BitCoinnnnnnnnzzzzzzzzzzz

TwelveBaud

However, when you bring in the practicalities of reality, the truth is that money needs to be backed by something (resource, legislation, whatever) that guarantees it has value; gold and dollars do, but Bitcoin doesn't.

@RaceProUK said:

At least the dollar and gold are backed by something;

Let me sit you down for a nice little chat about Bretton Woods and the Nixon Shock...

Oh wait, I don't have to. Wikipedia can do that for me.@RaceProUK said:

What happens then? With no way to generate more, it'll lose its value, and eventually be worthless.

Try again. It'll still have useful properties (anonymous yet verifiable transactions, able to function with "only" an internet connection, ...) and, as more and more bitcoins are lost due to rounding errors and deposits into inaccessible accounts, they'll increase in value as supply goes down. They'll eventually be worthless due to lack of liquidity (satoshi will be too valuable to part with, making them valueless), but that won't be for another 20-30 years or so.@RaceProUK said:

But then you'd end up with trading 1 satoshi, and quite frankly, that's just ridiculous.

FTFY.@RaceProUK said:

Bitcoins are (theoretically) infinitely divisible; dollars et al aren't.

There's a built-in limit of 0.00000001 BTC, called "1 satoshi".@FrostCat said:

Because somehow it can be verified. I don't care enough to check the details.

Every transaction in the entire history of BitCoin is public knowledge -- it's what's digitally signed in the block tree and what "miners" are validating. Each block of transactions includes one transaction from nowhere to the miner, which must have the correct value for the sequence number of the block mined. After that, just follow the money.@svieira said:

:snip:

This, exactly. Good write-up!@RaceProUK said:

So… how did the first Bitcoin come to be?

The genesis block has no transactions except for the one that mined the first 50 BTC -- to an intentionally unusable address. This block has the coins that were spent first.@redwizard said:

What happens 10 years from now when there are thousands (or even millions) of hashed transactions? 20 years from now?

They're collected into blocks of smaller size. In theory, you need all the blocks dating back to when all BTC that any account used was first mined to verify a single transaction. In practice, you just need to verify that they were given that money at some point (because of the difficulty of changing history) and it's explicitly allowed to snip blocks off the root if you have some way to track the account balances so snipped.

RaceProUK

@TwelveBaud said:

There's a built-in limit of 0.00000001 BTC, called "1 satoshi".

Well, TIL

Planar

@blakeyrat said:

So a lot of people made a huge profit on paper, but did anybody actually get rich?

Sounds more and more like the stock market.

redwizard

So in summary:

@Maciejasjmj said:

The concept was cool - nearly instant worldwide transfers with low processing fees, not tied to your identity.

Wait a minute...

@svieira said:

Grossly simplifying, you can think of it as a double-entry ledger stored in Git. Every change gets hashed, based on all the ones before it. This is called the blockchain. Like Git, the fact that each hash is a content+history hash means that you can't modify a parent or grandparent commit without breaking the whole history from that point onwards. (So no modifying a 3 year old entry to assign one billion bitcoins to your 3 day old address - that will corrupt your local copy of the blockchain and you can't pull any more of it until you remove that entry).

What?

@TwelveBaud said:

In practice, you just need to verify that they were given that money at some point (because of the difficulty of changing history) and it's explicitly allowed to snip blocks off the root if you have some way to track the account balances so snipped.

@Maciejasjmj said:

The implementation ended up fucked, happens.

Oh, ok.

Captain

No-one's ever explained to me, without sounding like a moron, how a computer runs some program for some time and magically creates a virtual currency which can be exchanged for real currency.

I hopefully won't sound like a moron, but the computer program that runs is doing the work of maintaining the bitcoin infrastructure. So the work is "valuable", given that bitcoins themselves have any value. It's not the work/computer program that gives bitcoins value. It's the inherent agreement to use them as a currency.

blakeyrat

The only inherent value in a Bitcoin is the value of the electricity that went into the GPU that generated it.

But of course actors in economics aren't rational.

martijntje

Interestingly, it appears to be supported by DuckDuckGo, but not by Google.

For some reason, Google gets confused and shows the exchange rates between USD and EUR.

dkf

@Planar said:

Sounds more and more like the stock market.

Actually, as time goes on it sounds exactly like the currency market, which is nastier than the stock market because it's a true zero-sum game. Because that's what it is.

lightsoff

That's insane - and the resultant behaviour is totally predictable.

I don't get why people over here have been pushing for a transaction tax, as it'd have the same chilling effect on the economy.

dkf

@lightsoff said:

I don't get why people over here have been pushing for a transaction tax, as it'd have the same chilling effect on the economy.

It wouldn't have much of an effect, as they're talking about something like 0.01% or something like that. On a $100k, that would be $10. The only people who would be heavily hit would be those who are pushing through very large numbers of transactions back and forth for no reason other than to push transactions back and forth, i.e., high-frequency traders. And that's exactly the group that the transaction tax is aimed at.

If they were aiming to hammer ordinary people with this, they'd be setting the tax much higher.

lightsoff

The high-frequency traders are (mostly) doing arbitrage.
If item costs less from A than it sells for at B, you can quickly buy & sell. This brings the prices closer together. You have to be fast, as the risk is that the price difference inverts during the transaction.

As arbitrage acts to balance the prices both within a market and across different markets, it's useful and probably necessary - it is basically the closed loop controller that ensures the price of item in London is the same as the price of item in New York.

Thus if it was taxed, the "best case" effect is to act as damping which slows the matching of price between markets, and to increase the error to roughly the size of the tax.

However, the other likely effect is that arbitrage starts being done in much larger timesteps (as the tax burden is smaller), which results in higher risk of overshoot (so they lose money as the markets invert), and thus higher risk of large oscillations.

Get unlucky, and the arbitrage becomes undamped - see Tacoma Narrows.

RaceProUK

I put bitcoin value into Google, and it gave me the conversion to GBP

TwelveBaud

You need to use BTC instead of XBT.@lightsoff said:

Thus if it was taxed, the "best case" effect is to act as damping which slows the matching of price between markets, and to increase the error to roughly the size of the tax.

And reduce the cost of infrastructure for bearing the load of these high-frequency transactions, by lowering the frequency to closer to the levels of conventional, non-arbitrage-based trades.

I mean, seriously, look at this shit (left is quotes, right is actual trades):

flabdablet

@lightsoff said:

the other likely effect is that arbitrage starts being done in much larger timesteps (as the tax burden is smaller), which results in higher risk of overshoot

I can't see why slowing the overall trade rate should alter the risk of overshoot on any given trade. What model are you using that suggests this should be the case?

blakeyrat

I have no problem with people doing arbitrage.

I have problems with a system that requires millions in capital and buddy-buddy wine-and-dine secret agreements to make millions of dollars with virtually no effort (beyond initial setup) and very little risk.

Transactions should be time-sliced to a long enough slice that Internet latency is a non-issue. Say, 5 second slices. Now everybody's an equal player in the market, no matter how many buddy-buddy agreements they have.

Kian

@dkf said:

It wouldn't have much of an effect, as they're talking about something like 0.01% or something like that. On a $100k, that would be $10.

Here's it's 0,6%, which adds up to 1,2% per transaction (since someone is sending it, and someone is receiving it, and both get taxed). Personal accounts are kind of exempt (provided the one sending it is also a personal account. Salaries are exempt). And since VAT has to be paid through the bank, you get to pay taxes on your taxes. Yay!

blakeyrat

@Kian said:

And since VAT has to be paid through the bank, you get to pay taxes on your taxes. Yay!

Dafuq?

Kian

Paying VAT (Value Added Tax, sorry I forgot to define it) is a transfer. Transfers are taxed. So you pay the transfer tax for whatever VAT you have to pay. Both when someone paid you for something that you had to collect VAT on, and when you send the VAT you collected back to the goverment. So 1.2% of your VAT is taxed by the credits and debits tax.

blakeyrat

That's ludicrously unjust. And you have no option to walk to the local tax office and pay in cash, or something that's free of transaction costs?

martijntje

Ah, so I have to misspell it for Google to recognize it. BT would stand for Bhutan, which Bitcoin has nothing to do with.

RaceProUK

ISO 4217 codes don't have anything to do with ISO 3166; anyway, the currency code for Bhutan is BTN

Kian

Not really, since it all has to go through the banks. Fighting evasion and money laundering, you see. It's ludicrously unjust, but people keep voting for the belgium-s that implemented this retarded system because the costs are hidden from them. Since it's "companies" that pay the taxes, and its not required for shops to show how much taxes change the price of things (not sure if it's allowed unless you actually need to pay your own VAT and ask to have it discriminated), people don't realize how much the state bleeds them for.

Double taxation, fixed untaxable minimums despite rampant inflation, and other such ridiculousness is one reason I've decided I'm bailing out if the current party wins again (they've basically won almost every election in the past thirty years).

lolwhat

@Kian said:

they've basically won almost every election in the past thirty years

Ask yourself why the opposition doesn't run on this issue... or why, if they do, they aren't doing it well enough to win. Don't be shocked if the answer is that they're in someone's pocket just as much as the current crop of assholes.

dkf

@Kian said:

Here's it's 0,6%

Wut?

@Kian said:

not sure if it's allowed unless you actually need to pay your own VAT and ask to have it discriminated

Here, anything normally sold to consumers has to have the price they actually pay, inclusive of tax. The retailer may show other things such as the exclusive-of-tax amount, and normally would do that for things sold mainly to businesses, but the amount that the consumer pays out must be shown.

Kian

Hmm, I think I expressed the opposite of what I meant. I meant to say that shops only show the final price. You have to ask for a special ticket, which requires that you be making a purchase for a company that pays VAT, to see the breakdown. Since regular people only see the final price, they don't realize how much they pay in taxes.

Buddy

Secure transaction processing is useful work. Miners get paid for doing that work. The intrinsic value of of the created bitcoins is directly related to how much people appreciate having a secure way to pay for things.

The advantage that bitcoin has over traditional currency is that it bypasses the lockdown that visa/mastercard/paypal have on secure payment processing.

Buddy

@blakeyrat said:

Transactions should be time-sliced to a long enough slice that Internet latency is a non-issue. Say, 5 second slices. Now everybody's an equal player in the market, no matter how many buddy-buddy agreements they have.

Considering that an unsolvable problem for bitcoin is the double-spend race-condition attack, this is probably a very good idea.

blakeyrat

Visa/Mastercard/AMEX/Paypal etc. can process a transaction in less than a tenth of a second (Bitcoin takes ages), and can reverse transactions in case of fraud (impossible with Bitcoin), and services using them don't need gigabytes of local storage (like the Bitcoin blockchain requires).

So... uh. It's not as good in many, many ways.

@Buddy said:

Considering that an unsolvable problem for bitcoin is the double-spend race-condition attack, this is probably a very good idea.

Natch.

dkf

@blakeyrat said:

Visa/Mastercard/AMEX/Paypal etc. can process a transaction in less than a tenth of a second (Bitcoin takes ages), and can reverse transactions in case of fraud (impossible with Bitcoin), and services using them don't need gigabytes of local storage (like the Bitcoin blockchain requires).

Credit cards are not the same as money. Bitcoin is not a credit system, but rather a currency system. In theory, Visa et al could operate just the same with bitcoins as the currency used to denominate transactions; the way things would work would look extremely similar to what we've got right now. Yes, people would have to trust the credit card operators to actually do what they say they do, but they have to do that now anyway.

The correct thing to compare a bitcoin transaction with is handing over some physical money. Which is even more convenient than bitcoin…

blakeyrat

@dkf said:

Credit cards are not the same as money.

Debit cards are close enough and VISA and Mastercard run those too.

Buddy

@blakeyrat said:

Visa/Mastercard/AMEX/Paypal etc. can process a transaction in less than a tenth of a second (Bitcoin takes ages), and can reverse transactions in case of fraud (impossible with Bitcoin), and services using them don't need gigabytes of local storage (like the Bitcoin blockchain requires).

So... uh. It's not as good in many, many ways.

@Buddy said:
Considering that an unsolvable problem for bitcoin is the double-spend race-condition attack, this is probably a very good idea.

Natch.

Yeah, a lot of the problems with bitcoin are ideological, rather than technological. Certainly all the ones you just pointed out are clearly (well, it's clear to me) down to their ‘decentralize everything’ and ‘buyer beware’ minarchist leanings.

Still, in the long run I think the idea has more potential than the old way of doing things. If enough people get used to using bitcoin, they'll start to get annoyed at the rough edges, and a crypto currency with a less right-wing-nutjob rule set will be able to compete. But for now we only have libertarian crypto currencies because those are the only people who care enough to back them.

dkf

@blakeyrat said:

Debit cards are close enough and VISA and Mastercard run those too.

They're different again. They're much more like a check, except that the technology exists to determine whether the “virtual check” is valid much more easily. The debit is an authorisation to do an account-to-account transfer; there are protections, mostly stemming from the fact that banks are required to know all the parties involved, but they're not as great as with a credit card, where you're truly borrowing to purchase. The effect is similar, but it runs via a different set of laws. That matters when things go wrong.

With cash, once you've given the money over, that's basically it. (Unless you take to the courts, but you could do that with bitcoin too.) That's completely different to both debit and credit card systems, which both operate on a “settlement in the future” model.

loopback0

It's not just that. Right now I can spend my money in the currency I was paid it. Or get it converted instantly at time of payment.
If I wanted to buy shit with Bitcoins I've got to convert my money to Bitcoins, and deal with the time and cost of that.

It's the equivalent of converting my money to Euros before spending it. It's daft.

dkf

@Buddy said:

Still, in the long run I think the idea has more potential than the old way of doing things. If enough people get used to using bitcoin, they'll start to get annoyed at the rough edges, and a crypto currency with a less right-wing-nutjob rule set will be able to compete. But for now we only have libertarian crypto currencies because those are the only people who care enough to back them.

The left-wingnuts seem to be more in favour of purely local currencies or even pure barter. That's a different sort of utopian crazy, but it's one that nobody gives a damn about.

Buddy

Bitcoin is bad because it's not widely adopted? That's not something I can address, I'm just the devils advocate after all.

loopback0

I didn't say it was bad because of this, just that it's another advantage traditional currency has over it (at the moment).

Buddy

Inventing a socialist cryptocurrency is the easy part. What would be hard is persuading anyone to put any money into it.

Buddy

Yeah the only use case I can think of is buying and selling digital stuff online—if you make it possible for people to buy or donate to your software projects using btc, you'll be able to use that to buy other games or programs without changing currency.

blakeyrat

It's possible BTC could solve the microtransaction problem. That's actually a valid use-case where speed of transmission isn't that important and refunds aren't ever needed and ditching transaction fees is a huge deal.

It doesn't seem to have been designed for that purpose though.

Buddy

That's a good point. And people could probably be persuaded to part with bitcoins more easily than with ‘real money’. In fact, I would be entirely unsurprised to find out that gambling makes up the majority of the current bitcoin economy.

boomzilla

@RaceProUK said:

Bitcoins are (theoretically) infinitely divisible; dollars et al aren't.

They often are divided into smaller amounts in calculations. Nothing wrong with that.

RaceProUK

Not at all, but dollars always have a known precision. As do Bitcoins, as it turns out.

boomzilla

@RaceProUK said:

Just thought of another flaw with Bitcoin; how to ensure bits don't just go missing.

Yes, but people have also shaved their coins since...I assume they were invented.

boomzilla

@redwizard said:

My dollar printed in 1939 that I use to buy some kleenex to wipe my nose with takes the same amount of time to transact with as the one printed this year.

Except for the time arguing with the clerk that the 1939 bill is really real.