
Betting on Bitcoin: Fundamentals vs Technical Analysis - eof
http://gd0t.com/node/15
======
jaysonelliot
If you lose your wallet, you lose your bitcoins. This means that losing data
from your hard drive is equivalent to losing your bank account.

I get the idea that people ought to back up regularly, but look at the reality
of the situation. How many times have you heard a friend or relative bemoan
the loss of important photos or files because they didn't back up their
computer?

I assume that the eventual goal of bitcoin is to be accepted by the mainstream
public. Unless I'm misunderstanding something (which is entirely possible),
we'd be asking people to accept the idea that their money is only as safe as
the data on their hard drive.

Do I have this all wrong?

~~~
DenisM
If you lose your wallet, you lose your cash.

That does not mean cash is unworkable, that only means people will learn to
keep their money in a safe place. Might take some time, but they'll learn all
the same.

~~~
jaysonelliot
I only carry a small amount of cash at any time. If bitcoin is only as secure
as cash, then no one will maintain any more bitcoin currency than a few
hundred dollars.

It would be irresponsible to entrust tens or hundreds of thousands of dollars
to the integrity of your hard drive and its backup(s).

Or is bitcoin not meant to become a currency that people would hold in values
larger than a few hundred dollars?

~~~
DenisM
See, you learned! You learned not to store all your cash in one place (on your
person, or in your home). Surely you will also learn to store or bitcoin stash
in an appropriate electronic analogue of the safe deposit box. Like dropbox,
only with real encryption.

~~~
jaysonelliot
Are you saying that you would keep the bitcoin equivalent of, say, USD$100,000
in this hypothetical secure location?

For bitcoin to become a viable alternative currency, everyone's wallet needs
to be distributed as widely as a torrent file, and secure enough that only the
owner can ever open it.

~~~
DenisM
Sure. I would store it encrypted in the cloud, and I would give the copy of
the key to my trusted friends, relatives,my lawyer, and my accountant.

Better yet, I would give _halves_ of the key to all those people, with some
redundancy.

~~~
mike_esspe
I think this is a great idea for bitcoin startup, especially generating halves
of encryption keys.

------
pemulis
I think that Mt. Gox needs to place limits on how quickly the 'official'
bitcoin exchange rate can rise or drop. This would help to limit the intra-day
volatility that is the defining feature of bitcoin speculation. Since the
trading volume is so low right now, savvy professional traders can manipulate
the market up or down with only a few thousand USD. This makes the current
bitcoin economy impractical for most ordinary merchants and consumers.

If people want to trade in dark pools or OTC exchanges at rates different from
the 'official' rate, that's fine. And in situations where there is an actual
_reason_ for the price to shoot up (like PokerStars announcing they will start
accepting bitcoins), those side markets are where we would see the 'real'
price. The official rate on Mt. Gox would lag behind because of the
restrictions in place, but I think that would be a small price to pay for an
end to the bot- and speculator-driven volatility in the exchange.

~~~
barmstrong
Wouldn't speculation driven volatility be automatically solved as the number
of participants and size of the market goes up?

~~~
ceejayoz
<http://en.wikipedia.org/wiki/Tulip_mania>

------
heyrhett
Since the author didn't bring this up, I think that the biggest technical
problem with bitcoin is that it takes 10 minutes to verify a transaction. It
can't be used in real stores until someone figures out a way to get that down
to under a minute.

~~~
shazow
You can include a transaction bounty (traditionally 0.01 BTC) with your
payment which the verifiers receive if they're the first to verify your
payment. Effectively, this puts your transaction at the top of the priority
queue. When you're connected to a healthy number of peers, this can bring down
the verification time down to seconds.

Another approach is to have "trusted sources" which are Bitcoin
banks/ewallets. If your customer is using a Bitcoin bank like eWallet to send
a payment, you can pretty much assume that the transaction is valid based on
the source, without verification.

Either way, this is merely a short term problem. As more Bitcoin
infrastructure springs up (more banks, more verification hubs, more incentive
on transaction fees rather than mining, when mining gets too expensive) then
these problems will be organically mitigated. If the Bitcoin infrastructure
were to remain the way it is now forever, it won't scale for many other
reasons (like requiring peers' wallets to store significant transaction
history that could grow at the rate of gigabytes per hour with "real world"
volume).

~~~
arst
_You can include a transaction bounty (traditionally 0.01 BTC) with your
payment which the verifiers receive if they're the first to verify your
payment. Effectively, this puts your transaction at the top of the priority
queue. When you're connected to a healthy number of peers, this can bring down
the verification time down to seconds._

Isn't transaction verification tied to block generation, and isn't block
generation limited to about 1 every 10 minutes?

~~~
shazow
Someone correct me if I'm wrong, but I don't think transaction verification is
tied to generating new blocks.

From how I understand it, verification involves:

1\. Confirming the privately-signed transaction against the public key of the
source wallet (transactions not forged).

2\. Confirming against the historical transaction chain that the coins
actually belong to the source wallet (coins not forged).

3\. Passing the verified transaction along to other peers.

~~~
Groxx
The generating of new blocks is what sets the transaction "in stone". And the
more blocks past a transaction's inclusion, the harder it is to reverse that
transaction - more blocks = more certain you have actually received the money.

Prior to being included in a block, it's entirely possible for the payer to
issue the same money to multiple recipients. Once it's in, it's assured that
only one is included, and others are therefore invalid. So it's in recipients'
best interests to wait for a few blocks before totally accepting something as
"paid".

~~~
shazow
Ah that makes sense. Thanks for the explanation.

------
kiba
Related: one of my writer wrote an article that concluded the fundamental for
bitcoin is strong, since the economy is growing.
[http://bitcoinweekly.com/articles/causes-behind-the-
bitcoin-...](http://bitcoinweekly.com/articles/causes-behind-the-bitcoin-
price-rally)

(P.S, I hope I am not spammy)

~~~
hugh3
Has an article in bitcoinweekly ever concluded that the fundamentals for
bitcoin are weak?

~~~
kiba
I think you would realize that there are only...25 articles in the archive,
and that this was the only article that actually analyze the Bitcoin currency
market.

~~~
ceejayoz
I think the point just wooshed over your head.

~~~
hugh3
Was that typed on an iPhone, or is "woodshed over your head" some expression
with which I was not previously familiar?

~~~
anamax
"whooshed" is past tense of "whoosh", as in "it went right over your head,
with you totally unaware".

------
Estragon

      > there are already competing exchanges being set up on 4 
      > more continents that will allow liquidity between bitcoin   
      > and other currencies
    

Anyone got a cite listing the four countries?

~~~
eof
> <https://en.bitcoin.it/wiki/Trade#Currency_exchange>

Additionally, glbse I believe will be open sourcing their server (the client
is already open).

~~~
Estragon
Thanks.

------
Teckla
What happens if you lose your Bitcoin wallet?

Are your Bitcoins gone forever, with no recourse? Do those Bitcoins
effectively leave the limited Bitcoin money supply forever?

~~~
kiba
They are lost forever if you do not back up your bitcoin wallet.

Also, it's impossible to distinguish between a hoarded bitcoin or a lost
bitcoin. But if it is lost, it effectively leave the money supply forever.

~~~
caf
I was wondering about this myself. There's a fixed total supply of bitcoins,
and a non-zero rate of loss can be expected - this doesn't seem like a good
long-term combination.

~~~
stuhood
The Bitcoin protocol allows for 8 decimals worth of divisibility, meaning that
there are actually 2.1E16 or 21 quadrillion "units" (aka "Satoshi's")
available.

~~~
Groxx
And the divisibility can be extended. The 8 decimals are largely just because
the current client(s) only understand it to that degree.

------
ww520
I actually want to work for BitCoins. Anyone has a small project that needs
work and is willing to pay it in BitCoins?

~~~
sgornick
You can list your availability as a freelancer on <http://bitcoiners.org>

or on the Bitcoin wiki: <http://en.bitcoin.it/wiki/Category:Freelancers>

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anonymous
Can we just stop talking about bitcoins?

