Like any cryptosystem, Bitcoin has a fixed shelf life. As algorithms and attacks evolve, the cryptographic hash function that forms its core will eventually become obsolete will need to be replaced. We know this.
The question is, can we build the ability to switch cryptographic building blocks into Bitcoin? I have no idea, but resiliency and adaptability are fundamental to the survival of any peer to peer system.
Yes, the hash algorithm can be upgraded as computing power increases. This was foreseen and built into it from the beginning. The implementation is relatively flexible, and can be modified or upgraded in a number of ways without having to restart the blockchain.
Development of the technology is pretty active, you can observe what's being done on the development mailing list at Sourceforge:
That's just a random sample from Gavin, but if you're curious take 30m and read through to get a sense of what their issues and priorities are. The current issues list and recent change logs are also instructive;
> Yes, the hash algorithm can be upgraded as computing power increases. This was foreseen and built into it from the beginning.
It's not really "built-in".
Everybody would have to upgrade their bitcoin software, and then the new hashing algorithm would become active after a transitional period. The only thing in the bitcoin protocol which facilitates this is an alert system that can be used to broadcast warnings: https://en.bitcoin.it/wiki/Alerts
If a significant fraction of the bitcoin nodes is not upgraded, then the bitcoin network would be split in two.
This isn't true. There are several kinds of built in upgradeablility.
First, the relevant structures have version identifiers, so new clients could operate on a mixed network without problems (though with the new features disabled) and continue to parse old messages.
Secondly, all bitcoin transactions are governed by small programs written in the transactions (called scripts). Many of the scripting OP codes are 'reserved' and treated as NO-OP by the clients today. If a vulnerability was found in ECDSA and we needed to migrate off it fast— You could write transactions which require a (say) lamport signature PLUS an ECDSA signature.. and encode the lamport signature requirement in script as a NO-OP (e.g. one of the no-ops gets redefined a 'check lamport signature'). Old clients will ignore that requirement and consider the txn good if the ECC key was good, new clients will validate it. The network could run mixed for a long time, though transactions sent and received by old clients wouldn't enjoy the improved security.
The script mechanism doesn't let you upgrade everything, e.g. you can't change the hash used for the proof of work or merkle tree that way... but that aspect of the usage is the most robust against attack. E.g. Bitcoin would still be acceptably secure if MD5 were used in the POW as well studied functions tend to fail fairly slowly with attacks becoming more powerful gradually. For those things you're left with the alert... and even there the system can use indicators in coinbase to have mining nodes vote on when to activate the change.
Because no one mining would be left on the old network clients that didn't upgrade would just see transaction processing stop, not a significant split.
>Are bitcoin users allowed to use arbitrary clients?
Yes. The protocol is pretty open-ended, but the whole system is designed to be verifiable - if you don't produce something that fits the rules of the existing clients, they simply won't accept your results, and you won't get anywhere. How you produce that information doesn't matter, the proof-of-work ensures you're playing by the current rules.
As far as making more radical changes to the system, the whole thing is purely mob-ruled. If you can convince others to change over, then you change the whole system. The idea is that security and value-safety issues would be important enough to migrate everyone over, and people would do it - if they didn't, their money wouldn't be accepted any more, and they'd pretty much just lose everything.
You can run whatever software you want, but if enough other peers think your protocol sounds funny or your transactions are improperly formatted then you'll be marginalized. I don't know if this has ever been tested, though.
It has been AFAIK on the test block chain. The test block chain has been intentionally forked many times to test this sort of behavior (orphan blocks).
The question is, can we build the ability to switch cryptographic building blocks into Bitcoin?
Wouldn't that be the equivalent of switching from one currency to another, like the manner in which the Eurozone nations switched from their national currencies (the franc, deutschmark, drachma, lira, etc.) to the euro? In order to ensure an orderly transition, you'd need to address the issue that bitcoins' perceived "value" (for want of a better word) is derived from the fact that it is (increasingly) difficult to mine bitcoins.
If the new currency is easier to mine, how would you bring the old and new currencies into synch? Trying to synch with a new crypto-currency which has a different coin creation rate (and a different rate of change in the difficulty of creating coins) seems like a recipe for wild fluctuations in value.
To my mind, Bitcoin is more like a virtual commodity than a currency, except for the fact that it has no intrinsic value. Even gold has intrinsic value for electronics and aerospace applications. One can argue that a bitcoin has even less intrinsic value than a fiat currency because it's not legal tender, so it can't even be used to settle debts or pay taxes. Some might say that it has negative intrinsic value because, in order to create a bitcoin, you have to expend many CPU hours doing the mining. Ultimately, that's incredibly inefficient - see http://goo.gl/I34VL
The obvious intrinsic value for a virtual commodity is CPU hours - i.e. the expenditure of resources to some useful end (or, at least, an end that someone is willing to pay in order to achieve), that can not only be delivered internationally and anonymously, but can be distributed across multiple CPUs provided by, for example, the members of a p2p network. You could then build a "CPU-backed" currency, where the issuers promise to pay the bearer X CPU hours on demand.
Of course, you then have the question of whether the issuer of a "CPU note" can be relied upon to actually deliver said CPU hours when presented with a note. Notes could end up being valued in a manner similar to bonds, where less credit-worthy issuers' (e.g. fly-by-night operations based in China or Eastern Europe) notes would be discounted relative to those issued by blue chips (e.g. IBM, Amazon).
Ultimately, though, the value of a currency whose value is based on a commodity will be determined by the fiat currency cost of the resources required to generate that commodity. The only way you could escape would be if the virtual currency were to become more liquid than the fiat currencies. In that scenario, the virtual currency would become a benchmark, in the same way that, for example, the price of US or German government bonds are actually derived from the price of the bond futures because the futures markets are more liquid and actively traded.
Given that the global foreign exchange market is the deepest and most liquid market in the world, that objective would seem to be a long way away.
Bitcoin isn't going anywhere anytime soon, IMHO. Works great for intended purpose. Just like a bike works great as a bike (not as a motorcycle or a rocket ship).
Want to conduct an anonymous consumer-sized transaction and/or send money internationally and/or minimize transaction fees? Bitcoin:
1) Make your deal terms, priced in Bitcoins. Include whatever time limits are required, such as payment must be received by x deadline or else commitment expires and/or is subject to repricing.
2) Login to Bitcoin exchange. Purchase Bitcoins at whatever market price is. Send Bitcoins.
3) Done.
Sure, you have other risks that you have hedged, minimized and/or accepted (or failed to recognize or address, and therefore accepted without knowing it). See here https://en.bitcoin.it/wiki/Contracts for some of the interesting contracts possible with Bitcoin.
Plenty of opportunity for Bitcoin-related designers, developers, investors, etc. to create the services and interfaces required for end-Bitcoin users to feel confortable and be able to EASILY and SECURELY conduct transactions and bank their Bitcoins SECURELY (easy, disaster recover, not stolen or hacked, etc.). Landrush is on. Early dayz are now... still.
Besides Bitcoin-related work, there is the whole, larger, universe of ancillary services. The analogy is Facebook to Facebook Apps or iPhone to iPhone Apps. Micropayments, automated bidding, pricing, incentivizing, etc. Lots of neat possibilities.
Or if you were a government. If in the long term bitcoin-like cryptocurrency is to play a significant role in society as money (not totally implausible, in the long term), I don't see why any entity with a more or less captive audience of payers (eg taxpayers) wouldn't start its own, taking a large cut ... http://gondwanaland.com/mlog/2011/05/30/cryptocurrency-cambr...
No, they can guarantee their computers supply minimum level of computing power to make the network trustworthy, they can also cover transaction costs perhaps, and the block chain is still open for all. They can also offer an exchange and make money that way. Ideally, they can protect the network from corporate and government attack or interference -- keep it somewhat unregulated, promoted, trustworthy and developing.
They can issue to themselves all the initial coins. I suppose they can do it transparently and fairly, or in a more exploitative way to their financial advantage. (another way to make money off it!)
Not sure, but in terms of government, wasn't bringing the power to issue money away from central banks and into the government's treasury what Lincoln did with his greenback and what had him murdered? A government run blockchain would be what Lincoln would do today if he were a hacker!
> I think it is, but there are significant ramifications that will result from the decoupling of currencies from governments.
The decoupling of currencies from governments sounds like a radical shift, but it's actually only fairly recent in history that we use fiat money. That, of course, allows us to do a lot of things that we've gotten used to in the last century particularly, such as taking advantage of monetary policy to address short-term economic concerns.
If alternative currencies catch on, that's something that governments will have less power to do - or at least, less power to do directly and predictably. Certainly, governments are going to push back on that, and probably try to discredit or disable alternative currencies.
At the end of the day, though, while money can be determined by fiat, value is determined subjectively, so if alternative currencies catch on (which I think they well), it will necessitate a shift in the way that people think about money. (Not unlike the way that the Internet has shifted the way people think about tradable goods and IP law - just take a look at SOPA.)
Bitcoin is also a technology. It can do more than just being money. For example, the technology is used in namecoin, which help facilitate the rise of a decentralized DNS system not subject to government control. After all, the DNS record is contained in every namecoin blockchain in the world. (OF course, the bigger issue is how the heck will namecoin get adopted as de facto DNS?)
I think in time, we will start seeing Bitcoin technologies adopted in more areas and more areas that have nothing to do with money or our financial system.
Agreed. Bitcoin's fundamental value is a feasible solution to the Byzantine General's Problem, or distributed consensus among untrusted parties. That solution can and is being repurposed, Namecoin being among the first. The cat is very out of the bag, and it's one of the most interesting spaces in technology right now.
I wouldn't call it a solution so much as a working approximation to a solution. AFAIK a complete solution would mean you could quantify how much each party trusts each other party at any given time.
It is fairly easy to get it accepted as the standard DNS.
First you have to package it so it is reasonably easy to setup Joe the regular user. It does not have to be perfect.
Then you have to offer an incentive. Napster (at the time the most popular program ever written) had tons of MP3 music as the bait. Bittorrent was seeded (ha a triple pun, win) with pornography.
In other words we have used lust and greed. Perhaps vanity or envy could be used to seed namecoin? Click here to see what your friends are saying behind your back? This is what they won't let you know about famous celebrity.
From the graph, it looks like drugs are the bait for bitcoins. It looks like every geek with a drug tweak bought in to bitcoin in the days after the Gawker article. It's not DNS related nor is it 100% responsible for the spike, but it is a unique solution for anonymous drug trade.
A good book covering the subject is The History of Money (Jack Weatherford). Money was has had a tradition of being valuable in its own right (gold and silver coin), and eventually banks created paper money that represented an amount of gold held in reserve.
The Bank of England, was at first a private entity (established in 1688) and was only nationalized in 1946[1]. The notes they issued were backed by deposits of coin, gold, or silver. They broke with the gold standard in 1931, and it's then we see money tied not to a specific asset, but rather as a debt instrument; it's valuable only because someone promises to pay you back.
When the debtor is a nation-state, we have fiat money, and the money is backed only by the faith and credit of the nation who issues it.
As Weatherford's book points out, fiat currency was not invented by the British, as the Chinese were using a similar system in the 1st or 2nd century, and continued to use a paper money system until 1399. Abuses destroyed the value of the paper currency, and it did not reappear in China until the 20th century.
As Weatherford's book points out, fiat currency was not invented by the British, as the Chinese were using a similar system in the 1st or 2nd century, and continued to use a paper money system until 1399. Abuses destroyed the value of the paper currency, and it did not reappear in China until the 20th century.
"Money was has had a tradition of being valuable in its own right (gold and silver coin), and eventually banks created paper money that represented an amount of gold held in reserve."
You should read the book Debt: The First 5000 Years. It might be an interesting read for you, as the author points out that times of virtual and "real" currency switched quite often. It shows some really interesting facts about the origin of money - especially the fact that the idea of money is not based on the idea to improve barter.
>and the money is backed only by the faith and credit of the nation who issues it.
another view was that the demand for and value of the money is supported by the government collecting back the taxes in supposedly the money printed by the government. But such a view is pretty much out of the window in the modern world of unbalanced budgets, "discount windows" and multiples-of-GDP sovereign debts
In the US, during the early 19th century, state-chartered banks (and other countries, such as insurance companies and railroads) would issue their own notes. These were not, technically speaking, money, but they were used as such, because there just wasn’t enough gold and silver coin circulating in the country to be practical for commerce.
As with many things in history, I don't think there is a single year that we can point to as the turning point, since it's a somewhat gradual shift.
Think about it this way - a few hundred years ago, it was commonplace to pay dues to the government using precious metals (like gold). In some parts of the world, this is still the case, but in the majority of the developed world, public and private debts are paid with money that gets its value by fiat.
This change can't happen overnight, even if you force it to; if people continue to accept gold (for example) has having liquid value, then it will continue to be used as a currency.
I wouldn't even use the beginning or end of Bretton Woods as the turning point (though it was certainly a turning point), because the point is less whether people can convert currency to gold than it is a question of whether they do.
Note that long before governments had fiat currency in the “we will print as many dollar bills as we want to” sense, devaluation of specie-based currency was not uncommon.
According to Wikipedia, the Roman denarius had about 4.9g of silver when it was introduced under the Republic, 3.9g under Augustus (about 200 years later), and 3g in the later eras of the empire (a few centuries after that). The Byzantine histamenon coin was high-quality gold when it was introduced in the late 10th century, and had almost no gold by the late 11th. The English penny started out in the late 8th century as 1.5g of fine silver, then went to sterling (92.5%) silver in the 12th, reduced its weight to 0.97g in the early 15th, to 0.78g in the mid-15th, and so on.
There's no clear message in the article -- except expressing a strong believe for Bitcoin or related tech. So, I guess he's trying to get some heavy co-investors on board by creating some hype on Bitcoin again. Any other ideas?
Besides: I love the Bitcoin idea and I'm sure it's not over yet (I still have Bitcoins).
Edit: Don't get me wrong, I am not into bashing Fred -- I just want to get the real message behind his post and to raise HN readers's awareness for influence by media (media manipulation). Before happily discussing a new topic by a VC celeb we should ask why is HE now posting about Bitcoin. Look: Fred and his blog have a strong reach and influence, so it should be legitimate to question his actions. More on this topic: http://en.wikipedia.org/wiki/Media_manipulation
Edit2: just read another reply in this thread (which is downvoted as well) about that he just want to give the Bitcoin price another bump.
Fred and his blog are very popular -- so he is not just "a" VC, rather a strong opinion leader in the VC and startup world. I am just saying: Take Fred's words with a pinch of salt
Sorry for being dense, but I don't catch your drift. It is easy to tease and talk your book when you are an investor of any kind. The bigger your audience, the better (for you, the investor).
Part of the point of his blog seems to be to take the temperature of his community of readers on certain topics. Given that the USV investment thesis involves "large networks of engaged users", it's helpful for him to be able to see where the crowd is going, or what direction it's leaning in.
We all live in nation-states and are required to abide by their laws as a result. Though it's theoretically possible to separate currency from governments, if that's not what the governments want, it will never be legally permissible. As it is, Bitcoin operates in a legal gray area. That's not going to improve.
Most of the VCs I talked to about FaceCash refused to invest because they were afraid of the regulatory implications. But throw in some bad economics (verified as such by Paul Krugman, see http://krugman.blogs.nytimes.com/2011/09/07/golden-cyberfett...), a catchy buzzword or two, and some political philosophy, and you've got yourself an investor?
Venture capital is even more broken than I thought.
Most of the VCs I talked to about FaceCash refused to invest because they were afraid of the regulatory implications.
Having followed your comments on this topic for a while, it seems just as plausible that VCs did not invest in FaceCash because they believed that you cannot take on the challenges(regulatory or otherwise).
VCs invest all the time in enterprises that are in the gray area because the potential upside negates the obvious risks.
Willingness to sue the gov doesn't say much about your ability to take on a challenge. In fact, your inclination to litigate may well have scared VCs who'd rather you get traction with your product even if it means operating in a gray area and litigate when forced.
I'm sure if payPal tried to meet every rule and take on what they deemed as unfair laws in their early days they'd never be able to focus much on their product.
I didn't even think about suing California until months after meetings with VCs, so your implications are false.
PayPal had to scramble at the last minute to deal with licensing issues right before its IPO, because it had ignored them up until then. This is well-documented.
I have no idea who you are. I do know that you are critical of my abiding by the law, and critical of my challenging it. You don't think that building an incredibly complex technology from scratch and suing a government demonstrates an "ability to take on a challenge." (Which leads me to ask, what does?)
PayPal had to scramble at the last minute to deal with licensing issues right before its IPO, because it had ignored them up until then. This is well-documented.
I see: in your opinion, unless I'm willing to risk incarceration--a risk PayPal never faced because the USA PATRIOT Act had not yet been passed--I'm not willing to take on "the challenge."
You have a strange view of the world, my anonymous friend.
No, the VCs were scared that they wouldn't earn a high return on investment with most of the money going to license fees, application fees, and surety bond premiums; and that in the alternative, they might be at risk of going to jail themselves. See 18 U.S.C 1960(a):
"(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both."
Most of the VCs I talked to about FaceCash refused to invest because they were afraid of the regulatory implications.
Given you have competitors that have raised money, this leaves two possibilities:
1. You were talking to the wrong VCs
2. You got rejected by the VCs for reasons other than the mere existence of the regulatory challenge(for example, they may have rejected you because they believed the regulatory challenges were surmountable but that you did not possess the skills etc. to deal with them in the manner that they'd like)
In either case, your attributing your failure to fundraise to the regulatory implications seems dishonest and/or misguided.
A sample of e-mails from VCs explicitly stating that regulations were a primary factor in their refusal is available as an appendix to the white paper I wrote about the laws, here:
In addition to those references, several more investors told me verbally that the laws were the primary issue. Beyond that, I'm not sure what skills you would be referring to that you are absolutely certain I (but not other entrepreneurs) lack, in order to deal with regulations.
Furthermore, the two possibilities you listed are not the only two, and I'm not clear as to why you are so insistent on refusing to acknowledge the possibility that regulations might be a hindrance in my case. Specifically, it's also possible that:
3. I was talking to the right VCs, but I was more honest in my assessment of the regulatory situation than the few other competitors I know of that recently did raise money;
4. I was talking to the right VCs, but both my competitors and their investors were genuinely unaware as to the situation regarding a brand new law.
If you'd like to continue the discussion you are welcome to e-mail me.
A nation-state may move to adopt bitcoin (think Cayman Islands or similar) or it could operate outside of the old political regimes, like Sealand.
We should cheer this development-- the nation-state historically is responsible for great misery and bloodshed, and most nation-states today operate as barely disguised petty criminal syndicates, shaking down their productive citizens.
The popularity and usage of Bitcoin shows there is an emerging trend in the currency and payments market: digital peer to peer crypto-currencies. Wilson is only making a statement that this trend has materialized, and he is excited to see where it would go -- if any viable businesses spring up based on these currencies it would be a smart idea for him or other VCs to invest. Why? Well, Wilson at least is an investor in Internet products, and seeing as how these currencies are looking to establish themselves in a global market (Internet) whose GDP is in the trillions... you get the point.
I've talked to about sixty, and Fred Wilson's post exemplifies many of the patterns I've observed throughout. So no, I wouldn't say I'm jumping to conclusions.
I think there is a valid argument that Bitcoin is an asset class, not a currency. As such, governments would have to make possession of BitCoin a crime. I would think any democratic state would find it very difficult to make possession of an asset illegal.
BTW, I don't find Krugman's arguments very compelling, in that they don't account for the nearly infinite divisibility of Bitcoin and unlike gold reserves, notes held against them cannot be fraudulently inflated.
Acting as a short-term store of value is very important for a currency, but it's bad for investment if it's good as a long-term store of value. Money at its core is not a store of value; that's one of the requirements, but at its core it is a common medium of exchange. It is the very indirection that makes markets using money more efficient than ones based on barter; having a single common medium of exchange means you only need to solve the price discovery problem for n products rather than n^2.
Deflation is bad because it turns money into an appreciating investment asset; this means it reduces productive investments (i.e. those that actually incentivize people to create wealth). A (quasi-)fixed base of money as a root cause of deflation lets people with a lot of money to begin with siphon off wealth from people doing productive work that increases the size of the economy and the velocity of money.
TL/DR: deflation means theft of wealth by people owning currency at the cost of the economy at large that uses the same currency.
Nobody understands economics well enough to predict what Bitcoin will become. For a start, both of those pieces hinge on the dangers of a deflationary spiral. But it is far from clear or agreed how such a spiral would work, or whether it would encounter a natural limiting factor. To the extent that deflation might cause a decrease in demand, it's not even clear that that's a bad thing - because we live in such a consumption-oriented economy it's hard for economists to even conceive of - let alone analyze - the idea that people might only spend money when they need to.
The issue at hand is the return on investments, not the value of goods and services. I still purchase technology because the value of having access to that technology exceeds the current cost - the resell value. No one is buying warehouses of Galaxy Tabs, expecting for a positive return a year from now, and if normal investments (for example, the capital required to build the Galaxy Tab) which normally have a positive return assuming 2% inflation suddenly become outstripped by deflation, then no one will invest.
So, instead of looking into the matter emperically, you argue that so and so said it and you believe in those people and therefore anyone with opposite opinion must be wrong, regardless of what they say?
Trolls do what trolls do.
ps. I agree with Krugman that Bitcoin is more likely to be treated as commodity and, as a result, causes the hoarding problem. But whether the hoarding could kill Bitcoin due to lack of activity in the bitcoin economy remains an uncertainty. Especially now that the exchange rate is down.
I'm not much of a fan of Krugman's blogging (which is fairly partisan), but it's pretty inaccurate to summarize his academic work as "built around big government manipulating the money supply". Yes, he's some variety of neo-Keynesian, but so are conservatives like Gregory Mankiw; Krugman's a vaguely center-left one, solidly in the mainstream (and considerably to the "right" of the modern-monetary-theory group). By "partisan" do you just mean that, like most economists, he isn't a follower of Austrian economics?
That's precisely what I meant by "built around big government manipulating the money supply"
As for partisan: I think all economists that take a definite position fall under what I meant by "partisan." I meant: advocating a niche view that is not accepted by a majority of experts. (In economics, I don't think there is currently any view that doesn't fall under this description.) That's not to say there isn't a correct view; I think there is.
What happens if someone releases bitcoin2? right now bitcoin exists as a unique entity, but with competition what happens to it's value? bitcoin to me seems like how beenie babies were to moms in the 90s. Super fun and interesting for a while, but a couple years later and everyones trading pokemon cards.
Plus I don't think I'm ever going to be able to get over how lopsided bitcoin favors early adopters.
There already is Bitcoin2, and 3, and 4, etc. Lots of forks, and even forks of forks (Bitcoin -> Ixcoin -> I0coin). Solidcoin is probably the main one, and has some interesting critiques of Bitcoin:
Fundamentally, the value of anything is a function of its supply and demand, even currencies. In Bitcoin's case, the demand derives from the new utility provided by a unique and clever solution to the problem of distributed consensus among untrusted parties. Eg, people want to transact and neither trust each other to deal honestly nor trust a central monetary authority (either not to devalue the medium of exchange, or not track them, etc).
Bitcoin created a system to make that possible, and hence has demand (and limited supply) and value. As long as the underlying reasons for that demand don't vanish, it should always have some value.
The question is, can forks of Bitcoin provide that utility in a significantly better way, that gives them enough marginal demand over Bitcoin to incentivize most people in the Bitcoin network to switch? Same as the general competing currencies idea espoused by Ron Paul and others (for the record, I'm a skeptic, but find the idea interesting), just applied to virtual P2P currencies that are created by hackers rather than nation states (of course, there's nothing stopping a nation state from creating one either except their own laws, mindset, and momentum).
As for early adopters being favored, you can only make that observation with the benefit of hindsight. Had bitcoin failed early or never taken off, early adopters would have lost. The expected value back when early adopters decided to commit and mine and accumulate bitcoin is decidedly different from the realized value of bitcoin now.
Also, most currencies favor early adopters, even (especially) gold and silver. I don't think that's really anything new.
It's arguably unethical to mention solidcoin and link to their PR material without at least a little word of warning:
Solidcoin is not a decentralized system like bitcoin. Every other block must be mined by one of several trusted parties. This has advantages and disadvantages.
(Because there are only a few bitcoin clients and only one popular one bitcoin has some centralization problems too, but it's not really comparable)
The solidcoin trusted parties have used this ability to change the rules of the system substantially on the users. E.g. the payout per block was recently reduced from 32 SC to 5 SC. Users could not disagree by simply refusing to "upgrade" because the trusted parties stopped issuing blocks on the old network.
There is a bunch of other funny business as well. Do your research.
The odd thing about Solidcoin is that I'm fairly sure that its centralization doesn't actually provide the claimed security benefits.
For those not familiar with Solidcoin, it has two alternating types of blocks. The odd-numbered blocks are mined through a computationally-expensive process similar to that in Bitcoin, though the Solidcoin one doesn't run as well on GPUs. The even blocks are created either by someone with more than a million Solidcoins (which no-one has) or by a node its creator controls that has a special 1.2-million-coin account.
The claim is that this prevents an attacker with 51% of the compute power rewriting history and spending the same coins twice because they can't create the modified even blocks required. The trouble is that I can't see anything stopping them. The even blocks are approved by including a special transaction showing ownership of over a million coins, but there's nothing tying that transaction to the contents of that block, or the previous block, or anything except the previous transaction using that account. An attacker should just be able to copy the block-approving transactions from the original even blocks to their malicious replacements.
Basically, its creator failed to grasp that if you want to validate something using a digital signature (the one proving ownership of the million coins) you need to make sure modifying that something invalidates the signature. Most of the Bitcoin clones have turned out to be inferior to Bitcoin in some way, actually.
(There's some subtle issues around timestamps that'd make this attack a bit harder but I'm not intending to provide a howto guide here.)
>It's arguably unethical to mention solidcoin and link to their PR material without at least a little word of warning:
True, my bad. I know of the scam accusations, just assumed anyone reading a Bitcoin thread in HN would have as well and that I didn't need to. But in case not...
Their site isn't an accurate description of Solidcoin or Bitcoin, though. There's actually a worse concentration of Solidcoins in the hands of its early adopters than Bitcoins and Solidcoin is far easier for the Government or a hacker to shutdown - all they have to do is get control of its creator's PCs. The amount given to the CPF account controlled by its creator has always been twice that stated: 10% of the value of an ordinary block, not 5%. The base reward for a block was reduced from the stated 32 Solidcoins to 5 by central fiat a month ago, which is why so many are in the hands of early adopters. The "10 trusted accounts of 1.2 million each" can actually be spent because the creator of Solidcoin designed it so he could transfer their entire contents to the CPF account he controls at will. I've already mentioned the 51% protection is deeply flawed and probably ineffective. It goes on.
Some of the criticisms of Bitcoin are valid, but they've already been fixed by other less problematic clones that still never became that popular. In practice they don't actually matter that much; for example, even 2 minutes to confirm a transaction is too long for many things anyway.
If you amend "currencies" to be "currencies of finite supply* then yes. However any currency administered by a central bank does not favor early adopters: The dollar being a very obvious case.
we all know what supply and demand are, and i understand the basics of crypto currency.
The question is, can forks of Bitcoin provide that utility in a significantly better way
Thats not really the question is it? It's not about better utility. It's about where you can unload the currency and for what/how much. It's not about usefulness it's ultimately about money. Real money. Bitcoins are only valuable in a world where there use is necessary. I wish I could bold that on HN, NECESSARY. Without the necessity any normal consumer would use a more convenient, less volatile system.
Lets shift for a sec. Think about the silk road marketplace. What they should really do is come out with a bitcoin clone of their own, get a bunch of early adopters behind it and then switch the website over to only accept their crypto currency. The'd rake in the cash and have a pile of it on hand from getting in early. They'd be selling the currency and the products you buy with it. The worlds best drug dealers. In fact theres no telling whether the bitcoin early adopters are involved in this very practice at silk road. It's not about beating bitcoin in usefullness, it's about real money.
Also, most currencies favor early adopters, even (especially) gold and silver. I don't think that's really anything new
Gold and silver don't compare. They're not currency, they're commodities that have actual use and value outside the realm of wealth exchange, and they didn't favor early adopters(thousands of years ago). That comparison holds little to no value and frankly I'm growing rather tired of people pretending like it does.
Of course, but it's worth mentioning here b/c people don't normally apply it to money.
>Thats not really the question is it? It's not about better utility. It's about where you can unload the currency and for what/how much.
For what and/or how much you can exchange the currency is a function of the level of trust in the currency, which is a function of the general demand for it, which is a function of several things - utility, soundness of the algorithm and system implementation, size of the network, etc. All these factor into its value. At any one time, different factors may be weighted differently by market participants, but those weights and the resulting market values can and do change.
>It's not about usefulness it's ultimately about money. Real money.
What is real money exactly?
>Gold and silver don't compare. They're not currency
Considering that gold and silver have been currencies for most of recorded human history, until just the past ~80 years, I beg to differ. But I wasn't attempting a strong 'comparison' there anyway, just a tangential observation.
It's not about better utility. It's about where you can unload the currency and for what/how much.
This sounds like the Bitcoin-as-investment thinking that produced the bubble. Imagine a fork of Bitcoin that clears transactions faster, has less volatility, and has a better GUI; would you still judge it only on its exchange rate?
_would you still judge it only on its exchange rate?_
the idea is that the market will judge it on the features you enumerated (GUI/settling speed/volatility) and the exchange rate will reflect that, n'est ce pas?
> Lets shift for a sec. Think about the silk road marketplace. What they should really do is come out with a bitcoin clone of their own, get a bunch of early adopters behind it and then switch the website over to only accept their crypto currency. The'd rake in the cash and have a pile of it on hand from getting in early. They'd be selling the currency and the products you buy with it. The worlds best drug dealers. In fact theres no telling whether the bitcoin early adopters are involved in this very practice at silk road. It's not about beating bitcoin in usefullness, it's about real money.
It is not only about the new blockchain, it is the infrastructure built around it. Currently bitcoin is the cryptocurrency which is easiest to use and has most infrastructure.
If you want to start your own drug market for a new cryptocurrency, you have to setup exchanges etc. too for it.
I think a large factor in adoption of BitCoin is the uncertainty of it's security. You have to be close to a hacker to truly understand how BitCoin works. General public has little to no chances at being able to gage how safe bit coins are to hold, and with no government to back up the investment, they will understandably be very hesitant to participate. Especially since it already got hacked.
To be fair, understanding regular currency isn't exactly trivial. Most people seem to get by without understanding the finer points of banking, quantitative easing, M1, M2, etc.. And one might consider the ability of governments to manipulate their currencies for political reasons to be a security flaw.
If nothing else, this story ought to trigger a small bump in te price of a bit coin. The price seems to be directly collated to the amount of press it gets.
Fred: Redo that plot substituting gold, a currency going back to biblical times, for dollars. Do you think there is still a chance bitcoin will follow the Gartner hype cycle?
I think it is a lot easier for the people to remove a ruling party, than for that ruling party to remove a software application that the people want.
What made email catch on? Did it put the post office out of business? Maybe the future is an online currency with <$5000 transactions used by smartphone users and somehow baked into the web like email, a server app. Apple, Google (or really the banks) should be onto this.
Some restaurants are already using bitcoin as a payment method, but it's still very hard to use it in real world situations. I still think that when we'll have a lot of NFC phones around, that's when Bitcoin payments will really start to become a common thing in the real world.
the emergence of currencies that are not controlled by nation states in my lifetime
What we expect is the emergence, not of currencies, but of a currency. Money is a natural monopoly, and a single currency is the free-market equilibrium. It's the current system of multiple separate floating currencies—each with its own name, exchange rate, and central bank/counterfeiter—that is the anomaly.
The question is, can we build the ability to switch cryptographic building blocks into Bitcoin? I have no idea, but resiliency and adaptability are fundamental to the survival of any peer to peer system.