Dai/Nakamoto emails

That's a good quote: "What's wrong with bitcoin is that it's ugly." It refers to the protocol and the technical implementation, and it's quite true for the reasons mentioned in the article. For example, it seems possible that the world's largest mining pools may eventually try to unite in order that a single entity can control more than 51% of the hashing power invested into bitcoin. As mining technology becomes more specialized, the probability of this will continue to go up. Being able to control the fate of an entire currency is tempting, and it will get more tempting as bitcoin gains widespread adoption.

In spite of all that, it still works, and works reasonably well. The protocol is also full of all kinds of nice features planned for the future. There was an article that went into these plans in a lot of depth (which unfortunately I can't find offhand) but the point was that bitcoin is capable of far more than just being a simple money transmitter.

So that's the protocol aspect. But what about the social aspect? How has that fared?

It turns out that bitcoin is dangerous to its users. The reason it's dangerous is also its core strength: irreversible transactions.

There have been so many losses due to theft and fraud. Some guy on Reddit posted that he'd lost his 16BTC after he took his macbook into an Apple store for some minor repair. Some employee popped his harddrive into an external enclosure and scanned it for wallet.dat files, then made off with his coins by using a mixer. No one could prove anything, and that thief is now thousands of dollars richer while the victim is that much poorer.

One unexpected reason for the danger to consumers is the legal protections provided to corporations. It's relatively easy to start an exchange right now. It's as easy as starting a corporation and putting together a website. And if users are persuaded to send their coins to the exchange, and the exchange happens to lose those coins due to e.g. a massive technical problem, an unforeseen protocol problem like malleability, theft by an attacker, or even theft by the founders themselves, then the users are completely hosed. They lose everything. What happens to the corporation? It's dissolved, and that's that. No one from the failed corporation is exposed to any kind of legal risks. That's the whole point of a corporation: so that the people starting them aren't directly liable for the corporation failing. But when a bitcoin exchange or webwallet fails, all of the users lose their money.

This unfortunately happened to me on Mt. Gox. They recently discovered 200,000 BTC that they accidentally misplaced, so hopefully those will be distributed among customers in a few months and I'll get about 10-15% of my holdings back. In the meantime, it's pretty clear that the exchanges can basically do whatever they want. How can consumers know which exchange to trust? The answer is that you can't trust any of them. There is no mechanism by which to recover from disaster, and disaster is just a matter of time. Bitcoin The Protocol has the chance to last decades. How confident are you that your favorite exchange (or broker dealer like Coinbase) will last that long?

Beyond that, there is still no turnkey solution for consumers to manage their coins themselves. There are solutions, but they are uncomfortable. They require careful reading and time, both of which are inconvenient. The current best solution is a dedicated cold storage computer (or Raspberry Pi) running Armory, and to make multiple paper backups and store them yourself in various locations, so that it's unlikely your computer and your papers are all wiped out simultaneously.

And even with that kind of protection, someone can still hold a gun to your head and force you to send them your bitcoin, and there's not a damn thing you can do to protect yourself if they succeed. All transactions on the blockchain are public, so if someone gets wind that you control a 1,000 BTC wallet, suddenly you're a target. If they compel you to send your coins to them and somehow get away, you'll never get them back. Heck, if they force you to send them your coins and don't get away, it's still unlikely you'll ever get your coins back. They'll just sit in prison and bide their time, then enjoy your coins as a pension plan for when they get out of prison.

Is there hope? Perhaps. As far as I can tell, what's needed is for an exchange/dealer like Coinbase to purchase some kind of high-risk insurance which is guaranteed to pay out in the event of a disaster. The insurance plan would have to be able to cover all coins that the exchange holds at the time of the disaster. Since Coinbase has >1M user wallets, Coinbase probably controls quite a lot of coins. Let's say that they hold ~1/4th the number of coins Mt. Gox claimed to: about 200,000 BTC. Let's say the price per coin at the time of the disaster is $400/coin. That's $80M of losses which the insurance company would have to cover. And how precisely will they pay out to the exchange's users? Or even to the exchange themselves? Let's say the insurance company hands over $80M. Now the goal is to use that $80M to buy back enough coins from some other source in order to return all lost coins. Well, you can't do it! You'll skyrocket the price of bitcoin from $400 to $MASSIVE_NUMBER if you tried to buy 200,000 coins, especially if everyone realized what you were trying to do. So the exchange may still wind up hosed! And of course, that means the users will wind up hosed in the end.

the citations of the paper is incomplete also, in that it does not mention finney's RPOW from 2004: http://www.finney.org/~hal/rpow/

quoting from there: "Security researcher Nick Szabo has coined the term bit gold for information objects which are provably costly to create"

bitgold as it was publicly described in 2005 was different than bitcoin in that there was a market for the tokens. bitcoin uses an agreement mechanism to establish the difficulty.

A smart man, especially someone that understands security, would foresee the argument from silence. If anything, I think it is a deliberate red herring to make suspicion fall on Szabo.

Satoshi changed the world and the newsmedia and humans in general are obsessed with geniuses and successful people. It's also a natural phenomenon that people are drawn to something that's mysterious and forbidden (read the book "Artful Persuasion").

I doubt it has much to do with anything rational, such as benefiting from finding out who he is or obtaining more insight from Sathoshi. It's just deep rooted human curiosity.

For one, his wealth will likely become monstrous.

If he anticipated Bitcoins success he has been wise to remain unknown.

While we're on the topic, does anybody know how many Litecoins its creator, Charles Lee, owns?

My theorie is that he worked under a contract that automatically transformers all created intellectual property to the company - even when done is his spare time. This is not unusual, especially for US companies.

One reason may be that bitcoin is a Ponzi scheme.

Well, for one he probably owes hundreds of millions of dollars in back taxes for all the coins he mined.

Someone posted that method on HN not too long ago. It's meant to increase readability by helping the eyes distinguish one line of text from the next. It's ugly and a tiny bit distracting at first but it really does work. Just give it a try. I zipped through those 2 paragraphs really quickly. I think it's Javascript based.

It seems quite readable to me, although rather ugly.

We may soon see Satoshi on the Forbes list of billionaires. It'd be a journalistic scoop.

Also of interest is that posts about the identity of Satoshi have been removed from Hacker News because it is not tech news, or relevant.

Yes, everyone. From Wikipedia: "Satoshi Nakamoto (中本 哲史[1] Nakamoto Satoshi?) is a person or group of persons that created the Bitcoin protocol"

very unlikely. all the code is written uniformly. all the posts carry one style. it looks as if at the time there was only one person in the world who was crazy enough to think this could actually work.