Bitcoin crashes over 25% in 24 hours, under $180

For the truly paranoid you could even generate your seed using coin flips or dice rolls... http://www.swansontec.com/bitcoin-dice.html

If one safe deposit box full of gold is stolen, that portion of the gold is gone. If a safe deposit box containing 1/5th of a Shamir's Secret Sharing secret is stolen, the secret can't be reconstructed by the thief, but can be reconstructed by the owner if they still have access to 3 of the 5 pieces (for example).

[1] http://en.wikipedia.org/wiki/Shamir's_Secret_Sharing

It also seems weird to hide a piece of gold at a friends house. Now you expose them to the risk of burglary, as well as to the temptation (in a crisis).

Bitcoin keys are much easier to hide, too.

I haven't bought a lot of gold, but I've never been asked for ID here in East Europe. Go to kiosk, buy coins with cash and that's it.

Epic :)

In general I agree. Only storing guns seems even more difficult than gold. I live in a country where it is not a normal thing, and statistics seem to point out that gun ownership increases risk of being shot. But in a doomsday scenario, I suppose having a gun would be a good idea :-/

Anyway. Turning "hoarding" into a dirty word is one of the last signs an economy is about to tear itself to pieces, just before the baseball bats come out and shop windows start getting smashed. Stay classy though!

For example recently in Greece the exact thing happened that people always worry about: home ownership was suddenly being heavily taxed, because those house owners have little way to hide their assets.

In general governments try to prevent the population from using alternative currencies (usually it is illegal). So if in an economic crisis gold would become too much of a live currency, countermeasures by the government seem very likely.

In the best case scenario, Bitcoin will continue to experience unstable boom-bust cycles as prices will rise when people start hoarding their coins, then crash again when people dump their Bitcoin en masse once prices hit a high enough peak. This is great for speculators, terrible for everyone else.

In the worst case scenario, Bitcoin prices drop to $0 when everyone gives up using it. Which leads to the second problem: Bitcoin never really solved the chicken-and-egg problem. Not enough merchants accept Bitcoin for customers to bother with yet another currency, and not enough customers use bitcoins for merchants to deal with yet another currency. Services like Coinbase are merely abstractions over the USD - too few merchants deal solely in Bitcoin, and for good reason.

It may not be much of a currency at the moment since banks are attempting hard to prevent its use but the freedom it gives you outweighs the risk of it being stolen if you are not careful.

Bitcoin would hurt Visa and Master Card very badly if it were adopted since it obsoletes their entire business practice.

It would also be potentially beneficial for the user since if you could purchase things with bitcoin at your local store the owner wouldn't have to pay the bank or Visa a small fee to make a transaction. That saving could be passed along to you as a reduction in price.

Now if there were any decently run services out there that could secure the average users wallets the market would pick up very fast. The biggest problem bitcoin has at the moment is all the hackers stealing the bitcoins and giving it a bad reputation in the news.

This problem is soluble (as sibling points out, it's been solved in the UK). Conversely Bitcoin always takes about half an hour to settle transfers, for fundamental design reasons. Bitcoin qua Bitcoin is never going to be an effective way to pay for your shopping, and if you're using "Bitcoin" via a Visa-like entity, the benefits over just using Visa are questionable.

> Another example, you want to donate to Wikileaks from the US. Not so easy.

I suspect for most people (that is, non-anarchists) that's actually an advantage. Bitcoin is the equivalent of paying in used notes; it inherently carries a whiff of, at minimum, tax avoidance or socially-disapproved earning sources, because the big places where Bitcoin is more useful than conventional currency are tax evasion and socially unpopular activity. Whereas someone paying with amex likely has a proper job.

I don't think the benefits of bitcoin outweight having to maintain (multiple) private key's security.

...and that's how you get a bank.

Similarly, talking about imagined futures is not a convincing way to defend a currency as a store of value. If you have to posit that your money will still be there iff A, B, and C are true, then you're not going to park your money in that particular stall.

Then don't do business with that bank. The vast majority of banks and credit unions in the US offer insured accounts. If yours doesn't you should move your money elsewhere.

The FDIC insurance is $250k per insured-account-type per institution. That is, if I have a checking and a retirement account with one bank I'm insured for a total of up to $500k. Anything exceeding that needs to be in another account type or another bank to be insured. Most investment accounts aren't insured, but some brokerage accounts are (you'll get that info when you talk to your bank) but the investments themselves (naturally) are not, just the value of any non-invested cash.

The cost (in the US) is put upon the banks to pay for this insurance. It's just a federally created insurance agency. Barring a major collapse across many (most?) banks, it should have enough stored up over the years to cover the cost without requiring financing from the federal government. In theory, you can have private insurance (I believe these do exist) for your bank, but I'm not sure how common this is in the US.

Like most insurance schemes, the more participants the more affordable it is. It'd be a tough market for someone else to break into.

There is no way not to be the potential victim of this, because bank customers do not have enough information to determine whether a bank is sound or not. Worse, soundness is dependent on what everyone else is doing; a bank can be fine one day then destroyed due to a bank run. Risk is hard to deaggregate in the mortgage business because house prices all move together.

You're onto something with "profits of risky loans are privatised while the losses are socialised", but bitcoin really isn't a good solution to that.

any benefit is on average far, far outweighed by the costs

A cost-benefit analysis with no numbers! Convincing!

Those stats assumed CPU/GPU and FPGA, not ASIC, miners.

For instance, the 5-to-500-gigahash-per-second rigs would have to be running at over 300k watts of electricity using those statistics. :)

So in reality, the network is much more efficient -- the high-end miners are using more than 100x less electricity (which would still be 3000 watts for high-end rigs per those numbers), and probably closer to 1000x less, than those estimates.

... and exponentially worse as time goes on (by design).

Your thought experiment misses an important point: the cost of energy. AFAIK that's already dominating hardware costs for miners.

That means: since the cost of bitcoin mining will tend to scale up (or down) linearly with the total value of bitcoin, so will energy usage (barring changes in energy price). It will not keep going up when the bitcoin value has reached a plateau (for whatever reason).

Your premise is wrong. Bitcoin has a mechanism called "difficulty". It's very much at the core of the protocol, google it and ponder how it affects your argument.

Furthermore, the current economics of mining have a fixed expiration date set to 2140, that's roughly when the last coin would be mined.

The protocol will need to be changed fundamentally long before that date. Since we don't know what that change will look like, we also don't know how it will affect the network's power consumption.

Any "thought experiments" that naively extrapolate from the current power consumption are as pointless as trying to guess your car's mileage based on its fuel consumption during ignition.

The protocol is still in the bootstrap phase. If it prevails then the bitcoin in 10 years will be very different from the bitcoin of today.

That does not tell the whole story though, power usage per gigahash is a more accurate measure, because the higher the GH the more secure the network. From CPU, to GPU to ASIC the power use per gighash has fallen significantly.

If you really want to compare it to the banking sector then you need to include the full and real costs of that banking system, power alone is not the only cost. One bail out, as seen in the last few years, dwarfs the power cost of bitcoin. That is without considering the knock on effects of the banking meltdown on the overall economy.

And bitcoin can take advantage of improvements to reduce power consumption of ASICs (as there is no next step tech that will provide an increase in gigahash as ASICs did, so now it goes to refining the power usage. Additionally larger farms are looking at renewable alternatives and uses for the excess heat being produced. It is still a very young sector so there is a lot of working out to do, but it is being done.

And changing over a course of 10 years (there's an incentive to constantly upgrade hardware anyway) is probably still way faster than the banking system would change on a global scale if it was running into a problem.

While this is a different story because hardware and the PoW algorithm is involved, Bitcoin has a story of "breaking" changes. There will be more with the increase of the block size, etc. So I doubt this would be aniticipated way before it made it's way into the protocol, so the affected parties could prepare as well.

Not really. Eventually electricity will dominate mining costs, not hardware, and people will only invest in more efficient hardware, not cheaper hardware. The total cost of the electricity used in mining will never exceed the total value of the block rewards plus transaction fees, since miners would rather stop mining than mine unprofitably.

Whether the total electricity used increases or decreases over time depends on whether the increase in price of bitcoins outpaces the block reward halving every 4 years, or transaction fees become a significant source of miner income (https://en.bitcoin.it/wiki/Funding_network_security). A single bitcoin would need to be worth $1 million in 50 years to keep pace, for example.

But I think it's more likely we'll transition to better (cheaper, more secure) mining system before then anyway, which is entirely possible to do without having to redistribute bitcoins (it would essentially be a fork that the "economic majority" agrees with: https://en.bitcoin.it/wiki/Economic_majority)

Centralized systems could be more efficient if their incentives were in line with the incentives of the people they serve. But their incentives are not and they are not fair.

You are theorizing about something based on how it feels without really looking into the reality of it. Bitcoin mining is so many orders of magnitude smaller than even fragments of current financial infrastructure it would laughable to talk about, even if electricity usage was any sort of a major issue, which it is not.

One of the first things you realize when you try to setup payment processing is that middlemen would not actually exist in the payment processing industry if it was an efficient market. But these companies do exist because the entire industry structure has developed to pass risk from credit card companies to intermediary businesses whose sole function is basically to manage risk and enforce policy compliance. It is a bit like if Google didn't give email addresses to individuals because it couldn't be bothered policing spam, so you got your email through a third party.

Anyway, even if we ignore the deadweight losses imposed on the economic system by all of the businesses which cannot get credit accounts (merchant accounts), the costs of supporting this credit-centric system are enormous. PCI compliance costs alone are staggering, and serve no purpose except to lower the risk held by credit card companies. And even with this, the inefficiency of central risk management is so great that VISA doesn't even bother to investigate fraudulent purchases of less than 500 USD. And why should they when costs can simply be pushed back to merchants and turned into a profit center by issuing chargebacks.

And this is where bitcoin gets interesting -- by inverting the risk structure and letting anyone accept payments without the need for a payment processor to issue credit, Bitcoin eliminates entire horizontal swathes of the payments industry, while placing competitive pressure on legacy payment providers. If the technology scales to the point you are concerned about, it will decimate the number of people required to be employed managing risk in everyday transactions.

Put more succinctly, you need to shift from thinking about the energy costs of bitcoin as a wasted ongoing expense and start considering them the price of eliminating an otherwise intractable trust problem in finance. It is like paying for a standing firefighting force. Expensive in one way, but a lot cheaper than the alternative.

No. It is a race on who can spend their energy the most efficiently. (in terms of hashes per kWh).

That's why old mining methods (CPU miner, GPU miner...) are obsoleted by new ones (ASICs).

You can pump a Gigawatt into an old GPU mining rig and it will only cost you a lot of money.

Pump the same Gigawatt into a modern ASIC rig and it might make you money.

It would, for sure. But I'm not sure how - people need to become rich enough to afford smartphones/laptops and a reliable internet access first. That implies we'd have solved a big chuck of the other problems first :(

> Which I never argued.

You're right, sorry if my post was misleading. You just pointed out other advantages of bitcoin over gold (which are correct).

Blockchain raised a silly amount of money for a platform that most people in the community have lost faith in due to repeated security failings.

I'm American and have lived overseas for several years and the currency exchange rates in combination with the 10-20 USD fees are a constant annoyance. And an annoyance for my startup which operates in USD but does business in several countries. It badly affects margin for smaller payments.

I'm a big Amazon Prime customer and I do a lot of purchase for family and friends for delivery in the US. I don't dare use my overseas credit card to pay for it, but if Amazon were to accept BTC I could pay from where I live. That would be very valuable to me personally.

I'm interested in bitcoin because it takes control away from traditional choke point exchange bank and also could serve as a 'world currency' of sorts. I also think that it would make possible a lot of cross-border sales that currently face real practical impediments.

This is why bitcoin is doomed to fail.

Bitcoin doesn't have that because most people don't care about what it does better and do care about what it does worse.

6 years into the experiment including an entire year regularly in the news and still almost no one cares and the userbase appears to have actually shrunk this year from an estimated peak of ~1-2m to an estimated 500k. And even that 500k is considered generous.

>Your mum and dad only got it when it had already become a mature technology.

I appreciate your condescending tone and trying to imply that I'm a child. But I've been on the internet and programming since 95 and while far from the earliest user I was a lot closer to them than most people. I'm well aware of days when online banking wasn't a common thing. And the fact that the idea of it and online shopping didn't spread fast because we were largely in the pre-internet(it existed but had limited adoption) world then.