument for how the exchanges are not vulnerable?
Definition 1: 'Good producer' is a producer that accepts bitcoins.
Definition 2: If all the good producers together produce all that you need, then the number of producers is 'enough'.
Definition 3: 'Ideal state' is when enough good producers exist.
Theorem 1: A producer will accept bitcoins if either of the following is true: i. Ideal state has been attained. ii. There exists exchanges that trade you physical currency against bitcoins.
Observation: Once we are in the ideal state, we no longer need to have bitcoins converted to physical currency. So we don't need the exchanges to exist forever. We need exchanges only till enough producers have started accepting bitcoins.
The great thing about good currencies is they can be exchanged for almost any currency and therefor can be used to purchase almost any good or service that is for sale.
At this point, a full-scale governmental assault on BitCoin could slow it down or scare some people away, but it's highly doubtful that the growth could be stopped altogether. The bigger danger is that they'll embrace it wholesale and start taxing BTC exorbitantly instead. :P
Do you care if you are paid in Chinese Yuan or USD? The currencies are interchangeable, but Yuan is very hard to convert it USD and you'll lose a lot when you do.
Regardless of how big bitcoin gets, everything will not be transacted in bitcoin. People try to accumulate capital to buy big things, like cars and houses. If you can't buy a beach house in Costa Rica - and any beach house, not just from a few sellers - then the currency is less valuable and people will prefer fiat currencies.
Bitcoin must be easily exchangeable to be widely adopted.
Direct links to them for your convenience:
Html transcript here: http://www.grc.com/sn/sn-287.htm
Text transcript here: http://www.grc.com/sn/sn-287.txt
Pdf transcript here: http://www.grc.com/sn/sn-287.pdf [pdf]
Not a key enabler, but I think criminals would definitely appreciate a hardly traceable and potentially anonymous currency, don't you think?
It's not an opinion unfortunately, there is already evidence floating around that they are using it or that they are very interested about it.
Because of this I don't think bitcoin should replace a national currency anytime soon, can you convince me otherwise?
check for example this: http://www.nbcnews.com/business/report-hsbc-allowed-money-la...
and this: http://www.guardian.co.uk/world/2009/aug/17/cocaine-dollar-b...
I also think criminals will avoid it like the plague. Bitcoin could conceivably tell law enforcement everywhere you received money from and everywhere you spent it. I realize it is one long number transacting with another long number, but law enforcement have computers too, and they have time on their side. Using bitcoins could be like leaving DNA on the scene of the crime - probably not a good idea if you want to get away with whatever you are doing.
Curious to read about the evidence, is all.
< The bitcon economy is growing fast.
> The bitcoin economy is growing fast.Any thoughts on how to design such a system?
A wallet service which you've entrusted your coins to can obviously do recurring payments (bonus: can't hurt you any worse than your total deposit).
Your local wallet software could do this (in a more user-friendly fashion than programming a crontab to invoke bitcoind).
A credit card would work, regardless of whether you settle your account with the credit card company in bitcoin or dollars.
The Bitcoin protocol supports future-dated transactions, but which can be canceled by a user at any point before the future date; so for a 'subscription', a user sends a few transactions worth $X future-dated to each month for the next, say, 5 months. The service holds onto them, and tries to commit them when they mature; if the transaction works, the user gets access for the next month. (See https://bitcointalk.org/index.php?topic=22772.msg287925#msg2... https://en.bitcoin.it/wiki/Contracts https://en.bitcoin.it/wiki/Script )
These will resemble the banks of today, in that you'll have an account with the service and they'll manage moving your money around for you. Some of this may end up just decreasing one account and increasing another within the same provider.
A lot of people assume these payment services will be just like banks, but that's not necessarily the case. There's certainly room for innovation, and so far there's nothing whatsoever that would require them to be subject to any particular nation's regulations. We'll see how it shakes out.
It might be neat to create or extend a bitcoin client that accepts invoices/requests that you can approve like many bank's bill pay services, but without the middle man. You would need to figure out how to prevent getting spammed with requests.
It probably isn't worth the effort though, because I'd bet that one day someone will just make create a credit card based on bitcoin just as they have for most other currencies (I don't think one exists yet).
Anyone can build a bitcoin wallet right?
So yes, you could probably write some sort of crypto-system that allowed continuous authority for a signed-address to be given a certain amount every so often, on request.
You wouldn't want to right now though, with the volatility in the value we're seeing right now you'd be a fool to agree to pay the same amount for something next month as you do this month.
A satoshi (not satochi) is 0.00000001 BTC, not 0.000000001 BTC.
Not sure where the $6,000/BTC comes from for $80b in annual transactions per 10m BTC, but consider velocity of money. A BTC can be spent multiple times in one year. Also consider that monetary base (raw currency) is not the same as a credit account, but you can spend either.
So in practice, you might only need 0.1 BTC per 1 BTC in annual transactions.
I have no idea, visually, what the difference is between those two numbers, and I so suspect no one else reading does either, without manually counting the zeros one-by-one.[0]
Here's an idea: we sometimes use commas to the left of the decimal point to make the numbers easier to read, perhaps using apostrophes to the right would also make things easier to read? E.g.:
A satoshi (not satochi) is 0.000'000'01 BTC, not 0.000'000'001 BTC.
I can easily tell the difference now. (The idea behind using apostrophes and not commas is that you won't inadvertently confuse the right-hand side of the decimal point with the left.)
Anyway, carry on. :)
[0] There's also scientific notation, but that only works in cases like this with lots of zeros between the decimal point and the number in question. With a number like Pi, scientific notation is useless.
Note also that your math involves 12m BTC but your page says 10m.
Let's assume 12m has been mined, 1m has been lost forever, 8m are hoarded, and a velocity of 10. You then have 30m bitcoins in transactions but 3m bitcoins circulating. In this case my estimate is off by a factor of 2 - 2.5 (but it could be 10, sure). But What if it doesn't take over half of paypal's transactions, but rather 4 times all of paypal's transactions? That's why I think any estimate is pretty hopeless. A good order of magnitude is ... if it reaches paypal scale it will be in the thousands.
Since there is no fractional reserve banking (yet, anyway) in the bitcoin economy, I don't see how the monetary base can be 1/5th of the money supply (but I might be missing something).
Arguably they'll even make it a bit harder since you'd need specialized hardware, and couldn't just buy up a bunch of GPU EC2 instances on a whim and take over the bitcoin network.
Their business model is that they have a sub-pool in a larger mining pool, and they financed their operation by selling shares (denominated in Bitcoin). The shares pay out weekly dividends, based on the awards the mining pool provides to them.
There's a couple (very, very tiny) bitcoin denominated stock exchanges, and on some of them you can buy ASICMiner "passthroughs". These represent shares in ASICMiner that are controlled in large blocks by an individual. That individual passes through the dividends to the passthrough shareholders, minus a small management fee.
It's an elaborate system, but I guess money finds a way, even when it's bitcoin.
Perhaps it is, but don't think it's what you meant :)