Bitcoin – The Internet of Money
startupboy.com
startupboy.com
Bitcoin has a scripting language which enables more than a “send money from X to Y” transaction. A Bitcoin transaction can require M of N parties to approve a transaction. Imagine Wills that automatically unlock when most of the heirs agree that their parent has passed, no lawyer required. Or business accounts that require two of any three trusted signatures to approve an expenditure. Or wire escrows that go through when any arbiter agrees that the supplier sent the goods to the buyer. Or wallets that are socially secured by your friends and family. Or an allowance account accessible by the child and either of two parents. Or a crowdfunding of a Kickstarter project that pays out on milestones, based on the majority of the backers approving the next payment. The escrow in each case can be locked so that the arbiters can’t take the money themselves – only approve or deny the transaction.
The scripting language can also unlock transactions based on other parameters. Unlocking them over time can enable automatic mortgage, trust, and allowance payouts. Unlocking them on guessable numbers creates a lottery auditable by third parties. One can even design smart property – for example, a car’s electronic key so that when and only when a payment is made by the car buyer to the seller, the seller’s car key stops working and the buyer’s car key (or mobile phone) starts the car. Imagine your self-driving car negotiating traffic, paying fractional bitcoin to neighboring cars in exchange for priority.
I've been following Bitcoin since the beginning and had no idea it supported "transaction approved only when M of N participants agree."
How do you feel about those scenarios? Also, does anyone know of other little-known Bitcoin functionality?
Beyond script there isn't a whole lot— nlocktime lets you make transactions which cannot be mined until a specified time in the future. This lets you build protocols that have "refunds", so that they don't cause funds to get stuck if a participant walks away.
But even just using a few features of script and nlocktime is exceptionally powerful:
Securely and privately trading Bitcoins for other cryptocoins (including Bitcoins): https://bitcointalk.org/index.php?topic=321228.0
or
Buying computationally verifiable information in an environment of mutual distrust: https://en.bitcoin.it/wiki/User:Gmaxwell/why_hash_locked
One of the most important things script does is allows you to produce transactions which are bound into more complex protocols occurring outside of Bitcoin in a secure way. This allows you to extend Bitcoin's trustless decentralization into things which aren't part of Bitcoin proper.
I highly recommend watching this talk by Mike Hearn, as well as reading the links in NhanH's comment: https://www.youtube.com/watch?v=mD4L7xDNCmA
Interestingly, I believe that this is one of the case where "lazy programmers make best programmers": instead of implementing the transaction system, Satoshi decides that he couldn't be bothered and just put in a scripting system instead (I have no citation for this, and can't claim for certain that this is the case, it was just something I read a while ago).
However, due to security concerns, I think that most of the scripting ability is currently disabled.
Due to the ponzi-like setup, the people who paid 4 million dollars for "MasterCoin" are very, very vocal when it comes to promoting it.
https://blockchain.info/address/1EXoDusjGwvnjZUyKkxZ4UHEf77z...
I wonder if a future Bitcoin offshoot might even use a more general standard language for in-ledger transactions. Javascript? LLVM?
Surely there'd be a number of technical and economic challenges to be overcome, but Bitcoin itself is an example of how a good-enough solution may be hiding in plain sight.
By not having looping or recursion script naturally gets an operation limit by virtue of having a size limit, and this is _relatively_ easy to get right between implementations. (Though, so far several of the alt implementations have gotten it wrong).
There is nothing that indicates undefined behavior of LLVM would lead to a fork in the blockchain.
If undefined behavior could make some nodes accept a transaction while others reject it the state would become inconsistent and potentially mutually exclusive. From one currency, you'd have two and every coin could be spent twice.
"This is a list of all Script words (commands/functions). Some of the more complicated opcodes are disabled out of concern that the client might have a bug in their implementation; if a transaction using such an opcode were to be included in the chain any fix would risk forking the chain."
Common wallet software just uses templates to create and decide which scripts are relevant to them— but the network itself absolutely does validate them.
But I can see it working with some adjustments: make your contractually obliged lawyer part of the transaction and include his fees. This way he can't grab all the money for himself and your usurpers can't get to your money that easy.
I know, I'm pessimistic.
I want to start from the beginning and learn everything. What are the best resources for this?
You're best bet to do so is probably to just skip the reference client and its complex C++ implementation, and learn the protocol from the Python implementation [0], combined with the protocol specification on the Bitcoin wiki [1].
If Java is your thing, I've also heard good things about the readability of Bitcoinj, which is used for various Android Bitcoin clients. Just note that Bitcoinj implements SPV, which is not the full reference protocol. But it would still be a great start to learning about Bitcoin.
If you're not a programmer, there are a 101 different intro to Bitcoin sites. I think I've heard good things about the Khan Academy's intro videos, but I've never watched them myself. And yes, and Satoshi's original paper.
0. https://github.com/jgarzik/python-bitcoinlib
1. https://en.bitcoin.it/wiki/Protocol_specification
2. http://code.google.com/p/bitcoinj/
3. bitcoin.org/bitcoin.pdf
EDIT: s/legibility/readability
It's not too bad to read. Only the first six sections are really necessary to understand how it works.
http://www.mail-archive.com/search?l=cryptography@metzdowd.c...
https://bitcointalk.org/index.php?action=profile;u=3;sa=show...
The bitcoin wiki is also pretty good: https://en.bitcoin.it/wiki/Introduction
I won't add more resources to the list others presented but i will +1 this suggestion: if programmer, code something bitcoin related.
Classic example of why techies need to avoid talking economics.
Internetworking technology didn't need the help of DC to crush the walled gardens of the past, and won't need anyone in particular in the White House or FCC to continue its ascendancy.
It is quite possible Bitcoin will be superseded by some other system introduced by one of the existing major transaction processors - they have a huge amount to lose if Bitcoin becomes a standard, and everything to gain by owning the future of transactions.
We all know how that went / is going when that country is controlling world politics.
What are the advantages that make your idea of "finance will take the theories, and code" seem plausible, to you? And, what would a patent have done to improve on the situation for anyone?
the knowledge you'll get most of your deposits back if the bank goes bust? (government mandated insurance schemes like FDIC/FSCS are really expensive for banks... this makes up a big part of your bank fees)
the bank's capability to match up long term loans with short term deposits?
people really want a 25 year mortgage, but also want instant access to their savings, the banks (mostly) match up these two incompatible goals: this is a useful function
and the transaction-scripting possibilities described in a lot of these comments are interesting but why couldn't banks implement the same thing? mainly because they are trying to protect you & intercept fraud etc.
My ideal version of Bitcoin is more like this -- you put money in the bank & then it becomes crypto currency. You can pass it around as much as you want & then at the end of the day if you ever want cash you submit coins to the bank & get cash. It's so simple & negates a ton of Bitcoin's problems. But it's not as romantic & get rich quick-y so the community will hate it. I think the allure of the black market, "f__k the systemmm", and pyramid scheme is 90% of why bitcoin is defended so intensely.
I think it's complicated legally though and that's why financiers want nothing to do with it. After all, if banks told you you could go 0% transaction fee if you incur some risk of losing your account altogether (if your wallet gets deleted or an admission that they might steal it or that you'll have to sell back your money at a new market price, plus the fact that you're entering an imbalanced market where early adopters have greater hordes of wealth for the same buy-in price) I think most customers would flat out reject it anyway.
It's also a very strange approach that a lot of the arguments take where they claim that because of the distributed nature it's safer than dealing with corporations. The Bitcoin network has its own points of failure (exchanges, hello?) that users have gotten burned for trusting. They are establishing new Gods, not eliminating the concept entirely. A public record does not mean that the system has no possible points of fault. A big part of banking is controlling these possible fault points to protect customers. As with lots of corporate/gov services, they are trying to design it so that it is strong/reliable/simple-to-use/stable.
Oh, and duh!! Lots of Bitcoin services (exchanges, transaction processors) CHARGE FEES! It's only when it's floating around the ecosystem ether that it is fee-less. If it gets to the level of everyday use, I'd wager there will be as many protectionary fees as with USD except maybe in certain situations: sending money to a friend, or a no-refunds type of transaction where ordinarily you'd pay cash (which incidentally is more off-the-grid than BTC would be at that point).
I grant you, just like with the Internet there is a transition point where to get on the internet you have to pay high fees (similar to exchange fees) but once internet is cheap and everywhere then lots of services become cheaper and more accessible.
The same goes on with bitcoin. As adoption grows you won't need to exchange for USD, EUR or whatever as much, therefore no exchange fees.
Banks will have to adapt, re-purpose themselves to a certain extend.
The problem with your suggested system is that it introduces a mandatory third party into all transactions, even where only two parties are desired. Bitcoin makes that third party optional.
You're correct that there are fees, but these are much more flexible and usually much lower than current fees (see international wire transfers).
Basically what I'm describing is Bitcoin but instead the exchanges are banks and without mining. The whole system would be pretty much the same beyond that.
I basically think that mining was a trick used to help adoption, but it's a big part of the destabilization of the currency. Forget banks if you don't like the idea (I suggested them because deposits could be FDIC-insured). What if the ecosystem started from scratch and Gox just inputted money 1-to-1? $1000 = 1 BTC, and then if you need to print more BTC, just put more money in the bank & raise the cap.
Think again - mining is closely tied to a "proof of work", a guarantee that the coins are not created out of thin air. That property is lacking from the system you are suggesting. How do you prove that your "DollarPegCoin" is actually backed by anything?
I agree that this has caused an inelastic supply and wild price fluctuations, and these will continue, but it serves an additional purpose besides being an adoption incentive.
I'm excited to see when they open source the code. I think a key part of this model that is missing from Bitcoin is that for this to work they'll have to keep an actual bank account to pay out to users whatever was put in. With Bitcoin once you buy a coin that cash is gone. The burden of maintaining the value of the system is then, somewhat paradoxically, on the buyer.
EDIT: Ugh, WHYYYY?!!! They mint a finite amount (100 billion XRP) and Ripple Labs plans to donate 55 billion to "users, charitable organizations, and strategic partners". This is MY WHOLE BEEF with cryptocurrencies. They are all redistributing wealth in a way that hasn't proven to be mathematically sound just cuz they're like "eh what's the big deal us originators can just print ourselves as much money as we want for a while". Now again faced with a situation where something that is supposed to be currency is now a trading platform with somewhat arbitrary rules that make the market difficult to predict.
Side note: I don't think anyone's confirmed Satoshi Nakamoto is actually Japanese.