What are the chances that as this message echoes out to virtually any urban-dwelling or internet connected human on the planet we may all, as a human race, wind up accidentally embracing a unified digital currency while in pursuit of what amounts to a lottery ticket?
Only if P=NP, in other words.
It is highly unlikely that it will be adopted as a currency for major business transactions (too unstable and unknown), and is completely traceable, so will not be adopted by major elements in the black market. In the end, if bitcoin specifically (as opposed to some alternate cryptocurrency) remains in use for a long period, it is likely to be for relatively small transactions in niche markets. Does that warrant it's current valuation? I have no idea.
Gold is extremely laborious to move, and not divisible enough for most usage. Diamonds are not fungible or very divisible. Both are very susceptible to physical theft.
Network effects for money are very strong, and bitcoin has a huge first mover advantage. Any competing digital currency will require quite the innovation or distinguishing factor to gain any traction. It is becoming more 'known' and trusted with each month that passes. Pre-bitcoin-era financial groups are slowly yet increasingly giving it more legitimacy (Mainly VCs, a few funds, the occasional bank, and research groups -- also Second Market and the Winklevoss ETF are two big things to watch right now).
The main counterpoint currently is that bitcoin use is quite error-prone and hard to digest, but this seems more like a temporary roadblock to me. Y'all remember geocities and AOL right? Bitcoin will become much easier and more secure to use in the coming years. Software is relatively easy to improve, compared to gold, fiat, and the like.
There are some potential solutions to traceability, but it is uncertain how that will play out (I can't even pretend to fully understand the regulatory environments and international politics that will affect this). The one thing I can guarantee -- the way we use and conceptualize money is going to change drastically in the next several decades, and I think bitcoin will have a huge influence on this.
You can't play off a good which is hard to move as "susceptible to theft" when you can log in and copy a data file and have succeeded in stealing a whole bunch of money.
Its websites coded by script kiddies such as inputs.io by an under 18 Australian who ignore security and then get hacked (or more likely do a runner with the coins themselves) once they get enough suckers to send them bitcoin
Bitcoins can be owned, so it's better to own them instead of storing them in someone's wallet on some website. Send you money to a shitty exchange nearby, buy bitcoins, move them into your own wallet immediately. Then you won't care if someone hacks the exchange.
Even nowadays with a few simple steps you can make your bitcoin stash VERY VERY secure. Install a fresh copy of linux on a USB, disconnect all networking capabilities, boot to the USB, create a new wallet/address (brain or paper) using established methodology, turn off computer, remove USB, presto, you have a un-hackable bitcoin address. You could even create a multi-sig stash that requires a digital signature from multiple people (2-of-3, 3-of-5, etc). Obviously, this is cumbersome and non-trival for the average joe. But with a small amount of imagination it is easy to see how everyday solutions could be developed.
You also haven't covered anything about backups, which means if you lose that USB or it dies, then poof all that money becomes unrecoverable permanently.
You can't even access that money now without booting an entire new OS on the computer, which means good luck spending it, not to mention, for a digital currency you might want network connectivity as well.
There are several tools that allow you to create a transaction offline (using similar steps to what I listed above, which only take 10-20 minutes) and then you can broadcast the raw transaction text to the network using something like http://blockchain.info/pushtx. Again, this only necessary for super secure storage of long term savings/investments/etc.
Lastly, one could easily keep small, day-to-day amounts on their smartphone, which can spent and transferred quite conveniently (average joe level convenient). Then top up this spending wallet every so often using your offline wallet (10 minute time commitment every week or two).
The options/methods for doing all of this will only get easier. We are in the pre-alpha stages of digital currency software right now. Think web in the early 90s.
Most probably, 51% will never happen because it's never economically justified. Even craziest anti-heroes must have earned a lot of money to risk pulling this off for very dubious reward. Some scientists don't like possibility of it, but it's their own bet on how reality works.
When I mentioned P=NP, I meant that Bitcoin rests on inability to quickly break hashes and ECDSA signatures. If we find such a method, it would probably be a proof of P=NP.
Really though, the point has more to do with formalizing Bitcoin's security. You claim that it relies on the security properties of cryptographic hashes and of digital signatures, but what property of Bitcoin actually reduces to the security of hashes or signatures? What are Bitcoin's security guarantees? When you can at least state some security property Bitcoin achieves, then maybe you can prove that Bitcoin's security depends on hashes and signatures. Without such proof you cannot go about making statements about P vs NP being relevant to Bitcoin's security; indeed, it is hard to speak about "security" for Bitcoin at all.
Good luck with that if the "source of disturbance" is a major nation state hostile to Bitcoin.
My prediction is the price is going to rise, faster and faster in the coming weeks. The hype is still building, people are seeing these 20% gains overnight, and thinking they're going to get rich. It feels like a pyramid scheme, where the people already owning coins are going out and recruiting others to buy into Bitcoin, to raise the value of their own wallet.
Now, time for a wild guess. I say it peaks at 900-1,000 two to three weeks from now, then starts to level off. People get worried not seeing gains, and decide to start cashing out in time for the holidays. By the new year, under 300.
If I had a coin, I'd hold it until the end. As others have said, I think it's going big, or going to zero in the coming years.
http://unqualified-reservations.blogspot.fr/2013/04/bitcoin-...
Remember there were people who dumped a lot of money into bitcoin at $200 last bubble and then bailed at $100 an extremely short time later.
Something like that will probably happen again with the current rise. The long term probably doesn't really care about the blips along the way though.
Or, in the case of cryptocurrencies, when something goes wrong with the underlying encryption. We are very far away from that eventuality (SHA256 is pretty damn secure and ECC is in the realm of "we don't think this will ever be broken unless the NSA curve weakness is real"). Still, one day.
Still, bubbles really worry me on a psychology level. All it takes on journalist to write an ignorant article on Bitcoin (which they never do) and then a whole bunch of other journalists then cite without research (which they never do) and POP!
I think it is actually exclusively confidence. Something could go horribly wrong with the underlying encryption and the perceived value would not drop until people recognised the implications of the problem and consequently lose confidence.
With a regulated financial sector and overwatch of ISP data retention, you still need to somehow gain knowledge of the encrypted bits to deploy a quantum computing attack against them. Governments have an interest in ecommerce continuuing, and there's a limited time-horizon where you can actually mount an attack - so provided you route your transactions over "known trusted" paths, everything basically continues - especially while the only quantum computers are controlled by governments to start with.
BitCoin on the otherhand almost immediately runs into trouble, because it's entire basis is centered on the difficulty of cryptography problems. It can't function without distributing it's content widely (and indeed, completely), which means its immediately valueless - even if someone doesn't attack it, it's immediately known that at any point in time someone can simply create every coin that will ever exist and credit it to them.
ECC would break[1] (funnily enough I was under the false impression that ECC was quantum-resilient until I did research for this comment), SHA wouldn't[2]. As far as I know the end-of-the-world attack against Merkle hashing algorithms are mathematical proofs.
However, the combination of quantum computers and advances in mathematical attacks against Merkle-Damgard hashing algorithms is almost guaranteed to happen eventually. Honestly, when it comes to security, using SHA256 was a major oversight. SHA512 would have given much more longevity to the currency - considering that you are talking about an algorithm that encapsulates wealth; nothing is overkill.
The only semi-confirmed usage of quantum computers, to date, is finding minima/quantum annealing (DWave). Shor's algorithm (which would be used to attack RSA and ECC) has been demonstrated on a very small scale, although many doubt that it was a true demonstration[3] (read: unentangled particles means that Shor's algorithm wasn't truthfully demonstrated by IBM).
[1]: http://en.wikipedia.org/wiki/Elliptic_curve_cryptography#Qua... [2]: http://bitcoin.stackexchange.com/questions/6062/what-effects... [3]: http://prl.aps.org/abstract/PRL/v83/i5/p1054_1
There is no need for the crypto to be broken to have a crash.