Posted on 04/03/2014 7:20:12 PM PDT by Errant
Respectfully, I’m sure you beleive what you have written there is just so much that is factually incorrect. I am referring here to both your lengthy posts.
No one is compelled to mine, it is done by free will.
In the early years there was no profit in mining. Two pizzas were purchased for 10.000 Bitcoin.
Early there were no cookie cutter mining rigs. It took a lot of effort to assimilate the knowledge to run a rig proficiently from scratch.
Anywhere in the world if you need to send $1000.00 to someone they will receive $1000.00 minus perhaps a few pennies. Moving money through banks or a wire service will cost you a large percentage. The poorer the country, the higher the percentage. If this is not intrinsic value to you , then it’s not, its subjective. I can tell you it is very valuable to me.
Any issues with speed of transaction will be addressed by developers as billions of investment in “ real “ dollars are poring into Bitcoin. You seem like a tech savvy guy so you know this is a very solvable issue.
The Bitcoin network is supported and secured by the worlds most powerful supercomputer, it is valuable to me. Scientists are already preparing to fold proteins for medical research with the network. Naturally as capabilities are realized, more will be accomplished. I had a friend describe the process of discovery thusly in terms of acquired knowledge of the blockchains potential. “ I was digging a well for water in my yard and oil started gushing out”. Innovation in the coming months is going to explode because of this discovery.
The Byzantine Generals problem has been presented at all major computer science institutions of higher learning as unsolvable. Bitcoin technology has solved it. In short, the solution of trust-less consensus across time and space has been discovered. The implications of this discovery cannot be overstated. It is a breakthrough of monumental proportions with great promise for the future.
Bitcoins are divisible to 100.000.000.00 places and more if need be. Anyone who wants Bitcoin can get it, and if you don’t want it you need do nothing.
Actually the IRS uses the tax code to manipulate all business and wealth activity.
Bitcoin, as a fiat currency, has no inherent value.
We have a perverted view of wealth these days. Too much of a focus on liquidity.
Thats the point, if Bitcoin had no value the IRS wouldn’t issue guidance.
Since there is no slavery in the world [that we live in,] everything that we do is done by free will. Why mining of Bitcoins would require a special mention?
In the early years there was no profit in mining. Two pizzas were purchased for 10.000 Bitcoin.
Those pizzas were purchased, regardless of the profit in mining, for the real value of Bitcoin as the pizza vendor perceived it to be at that time. I bet that the pizza maker did not even know what was the "profit in mining," just as when you buy an apple from me for $1 I do not ask how hard you had to work to earn that dollar.
Early there were no cookie cutter mining rigs. It took a lot of effort to assimilate the knowledge to run a rig proficiently from scratch.
I'm afraid you have it backward. Early on the mining rigs were just a PC with a program. Compare to the GPU setups of last year, and to the custom ASIC miners that cost a fortune. It did not become "easier" to mine - it became harder, much harder, because as the network grew in size the hash rate had to be kept constant, at one block per ten minutes on average. Thus, each miner has to share this loot with all other miners.
Anywhere in the world if you need to send $1000.00 to someone they will receive $1000.00 minus perhaps a few pennies. Moving money through banks or a wire service will cost you a large percentage.
First of all, here is a link to some discussion about this. I had most of my response written before Google gave me this very recent news article.
Then, I am not sure why moving the money abroad is such a popular example in the Bitcoin world. Very few people need to do it impromptu. Most people do not send money abroad because they and their relatives live in the same country. Some other people have relatives abroad, but wire transfer is one of not quite common ways to help them out. There are easier ways. And, finally, businessmen who operate in multiple countries have bank accounts in all of them, and the transfers are done by the banks. (One couldn't do it otherwise anyhow; imagine IBM walking into a US bank to withdraw $10M to pay salary to their Malaysian workers :-)
Most of the money rotates inside the country; we get paid, and then we spend most of it within a pay period. This is "the killer application" of any payment system - to be able to effortlessly pay for gas, for utilities, for rent, for food... and existing banking systems are nearly ideal for that. I haven't written checks in ages, since "Bill Pay" service - an electronic one - is free at Wells Fargo. I rarely use cash, unless at a flea market, or when crossing a bridge once in a blue moon. This is what matters - and Bitcoin is lacking in this regard.
But even if we look at the foreign transfers... what are my options here? Say, I want to send $3,000 to Germany.
a) I go to the bank and execute a wire transfer. This is a very safe method, where the money will not disappear into the vacuum of open space if anything goes wrong. I had one case when I wired money to another country, on request of a relative's friend, but the account there was closed. Guess what, I got all the money back. It's reliable. How expensive is that? About $30 or $40 last time I checked. Flat fee, regardless of how much you send. That would be about 1% of the $3K that I wanted to send. Time to do this: about 15 minutes, as you are guaranteed to pass by your bank every single day.
b) I can buy Bitcoins, send them to the recipient, and ask the recipient to cash them back to USD. How much will that cost? Let's count. First, there is the spread. Today you can buy bitcoins for anything from $490 to $447, and to sell them for anything from $447 to $402. Naturally, you'd want to buy and sell for exactly $447, but that is not always easy: there may be only a few coins available at that price. If you need more than one... tough; talk to more expensive sellers and less expensive buyers. In our example, you need $3K. That would be BTC 6.711. If you buy for $457 and sell for $437 your loss on the spread alone is $134. This is already far more than I'd need to spend at my bank, with insurance and all. But you may be more lucky and you can minimize the loss here. Will the recipient be equally interested in saving your money? If he is a business, he will sell the BTC at whatever going rate it is at this very moment, and if he gets less USD than you need... do not guess, I will tell you - he will request more money from you.
On top of that you will be hit by the exchange fees; by the transfer fees; and by the labor that goes into all this Forex stuff. You cannot do it all in 15 minutes! This labor not only costs money, it is also risky. To begin with, someone can make a honest mistake. But it is also possible that you will never see your money again. It is also a lengthy process. Mt. Gox, in their better days, required a long time to have the trading account set up; you had to transfer US funds into their bank ahead of time. We are very quickly running out of 15 minutes!
As an executive summary: if your life does not revolve around various, complicated ways to lose your money, just go to the bank, pay the man, and have your money sent the right way.
The Bitcoin network is supported and secured by the worlds most powerful supercomputer, it is valuable to me
That is actually the truest statement about Bitcoin, even though most of the hashing power is provided by single purpose machines, like ASIC miners. Still, if they can be used for something good, why not? The catch here is that all this computing power costs real money to buy and to run. Miners hope to get rich off of their BTC activities. Will they be likewise rich on protein folding? If not... too bad.
Bitcoins are divisible to 100.000.000.00 places and more if need be. Anyone who wants Bitcoin can get it, and if you don’t want it you need do nothing.
This is also correct; but it is orthogonal to the discussion. The question here is much simpler: "Should the society embrace Bitcoins as they are?" My answer to that is "No. The technology is promising, but it's nowhere ready. Go back to the drawing board. Come back when, for example, you have a solution for waving something in front of the terminal and having your coffee paid for at that very instant." This is the level of simplicity that we have today, and it would be unreasonably optimistic to think that people will want to do copy and paste of unreadable gibberish that is Bitcoin addresses.
Thanks for your consideration. I really do need to start limiting my online time. This time of year is my favorite time to be outside doing stuff. Everything in moderation you... ;)
1. Convenience of use.
So how would my parents, for example, go about it when they are in the store?
This reminds me of the vault issue I discussed back in December with the other guy. I discounted his notion vaults would still be needed too easily, due to only looking at the circumstance from my point of view. What you've raised here could be a similar need that needs a solution. I just happened across a article that may answer part of the problem: Inside Square’s Stealth Approach to Bitcoin Integration
I have a 0.00005 BTC somewhere in a test account.
That's only $0.0225. Not hardly worth bending over to pickup? If you're going to do some testing, a tenth of a bitcoin would only run you about $45 now.
Again, the easiest, fastest online transactions I've ever made were done using bitcoin. Before I could change windows after hitting send, the purchase was completed!
2. Insurance of accounts
I do not need to pay anything for my bank accounts being insured. There is nothing of the sort with Bitcoin.
Yes you do, It's hidden, you wouldn't believe how much insurance costs (e.g., facility, FDIC, other). Also, banks have large IT security, and independent audit costs.
3. Guarantee of convertibility
There is no even guarantee that you will see your money ever again, as it is the case with Mt. Gox.
For every Mt. Gox, there are dozens of others that dealt in dollars which have also collapsed. And indeed, the long arm of the law is working to get victims at least some of their investment back. Then there is a class action lawsuit that has been filed.
4. Government oversight to prevent shenanigans
There were no rules to follow for Mt. Gox because it was an illegal (in many countries, but not in Japan,) unregulated bank.
Mt. Gox was/is an exchange, not a bank. Indeed something strange took place and it's being investigated not only by Japanese Investigators, but also US Investigators.
5. Stable value
It's a rollercoaster alright. What else can one see there?
Actually I find its value pretty stable considering its high tech, newly invented nature. If you haven't noticed, gold, silver, and certain well known stocks (twitter, facebook for two) have been pretty volatile too.
6. Paper trail and reversibility of transactions
So why Mt. Gox won't reverse transactions through which, they say, someone stole their money? The answer is simple: you only can know that account 32904823jrkjl3423432 received the money. No face, no name, no address attached to that account.
Actually Mt. Gox does have this very information available. Everyone had an account with their personal information and attached to each, addresses to their bitcoins.
7. Acknowledged security of the entire mechanism
Credit cards, even those with mag stripe that we still use in the USA, have far more security checks at the bank than any Bitcoin transaction. But the real deal here is that those transactions are reversible because every payment has a name and an address attached to them.
I believe there is the requirement to notify your CC agency within 30 days of discrepancies. Bankcards have not so many avenues to contest charges. The CC industry spends much time and resources dealing with fraud, securing customer records, and etc. and these costs are passed on to the consumer through higher interest rates and merchant fees.
CC companies are looking at crypto push technologies due to its superior efficiency since the merchant doesn't have to fear chargebacks, and customer records aren't required for verification at the POS. No doubt more can be done to make crypto more user friendly. Sounds like another opportunity for filling a need to me.
If the world holds together, crypto currency/payment are here to stay and will continue to grow in popularity due to their utility.
The last purchase I made from Overstock using bitcoin, I decided to see how much was going toward "fees (i.e., transfer fees)". So I took the amount and converted it to the price of btc at the time. It came out exactly equal to the price in dollars. And again, the transaction took less than 1 sec. to complete.
Btc is only one of about a hundred different cryptocurrencies. The market will decide which ones succeed based on their individual merits - way better than the artificial markets and too big to fail/jail banks/banksters that have taken the world's economies to the very edge of the cliff.
More than the entire current market value of Btc in existance.
I assure you, the US Government is perfectly happy - and able - to mismanage money that is denominated in any currency.
I am certain your world view is going to be crushed in the not to distant future.
Good thing the government is anti shenanigans/s
I don't think it was completed at that time. It could have only been sent into the network, and then Overstock assumed that you will not double-spend the coin. In most cases this is true; however you cannot build a large payment system on a hope that only honest people will be using it.
To elaborate on that: (link)
Bitcoin confirmations represent the number of blocks in the block chain that have been accepted by the network since the block that includes the transaction.In simpler terms it represents the difficulty of a double spend attack. With only one confirmation there is about a 50/50 chance that a double spend is possible since the next block that is solved may confirm a different block instead of the one that has the transaction and that block my show the coins being spent elsewhere. The odds that a double spend has occurred gets exponentially smaller with each confirmation.
An attacker must match the power of the entire bitcoin network to keep up with block creation so as time goes by it becomes increasingly difficult to forge a transaction.
It is generally accepted for most transactions that 6 confirmations represent enough security to assure the transition is valid.
And here is another good explanation, from the same link:
If you don't grasp the basic concept, imagine for a second that a network outage split the bitcoin network in half. I could send one transaction giving 30 bitcoins to Abel to one half and one transaction giving those same 30 bitcoins to Fredto the other. Each half would accept that transaction and until the two halves reconnected, you wouldn't know which transaction would be honored tomorrow.Confirmations are simply blocks that have been generated after the block that contains your transaction. Because there is no central authority that can be consulted to be sure a transaction will be committed, recipients use the number of confirmations as a way of protecting against double-spend attacks.
The network is always trying to extend the longest chain, and eventually, some chain will win. The deeper the transaction is in the chain, the higher the chance it will win because the network tries very hard not to duplicate efforts. (Because miners want their coinbase transactions to win, they all try very hard to extend the chain most likely to win, which makes sure it does in fact win.)
Effectively, the more confirmations, the higher the likelihood that a transaction will remain forever in the public hash chain rather than a conflicting transaction if there was one. At 6 confirmations, it is perhaps one in a billion that a transaction won't be permanent -- and that's if the sender is attempting a double spend attack.
As the blocks come at a certain rate (6 per hour) you may need to wait from 10 minutes to 1 hour to get enough confidence that your transaction is now "cast in stone." Until then it may be outvoted by the majority. This is how the Bitcoin network fights double-spending.
This is why I am sure that Overstock simply accepted your payment on a honor system. There is no alternative for them, since they cannot request a customer to wait until the payment is confirmed. And there is no risk for them either because they have all the time in the world to wait until the payment clears. In a c/c transaction it is done in your presence, and you are given a confirmation number. In a Bitcoin transaction you can get your own confirmations if you know how. If Overstock does not receive confirmations, they will not ship the product - it's just that simple.
Unfortunately, this mechanism does not work when the payment has to be here and now - such as when you buy in person. Either the store has to trust you and allow you to walk out with merchandise, or they have to put you into a "holding area" where you will spend the next hour waiting until your payment clears. I'm sure that very few people will agree to that :-)
So we need to be very clear. When you say that your purchase was completed in one second, it only means that you entered the transaction data in one second. It's like if it takes me a second to swipe the card and then one hour for the purchase to be approved :-)
This whole mechanism of confirmations reminds me of a mountaineer who has to scale a mountain, all alone. He has to climb, step by step, and pound his own stakes into the stone to support him. If there is another climber, he has to do all this all over again, from scratch. This is how Bitcoin forces you, and me, and him, and his dog to prove that you did not overspend. This is a mathematically correct way, but it is amazingly expensive. If I need to travel to the top of the mountain, I take my car and I drive up the road. If none is available, I take the cable car. Both are good for large scale, unskilled use. If we set the paranoia of pure math aside, we can implement a far simpler system that (a) trusts you, and (b) catches you if you misbehave. This is exactly how the entire world operates, not only in the sphere of money. It may be electronic money - as I said, I have no objections - but the system must be usable; at very least it should be just as convenient as the existing card networks. I understand that Bitcoin was designed as a largely anonymous system - and then it required such complications to remain sound. However most people in the real world do not need an anonymous payment system that comes at such a huge cost.
Indeed! ;)
There may be some low tech solutions to the POS issue, one might be a check against known addresses which have attempted to double spend in the past, or a check against those that have history of no issues, and etc. Doing so would give a higher degree of confidence and would only take a few milliseconds. There are a lot of smart people, and you sound like one, who are working the problem and finding solutions/fixes.
I certainly don't have all of the answers, only have seen the practical side of how well it worked for me in this particular instance.
If/when the cost of mining a bitcoin exceeds the "value" of generated bitcoin for some extended period of time, the fallout — the "bear market" in Bitcoin (and/or switch to mining other cryptocurrencies such as litecoin etc., potentially with the process repeating itself a number of times before it will be declared a pyramid scheme) — will be swift and cascading.
The early adopters of Bitcoin, who are now sitting on the unrealized wealth of about 1/3 of the planet's worth (if Bitcoin becomes an accepted currency,) ...
I think there may be a problem with your estimate. At the "guaranteed" limit of BTC in circulation capped at 21 million and assuming 1 BTC is trading hands at USD$1,000 (which is more than double of current conversion price) the total capitalization of entire Bitcoin economy would amount to USD$21B (at most, counting bitcoins that are lost, "unminted" and hoarded - IOW, not in circulation) — a piddly amount of international trade - about a quarter of current annual revenue of Amazon, about 2/3rd of American Express annual revenue, or about the combined annual revenue of Visa and Mastercard. **
Of course, if we assume exchange rate of 1 BTC per USD$1,000,000 then the [eventual nominal] Bitcoin economy would approach USD$21T, or approximately the size of entire US economy in a not too distant future. *** / ****
Of course, synchronizing the ever-growing distributed blockchain database will inevitably slow that "economy" down significantly (yes, I know about "light clients" and "pruning" - good luck doing that in real time in a multi $Trillion economy with millions of transactions daily, without compromising and jeopardizing transactions' security) - the decentralized system of making Internet micropayments simply was not meant to be that scalable. In other words, there are a lot of serious technical and nontechnical disadvantages in the decentralized / "communal trust" scheme, not just ephemeral "political advantages" over other fiat currencies the Bitcoin faithful are emphasizing.
There are far more robust secure digital e-payment systems already on the market, and more are coming. And none of them have the "currency" or "investment" risk or elements of pyramid scheme present in Bitcoin.
Also, the Bitcoin proponents like to favorably compare the cost of Bitcoin transactions with the credit card costs, but they ignore the costs of conversion into dollars or other fiat currency, and the fact that the credit card charges include the credit risk (since in reality it's actually a loan / credit that defers the payment) while the debit card and Bitcoin don't extend credit and therefore should be significantly less expensive to process - as the debit cards are. Turns out, Bitcoin should be compared to the debit card, and it is not a cheaper way to pay for "stuff" once the credit risk is taken out of the equation. *****
___________________________________________________
** Ref: Bitcoin is Gold 2.0: But how can it be regulated? - FR, post #22, 2013 December 28
The Serious Disadvantages of Bitcoin - FR, post #21, 2014 January 05
***
Currently there are more than 12 million bitcoins in circulation, so total potential Bitcoin "market" capitalization will be significantly smaller than "potentially authorized" capitalization. At the rate of creating approximately 25 bitcoins per 10 minutes, it would take over 100 years to create the [complete] supply of 21 million bitcoins.
**** The bitcoin value forecasts from wiki: Financial journalists and analysts, economists, and investors have attempted to predict the possible future value of bitcoin. Economist John Quiggin stated, "bitcoins will attain their true value of zero sooner or later, but it is impossible to say when."[93] In 2013, Bank of America FX and Rate Strategist David Woo forecast a maximum fair value per bitcoin of $1,300.[104] Bitcoin investor Cameron Winklevoss stated in 2013 that the "bull case scenario for bitcoin is... 40,000 USD a coin".[105] In late 2013, finance professor Mark Williams forecast a bitcoin would be worth less than ten US dollars by July 2014.[106]
***** Ref: Bitcoin Is an Expensive Way to Pay for Stuff - FR, post #21, 2014 January 05
Debit vs Credit Card Charge / Offline Debit Vs Online Debit Vs Credit Card Charges - Cardfellow.com, by Ben Dwyer, 2013
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.