40e6 (watt) / 0.06 (joule/gigahash) / 1e6 (petahash/gigahash) = ~650 petahash/second
BitFury's immersion cooling tech:
https://www.youtube.com/watch?v=uV7MDhqNyXE&t=0m42s (shows the fluid boiling - starts at 0m42s)
BitFury's 16nm chips:
Plus, with BitFury online, the cost of a 51% attack just raised to $200 million.
The only reason it is (currently, for a short time) hypothetically possible to 51%-attack the network with a budget in the low hundreds of million of dollars is because most of the miners are not using such efficient 16 nm chips. As the market migrate to these last generation chips, expect the cost to increase to $1+ billion in the next year.
If BitFury can turn $200 million into $400 million now rather than over a couple of years, why on earth would they care about the side-effect of killing off bitcoin?
For the avoidance of doubt, I think that BitFury's best interest is BitFury; as long as they make a decent chunk of money, the end result for bitcoin is - and should be - immaterial to them.
Would they even need to convert BTC into USD? Even ignoring the obvious opportunities for shorting an entire economy?
I mean, I'm kinda curious to know what effects they could cause by e.g. choosing to mine zero-block transactions for a few days.
If they find the next block during the time they are mining only against the block header, that block will contain no transactions. This doesn't happen very often, and there are some other issues that can arise from the practice (a multi-block fork happened once), but miners believe that it increases their profitability so (afaik) they continue to do it. More info here: http://bitcoin.stackexchange.com/questions/38437/what-is-spv...
Why would the price plummeting matter to them if they've already made their money?
Not if their cash isn't - somewhat ironically - tied up in BTC.
Really, I'm sure between the two of us, we could imagine a thousand and one viable ways of making a tonne of cash very, very quickly that wouldn't involve transacting in BTC at any point!
You can cripple Bitcoin transaction clearing with a thousand dollars to DDOS the network with spam. If only state-level actors had a thousand bucks lying around ...
So they can "unspend" their own bitcoins, as follows : use 51% of your hash power to create a parallel blockchain, which is not published. Include all transactions, except the one you used to buy a TV. Put something else in it's place. Keep doing this until the TV is shipped/arrived. Then publish the parallel blockchain. Boom. Unspent.
In any reasonable person's version of "wait X blocks for confirmation" (currently mostly 3), X would be infinite.
If they make good money from it, why would BitFury care about bitcoin's long-term outlook?
Best case scenario is that at the end of the effective life of this DC BitFury decide to doublespend their coins to allow them to spend all bitcoins once, however by that time their relative % of the network will be less than 50%.
Why not? Surely this is more a lack of imagination on your part, rather than a hard fact?
* During the transaction spam DDOS attacks, the price went up even though it was literally unusable.
* The present price seems sustained by something that looks very Willybotish running between OKCoin and Huobi. https://www.reddit.com/r/Buttcoin/comments/3vnjgk/what_drive...
The remaining American Bitcoin traders are certainly gullible enough to keep buying and trading a 51%-compromised coin. (I mean, there are people who still think Paycoin could make a comeback.) But American traders are a sideshow - all the action is in China (miners, actual traders). So the question would be: will Chinese speculators keep gambling on a 51%-compromised coin?
(And of course the MMM ponzi buyers, whose judgement is sufficiently bad that they wouldn't even understand the problem.)
No, this post, and the handy table inside, explains the various attacks possible at different percentages of the hash rate:
50MW is enough power to supply ~14k homes from different references I've seen.
I'm curious about what normal data centers use for backup power since natural gas and diesel generators don't get much bigger than 2MW. Or maybe they just don't have backup generators.
They have gas capable engines (50DF series, 50cm cylinder bore) with ratings up to 975kW/cylinders and up to 18 cylinders or 17MW per genset at 60hz.
They're not the only player in that field. Fairbanks-Morse sells the Colt-Pielstick PC2.6 line with 750kW per cylinder at 600rpm and up to 16 cylinders for 11.5 MW @ 60hz. They also sell MAN 48/60 engines that go up to 21MW and MAN natural gas 51/60 G engines up to 18.5 MW.
 This also means that putting 650 Phash/s gigs into the network is not as profitable as it seems, since it will double (55%) the ratio while three times more expensive (if it linearly scales).
It doesn't really matter how high the difficulty is or who the miner is the coins are mined and most of them sold.
There might be a small fraction of coins which are still mined in pools using outdated miners and those people don't bother selling them coins(fractions of coins that is).
It has been accepted wisdom that most mining operations sell most/all of their mined coins.
I'll look for that article now.
EDIT: Not the article I was looking for, but it covers it and was from 2013. This guy was using the cheap Icelandic power and the cold Icelandic air to his advantage.
What you describe is price-based competition. It’s probably the most documented situation in economics, and it present in many markets. It is a race to the bottom, but rarely ever ends; when it does, it is generally by disruption (something people on HackerNews know a lot about). In the mean time, it drives technical innovation after technical innovation—but I doubt, after 40 years of Moore’s law that it will suddenly end.
* The constant amount actually changes periodically when the coinbase reward is adjusted downward but that only happens about once every 4 years and historically exchange rate price appreciation has outstripped the reduced coinbase mining rewards. eventually the coinbase reward will go to zero and the number of coins that go to miners each day will be their relative share of the total fees being paid by users transacting on the network. Miners choose which transactions to include in a mined block so in the future a large miner may have some pricing power over transactions because they could refuse to process any transaction with a fee that falls below some threshold.
To put this into context, by comparing it with a centralized version, an equivalent number of actual transactions could be done at a bank with a crud app running on a $5 complete desktop PC which the Raspberry Pi foundation just released. It is a 1 ghz computer with 512 MB of RAM. It draws up to 0.7 Watts.
Wait, wait, wait. did I say an equivalent number? Since Bitcoin is limited to 7 TPS (7 transactions per second), I should modify this to 100x more transactions (700 transactions per second), if you wrote it in C, or if not a hundred times, then at least ten times as many in python. If it were a crud app running at a bank, a $5 computer could do 100 times the transactions that 650 Phash/s of wasted effort collectively give. And 40 megawatts.
But it's a stupid, wrong solution. The basic idea sucks. It's bad.
(by the by my target price for btc is $600,000 based on a comparison with how bad gold is physically, and the market cap of gold. :-P.)
I love fiat currencies, they're one of the great achievements of modern civilization. (This sentence isn't ironic, it's actually how I feel.) Despite my target price I don't hold any bitcoins at all. I hope some of the numbers I've given can put into perspective why.
> But it's a stupid, wrong solution. The basic idea sucks. It's bad.
instead of explaining that the cost is the cost of guaranteeing the authenticity of the transaction. HackerNews likes technical comments, and will happily burry expletives.
You could find more compelling example, such as estimate the ecological cost of having most of the current world-wide banking transactions on BitCoin, and prove your point.
Also, you don't seem to understand the point of PoW.
No, you're being downvoted by technical people because you're missing the whole point of decentralized digital currencies. Educate yourself: https://en.wikipedia.org/wiki/Cryptocurrency#Timestamping
> I love fiat currencies, they're one of the great achievements of modern civilization.
Yeah, unless you want to export some Cuban cigars from Germany to Denmark: https://en.wikipedia.org/wiki/Society_for_Worldwide_Interban...
Hash rate has increased by 41.9% over the same period, so the difficulty has kept the time-to-generate relatively fixed - just the way it's supposed to work.
The real news is that someone or someone(s) have added ~200PH/s worth of processing power to the network in the past 30 days. This is probably from some high-power ASIC miner being released, or from some consolidated mining concern going live.
How would bitcoin's power consumption stack up if it were tasked with servicing tens of millions of transactions per second?
It would stay almost the same since the hashing power is not connected to the number of transactions.
Also by the way, no one does tens of millions of transactions per second, visa does something like 40,000 at their absolute peak.
The amount of power wasted by BitCoin indirectly depends on the monetary turnover of the system. Because if somebody can spend $1mln to perform 51% attack and move around $1bln, that will likely be done.
Hence, the power wasted is proportional to the turnover of the system. Otherwise, it does not work.
Also, when a bank charges me 1% for a wire transfer, they pay salaries from that money and some people buy food. The power burnt by BitCoin is actually literally immediately irrecoverably physically wasted.
If the high turnover is done between trusted parties, or with settlement time, then it doesn't matter to security. It needs to be people accepting large amounts from strangers/untrusted counter-parties and giving stuff for it immediately. But usually, if I send someone $1000, they can wait 3 hours for security.
>Also, when a bank charges me 1% for a wire transfer, they pay salaries from that money and some people buy food.
When a bank has lights on, burns fuel to send an armored truck around, etc, that's also wasted.
World wide standby power waste must be 1000 times more than what bitcoin uses - world wide power usage ~17TWH, 1% standby power waste => 170GWH.
I'm pretty sure that all the power dedicated by the banks to perform the same opperations as bitcoin (people driving to work, office building power, air conditioning, datacenters power, and so on) is signifficantly more than 40MWH.
So, just the global standby power waste is orders of magnitude greater than what bitcoin uses, and banks probably use a lot more power to perform the same opperations as bitcoin does.
If you pay a 1$ fee to a bank or a bitcoin fee, that 1$ will recirculate back into the economy.
The difference is the banks are a lot more inefficient and are such human resources hogs because of their exclusive right to create money out of thin air.
> Because if somebody can spend $1mln to perform 51% attack and move around $1bln, that will likely be done.
Then why hasn't it been done? The answer is that bitcoin doesn't even remotely work like this. You would have to sign a transaction, then double spend it to yourself, then BY CHANCE mine enough blocks to satisfy the person giving you whatever you are buying before they see the double spend.
That is not going to happen. Someone receiving a million dollars will not give over a briefcase of cash the second they see the transaction, and that's the only way something like this would work. If you are taking money out of an exchange, the exchange would never even credit your account, let alone send you money. They would see the double spend transaction and if by some chance (0.015625%) you managed to mine the next 6 blocks or so, they would just wait longer since there is a double spend out there. By the time they might actually send you money, the chances of you mining all the blocks up until that time is practically zero. So you would then be gambling your million dollars against enormous odds.
You might not want to believe that bitcoin works, and it might seem counter intuitive that the proof of work is important and useful, but this isn't about how you wish the world works, it is about how the world ACTUALLY works, and that is why bitcoin actually works.
So far, my observation is that BitCoin can't run cheaply on the reasons already mentioned. I will only buy your argument if you'll show me a graph of power consumption vs turnover and it will happen to be sub-linear.
I'm not sure what you mean by turnover although you might want to learn more about bitcoin before you rail so hard against it.
Ultimately, that is a graph of dollars moved vs dollars wasted. (I explained the difference of "spent" and "wasted" in a different comment.)
This attack allows double spending and censorship. It does not allow to directly steal someone's BTC.
> Also, when a bank charges me 1% for a wire transfer, they pay salaries from that money and some people buy food.
And horses are pissed at cars.
> The power burnt by BitCoin is actually literally immediately irrecoverably physically wasted.
No, it is not. It buys security in a way which traditional banking is not capable of providing.
So basically they are paying bunch of people to live and consume without doing anything useful. How much power wasted is that? How do you know how much wasted day of human life costs?
My Russian bank is mobile+internet from day 1. They have no branches. They don't even have their own ATMs.
I am not sure what is the current trend in US, but my personal experience certainly contradicts your thesis.
Maybe you meant the thesis I was responding to that banks use 1% to pay salaries.
How many libraries of congress can they power with 40MW?
There is no way to do this calculation. At the moment Bitcoin mining uses, let's say 150MW and can do around 4 transactions per second. If you gave the network a 1000 times more hashing power, you'd be using 150GW, and could handle... around 4 transactions per second.
You could do it with an increase in the block size, but the Bitcoinsphere has bitterly resisted all attempts to increase the block size.
According to our estimates then, the whole Bitcoin network is consuming maybe 10% of a large power plant’s worth of electricity. Although this is not an insignificant amount of power, it's not yet a large amount of electricity compared to all the other things that people are using electricity for on the planet.
Any payment system requires energy and electricity. With traditional currency, lots of energy is consumed guarding and moving gold bullions around, running ATM machines, coin sorting machines, cash registers, and payment processing services, and transporting money in armored cars.
Some people say Bitcoin wastes energy because the energy expended computing SHA-256 hashes doesn’t serve any apparent purpose. But you could make this same argument for traditional currency as well — there’s a lot of energy being wasted and it doesn't serve any purpose besides maintaining the currency system. So, if we value Bitcoin as a useful currency system, then the energy required to support it is not really being wasted.
That said, we can ask if there’s a way to do better ...
BitCoin tends to waste energy irrecoverably.
Apples-to-apples comparison is a challenging task, but the modern financial system hardly has that feature of burning more for the sake of burning more.
Bitcoin is best technical solution we have for an existing societal problem. As soon as better technical solution will be created (e.g. proof-of-stake which can be relied upon), Bitcoin will be modified to use it. And Bitcoin will continue to operate with lower costs - burning less energy.
Yes and no. If a banker is being paid $100/hour then presumably (in an efficient-markets sense) their labour is worth that much, and they could be doing something else with their time that would be creating $100 of value instead.
Whenever the topic of bitcoin's inherent wastefulness is discussed, someone always brings up this point, but it's a fallacious comparison because most of the power consumed by the traditional financial system is spent in its capacity as a ubiquitous pillar of modern society, wherein bitcoin would be completely subsumed were it to become anything more than a technical novelty.
Even when you subtract the common denominator that represents the vast majority of the world's financial intuitions, bitcoin is still the only currency that burns resources as a function of its circulation.
Either I missed your point or it would be nice if you brought this back down to Earth. Yes, traditional ledgers help mediate economic exchanges. Bitcoin, as a ledger system, also helps mediate economic exchanges.
> ... wherein bitcoin would be completely subsumed were it to become anything more than a technical novelty.
You put this forward like we should all nod and say of course. Care to tell us about this scenario?
I forget where I read it, but when countries and banks buy and sell large amounts of gold bullion they don't usually move it around because it's expensive and inconvenient.
The ownership changes, but it's usually left where it is.
(all are hyperlinked)
I'm not an expert but it makes a lot of sense to me. Most real-world decentralized institutions work kind of like this.
It's not obscene to me that a truly global currency, that is decentralized and not controlled by any government, would cost a tenth of the energy output of a modest-sized power plant.
Instead of 'proof of work' it should require actual, /useful/ work. I think it should be a mix of work /types/ to promote general purpose computing, instead of ASICs. Imagine if a comity decided, and the owners of existing coins voted on, what work was worthy of being included. Folding proteins for medical research, SETI, attacking DRM/bootloader encryption keys... things that benefit the world.
Lots of very smart people have tried this and failed. The best effort so far has been to find prime numbers, and even that turned out to not be a robust proof of work.
You are free to create that proof of work system and you can see who buys your coin.
Now, if you piggy back on something people are already doing, then you might have something.
I hope figures out how to get a solar powered, interchangeable bitcoin miner in a box at a positive ROI. It may seem impossible now, but solar prices are falling faster than expected.
"Valery Vavilov, CEO of BitFury, said: “We are very excited to launch mass production of our super 16nm ASIC Chip. The final results of our hard work have fully met our expectations. We understand that it will be nearly impossible for any older technology to compete with the performance of our new 16nm technology. As a responsible player in the Bitcoin community, we will be working with integration partners and resellers to make our unique technology widely available ensuring that the network remains decentralized and we move into the exahash era together. BitFury warmly welcomes all companies interested in joining our integration and reseller program.”"
If your concerns were about something other than distribution, please clarify.
It takes a price per kW-hr differential of about $0.03 before it makes sense to put miners on a plane. That's far less than the power differentials one would expect, so those miners will stay put. Just paper ownership will change hands.
This is why we're disagreeing, I can't see any indication that the chips will not be used in other data centres. Where are you getting this information from?
I'd have thought that because fossil fuels are cheaper, it will literally never be possible to have have a positive ROI bitcoin miner on a renewable energy source, assuming that people are willing to mine using $0.99 of energy to make $0.01 profit.
EDIT: Downvotes and no comments for a simple question? WTF is going on with HN these days, can we not ask questions?
Does the new capacity make a bitcoin more valuable or less valuable?
Intuitively seems like more valuable, but the average cost in energy to mine the marginal block has gone down (otherwise the new miner wouldn't be mining) and that's often though of as the floor on BTC value.
Seems like having a stronger network is a net plus, and since they're probably not near the 50%+1 threshold it probably is in fact a stronger network. Although maybe they will get close if marginal miners are forced to turn off if the price of XBT drops and BitFury is enough more efficient.
Although BitFury is probably not a bad actor, technically a 50%+1 attack is not obviously illegal (IANAL), although a government might step in ironically enough. It seems to me these types of more centralized setups do introduce some tail risk to the system.
> we now know that there is a near precise
model that describes the cost of running and maintaining the network. The way the
cost estimate is determined is through how Bitcoin acts as a decentralized waste heat creator
that activates and deactivates heat generation based on market participation and pricing
signals. What do the randomizations necessary for cryptography and the waste heat produced
by computing devices have in common? One word: “exergy,” a term of art describing the
maximum useful work possible during a process that brings a system into equilibrium with a
heat reservoir. Exergy is always destroyed in the seigniorage hashing process - for example - if
a token's value increases to $1,000, this means that at most $1,000 worth of waste heat will be
generated somewhere in its creation.
From my reading of the text, it's not so much the additional hash power that's valuable, it's the additional money spent building and operating the ASICs. In theory, the market cap of a proof-of-work system should approach its total cumulative cost to secure. The more watts you see being dumped into the environment calculating hashes, the more you should value Bitcoin.
If Bitcoin is worth less than its cost to mine, no rational miner will mine (if they want BTC they'll just use their electricity budget to buy it on the market), so the competition (and therefore the cost) to mine each block goes down. If Bitcoin is worth more than its cost to mine, mining becomes profitable to anyone willing to put up the capex, so the competition (and therefore the cost) to mine each block goes up. There's an equilibrium where the value of Bitcoin is equal to its cost to mine.
The actual price of bitcoin as seen by the average consumer is insulated from the cost to mine because of effects like speculation, perceived future movement, and the value provided by ease of spending / anonymity, so the economic theory isn't really accurate, but that's why it's a theory!
We are in a world where the energy has a frightening ecologic cost and people to spend it in gigantic quantities just to create a virtual money...
I am. But this is a drop in the bucket compared to financial sectors that deal with "real" money. Really, isn't nearly all modern money "virtual"? Nevermind the fact that a lot of money only exists electronically, modern money doesn't actually physically represent anything. Therefore: virtual.
The idea behind it is that you need energy to gather money (metalic money for example). but this is pointless for bitcoin, it's just wasted without any utility.
All that mining does is give the person with the most hashrate more voting power in which transactions will be accepted. Innovation in mining hardware and data centers does not in any way increase bitcoin's security.
This is completely wrong. The higher the difficulty, the harder it becomes to attack the network, which is a critical feature. If anyone who rented a data center could attack Bitcoin at this point, it would be even less stable (much less!) than it has been already.
If everyone can use technology to push a higher hashrate, then what has changed? The people who can get their hands on new mining chips first have an advantage for a little while, but in the end it's a zero-sum game. The pie is 100% of hashing power/block validation power. How can you divide a pie into more than 100%?
It might encourage others to compete, and the arms race continues. But if too much of the network is controlled by a minority, then it's not automatically more secure.
Not sure exactly what you mean here - mining, and mining faster, generally increases the computational resources another third party would need to 51% attack the network.
The only way to make a 51% attack impractically expensive is to make the network impractically expensive to run.
But, and this is arguably one of the cleverest parts of Bitcoin's design: Who is going to get all that compute setup to mine Bitcoin, and then break the very system that makes it worth having?
Not saying there couldn't ever be scenarios where it happens, but its a pretty good first deterrent to bad behavior - and its clearly intentional, mentioned in the original Bitcoin paper:
"If a greedy attacker is able to
assemble more CPU power than all the honest nodes, he would have to choose between using it
to defraud people by stealing back his payments, or using it to generate new coins. He ought to
find it more profitable to play by the rules, such rules that favour him with more new coins than
everyone else combined, than to undermine the system and the validity of his own wealth."
In some ways, the existence of custom mining hardware is a bad thing, by reducing the spread of participants who can mine cost-effectively - essentially un-democratising the running of the system.
But on the other hand, its meant that an attacker has to invest in a lot of special-purpose hardware to attack the system (rather than just being able to e.g. rent enough EC2 nodes, or turn their entire government's cluster against Bitcoin, or whatever); which probably increases the cost of (then) destroying the system, and makes Satoshi's original Incentive argument stronger, imo.
But I can imagine scenarios where its game theory might not hold - because "profitable" is measured in bitcoins. For example, Bitcoin might not be suitable for use as a reserve currency if doing so would create "political profit" for destablising bitcoin that might exceed the monetary cost.
You seem to be implying total centralization, which is not at all true.
I also have paper draft about better Proof-of-Stake protocol, and would like to share it with people from academias to get a feedback. Please write me ( kushti at protonmail dot ch ). I also have half-written paper draft about PoW+PoS hybrid chain.
The recent rise in price justifies bringing miners online or shifting them away from other cryptocoins.
Halving day is coming soon too.
This has been a really interesting tech to watch over the years.
The only people it is bad for are governments. Throughout history there is a patter of promising, spending, and becoming insolvent.
The idea that an individual wouldn't choose a deflationary currency is ludicrous. Inflationary currencies are what you want everyone else to use.
And by the way, the cat is out of the bag. Cryptocurrencies are here, bitcoin or not. When people can choose to use any currency they want, will they choose one that inflates? I doubt it.
(Note I work on Bitcoin Core and co-founded Blockstream, a prominant bitcoin company. The value of Bitcoin is not the currency, but rather what censorship-resistant, distributed global consensus gives us.)
> decades-long recessions and wars triggered by fluctuations in the commodity markets
As opposed to now where we have no recessions and no wars? A deflationary currency doesn't cause a recession, the unwinding of practices like fractional reserve banking or the deleveraging of debt do. When these spin out of control the financial system becomes fragile because none of the intermediaries are resistant to any sort of failure to be able to keep their promises. If no one person in an organization is really accountable, why would they care? They can make short term gains, and when things fails they all fail together and no one really has to claim any substantial responsibility - they can say 'it just happened'.
So what you are talking about is a problem with certain systems, not with money that doesn't lose value. Then again it doesn't come as a surprise that a co founder of a company so misguided and desperate doesn't really understand systems, accountability, or even bitcoin/cryptocurrencies.
That is like saying 'the value of the discrete cosine transform isn't JPEG but what it lossy compression gives us'. They are separate things, and denying the impact of one is a simple, easy, and wrong answer.
You can get that while being less deflationary though, e.g. Dogecoin.
They will choose an inflationary currency if they have any debt. Debt with deflation is very bad, and it's incredibly stupid to offer credit with deflation.
 before you say that inflation hurts the rich, among other reasons the if inflation didn't hurt the poor, we would never feel the political pressure to increase the minimum wage.
Essentially, if you think that a currency will be worth more tomorrow than it is today there is little reason for investment (or even spending!). It quickly becomes a spiral where no one wants to spend. Inflation provides a nice kick in the pants for people to put their money to good use.
This isn't a concern yet for Bitcoin because in the scheme of world economies BTC simply doesn't matter (it could go away tomorrow without any noticeable effects), but if in the future it becomes a critical thing it would be a major concern.
For one thing it assumes a massive collective irrationality where people's expectations are all rendered berserk and plunged into a negative time preference. It's a very tough gambit to make that people can withdraw their propensity to consume to such a high extent. It's tough to presume that the heterogeneous stock of capital and the time structure of production will just stand still to a deflationary pressure and not readjust to add more stages or adjust the price spreads in between.  Of course, BTC being a global currency means it exists in competition and per Gresham's law can always be driven out. Not a catastrophe.
One of the more idiotic ideas to come out of neoclassical economics is the assumption that a negative time preference is irrational or impossible, when most of us have one (pension, passing wealth on to one's kids, saving up to buy big ticket items, etc.).
Indeed, what would really be irrational is spending all of your money immediately.
The three activities you list in parentheses apply only for those goods, and do not even imply a negative time preference. Saving doesn't have to be a result of negativity at all, per se.
Under the neoclassical synthesis capital investment is done purely by investors who have a positive time preference but are being paid enough to offset their desire to spend absolutely all of their money right this second.
It's kind of dumb.
Economists agree: deflation is either good, or bad, or irrelevant:
The "deflation makes people not spend" is a hand-wavy argument. There is zero empirical evidence for it.
Actually with negative interest rates proving possible (almost nobody thought they were a few years ago) if you had a deflationary currency you could always use negative interest rates to control demand. I am sure some smart economist has looked into this.
Business should not really be in the business of retaining earnings. If it was not for tax reasons it would be best to return any excess funds to the shareholders and raise new capital when needed.
You're some saying it'll be different this time, and the only explanation you give is, 'communications' and 'electronic', and yet plenty of fiat currencies have collapses under such systems. Again, every fiat currency that has ever existed has collapsed, sure there are some new ones that haven't yet but to believe they won't is magical thinking.
Again gold, after thousands of years, is still being hoarded in vaults by every major and minor world power, you really need to review some history.
In essence the problems faced by Greece are due to a reinvention of the gold standard despite there not being gold involved this time around.
Point being that Gold only "worked" for a small elite and it was largely devastating to the rest.
Hashrate!= inflation btw
Right now all comments about "inflation" etc are downright silly, usually form people regurgitating sill cons against bitcoin that are not a concern at this time.
But lets not have fact get in the way, downvote away.
After no more coins are mined, miners will be relying entirely on transaction fees. At that point, competition will show us the real cost (and electricity used) for transactions.
Right now transaction fees are low(er) because miners can offset their costs against the coins that they mine as well.
What about this: Why not just diversify your risk by doing transactions or investing in currencies/assets across a diversified set of untrusted counterparties? Same net effect, and a lot less electricity wasted.
As soon as Satoshi tries to convert any of his coins into dollars or any other legacy currency everyone will know who he is.
Not in my understanding. I have some coins X that are tainted. I send them to you, Y. You, Y, happen to have other coins completely unrelated to the address I sent my X coins to, and you send them to me at address Z. There's no blockchain link between X and Z.
I suppose physically tracking you down, assuming you keep logs, could hurt me, but if I trust you not to keep logs then I'm safe after you delete the logs.
Of course, the more washing transactions you do with dirty coins the harder it is to track down the original wallet. That being said, the blockchain is somewhat self limiting in how many transactions it can processes per unit of time and thus the its obfuscating capabilities are diminished.
If all you need is a finite number of leads, then trivially the number of humans/bitcoin users is finite. I don't think that makes a difference.
For these reasons, I cannot figure out why they don't know who stole the MtGox bitcoins. The only way to hide is to forever keep your booty in bitcoins. Whenever the thief tries to convert his/her bitcoins to money or goods, the veil of anonymity will be pierced. And given the amount money involved in MtGox, it would be blow wide open.
As an aside, this has to be one of the deeper HN threads that has not devolved into a flame war. kudos to us.
>For these reasons, I cannot figure out why they don't know who stole the MtGox bitcoins.
When you don't understand something, something might be wrong with your model. (http://lesswrong.com/lw/if/your_strength_as_a_rationalist/ comes to mind).
The exact addresses of the Gox stolen coins aren't known AFAIK. Even if they were, to cash out you only need to get someone to accept them without verifying ID. I can send coins to an exchange, and have them send me other coins in a different cryptocurrency, and send those to another exchange, then convert back to btc. If the intermediate currency is something like Monero, then the chain analysis must stop there.
I'm not saying most mixing happens through alts, but it is a fairly foolproof method for anonymity, at the cost of not supporting volume and high fees.
Also, you can sell to people for cash, so any investigation hits a dead end. There are probably dozens more ways to cash out anonymously.
It doesn't matter who keeps the logs, the blockchain is the log. I really think you are the one who is missing something. Because the blockchain has the entire history, everyone knows every transaction wallets X, Y, Z and any other wallet has ever done.
> A block chain is a transaction database shared by all nodes participating in a system based on the Bitcoin protocol. A full copy of a currency's block chain contains every transaction ever executed in the currency. With this information, one can find out how much value belonged to each address at any point in history.
Do you understand the concept of taint in block chain analysis, and how mixing can produce untainted coins?