
Bitcoin Non-Technical FAQ - snitko
http://blog.oleganza.com/post/32725987418/bitcoin-non-technical-faq
======
lmm
"Bitcoins are not created upfront and distributed to some privileged persons."

Well, yes and no. Around half of the bitcoins there can ever be have already
been created and distributed to some privileged persons (certainly far less
than half the world's population). IIRC around half of those belong, or
belonged at some point, to its original inventor.

I admire the mathematics of bitcoin, but I'll never buy any until they make
the production curve fairer.

~~~
oleganza
No production curve can ever be "fair". If you imagine that one day every
living person has equal amount of bitcoins, they will be very quickly
redistributed from those who doesn't care to those who do for a relatively
small price. And then, when the network becomes more stable and useful, those
who have sold their fair share early will whine again about being unfair
distribution.

Second: even if a lot of bitcoins are initially belong to a single person, it
poses no problem. Either you hold money that nobody needs (value is very low),
either you hold money that people a willing to buy from you and every day you
are not selling them, your opportunity cost rises.

In other words, it's entirely possible to create inflationary effect by
stashing 50% of money and then suddenly selling them out. But the imaginable
effect is very limited:

1\. The longer you keep the money, the longer you bear the risk of
uncertainty. If your bitcoins today are worth 100K USD, there is no guarantee
they will be work 1M USD next month. This creates an incentive to sell
earlier.

2\. Each successive act of selling naturally lowers the price as supply is
increased. So if you start selling your stash, the remaining part will be
worth less (or will grow in value slower and slower)

3\. Generally, you cannot sell in bulk. If people are trading 1 BTC for 10
USD, it does not mean that somebody will buy 1000 BTC for 10000 USD. There
necessarily be a discount or simply nobody will spend 10K USD at once. This
returns us to points #1 and #2.

So even if Satoshi had a lot of bitcoins initially, he has either sold
significant part of them already, or will be able to "disturb" the market by
selling them at once only to his own great expense.

~~~
lmm
>No production curve can ever be "fair". If you imagine that one day every
living person has equal amount of bitcoins, they will be very quickly
redistributed from those who doesn't care to those who do for a relatively
small price. And then, when the network becomes more stable and useful, those
who have sold their fair share early will whine again about being unfair
distribution.

I said "fairer", not "fair". While there is no perfectly fair distribution
curve, the deflationary one bitcoin uses is far worse than any other currency
in existence. The very concept of one individual owning 1/4 of the entire
world's supply of dollars or gold or even sea shells is absurd, because such
an individual would have to be ridiculously, obscenely wealthy.

If you want a practical suggestion, simply removing the exponential halving
would make a far fairer curve. People would then obtain wealth proportional to
how long they'd cared about bitcoins (assuming that investments and computing
power grow at approximately the same rate).

>Second: even if a lot of bitcoins are initially belong to a single person, it
poses no problem. Either you hold money that nobody needs (value is very low),
either you hold money that people a willing to buy from you and every day you
are not selling them, your opportunity cost rises.

>1\. The longer you keep the money, the longer you bear the risk of
uncertainty. If your bitcoins today are worth 100K USD, there is no guarantee
they will be work 1M USD next month. This creates an incentive to sell
earlier.

But they're inherently deflationary, so actually you gain money the longer you
hold them. If you have 4 million bitcoins now, you can guarantee that you will
always have at least 5% of the entire bitcoin economy, and economies generally
grow.

>2\. Each successive act of selling naturally lowers the price as supply is
increased. So if you start selling your stash, the remaining part will be
worth less (or will grow in value slower and slower)

>3\. Generally, you cannot sell in bulk. If people are trading 1 BTC for 10
USD, it does not mean that somebody will buy 1000 BTC for 10000 USD. There
necessarily be a discount or simply nobody will spend 10K USD at once. This
returns us to points #1 and #2.

Sure, you'd have to ration them out over time and not spend them all at once,
like an arab prince who owns millions of barrels of oil. Doesn't make you any
less wealthy, just means your assets are not entirely liquid.

>So even if Satoshi had a lot of bitcoins initially, he has either sold
significant part of them already, or will be able to "disturb" the market by
selling them at once only to his own great expense.

I'm not worried about him disturbing the market. I'm worried about
concentrating an enormous amount of wealth in his hands. You can say he and
other early adopters deserve some profit from creating the system, and I'll
agree with you. But 1/2 of the entire future economy being concentrated in the
hands of so few is ridiculous.

~~~
jl6
If Bitcoin becomes the currency of the entire future economy, the initial
distribution method will have been proved to be a non-issue. More likely,
Bitcoin will be one currency amongst many, and the early adopters will sell
their windfall gradually according to supply and demand.

------
nullc
Gets a few facts wrong— E.g. the maximum block size is 1MB not 10MB, and there
is no facility to increase it without replacing all the software—it's as
fundamentally hard to change as the supply of coins because it's also a
scarcity which is essential to the security of the system. (without it, the
system would rapidly become centralized as miners produced enormous blocks
taking every single with-fee transaction; and then no one but miners could
afford the computational, storage, and network costs of validating the
gigantic blocks; nor would there be reason to pay substantive transaction fees
to fund security).

Overall it's pretty good.

~~~
hnolable
Also wrong, 'Can the government shut it down?'

Should be: Q. Who can shut it down? A. Anyone who is willing to pay 51% of the
monthly operating cost of all miners. Plus an initial investment to
manufacture the hardware. Neither of these numbers are out of the range of
Governments or Banks. And they probably won't be for a long time. This is the
death of Bitcoin scenario that worries me most. And it seems no one is really
worrying about it or taking it seriously.

edit: Here are the numbers someone calculated at the height of the first
mining bubble [1]. We're currently at less than double the hashing power of
then [2]. So a current rough estimate would be to double all those numbers.

[1] <http://bitcoin.stackexchange.com/a/1094>

[2] <http://bitcoin.sipa.be/speed-lin-ever.png>

~~~
sp332
Controlling only 51% of the current operating power of the miners would take
over eventually but it would take a very long time. Since each client trusts
the longest chain, you would have to recompute a new chain that's longer than
the entire chain so far. If you only pay for an extra 1% over the "legitimate"
chain, it would take several years to make a longer chain.

~~~
hnolable
You're thinking of the wrong scenario. If you have 51% of the power you start
mining a new block off the latest legit block but you include 0 or no "real"
transactions in it. After you find one, you only compute new blocks off of
_your_ "bad" last block. Since you have 51% you will control the entire
blockchain from this point on. And you can basically shut down all
transactions.

Note that we aren't trying to reverse any transactions or steal people's
bitcoin. We are just trying to stop all transactions. This is what bitcoin is
all about, so do this and you've destroyed bitcoin.

~~~
blake8086
51% doesn't mean you always "win" a block, just that you win 51% of the time.

~~~
hnolable
Ok I'll bite and explain it.

You're right, sometimes someone else will find a block before you and will add
it onto the longest existing chain. IF you always appended your bad blocks to
the longest chain then the blockchain would look something like
bad->bad->good->bad->bad->good->bad->bad. BUT you WONT be adding your blocks
to the longest chain. You will always add your blocks to YOUR OWN last bad
block. So you will always be working on a blockchain that looks like ...
->bad->bad->bad->bad. And since you have 51% of the power your blockchain will
eventually always be longer than the other chain(s) miners are working on. For
a while the two chains (legitimate and your bad one) will go back and forth
between which is longer. But at some point yours will get long enough and
outpace the legitimate one.

If you don't understand this you don't understand how bitcoin works. I don't
say this to be a dick, but I say it because this is a real concern that a lot
of people don't realize or think about.

~~~
blake8086
I hadn't thought about only working on your own blockchain like that.

A piece I'm missing is the heuristic most clients use to determine "longest".
Depending on how that works, this plan could be really easy or really hard.

~~~
hnolable
I believe the way longest chain is determined is the sum of the difficulty of
all the blocks. This basically boils down to just the chain with the most cpu
power that went into it. So as long as you control the majority of the cpu
power, you can control the longest chain.

------
spindritf
I would prefer a tutorial on how to safely use it to another pretty high-level
overview, just in the QA format this time.

------
rcknight
Mentioning things like "Peer to peer digital currency" and "protocol of
storage and exchange" in the first paragraph seems to me like it would turn a
lot of non-technical people off.

The "Why is it any good?" answer would be a much better introductory paragraph
I think!

------
tomrod
This is going to sound a bit naive on my part, and perhaps it is. If the
bitcoin transaction database is signed and stored on every computer, what
keeps this database from growing too large to handle?

~~~
oleganza
Nothing keeps it from growing too large. In fact, this is the problem that has
several theoretical solutions.

First, people may develop and use lightweight clients. They will only store
wallet and sign transactions, but will not store and verify the blockchain
themselves. For instance, they may refer to some public service to figure out
the current balance.

Second, there is a possibility to develop a client which stores only the block
headers and downloads only necessary blocks to validate particular
transactions.

Third, it is also possible to compress/discard old blocks that contain
transactions with empty recipient addresses.

~~~
tomrod
Would using only a partial block chain result in severe security issues?

~~~
oleganza
No. If someone does not want to keep a full block chain, then there are two
alternatives: a personal client with partial blockchain or an escrow service.
First option is definitely more secure.

------
nollidge
This needs some editing by a more experienced English speaker if it's to be
widely read.

~~~
caio1982
Can you point to some part of the text that needs editing? I don't think the
English in the FAQ is bad written at all (as a non-native speaker myself). I
agree the "non-technical" thing is a bit misleading though.

~~~
nollidge
Error-wise I didn't notice a ton of things, but:

> Bitcoin is designed to be a faster, cheaper and _a_ more secure currency

> Security is achieved by having every participant do the verification
> themselves using _[an]_ open protocol based on well _[-]_ known cryptography
> methods

> The original software source code is open and available _[to]_ everyone for
> review and improvement.

> The reward is halved approximately every 4 years until _[a]_ total of 21
> million bitcoins are generated around year 2140. Currently more than 9
> million _of_ bitcoins are available already.

Also "bitcoin" is not consistently capitalized.

That stuff aside, it's also not very idiomatic. I'm not sure what the ideal
audience is, but if it's, say, my 60-year-old mom who doesn't really
understand browser tabs, I don't think it's going to reach them. It's good for
_me_ though, as a programmer who doesn't specialize in crypto or know much
about currency theory (if that's a thing).

~~~
oleganza
Thanks for the remarks. What do you think about this way to capitalize
"Bitcoin"? [http://blog.oleganza.com/post/32746652183/how-to-
capitalize-...](http://blog.oleganza.com/post/32746652183/how-to-capitalize-
bitcoin)

~~~
nollidge
Makes sense to me.

