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bbbhn

Krugman doesn't understand Bitcoin. The computing power expended on mining is used to secure the Bitcoin network.

There are many, many costs associated with securing the integrity of established financial networks too.

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I hate the term "securing the network".

Mining prevents double spends, that's all it does.

It doesn't prevent your bitcoins being stolen or make you whole afterwards, it's not analogous to a security guard standing outside a vault, or the government guaranteeing your deposits.

I'm mildly optimistic about about crypto currencies in the long term (10 years or more), but energy usage is the weak point of bitcoin, I wrote about this here http://www.reddit.com/r/Bitcoin/comments/195k4o/the_case_for...

Mining prevents double spends, that's all it does.

That is the level of security in the bitcoin network. It might be a design flaw to assume we can act like responsible adults, I agree. But if you're looking for something that makes end-runs completely impossible, I'm afraid you are asking to much and you won't find it in anything that exists.

I'm not commenting on the politics and economics of using public funds to guarantee deposits. I actually agree with the philosophy behind bitcoin, it's clear from the levels of public and private debt that west is gaining a reputation for poor fiscal discipline.

I just think the term is misleading, especially to people who don't know much about bitcoin.

> The computing power expended on mining is used to secure the Bitcoin network.

Could you expand on this? I'm not sure I understand it. Thanks.

Miners choose transactions which obey the network rules. They then "vote" on which transactions to commit by exerting computational power. To subvert this collective decision making process would require a computation power at least equal to the bitcoin network (bigger than any supercomputer). Therefore any such attack would be absurdly expensive, and we can consider confirmed bitcoin transactions to be secure.

> To subvert this collective decision making process would require a computation power at least equal to the bitcoin network (bigger than any supercomputer). Therefore any such attack would be absurdly expensive, and we can consider confirmed bitcoin transactions to be secure.

There are plenty of organizations that, if they wished to mess with bitcoin, could easily afford more computing power than the bitcoin network (yes, even though that is "bigger than any supercomputer".)

Included in these organizations are ones (such as the US government) that have been accused by some of bitcoins proponents of being actively attacking bitcoin.

So why should we consider confirmed transactions to be secure?

No one considers them to be absolutely secure. Rather there is a calculable cost to subverting the network, currently measured in the millions of dollars and growing. Having the cost of reverting a transaction be $X,000,000 is sufficient for most purposes.

Ultimately I think mining protects against sybil attacks and thus helps everyone agree on a single transaction history. Without mining, it would be fairly easy to create multiple alternate histories and it would be hard to tell which one to believe.

(If you don't care about sybils, you can use Ripple which requires no mining.)

Once you secure the system however, the costs of increasing currency into that system is trivial.

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