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Largest bitcoin bounty paid for animation about the system (8500BTC, ~$6000) (bitcoin.org)
52 points by mike_esspe 2238 days ago | hide | past | web | 41 comments | favorite



There sure seems to be a ton of bitcoin articles that show up on HN, with many of the same usual subjects showing up to comment as soon as they're posted. I know you guys want to drum up as much interest as possible in bitcoin for the obvious reasons, but it comes across a bit spammy/scammy at least to me.

Besides, if you really want people to set up shop trading things of actual value for BTC you're going to need to get the bullish forces under control so that you don't have this runaway strength in the currency. Promoting it so heavily looking for those slashdot type bumps in the value makes the community come across as just a bunch of greater fool theory speculators.


It's fascinating, in an aggravating kind of way. It's a particularly virulent sort of meme -- one that you spread because the meme basically says "spread this meme and you'll get rewards!"

And unlike a religion, there actually are genuine rewards. If you play it just right, then sometime before everybody loses interest in the game (around about the time people start saying things like "If you mention bitcoins one more time I will shove a very large economics textbook up your ass") you might make a few dollars.

Economic bubbles and religions have another thing in common, too -- I'm only interested in playing if I'm starting it myself.


There sure seems to be a ton of bitcoin articles that show up on HN, with many of the same usual subjects showing up to comment as soon as they're posted. I know you guys want to drum up as much interest as possible in bitcoin for the obvious reasons, but it comes across a bit spammy/scammy at least to me.

Who's going to answer HNers' questions and criticism?

Besides, if you really want people to set up shop trading things of actual value for BTC you're going to need to get the bullish forces under control so that you don't have this runaway strength in the currency. Promoting it so heavily looking for those slashdot type bumps in the value makes the community come across as just a bunch of greater fool theory speculators.

Maybe Bitcoin is just a very viral idea. Bitcoin prices functuate and they don't alway goes straight up, so it's not always bullish. Corrections are part of the natural part of the market.


Your enthusiasm for Bitcoin may be innocent, but shills and astroturfers abound on the Internet. If Bitcoin is so interesting, other people will take up the conversation; you don't need to dominate it.


Animation that got the bounty: http://www.youtube.com/watch?v=Um63OQz3bjo


How do you avoid a deflationary spiral (same issue as gold standard)?

You can kind of get around it by continuing below 8 decimal places but it seems like a potentially fatal issue as the bitcoin economy expands.


Another example of the issues faced by a private currency were related by Krugman in 1998. It describes the economic issues of a Capitol Hill baby-siting club that issued a limited amount of scrip to keep track of hours of time for people offering and using baby sitting services:

http://www.slate.com/id/1937/

It's a good description of an unexpected problem.

Edit: also don't miss the sidebar about solving the problem of cycles with inflation:

http://www.slate.com/id/1937/sidebar/42410/


Fascinating. Still, I'm not sure the problem with the babysitting scrip applies to bitcoin. You must be very careful to differentiate between monetary deflation and price deflation.

In the case of the babysitting scrib, it sounds like it was clearly a problem of monetary deflation. The payment of dues took coupons out of circulation, deflating the monetary supply. Aside from lost wallets, bitcoin does not have monetary deflation.

A doomsday scenario involving price deflation is just a theory since as far as I know there has never been an example in real-life. Logically, it does not make sense to me but I-Am-Not-An-Economist.

Bitcoin has been undergoing price deflation for much of its life. So far, it has not caused a problem except that vendors are inconvenienced by relatively quickly changing prices.


I not sure if the lessons there are applicable either. There are a ton of differences. For one thing the coupons 'value' was fixed to an amount of work and they were not divisible.

Also don't miss the sidebar at the end of that article. I was firmly in the "inflation is always bad" camp until I started thinking about it a bit. Inflation is definitely an incentive not to hoard the currency. It causes money to flow back into the economy. Now I'm not sure where I stand on the issue other than I know that I don't understand it enough.

Suppose a Buffet-like successful person was able to hoard up 10% of bitcoin. This money is effectively out of circulation because he's a scrooge that will never spend it. Because bitcoin is divisible, it doesn't really matter much and the price reflects the amount in circulation. Then let's say he died and passed it onto his kids who were irresponsible and spent it all in 3 years. The amount in circulation would be increased by a huge amount (assuming that most people have some savings) relative to the amount in circulation before. The liquidity of the bitcoin would change significantly but the underlying value of it doesn't. I believe that's what you were talking about with monetary deflation and price deflation, no?

Based on that, it means I would expect the price of bitcoin to fluctuate quite wildly. Then again, I guess gold has the same problem.


Though really that analogy isn't to say small groups shouldn't use non-fiat currencies. It's referring to an economy as a whole using them and not being able to use Keynesian techniques to smooth boom/bust cycles.

No one could stop "ByteCoins" from coming out and issuing similar currency that might be backed similarly - unlike the problem of not having anymore gold.

As this happened more, people would create synthetic currencies (like the IMF's SDR) to hold a basket of these goods - which would probably be adopted by many, or used for collateral for risk-mitigation instruments.

TL;DR: Yes, there are some problems, but this doesn't have many of the issues the gold-standard did.


Astoundingly, that's in the FAQ: https://en.bitcoin.it/wiki/FAQ#Bitcoin_s_monetary_policy_cau...

Linking to https://en.bitcoin.it/wiki/Deflationary_spiral

(Answer may not be great, but someone has thought about it.)


Deflationary spiral is a heavily debated topic on the forum but I believe most bitcoiners come to accept it as a good thing, rather than a bad thing.

Here's some of the search result: http://www.bitcoin.org/smf/index.php?action=search2


For those who don't know what Bitcoin is:

It's an open source P2P cyrptocurrency.

Here are some helpful links to get you started:

1. http://bitcoin.org - The main site

2. https://en.bitcoin.it/wiki/How_bitcoin_works - How Bitcoin works

3. https://en.bitcoin.it/wiki/Getting_started - Getting Started Guide.

4. https://en.bitcoin.it/wiki/FAQ - The Bitcoin FAQ


When I first heard of this, I thought it would be something like seti@home where it uses your PC power to do jobs, and people would pay for those jobs to put onto the nextwork, if you were running it on your PC, you'd get some of that money.

But from what I read, all it does is do complex calculations that don't actually get used for anything? Just uses electricity in return for 'bitcoins'?

Does anyone know if there is such a thing as my original idea? Companies could buy distributed computing time that is sourced from home users idle clock cycles.


No, that's just the generation process you are referring to. The really interesting thing is moving them around like currency. The idea is that they can replace dollars, not that they are just empty computation.

I am not aware of anyone selling home users idle clock cycles. This is probably because it doesn't work economically. The difference between a home desktop on 24/7 doing 'nothing' and on 24/7 doing its maximum compute load could be in the low tens of dollars of electricity per month for the user, so to actually sell the cycles you're going to have to not just charge that much, you're going to have to remit that much to the home user, plus extra for wear and tear. (Or hope for dumb users.) And then you have the problem that this cluster has low bandwidth and high heterogeneity, so pretty much the only thing you can sell it for is something like Seti where you have relatively small amounts of data that you want to run enormous computations on. In the end I just don't see how you can compete with Amazon.


The complex calculations are used for something. They are used to create a peer-to-peer digital notary service that is very hard for an attacker to defeat. The proof of work is essential to prevent fraud.

Early in bitcoin's life the "miners" (people who contribute CPU time to keep the system secure) are paid using monetary inflation (currently 50 bitcoin per solved block). After some time they will be paid by small transaction fees instead and the inflation will stop.

Do not think of bitcoin in terms of CPU time creating money.


But from what I read, all it does is do complex calculations that don't actually get used for anything? Just uses electricity in return for 'bitcoins'?

That's accurate.

Does anyone know if there is such a thing as my original idea? Companies could buy distributed computing time that is sourced from home users idle clock cycles.

That's a good idea. I think the owners of GPU farms or just any GPU cards or CPU could pivot to a business model that mine bitcoin when it's profitable or do computation works for companies when it's more profitable.


http://en.wikipedia.org/wiki/United_Devices It failed because the idle time on your PC is worth less than the overhead of organizing it.

I wouldn't say that the CPU time used by mining bitcoins is wasted per se; in some sense that computation prevents attackers from falsifying transactions.


And 'Centrata' (in its original incarnation). And a bunch of others in the same era: Popular Power, Applied Metacomputing, Parabon Computation, Distributed Science/ProcessTree, and DataSynapse ("get paid in Flooz!").

And kids today think they know what a bubble is!


In that link, there are a couple of links to a Ponzi scheme which is openly advertised as such.

Weird. (Or is this just a big fat joke?)


People who are willing to invest in what they think is an economic bubble are probably pretty willing to invest in what they know is a ponzi scheme as well. After all, both can be pretty profitable as long as you get out right before the bottom drops out.


And Bitcoin has no clawbacks. (A concept I'd never heard of until Madoff.)


Yeah, I think it is a kind of joke. When bitcoins were worth something like 1000 for 1USD a lot of the early users would kind of just use it to playaround with. Monopoly money.

Hey at least they're being honest about them being ponzi schemes, quite refreshing.


Some people play ponzi schemes for fun.


I've been seriously considering purchasing 18000BTC as an investment. If bitcoins catch on in the next ten years, 18000 will be equal to 0.1% of the total available currency.

Just wish I still had the money to do that (startup is busy digesting whatever I had)


It's a big gamble, though. The bitcoin community don't know if the currency will succeed but we're trying our damn hardest to make sure it succeed.

Other than that, bitcoin is an extremely fascinating subject. You can spend hours upon weeks upon years talking about it.


You can spend hours upon weeks upon years talking about it.

Yes, kiba, you can. We've noticed.


When you do have some extra money, consider talking to an investment advisor before you decide what to do with it.


Wasn't there a transaction of > 300,000 BTC? Or does the headline specifically mean a bounty?


Anybody can send 300,000 BTC back and forth between their computers. It doesn't mean something.

However, it is significant when somebody won one of the largest bounty by performing immensely useful work such as the production of a well polished animation video that is designed to introduce users to bitcoin.


> Anybody can send 300,000 BTC back and forth between their computers.

You assume that's what it was. Calling the bounty in the headline ~$6,000 is disingenuous, too, because dumping the BTC into the market would drop the price significantly. You'd never be able to move it for $6,000, currently. You're talking about more than the daily Mt. Gox volume.

(Yes, you might be in your domain, but there are other people familiar with BitCoin present. It bugs me when those with domain-specific knowledge assume people in alternative forums don't have a clue.)


You assume that's what it was. Calling the bounty in the headline ~$6,000 is disingenuous, too, because dumping the BTC into the market would drop the price significantly. You'd never be able to move it for $6,000, currently. You're talking about more than the daily Mt. Gox volume.

It's actually hard to say. Mt. Gox order volume is partly hidden because of dark pool order. What people see might not be an indicated amount of bitcoin on the market.


Dark liquidity still affects a market, it just affects it less.

BitCoin is fascinating to me because there are people who are absolutely absorbed in it, but it's unlikely to get traction outside of its current domain. The fact that it's moving for real money is interesting, though, and mining or small trades is currently worth it.

I wouldn't dump my life into it, though. Outside regulation picking up on it is likely to be interesting, as well. The system itself is a prime target for laundering money, if the market gets to a point where it can support enormous trades.


That's not very fair to assume it has to happen all at once or never at all. I'm betting someone could exchange 8500 bitcoins over the next few months and get a good rate on it without disrupting the economy significantly.

Especially since Bitcoin has been getting a good amount of notice lately, lots of new people coming in with small buys if only for the novelty of it.


Calling the bounty in the headline ~$6,000 is disingenuous, too, because dumping the BTC into the market would drop the price significantly.

4 upvotes and no one actually bothered to check. Good job, Internet. Quite disingenuous.

I imported the data from Mt. Gox (main bitcoin exchange) into a spread sheet and calculated how much his $8500 BTC is worth if he sold it all right now: $5671.23


It sounds suspiciously like you're accusing me of something. The statement after the word "because" in your quote kind of matters to the original sentiment, and you happily ignored it in your calculations. It doesn't take a rocket economist to do:

    Quantity x Spot Price = "Value"
However, it also doesn't take a rocket economist to figure out that value there is meaningless, since (a) you're using the spot price, (b) the quantity of BTC to move is greater than the daily volume of the entire market, and (c) attempting a move of this size would probably devalue BTC significantly. You have a value, but there's no way that can be its value currently, because you'd have to spread the transactions out over time -- making the value a different number.

If someone owned $5 trillion of gold, do you think they'd be able to successfully move it all for $5 trillion? That's why the value is meaningless. You're talking about an exorbitant figure of money which the BitCoin market can't support.


No, I think you're misunderstanding me. I'm not using the spot price. I'm using the values that people are actually selling for. If you put in a sell order with a minimum price of something like $0.60, the orders would go through immediately, and you'd get $5600 in your Mt. Gox account. Once again, you've failed to actually fact check your post. The daily volume of Mt. Gox is routinely 10,000-15,000. Yes, you would bring the price down about $0.10 in a matter of minutes and possibly trigger a sell off, but that wouldn't make a difference to you if you just wanted your $5600.

EDIT: Here's the actual spreadsheet if you'd like to double check my work: https://spreadsheets.google.com/ccc?key=0AomGTgVWFh3WdDAxQ01...

Here's where I got the data on mygox: http://mtgox.com/trade/history


It's amusing how you went from "you're misunderstanding me," admitting that there might have been a mistake, to "you failed to fact check". I'm willing to admit that I'm wrong, be educated by others, and learn from my mistakes because it does appear that I misunderstood you; when you're an abrasive shit, though, I'm not really inclined to give you the time of day. I gave you one pass to communicate like a reasonable human being, because you're obviously aware of interesting information that I'd like to know, but you are now a waste of my time.

I'm really tired of bending over backwards to be nice to people on HN. A few threads of arrogant snark like this in the last 24 hours, and I'm really stretching thin on patience. Now I see what the long-term users are on about.


Point taken, jed smith. I do apologize for being so abrasive. I hope this doesn't turn you off from hacker news, as your patience is something I could afford to learn more about.


That's like saying anyone can wire $250,000 to their friend and have them wire it back.

Sure, some people could do that for fun. But I don't have that kind of cash. Do you?


That's like saying anyone can wire $250,000 to their friend and have them wire it back.

But wiring money is so easy that it's not very special at all. Beside, the economy will experience massive price inflation if it was dumped on the market.




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