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I have my doubts about Bitcoin (cringely.com)
25 points by citizenkeys on Oct 2, 2013 | hide | past | web | favorite | 26 comments

This is woefully uninformed.

> There can be only 21 million Bitcoins ever found or mined, though once found ,Bitcoins can be divided into 10^8 small subparts called shitoshis which are what’s actually used for buying things.

There's not really a limit to it. You can increase the precision to 64bit if you really wanted to, 8 decimal places is just arbitrary for the moment. Values below 0.00005 BTC aren't even spendable though at the moment to avoid spam, so eight points is hardly a limiting factor.

> but on the other hand Bitcoins are inflation-resistant because of constrained supply and can’t easily be counterfeited, either.

They can't ever be counterfeited actually. At one point an integer overflow meant that additional ones were erroneously created, but that's been patched since 2009.

> Bitcoins, while possibly uncrackable are definitely not unhackable. Mining Bitcoins requires the validation of 90 other random miners before your Bitcoins are judged real and assignable

120 blocks to mature, actually. The term "random" makes them sound untrustworthy, but there's not really much trust put in them either. They could be as malicious as the author.

> but what’s to keep me from owning 90+ Bitcoin mining accounts and gaming the system?

Nothing but the cost of doing so, which is the entire point of miners competing.

> What if Amazon Web Services simply assigned all unoccupied EC2 cores to this task?

Nothing. EC2 rented servers are far too slow to attack the network at this point, that's the point of having a faster hashing speed and overall difficulty.

> > What if Amazon Web Services simply assigned all unoccupied EC2 cores to this task?

> Nothing. EC2 rented servers are far too slow to attack the network at this point, that's the point of having a faster hashing speed and overall difficulty. The point he's making is one that was referenced in the original bitcoin whitepaper. If one user were to amass more computing resources than the honest users, that person would have the ability to over-ride the transaction record. This however would incredibly difficult given the global hashrates are probably coming close to terahash/sec levels. If one extremely wealthy person wanted to, they could get butterfly labs' developers to sell them the design for their new 600ghash/sec mining card, then go on to fill a datacenter with systems that have several of those cards in each of their systems.

Consider what the following could do:

1) Supermicro X9DR3-F - server board with 3 pci-e x16 slots

2) Any 2U supermicro chassis

3) 3 Butterfly labs Monarch cards per server

4) 48U cabinet

Those cards mine at 600ghash/sec, put 3 of them in a single server, and the single system can mine at 1800ghash/sec, or 1.8thash/sec/server. Fill a 48U rack with 24 of those systems, you're mining at 43.2thash/sec. Fill 10 cabinets with these systems, and you're mining at 432.0thash/sec.

Possibly, but those devices don't exist. Given ButterFly Lab's record (12+ months late), I don't expect them to exist any time in the near future. The Monarch cards are very much stretching what a normal motherboard would be able to handle anyway, probably up to the point where you could only have one per board.

Actually, the bitcoin network's hash-rate is currently at about 1.46 PH/s, as in more than 1460 times 'coming close to terrahash/sec levels'.

1. It's a free market. If it begins to cost more to mine Bitcoin than it is worth (considering all costs into consideration), more people will start exchanging fiat into Bitcoin and fewer people will mine. This will reduce the mining difficulty while increasing the BTC/USD rates.

2. You got to be kidding. The fastest US supercomputer is about 18 peta flops. The world's fastest is about 35 peta flops. The Bitcoin network difficulty crossed 12,000 petaflops or around that range, depending on how you calculate it.

3. The first mover advantage is a disadvantage because you might think of a situation where some legal entity in some country might think of outlawing Bitcoin without ever figuring out how to enforce it?

4. If finance were about compassion, there wouldn't be thousands of people dying of hunger while we have bajillions of tons of food literally destroyed in other parts.

You've mentioned the 'bad' parts, without much merit, IMO. You didn't consider the better cases, let alone the best. Everything from escrow payments to digital identity to autonomous agents is encoded in the protocol that is yet to be implemented. Bitcoin isn't a gold replacement or a cheaper credit card, it's a fundamentally different way of thinking about finance and economics.

You should have your doubts about Bitcoin when there's a better competitor out there.

There is a better competitor - real money. The fluctuations in Bitcoin are way too risky for any serious investment (between $120 and $150 in just a month? No thanks!)

In its short life, Bitcoin has outperformed every other asset on the market and is holding its value. It's up almost 10x from where it was this time last year.

That's not actually considered a good thing when it comes to currencies (as opposed to commodities).

That may be true for money issued by a central authority. Bitcoin appears to upset a few apple carts as far as conventional wisdom goes.

On the other hand: from $0 to $140 in 2 years? Oh god yes!

He fails to mention the two biggest weaknesses of Bitcoin (in my uninformed opinion) :-

- The stability and security of the various online exchanges

- The relative difficulty of converting BC to/from cash

> - The stability and security of the various online exchanges

The exchanges are not "part of" Bitcoin. Shitty exchanges will go out of business, good exchanges will survive.

The only thing that can interrupt that is government regulation. For example, the best US exchange that I know of, CampBX, doesn't have much competition, because nobody wants to spend millions of dollars to get money transmitter licenses in all 50 states.

Government regulation could also simply make bitcoin exchanges illegal.

So if you replace this point with "government regulation," I would agree.

Of course, not all governments will outlaw Bitcoin. Those that don't will have a potential economic advantage. This creates a game theoretical situation where it's in every country's interest to just allow it. (Of course, governments do not act in self-interested ways.) Regardless, it would be hard to outlaw bitcoin everywhere.

> - The relative difficulty of converting BC to/from cash

Coinbase.com is really good for converting money in your bank account to bitcoin and vice versa. That model is sufficient, in my mind.

Credit and debit cards are a good analogy for "using bitcoin for everyday transactions." Nobody has complained that you can't convert cash into money on your debit or credit card.

I must admit though, these criticisms are billions of times more valid than the ones in the article. Though you do a good job responding to them.

Those difficulties aren't Bitcoin's problems. Those are political problems that we have to confront or circumvent.

Bitcoin has just a few tasks and it does them very well so far.

>Bitcoins can be divided into 10^8 small subparts called shitoshis

Stopped reading there, do some research. First off they are calles satoshis, also that limit is far from hard.

Shitoshis, I think he was actually researching Buttcoins.

We've passed the point where superficial (non-technical) analysis of Bitcoin can add anything useful to the discussion.

Right now, we need thought put into the permanent, public history of the block chain and how that accountability, fully harnessed, will interface with the power structures of the world. It's an unfathomably complex topic.

Given the massive, long-term and apparently ongoing breaches at major data collection agencies, a complete leak (to the public) of non-pseudonymous transaction history for any given credit card has probably either already happened or it's just a matter of time. You probably shouldn't use a credit card or checking account to do anything you wouldn't put a picture of on Twitter.

There seem to be a lot of forces that make it impractical for institutions to keep secrets of any kind secret. This does not seem to be stopping said institutions from acquiring vast volumes of sensitive data. The volume of data used to be a practical limit on it becoming public, but that's fading fast too. This is going to get weird before it gets better.

I would be more concerned about CC agencies selling the data. I'd rather have the data public than only available to large corporations.

Rewards cards are 100% about selling/analyzing that data.

There are billion dollar publicly traded companies who specialize in mining consumer data (something for example, highly valuable in pharmaceuticals).

I'd be curious to see the laws preventing CC companies from doing the same. Most likely the data is anonymized when sold.

"Big-data" marketing is heavily at work in the background of our society.

I read somewhere a post where the author figured the amount of bitcoins the creator likely owns, and that it would be enough to vastly devalue the currency if he ever wanted to sell. I thought it was Schneier's blog, but now I cannot find it. Does anyone have the source?

This is just wrong. The analysis he links to on the profitability of mining is based on litecoin, he claims it's the same, but it's simply not.

Quick calculations on bare avalon chips with a 100k investment gives a current ROI of 4 days, this does not account for risk, does not account for setting up the chips, etc etc etc. However, it is indicative of the idea that the pursuit would be "unprofitable" is pretty insane.

The 90+ bitcoin mining accounts giving you the ability to game the system is even worse, it's like he doesn't have the faintest idea of how bitcoin mining even works. I should go hook up 1000 fake SETI@home accounts and reap the massive kudos for my epic performance this will surely provoke. What the hell?

In 3, he goes back to cheerlead for litecoin, even though in 1 he proved the mining of litecoin wasn't even profitable. Simultaneously acknowledging that any state attempts to ban bitcoin in a given jurisdiction won't actually be effective at any rate.

And 4 basically says "Because I'm a keynesian". Well, that's nice, go buy freicoins or some other cryptocurrency that supports your pet economic theory, there are likely dozens by now. Nobody else wants to be forced onto an inflationary store of value and will not accept your McBucks? You don't say, maybe there's something to be learned from that.

> Quick calculations on bare avalon chips with a 100k investment

Does that include the electricity?

Which with avalon gear is a huge cost; something like 8W/GH.

Nope, it was very quick test on the mining profitability calculator, but those results were so good that I was instead looking into this;


Which gives much more realistic / complete analysis of the actual profitability levels available from the various ASIC vendors. And the end result is yes; it is clearly quite possible to be profitable, and there are a multitude of ways to be so, and ROI under half a year is almost par for the course.

You are also missing the point. The point is: it is irrelevant if mining is profitable or not at any given moment. Author of the article states that it is, when it is not.

If it is unprofitable - some of the competition will crumble, thus making mining more profitable for the rest of miners.

We need miners because they RUN the network. We don't need them to make huge bucks out of it. Existing mechanism (difficulty adjustment plus bitcoin market price plus mining costs) will guarantee that in the long term (after current artificial bubble stabilizes) mining will be just as profitable as any other business investment.

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