I don't like how people get defensive around capitalism; "our ideas are not at odds with capitalism", ok, so what if they were? If an idea is at odds with capitalism, that doesn't necessarily make it a bad idea.
For instance, I think the idea of free software (RMS style) really is at odds with capitalism; but so what? This is not a good reason to agree or disagree with the idea.
Free software isn't at odds with capitalism (you don't have to extract monetary profit from everything you do in capitalism). Neither is bitcoin. Government-controlled paper money, on the other hand, definitely is at odds with free market.
Nobody wants a free market. That's a market that includes slaves, child pornography, assassination contracts, etc.
At the level of globally integrated economies, I think the gold standard has been pretty well proven to be disastrous. It especially doesn't deal well with trade imbalances that unwind suddenly. The trouble you see in the Euro area can be seen as a microcosm of what a gold standard is like; countries like Greece, Ireland, Portugal, Spain don't control their money supply - more or less, it's like gold - so they're caught in an extremely painful bind, when what would be best for them is to devalue their currency some. Instead, they're having to struggle under huge debt burdens, and some might have to default, or leave the Euro (i.e. by analogy leave the gold standard).
> Nobody wants a free market. That's a market that includes slaves, child pornography, assassination contracts, etc.
Those things are perfectly compatible with democracy but completely incompatible with capitalism. An inherent idea to capitalism is the protection of individual freedom which those things clearly violate in some way or another. On the other hand, those things are perfectly compatible with democracy given that 51% of the population are OK with it. In fact, what nobody believes in is democracy (that's why most democratic countries have a constitution).
Not treating people as property is a distortion of the free market. If people aren't property, what incentive do companies have to invest in their education? Rich people would be much more likely to pay for the education of their slaves if they were assured of strong property rights over them. How can you properly price human capital if there isn't a free market in it?
Etc., etc. Free markets are amoral machines that discover price levels appropriate to supply and demand through transactions. They are not intrinsically good or bad; it is in the transactions that make them up that moral judgement comes in. But if the market is truly free, then there will be no limit on the kinds of transactions.
Well, you're not talking about capitalism. Your whole reasoning is based on a false premise, because there are limits to the kind of transactions allowed in a free market. In a free market, you are free to do whatever you want as long as it doesn't interfere with someone else's freedom. Your freedom ends where someone else's begins.
Hence, slavery not being compatible with capitalism is a fact, not a distortion of the free market nor a mere opinion.
We're talking about market freedom not individual freedom. You're confusing the two. Companies owned by larger companies can still both operate in a free market. It's no different in principle for people. And my irony was about phrasing the ownership of people issue in free market terms to show how it is distorting (and it straight out is), not to argue for it or that there aren't other approaches to the same problems.
Our current quasi-free markets already do have "assassination" contracts - your supermarket pays a slaughterhouse to assassinate cows. We also have slavery - horses are forced to labor for whatever amount of money their owners give them.
I'm not making a "meat is murder" argument. I'm just pointing out that pretty much any conceivable capitalist system defines cows and horses to be property, not people. One can envision a capitalist system which does the same for slaves and assassination victims.
I.e., by tweaking the definition of "person" or "market participant", you can get all sorts of odd results.
(That said, capitalist advocates have never made such arguments, as far as I'm aware. Most early supply&demand types were abolitionists, and the phrase "the dismal science" was coined by a pro-slavery advocate.
True, but that's a problem of semantics which is not specific to the definition of capitalism. Whatever system you advocate, you'll have to define the terms you employ: "person", "market participant", "proletariat", "equality", etc.
"Free market" is defined as environment of voluntary transactions. Slavery is not voluntary, so it has nothing to do with free market. The same applies to assassinations (unless the victim voluntary agrees to be assassinated).
As for your argument wrt gold, it's inconclusive to say the least. Specifically, PIIGS has failed not because they can't expand their money supply at will now, but because they could (and very much did) extend their money supply before (using ECB as a source of cheap money, which would be impossible on gold standard).
But that's a century old debate, Austrian school has made their very convincing case about fiat money w/ goverment controlled supply causing business cycles in, what, 1912? Something like that.
Why do you think slavery isn't voluntary? Why can't you sell yourself? Do you not own yourself? Why can't you enter into a contract to sell yourself for a particular period of time, or to a binding set of responsibilities, etc.? Many (I've read some accounts that say most) slaves in history were willing slaves, in that they faced destitution and starvation outside slavery. Part of the implied contract of becoming a slave would be that your owner would look after you. And he would have every incentive to, of course - he doesn't want his investment damaged.
I'm not familiar with the situation in all PIIGS, mostly just Ireland (I'm Irish). The money came from British, German, French banks, over the course of a decade. ECB was the source of emergency financing when the bubble collapsed; i.e. you have your order of events backwards.
For as long as they are willing to stay slaves, I see nothing wrong with trading them. Outside of that situation, though, the right to body is unalienable (according to many rights theories).
The money came from British (banks, sponsored by artificially expanded money supply of BoE), German, French banks (sponsored by artificially expanded money supply of ECB), etc. I've got my order exactly correct. Then, when the crisis hit, more money come from ECB. It's a little surprise that the problem caused by excess money is not exactly fixed (in PIIGS) by more excess money.
I think most people's definition of "free market" is that people can sell or not sell their property or services for whatever price they wish - not that any good or service is legal to own or produce. People sometimes, but not always, lump the right not to have your property or labour taken from you under the term "free market" and sometimes just lump not having it taken from you except for monetary taxes (as opposed to taxes in kind or forced labour). Some people also lump freedom of contract under the rubric of "free market".
The generally accepted term for everything, including murder and conspiracy to murder, being legal is "anarchy" and if people still have free markets in this anarchy thats generally referred to as "anarcho-capitalism". Though nothing about having a free market says that murder is legal and probably says that forcing another person to work for you using the threat of violence is illegal. I can certainly see arguing that a free market implies legal prostitution, however, since unmarried sex is legal in most places.
EDIT: And as to Capitalism, well to quote Wikipedia: "There is no consensus on the precise definition of capitalism, nor how the term should be used as an historical category."
You keep coming in with this notion of what's legal. That's my very point exactly; what's legal and not is external to the free market itself. It is imposed from without, constraining it, and is not intrinsic to it. Whether contracts for assassination, or prostitution, or raw milk, or cigars from Cuba, etc. are legally traded is a matter of degree, not some self-evident binary choice. All constrain free trade.
People arguing for free trade are generally arguing for a particularly scoped subset of "free" trade, but they take as a relatively unexamined assumption that free trade is inherently good. Usually, there is some trade in particular that they would like to pursue, and they fight laws that inhibit it using free trade as a rallying cry, as if it were a self-evident justification. My point is that free trade by itself is not intrinsically desirable, and that we do in fact want all sorts of limits on what people are free to trade in.
I think free software is at odds with certain capitalistic ideas:
As a private owner of a "production" factory, you have control over your products, and through this control you gain profit.
Contrast this with communism, which views private control over things which are needed by the public (like food) as a bad idea because the person in charge gets to limit the freedom of others (or some idea similar to that).
Free Software is similar in this regard: software is ubiquitous, and so it's unethical (according to the philosophy of the FSF) to let it be under the control of corporations. Apple has complete control over iPhones, and they decide what you can and cannot do with it: this is "evil", according to FSF's philosophy.
From a purely capitalistic point of view: a software developer gets an incentive to create and evolve software if it was closed source and hard to crack so that he could sell it and get profit. From a market perspective, this is more efficient.
But, from RMS's perspective, market efficiency shouldn't matter here because the act of putting artificial restriction on software usage is unethical.
While I don't agree with RMS about this thing being necessarily unethical in and of itself; I do find his arguments very compelling, and I'm inclined to say that it's best if one was able to make money doing open source. However, I think one has to be realistic, and in reality developers need money, and so it's ok to sell closed apps (as in iPhone apps, or SaaS webapps like 37signals).
As you can see, my position doesn't have anything to do with capitalism as an ideology.
The issue is your statement "you have control over your products" does not apply.
Copyright law legally prevents you from including someone else's software in your work, unless you get permission. The GPL grants you that permission so long as you follow the terms of the license. In other words, it isn't "your products", it's a joint product, and the other contributor wants a say on how the joint product is delivered.
If your product doesn't use anyone else's license, then the FSF does say that it's morally reprehensible to not have free software, but they stay well within copyright law to change the system from within.
Have you considered that perhaps it's copyright's temporary monopoly grant which is "at odds with certain capitalistic ideas"? After all, copyright in US law comes from promoting "the Progress of Science and useful Arts", not making profit.
> The GPL grants you that permission so long as you follow the terms of the license. In other words, it isn't "your products", it's a joint product, and the other contributor wants a say on how the joint product is delivered.
I've already responded to this in another comment.
The GPL doesn't "simply grant you this right". FSF think this right is essential and that it's unethical to not grant this right. If RMS simply wanted to give you a permission, he could've used a variation of the BSD/MIT licenses.
> but they stay well within copyright law to change the system from within.
But they still think the system is wrong.
> Have you considered that perhaps it's copyright's temporary monopoly grant which is "at odds with certain capitalistic ideas"?
I've heard this argument, and I don't think it's very compelling, but really what's the point? Why should anyone feel compelled to make such an argument? As if capitalism is the religion of the state, and every ideology must be compatible with it, or else!! So you have to go around and make these interpretation about what "true" capitalism is all about.
Ahh, so you are arguing what would happen if the free software movement were able to change copyright law to what they wish. I thought you were talking about the world as it is now, and not the way the FSF would like it to be.
With that in mind I think you can see how I interpreted your comment to mean that the legal expression of free software ideology embedded in the GPL, which depends on current strong copyright law, is at odds with capitalism. If that were the case then strong copyright is at odds with capitalism.
I personally can consider a set of laws in which distributed software must be distributed as free software. I agree that such would be a limitation of the sorts of economics decisions you can make. As such, I can agree that it would be against "certain capitalistic ideas."
However, since we (as a general culture) agree that Mr. Factory Owner may not employ child labor, may not have slaves, may not dump toxic wastes in the water system, must have a safe working environment, and so on, we are already at a point where we (as a culture) agree that "certain capitalistic ideas" are either morally toxic or at least subject to trajedy of the commons oversight.
Since we (as a culture) don't have, and don't want to have, a "purely capitalistic point of view", arguments grounded in that premise are at heart faulty.
Here's what what said about the gold standard to differentiate from Bitcoin: "There was no choice in how one could pay, payments were made in a vacuum. All transactions had to be made in a currency backed by gold. That meant that any abuse of the Standard could affect the economy negatively and runs on banks were almost inevitable."
So what? People were and are always free to transact business in any way that they would like, but the coin of the realm that you are required to accept and pay taxes with is/was gold. That doesn't mean that I can't exchange a few bushels of wheat for a goat. Or some coupons for car washes for a sandwich. Or some bitcoin for a webhosting, or whatever you buy with bitcoin.
Bitcoin is only against capitalism in the sense that nobody is going to make a significant amount of money from it.
Saying that "bitcoin means freedom to choose a form of payment" is naive. Let's say that Bitcoin is success, and 98% of internet merchants accept bitcoins as a mean of payment.
This will mean that once I open up a shop, I have to accept it as well, or I'll lose sales. Of course, in theory, nobody would force me to accept Bitcoins, but so is the case today - nobody forces me to use Dollars, or PayPal.
You don't have to pay in dollars, but you must accept dollars to settle a debt.
You and I can have a contract where I buy a cow from you today in exchange for an iPod next week, that's a valid contract. But if I cannot produce the iPod next week, you must allow me to give you a quantity of legal tender currency (US coins or paper dollars) to settle the debt.
If you require payment upon receipt, however, you can refuse to exchange the cow for cash.
Free software isn't at odds with capitalism. In fact, right of property is what makes free software possible (otherwise you couldn't enforce any free software license).
You're right in the sense that the free software movement as advocated by Richard Stallman is at odds with capitalism. I really meant "Open source software isn't at odds with capitalism".
But I don't think we should exclude the capitalism debate from an intelligent discussion since it has pretty huge implications. If you're advocating a system that is incompatible with capitalism, you have to first make the case for an alternative to capitalism.
It's not as if we live in a purely capitalistic system. In a pure capitalism, there would be no taxes. Yet here we are living in a system where the government takes money from you, specially if you're really rich.
It's not as though any idea that's at odds with capitalism will require "an alternative system". There's not gonna be any change to the system that requires a new theory of economics.
Suppose bitcoins are at odds with capitalism because they're just like gold (yes I know this is ridiculous, but just for argument's sake). What now? Should bitcoiners make a case for an "alternative to capitalism"? No. You will still be able to buy and sell and own property and trade and own factories and rent an office space and build a company and hire employees.
I agree that we don't live in a purely capitalist system and in fact, I don't like to call it that way as it undermines its meaning. In a truly capitalist system we wouldn't have this discussion at all since there'd be no federal reserve and currencies would be free to compete against each others. In my opinion, Bitcoin (and the gold standard in some ways) is as close to capitalism as it gets.
" As someone else pointed out, in a pure capitalism, we'd have slaves, child porn, thugs for hire, assassination contracts, etc."
No you wouldn't. All of those things are the exact opposite of capitalism, since they prevent voluntary association and threaten body, liberty and property.
"as close to capitalism as it gets" is not necessarily a good thing. As someone else pointed out, in a pure capitalism, we'd have slaves, child porn, thugs for hire, assassination contracts, etc.
I just got this idea right now, but I think a pure capitalism will deteriorate very quickly into a dictatorship. All it takes is for someone to accumulate enough military power so that he can take over. Assuming you can buy/sell groups of armed people and/or hire them.
You've got it all wrong. Those things are the antithesis of capitalism. I really don't know where to start... May I suggest you watch this documentary: http://www.freetochoose.tv/
in a purely free market people won't want to do business with people who violate others' property rights since you have no guarantee they won't violate yours.
traditionally, guarantees against this have been ethnic. "well I know he won't enslave me since the norm is to only enslave blacks, therefore we can both happily profit from the slave trade and are no threat to each other."
There's a lot of disagreement over that word "voluntary", though. People who emphasize the "capitalism" part, as in anarcho-capitalists, tend to take a very loose view of what constitutes voluntary agreement, which is basically anything short of initiating actual physical violence, or perhaps direct threats like putting a gun to someone's head. Others, from the more left-leaning parts of voluntaryist circles, require a stronger definition of voluntary.
The standards of traditional western contract law for what counts as a voluntary agreement (i.e. not one entered into under coercion or duress) are somewhere in between.
Your viewpoint is only sensible if one is neutral or negative toward capitalism and assumes everyone else must be as well. If you think capitalism is a good thing, then of course something being at odds with it is problematic.
"If you think capitalism is a good thing, then of course something being at odds with it is problematic."
Something can be problematic but that still doesn't make it a bad idea. It might be a brilliant idea which challenges you to modify your viewpoint - perhaps you end up questioning the particular form of capitalism which you think is good. Perhaps you end up endorsing your former viewpoint and discarding the new idea. hasenj's point is perfectly valid: "If an idea is at odds with capitalism, that doesn't necessarily make it a bad idea" (even if it might be problematic).
Again, Open Source is not at odds with capitalism. Capitalism doesn't mean making money or selling stuff. In fact, charities aren't at odds with capitalism. Did you know that Wikipedia's founder, Jimmy Whales, is a libertarian?
Ah careful. RMS's Free Software is not the same thing as Open Source. Open Source in and of itself is not at odds with capitalism. But Free Software is at odds with some ideas of capitalism. (In my humble opinion anyway, which is really irrelevant to my original point).
can you point out the difference between "free software" and "open source" that causes one being at odds with "some ideas of capitalism", while other is not? Apart from "free software" being connected with RMS's ideology.
RMS doesn't care if you give him back your changes; he cares that you have the freedom to make any changes you wish. He wants you to be free from artificial restrictions imposed by copyright laws. He doesn't care if you share your changes with him.
> He doesn't care if you share your changes with him.
Well, he does care if you make your changes available to the users of your software so that they too can make the changes they need. That's the whole point of the license, or you should just use MIT/BSD.
Yes, so he cares about the freedom of the user to change software. He doesn't care whether or not these users share these changes with each other and collaborate to develop the software. Although he thinks that's a nice-to-have side effect.
He cares that this freedom propagates to all users, not just you, and so just like he gave you this freedom, you also must pass on this freedom.
At times gold production has exceeded population growth, at times it has lagged behind, but it certainly has not leveled off.
Also recall that Friedman called for a fixed 3% growth in the money supply, year on year, commensurate w/ long term rates of economic growth. So why would Bitcoin use a curve that starts steep and levels off?
I have heard two claims from Gavin: 1) it represents the pattern of natural resource extraction (easy it first, progressively harder until the marginal cost exceeds the margin gain), and 2) it encourages early adopters.
Now, I might wish it weren't so, but we're really good at natural resource extraction, and we get better over time, until demand falls. Plus, the general thinking goes, money supply should ideally grow at a constant rate, in line w/ long term economic averages. Maybe the extended long term view would restate that as a constant rate, relative to population growth. I don't know. The system has to reach equilibrium eventually, but we're not there yet, and for now the closest approximation is a constant percent, year-on-year.
So I'm afraid that reason (1), and Bitcoin resembling something fundamental in nature and the economy, is just not true. At best, Bitcoin is an entirely new kind of monetary system, with properties that don't resemble the gold standard or fiat currency, but will be beneficial in some fashion down the road. And at worst, it's just a Ponzi scheme.
I haven't seen (1) addressed substantively, so for now I'm tending towards bitcoin-as-ponzi-scheme.
How exactly bitcoin resemble a Ponzi scheme? It kinda sounds like you mean pyramid scheme, rather than Ponzi scheme. (Not that bitcoin is a pyramid scheme either...)
In that Bitcoin presents itself as a viable alternative currency, and encourages adoption by people looking for a safe haven from fiat currency. Eventually, though, it could become clear that certain factors, possibly the production function, preclude it from long term viability. The value drops, holding are wiped out, but not before the earliest adopters have already secured their gains.
It's only a Ponzi scheme if you're lying to investors about how much money you have. If you invest in something and then it fails due to some unforeseen factor, that's just bad luck (or bad planning), not a Ponzi scheme.
This current debacle shows that economists and hackers look at bitcoin from completely different perspectives.
The rant was based mostly on issues of economy disregarding the technical side completely. This response to the rant however disregards the economical side of the rant almost entirely. It's sad to see two groups of smart individuals talk completely past each other.
I don't think the guy who ranted about bitcoin using the gold standard is an economist because from reading what he writes it's clear he had no clue of what he was talking about.
All economies are built on some combination of trust, fakery, coercion and hard work. The underlying rationale of a currency backed by "real material" is that it can be trusted to last. It can be trusted more than any government. Governments can fall quickly.
Bitcoin hasn't proven itself to the degree of gold. It doesn't necessarily have to, though. It just has to look _better_ than alternatives, within some useful timeframe of economic activity(i.e. more than a year or two, but probably less than a century). And, as the original author wrote, it might fall apart suddenly, but then it is basically the same risk as a government-backed currency.
Gold isn't "real material" any more than paper. It's only has its value because of supply and demand, just like fiat money. If someone finds a huge lump of gold underneath the ground, or in some other possibly accessible location, gold's value will dramatically drop. If a new industrial use for gold is found, its value might dramatically rise (assuming the industrial use returns higher value than current prices).
I think the chances of a flaw being found in the Bitcoin cipher system are a lot higher than e.g. a sudden disintegration of trust in the US dollar.
Why have plundering governments plundered? The answer to your question is an implicit assumption of your question.
As to governments replacing gold with paper, that seems to be correlated with economic growth and modernity than anything else. A mercantile approach to gold would be something like that followed by the Spanish with their South American possessions, mining for gold, etc. It didn't serve them very well because they didn't understand that it's not some magical property of the gold that holds value.
It is difficult for me to fathom an environment where bitcoin is more attractive than gold or silver. At least outside of the alternate universe of PR that bitcoin proponents seem to live in.
Bitcoin claims to share the attributes of metals that make it different (ie. immutability, scarcity), but does so in a way that is impenetrable to the average person with the added flair of having do go through anonymous and shady middlemen to exchange bitcoin for an alternate currency in a highly volatile market.
So other than making the early bitcoin users who likely hold most bitcoin rich, what is the advantage of using it over other physical commodities whose use has been established for millennia?
Technically, BitCoin is hardly scalable.
As every participant needs to be aware of every transaction, that gives O(N^2) computational/storage cost, assuming N is participants and transactions~participants.
May be cured by a dedicated central server storing all the transactions, but then it is not P2P anymore.
> Technically, BitCoin is hardly scalable. As every participant needs to be aware of every transaction, that gives O(N^2) computational/storage cost, assuming N is participants and transactions~participants.
That's not true. The Bitcoin protocol defines a "simplified payment verification" method that does not require clients to store the full block chain.
The Bitcoin network does need a sufficient number of full clients to ensure that an attacker cannot get access to over 50% of the processing power in the network, but the number of full clients could be much lower than the number of simple clients.
If Bitcoin ever becomes a major economy, the full clients will be sitting in data centers with lots of bandwidth, and most people will use simple clients.
So, the claim of being P2P goes to the wind first :)
Second. When accepting a coin, a node needs to check the coin was not spent since the last time it changed hands. If the buyer claims he got it 1 month ago (and shows a proof), then the seller needs to check a month worth of transactions, just in case it was double-spent.
Note the terrible asymmetry of the attacker's and the defender's costs.
Third. Today I had to reread the paper (by Nakamoto) and I am surprised (again) by the level of wishfulness and naïveté. Sec 5 (page 3) says: "the nodes that were working on the other branch will then switch to the longer one". Does he realize that in a distributed system nodes might have totally different opinions on the number and length of those branches? And that those opinions might change. It is easy to imagine nodes hopping between branches with no global agreement possible. His very way of thinking has zero intuition about distributed/asynchronous systems, sorry.
Obviously, that may be cured by introducing well-provisioned central sites, as you say. But then, all that crypto-trickery becomes entirely meaningless and the system loses its raison d'être. Well-provisioned mutually-recognized sites/banks may do it exactly the way they do it these days.
"So, the claim of being P2P goes to the wind first"
It depends on how pedantic you are about the term "P2P". I guess you could argue that any P2P network that includes supernodes is not a true P2P network, but in practise I've never heard that objection.
"If the buyer claims he got it 1 month ago (and shows a proof), then the seller needs to check a month worth of transactions, just in case it was double-spent. Note the terrible asymmetry of the attacker's and the defender's costs."
Not really. Finding out whether an address can spend a coin is just a hashtable lookup. It's not like we have to use linked lists!
So the cost for the defender is trivial. An attacker, however, has to orphan the current block chain, which requires controlling at least 50% of the computational power in the Bitcoin network.
For instance, let's say Alice gives Bob 1 BTC. Bob waits for 6 confirmations before accepting it as valid, which is the standard length the official Bitcoin client uses. This means that there is a chain of 6 blocks verifying the transaction; if Alice wants to double-spend, she needs to get rid of that chain, which she can only do if she can produce a longer alternative block chain. This means she has to produce blocks at a faster rate than everyone else on the network, which requires that she possess over 50% of the computational resources.
"Does he realize that in a distributed system nodes might have totally different opinions on the number and length of those branches? And that those opinions might change. It is easy to imagine nodes hopping between branches with no global agreement possible."
No, because clients always choose the longest block chain. It's possible that for a little while the block chain will branch, but that situation is inherently unstable; eventually one branch will produce a block faster than the other, and everyone will switch to the winning branch.
Finding out whether an address can spend a coin is just a hashtable lookup.
Trying to follow your perspective. You likely assume that every node has a dossier tracking every single coin. That dossier is summarized as a hash table. Right?
there is a chain of 6 blocks verifying the transaction
Does it mean a transaction needs 1 hour to settle or I'm confusing something for something? (1 block is created in 10 minutes)
everyone will switch to the winning branch
Well... suppose I'm an attacker who briefly mobilized some significant CPU resources (a GPU cluster, a million zombie PCs). I make nodes face two chains of equal length. Once new block arrives and nodes rush to the "winner" branch, I help the other branch win, so they rush back.
You see, it is far more serious than "using it to defraud people by stealing back his payments" (Sec 6, last paragraph).
The strategy of "alerts" (Sec 8) might be open to attacks as well. "Bad" nodes might also do alerts. etc etc
...and that is just off the top of my head.
In very general terms, I also don't like the approach on the following reason. With strong crypto, I may encipher something, so even the biggest Google cluster will not be sufficient to break it any time soon. So, it is mathematically strong, in a sense.
BitCoin weakens it to a majority vote in terms of CPU cycles uselessly burnt. That appears really weird to me.
"Trying to follow your perspective. You likely assume that every node has a dossier tracking every single coin. That dossier is summarized as a hash table. Right?"
Now I've had chance to think about it, it's probably a tree rather than a hash table, but the general idea is the same. There's no way you'd do a brute force O(N) search if N is very large.
"Does it mean a transaction needs 1 hour to settle or I'm confusing something for something?"
Yes, but it depends on how important the transaction is to you. If you receive the equivalent of $10, you may consider 1 confirmation enough, but if the amount was $10,000, then you'd probably want to wait for 6 confirmations just to make sure.
The Bitcoin client tends to err on the side of caution, and considers transaction unconfirmed until they have 6 confirmations.
"Well... suppose I'm an attacker who briefly mobilized some significant CPU resources (a GPU cluster, a million zombie PCs)"
You'd need a lot of resources. The Bitcoin network currently runs at 17190 Tflops, which is about equivalent to 2.5 million desktop CPUs. If bitcoin ever becomes a major currency, this value will be much higher, and out of the range of most botnets.
"I make nodes face two chains of equal length. Once new block arrives and nodes rush to the "winner" branch, I help the other branch win, so they rush back."
What would be the point in doing that?
"BitCoin weakens it to a majority vote in terms of CPU cycles uselessly burnt."
What's the alternative? A centralized server is likely to be far more vulnerable to attacks (just ask Sony!).
This is a good point and is one of a large number of challenges BTC faces. Right now, a small transaction fee ensures that your transaction will be processed quickly. This distributes the cost of validating the transaction. Eventually, we may see the transaction fee structure become less of an option and more of a necessity.
BitcoinJ (the Google 20% time project) uses a very compressed and less comprehensive block chain to make transactions but is not intended to be used to generate coins.
In other words, the problem is being mitigated. The level of innovation in the BTC community is jaw dropping.
I was wondering about this after reading a little about how BitCoin worked. It sounded like every client needed to know about every transaction ever, which clearly can't scale to a mainstream currency.
Perhaps there's a way to partition/shard the historical data?
there really is way to "shard" historical data. But mainly, it is expected, that most users will not use whole transaction history, but trust majority opinion of network without actually verifying it or even use services of established network nodes without actively participating in network. This can be seen even now, when there are disjoint sets of nodes that actually perform "useful" transactions (users) and nodes that timestamp them (miners).
I don't think that's true. Clients just need the latest block (and a few blocks after) to verify that a transaction has gone through, only nodes (which are meant to be quite computationally powerful) need the whole block chain.
I'd like to see some of the many bitcoin evangalists about the place convert their life savings, serious cash, into BitCoins and keep it that way. Talk is cheap, particularly when it's abstract economic theory.
Then I might think it's got something in it rather that looking like a volatile ponzi scheme that geeks are keen because they think they're in early and going to make mint.
That's not a good idea. Being passionate about bitcoin doesn't imply you should convert all your money to bitcoins. In fact I would never advice anyone to invest too heavily in it: treat it like a side project, like an experiment. Maybe accept it as a form of payment for some non-essential products or services that you provide. Maybe try to make some trading with bitcoins. Try to see if you can buy a pizza maybe with bitcoins.
But only on the side.
Not because it's a ponzi scheme, but because it's still in its early days.
> ponzi scheme that geeks are keen because they think they're in early and going to make mint.
I just learned about it yesterday, but I'm excited about it because it has the potential to become a "Free" currency (free from the central control of a powerful authority).
Because market value of BTC is not at all stable or proven as the market is quite small. It is entirely imaginable that somebody will design similar, but slightly better system (faster transactions, more efficient implementation, whatever) that will cause most bitcoins traders to move there. Essentially, system like this depends entirely on market, while nothing has "inherent value", most physical things can be still exchanged for something (and actually gain value) after market crashes, when this kind of virtual market is abadoned, you are left with completely worthless big chunk of data.
So if this is an unstable, unregulated market that shouldn't be used for anything more serious than pizza at what point is that going to change? What magical thing is going effect to change?
And if that thing doesn't exist, what is this apart from a more complicated way to waste electricity than Seti@Home?
The link ignores most of the arguments made in what it purports to reply to:
No response to the Great Depression argument.
No response to the governments will declare it illegal argument.
No response to the offline argument.
No response to the potential hackability of bitcoins.
I'm oversimplifying here, but it all boils down to Keynesian economics[1] (steaming rant) vs Austrian economics[2] (this submission) if anyone wants to dig deeper in the subject.
Just on a brief look at BitCoin the question I have is generating blocks of bitcoins which requires computational power earns 50 bitcoins. Firstly that seems fairly arbitrary but secondly, what would happen if the currency became commonly used and a large company with a lot of computational power decided to get involved i.e google / facebook / microsoft. Wouldn't they end up monopolising a large portion of the bitcoins?
A good description of why that won't happen comes from a comment made on HN a week ago by Construct.
"Meanwhile, hardware enthusiasts all over the internet are rushing to buy GPUs to dedicate to mining. They don't seem to realize that the bitcoin system automatically adjusts to keep the bitcoin generation rate constant at 50 BTC per 10 minutes. As the mining market becomes flooded with new 'miners' the difficulty will climb rapidly, until it becomes unprofitable to run a GPU if you have to pay for electricity."
Sounds like it's already happening - to quote construct "Some quick research shows a handful of big players in the mining market who have invested heavily in high-end GPUs for dedicated bitcoin mining, some with over 50 GPUs running 24/7 for months now. These guys are bound to have huge quantities of bitcoin they are eager to unload when the price is right. Meanwhile, news coverage is driving exploding popularity, which appears to be pulling the exchange rate sky high. On paper, many of these guys have become overnight millionaires just by running a bunch of computers 24/7."
I believe the idea is that mining was a solution for launching BitCoin, and that as BitCoin has become more popular, the value of mining has gone down, meaning that at some point (I don't know if it's already happened or not), mining won't be worth the returns.
This is one thing that does seem to make sense: If mining isn't worth the return, then people will stop, and the returns will go up. It should adjust itself to whatever return people think is necessary to bother.
mining has to be worth the returns, because without mining the network will not work. It is not about generating BTC, but about estabilishing verifiable historical record of performed transactions. It is expected, that when value of one block will go down, miners will make profit from transaction fees.
Bitcoins are only generated every 10 minutes (on average), so it would probably not be worth it for a company to dedicate a huge cluster of computers to it. At most they could earn 50 BTC/10 minutes, no matter how much computing power they'd throw at it.
It get's more interesting if a company could calculate blocks faster than all the other nodes combined. Then that company could forge the complete chain of transactions.
I think there are even numbers floating around in the BitCoin forums as to how much it would cost to build such a server farm atm. So yeah - with enough money you could ruin BitCoin, but why would you be motivated to do so? Also, it gets harder every day, as the network of nodes grows.
Yes. Though it would be hard to just out-compute the hashes without the community noticing. Just to put it into perspective: currently the network is crunching away at 16344 TeraFLOP/s ( http://bitcoinwatch.com/ ).
If someone still didn't get it - the whole original post was a hilariously executed troll. The author very clearly states this:
"See, a bitcoin rant is almost too over-the-top for me. Asking why I think bitcoin won't work is like asking why the sky isn't red. I mean, wait, you think it is red? You actually took that seriously? Oh boy. Where do I even start?"
"For the record, I'm stupid and trolling. That's why it was hard to tell."
I don't think that's true at all. The original post was a cogent, if brief, explanation that about currency and the challenges for bitcoin. The last quote is most certainly meant to be sarcastic. He most certainly is trying to tweak people who are all worked up into a lather about bitcoin as a serious replacement for currencies. Just because he's provocative, doesn't make him a troll.
It appears a lot of HN readers like you took his comment too literally and killed the post. It's a shame because he makes some good points worthy of discussion. I'm not certain I agree with all of them, but there's certainly plenty of substance there. In contrast, this "rebuttal" adds little.
The aim of both the gold standard and bitcoin are to limit the power of governments and banks to defraud their citizens by forcing them to use fiat money.
> gold standard is a tool used by a central banking authority to promote stable prices.
This is the wrong way to look at it. The reason for central banks is to allow banks/governments to devalue/print money, i.e., to deviate from a gold standard.
For instance, I think the idea of free software (RMS style) really is at odds with capitalism; but so what? This is not a good reason to agree or disagree with the idea.