

Innovations in payment technologies and the emergence of digital currencies [pdf] - FatalLogic
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q3digitalcurrenciesbitcoin1.pdf

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Animats
That's a useful article. As they point out, "the key innovation of digital
currencies is the ‘distributed ledger’ which allows a payment system to
operate in an entirely decentralised way, without intermediaries such as
banks." That's what made Bitcoin work. There's no need for a central trusted
authority.

The problem is who has authority over the validity of the distributed ledger.
For Bitcoin, it's the biggest mining pools. The top one or two pools together
have over half the hash rate, which gives them control. That wasn't the
intent, but it's now the reality. Now we're back to a central trusted
authority.

Not quite, though. It's possible for anyone to tell if the central authority
is cheating, because everyone can see the ledger.

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DSingularity
Still a serious problem. Transparency is still a unique property but
decentralization is important for a variety of reasons. In the end-game the
miners will be important to processing of transactions. If there is only a few
major players with necessary infrastructure because everyone has giving up on
mining then that will give them immense power over the currency. Its for
reasons like this that bitcoin might not survive the crypto-currency wars.

