And a link to the front page of WSJ's financial section today:
For those who say "It isn't being used as a currency!" here is my response:
Bitcoin excels as a secure protocol for tracking account balances in a decentralized, seemingly untamperable fashion, as well as transferring value very quickly to anywhere in the world at the sole, uncensorable discretion of the owner. It is both a payment protocol and a distributed ledger. A lot of people want these unique feautures, even if they can't buy groceries with it yet. Those types of merchants will always be the last to adopt.
Bitcoin also has the pontential to be used in diverse ways as "progammable money". It has a built-in API, and features like timelock, mutli-entity transaction signing (built-in escrow), and others that I don't fully understand. An AI bot could utilize bitcoin (might have trouble with a bank account!).
Also, see gold and its $8 trillion of largely made-up valuation (not stemming from industrial/ornamental demand). You don't see gold owners buying things with a few shavings ;) Bitcoin is far superior to gold in almost every way (it isn't quite as shiny tho). If society can make up several trillion dollars of monetary valuation for gold, then I definitely can picture bitcoin snagging a pretty decent slice (right now it is only 1/3,000 the size gold).
People recognize this potential, and thus choose to invest. The first mover advantange is massive. Network effects are very important - it will take quite the innovation to unseat bitcoin, and it has to be something that can't be simply copied/integrated into the existing protocol. The whole thing is sort of a self-fullfilling positive feedback loop. I'm a cautiously strong proponent, and find it absolutely fascinating to watch. These kind of events don't unfold that often.
TL;DR - magic internet money!
Sorry for the multiple edits. I wrote this on my phone.
TL;DR: Speculative investment is the only way for an asset to have value and thus become useful currency.
Hypothetically, what's to stop countries and ISPs blocking it on the protocol level, the way China blocks certain types of traffic? Wouldn't that kill it for mainstream use and make it work only on darknets like TOR?
Especially if trading would just move to Tor-like channels if this happens.
It's like being upset that the original miners could get a block reward of 50 BTC for mining on a CPU but today you have to use specialized hardware for less BTC. But as competition increased (and difficulty increased), the BTC is worth way more than it was and is less risky (although, still risky).
Profit is profit and some people/organizations will still have incentives to mine. Of course, there are problems that need to be sorted out before then though, like having more transactions included in each block to make it worth while for miners and cheap for users.
What is the acceptable user experience for maximum verification time of a transaction? At that max 'verification time' difficulty level, how long would it take to generate all remaining coins?
The bitcoin payout (which goes to the miner of a block) gets predictably smaller over time.
So no, this affect does not increase expected transaction time.
The difficulty is designed to be at a rate that will see a block mined every 10 minutes. So the ideal max verification time should be about 60 minutes (6 blocks) on average, although you should see your transaction included in the next block mined (in 10 minutes-ish, assuming the miner included your transaction, which they have an incentive to do if you included a fee) but to stop a double spending attack, it would be unwise to consider a transaction verified after 1 block, 6 blocks makes sure your transaction is not lost in a blockchain fork or part of a double spending attack. Some people consider 3 blocks to be enough verification time, it depends on how much money you are dealing with but the recommended amount of 6 blocks is in the original paper.
The last block to generate BTC that will be mined should happen in around 2140 (with the reward halving every 4 years) and then there will be a maximum of 20999999.9769 BTC in existence.
Interestingly enough, if you flooded the network right now with your own transactions and included a higher than normal transaction fee on those transactions, you could conceivably block other transactions from being included in the blockchain, at least for a while. Last time I calculated the cost of such a scheme it was about 72BTC per hour, so even without fixing the scaling issues of transaction volume in BitCoin, the rise in price makes this sort of attack less likely (still theoretically possible).
There is no such thing as "transactional currency".
If you simply create another wallet, or another wallet address, and move your coins (transact) without buying or selling anything, you fulfill the demurrage requirement and your coins don't evaporate.
If you work with large amounts of digital money and you don't check on it for a year, quite frankly you deserve to lose it! You should have robots executing on arbitrage opportunities and it should be no problem for you to show some activity in the span of a year, if you call yourself an investor. That being said, I don't have any Freicoin and I won't put my money where my mouth is, there are more interesting bits to tune in Bitcoinia, like Terracoin which has shorter block targets and hard-coded limits on the amount of variability and swing that difficulty can have.
Your opinion is irrelevant. People will not put money where they need to run some robots just not to lose their funds if they have a better alternative. Freicoin thus will never have any value and therefore no one would use it as a currency.
Terracoin is essentially the same as Bitcoin, but is compatible with Bitcoin ASICs and thus prone to attacks from their part. Litecoin, on the other hand, has incompatible hashing scheme, but no one would invest in mining Litecoin if you can invest in mining Bitcoin. In other words, people want one, most marketable, most popular, most liquid money. If Bitcoin was leaking savings, people would choose Bitcoin 2 which wouldn't and stick with it.
My hat is two sharks, your argument is invalid. Asserting confidently that bitcoin is a transaction network not a value store mechanism, and that "people like you" who have excess value are the ones who attack it, by keeping the bitcoins and speculating that they will be worth more later, rather than executing or transacting with them, just holding them as some kind of "savings."
Terracoin is "susceptible" to attack by ASIC just as Litecoin is "susceptible" to the "millions of GPU-toting gamers" attack vector. Mining is "investing" in the network, and if your only interest is to see yourself on top and the network in shambles, you could probably find a better way to invest.
Then again, some people are anarchists.
Think of it this way. If I told you I was keeping my savings in bitcoin, and I've saved hundreds of bitcoins for the last two years, and never converted any of them to cash, and never spent any of them in the last two years, you would probably say "Wow. You've missed at least two great opportunities to cash in on terrible market crashes. You could have had thousands without investing any more real money, you'd be filthy rich and have placed nothing at risk."
Certainly I could have done better if I had made _some_ trades. History tells me I personally will pick the wrong times to trade, and the above strategy is probably best for me, given my strong propensity to buy high and sell low (otherwise I would have those hundreds of bitcoins still.)
But if you've never made a transaction, you have never realized any of the value, and an argument can be made that your entire portfolio is at risk.
Just like buying 50-year bonds, there is a risk you won't live that long. Nobody's going to contact your next-of-kin to alert them to your bitcoin holdings if you die having kept them a secret. That's a real danger to the network, and with a cap on the total number of bitcoins, it causes real harm to everyone when those coins are lost, unaccounted.
At least with someone moving them around from time to time, you will be able to know that the keys have not been erased and "those coins are still alive," you won't spuriously inflate the value of your own and your neighbors' coins on public exchanges, opening yourself to the real dangerous Satoshi attack of "rising from the dead and seizing all of the at-risk cash on everyone's trading accounts." If Satoshi ever comes back, we will likely have made him fabulously rich and all because we didn't think of it first, and people like to jump on bandwagons.
No contract! No fair. Ergo, demurrage is good.
People even call me a hoarder, luckily I've got it down to just one closet now because of repeated moves. I can promise I don't have savings in excess of the bitcoins I already mentioned, sadly.
I find bitcoin really interesting, love the idea of a cryptocurrency, and also find the idea of a deflationary currency interesting. I've no argument with that side of it. Obviously there are issues with things like exchanges which seem to be almost entirely run by amateurs who think that a VPS or leased server is secure enough for financial transactions, but those problems could go away in time, they are not inherent to the currency, though they're another reason to be cautious at present.
However there are a few issues with the use of the currency which can't easily be fixed. What I find more troubling is the commitment to anonymity and lack of accountability from the creators - it is designed to allow anonymous transactions, and the users seem to be resistant to regulation. Those two things mean people can engage in bitcoin theft, fraud, laundering, cornering the market, setting up bogus or insecure exchanges/banks, with impunity and anonymity. Without proper regulation, insurance, compensation, which means identification of users and verification of transactions and everything that goes with that, I can't see bitcoin spreading beyond enthusiasts.
I wouldn't use it for anything important because of the lack of regulation and controls, but do think it represents something of the future of currencies, after our latest experiment in hyper-inflationary fiat runs its course (see Fiat Money Inflation in France for a previous experiment). It'll be interesting to see if other cryptocurrencies are born which take a different direction and attempt to build in accountability and responsibility to secure transactions and allow them to be policed effectively by tying them to real world identity. Anyone know of any?
I have money in bitcoin, I believe in its future, and I acknowledge we are in a bubble. Nothing to be terrified of; the aftermath of the last April bubble left the prices much higher than when it started. And with every single bubble bitcoin kept going no matter how big the crash was.
Those two things mean people can engage in bitcoin theft, fraud, laundering, cornering the market, setting up bogus or insecure exchanges/banks, with impunity and anonymity. Without proper regulation, insurance, compensation, which means identification of users and verification of transactions and everything that goes with that, I can't see bitcoin spreading beyond enthusiasts.
You have to consider that this is a new way of thinking of money. No regulation and a decentralized nature does not necesarily mean all sort of bad things will happen at once; this thought is what comes naturally when you think of money in a traditional sense, but people can adapt and start seeing and thinking of money in a different way.
Let me give you an example: Email. It's unregulated and decentralized, and anyone, anytime, can write anything to any email address with almost zero effort. In paper this sounds like a terrible idea, because the moment my email address is public anyone can send all sorts of crap to it, not to mention that malicious people could completely trash my inbox by sending thousands of crap emails having no repercussions. But, as a society, we still adapted and embraced it.
As long as you don't have significant money in it, it's no big problem, but say you had your savings in it or were paid a salary in it - at that point the volatility would be a nightmare and the prospect of a bubble seriously troubling (bubbles always burst badly, and frequently go through successive waves of euphoria before they do). That the price has returned to a new high does not mean it will stay that high.
To supplant other currencies bitcoin would have to deal with the volatility and perhaps more importantly the lack of regulation and verification - with the current setup and community that'll be a huge issue, and perhaps impossible. It'll be really interesting to follow the trajectory of bitcoin and similar currencies as they negotiate these problems but I don't trust them just yet.
I do think email is broken for precisely the same reason - it thrived in spite of its anonymous insecure nature, not because of it, they simply didn't think about having to verify identity at the start, which has led to all sorts of problems with phishing and spamming. A lack of verified identity is at the heart of both these systems and causes issues for both of them, so I think email is a great example of a system which has problems of abuse (spoofing, spamming, phishing, fraud) because of anonymity being allowed.
By and large I have made a lot more money holding bitcoins and not selling them, than by gambling or actual market activities like trading or selling actual goods and services. I can't say I trust it, but when you take your first $50 and turn it into $500, only to spend it all on mining equipment that doesn't expect to make you 5BTC because other people are out there betting extra zeros, well hell, sometimes you gotta double down and make money.
I have no illusion that it's not a bit risky. I could also be paying bank fees. Today it looks like the last three years there has never been a bad day to buy bitcoins.
Not so scary anymore! From what I understand, people should be looking at this sort of data on a log scale.
But look at the chart you posted. I see a sharp uptick on a nice linear trend since July. Now go look at the rest of the chart and ask yourself what happened every time there was a sharp uptick? Hmmm
I believe bitcoin will continue to grow, but I wouldn't tell people this is a good time to buy. Wait for the "correction" then buy.
Now is a good a time to buy as any. No one knows if the correction is going to drop below the current price or not. So it really doesn't matter when you buy, especially so if you're holding for the long term.
I really need to find it, it's actually worth money now...
ps. that pizza is now worth $3 Million
5 free bitcoins for solving a captcha? Yes please!
Most of the people of the world can't really save either. Cash loses value over time, gold is hard to validate and keep safe, and is even banned in lots of places. Bitcoin to the rescue! Now everyone can start saving, and even be rewarded for that.
I could go on all day long, the benefits are endless. Just live in a shitty country for some time and you'll figure it out pretty fast.
Yeah cause internet access and a modern computer are waaaaay more common than bank accounts or prepaid credit cards....
Digging around, I found they're almost equal actually, and cellphone users vastly outnumber bank account holders (cell phone users exceed toilet access !!!).
50% of adults worldwide have an account at a formal financial institution.
60% of adults worldwide have internet access, with 39% having home internet access (the remainder having shared or limited internet access).
80% of adults have cell phone access.
According to wolfram alpha, there are 1.871 billion children age 15 or younger: http://www.wolframalpha.com/input/?i=population+under+15
Those 1.871 billion children literally determine the future. And all of them can currently use bitcoin for buying anything available via bitcoin. That includes Humble Bundles, for example, not just drugs. Though admittedly they'll still just pirate most videogames rather than buy them. But they won't be able to pirate MMO's, and it's a matter of time before MMOs begin accepting bitcoins.
I believe that what is pushing Bitcoins value is that many people call it "the credit card of the 21st century" and they are buying bitcoins as shares of the next Visa.
EDIT: as wildgift said, there is no insurance in Bitcoin yet, but I'm sure that if Bitcoin starts being really popular we are going to start seeing online wallets with insurance provided by big corporations. CCs (as a technology) don't include insurance either...
That's what's different with Visa - there's an element of insurance with a credit card, and that is greater than what you get with a bank's checking account.
The insurance of being able to cancel a check is what you get with a regular checking account, and that's greater safety than what you get with bitcoin.
Of course, there's a price to this insurance, and it's the fees, which are much higher than what you pay for bitcoin transactions.
So 1 new Bitcoin = 0.001 old Bitcoins = $0.3
I think I'd like that more than just starting naming them something else all of the sudden, and call them Satoshis or whatever, and then when the Bitcoin reaches $10,000 we'll probably have to use new names yet again.
Cutting the zeros could be a little confusing at first, but I think less confusing than starting talking about Satoshis, or mCoins or whatever, all of the sudden.
I think it's not something that can be mandated. A new terminology will naturally arise if the need is genuine.
Right now, advertising a computer at 3 bitcoins is not practical. The value of those bitcoins change to fast.
Only if you're seeing the "real" value as the USD. No-one says "$100 is meaningless because its conversion to Thai Baht varies so wildly".
The only thing that will kill bitcoin is stability without utility.
I would, if I lived in Thailand. I wouldn't quote prices in dollars.
Sure, what really matters is how well bitcoin price is correlated with food, labour etc. - things you actually need. But those are pretty closely correlated with USD in practice, and bitcoin is not well correlated with them.
I've never heard of that, although the opposite has been done plenty of times. But that's rarely a sign of a healthy economy, most of the time it's done out of desperation I would think.
Zimbabwe did it about once every other year or so back in the mid 2000's.
Though the situation was exactly the opposite of Bitcoin. Money was losing value so the numbers were getting too big. Bitcoin is becoming too valuable so the numbers are getting too small.
People used cents in day-to-day dealings and I doubt anyone found it inconvenient. Same stuff with BTC and satoshis. People will get used to that sooner than you'd think.
Similarily with software - everyone in the source code it'd say "bitcoin" programmers would need to check whether it's new or old.
The amount of confusion, and engineering work would be staggering. It's far better to have a new term alltogether. People have been proposing "millis" or "millibits".
We're talking $10,000 to 1BTC. So what then? Lose another set of zeros?
(Rapid deflation is not a great thing for a currency in general)
BTC is driven by little to no fundamental data. Its exchange rate is subject to pure mass psychology which is why it repeatedly goes through boom and bust cycles. This is not going to stop unless something like a real BTC economy of non-trivial size develops. But I think it very unlikely for this to happen for the aforementioned reason of volatility and the fact that BTC is by design deflationary. BTC's deflationary properties would choke off any such economic system that is based on this crypto currency.
All in all, I am of the opionion that BTC is an interesting experiment and a case study in speculative behaviour. The difference compared to former manias (see  for historic examples) is that in BTC the process plays itself out at an extremely accelarated pace. Maybe this is even what the creator(s) intended. Maybe they created a purely electronic ecosystem of speculative behaviour to be able to study and better understand the phenomenon of financial bubbles. This would certainly explain the 'Satoshi' entity's non-interference.
I guess the closest 'real' currency examples would be something like http://www.xe.com/currencycharts/?from=ZWD&to=USD&view=10Y
Of course only should only look at daily graphs no older than two days.
A better word would be "recapitulation."
When Bitcoin becomes a world currency, then capital controls wouldn't matter.
"You have 50,000 bitcoins.. transfer them to me now or alternatively do xxxx now .. or else." In fact some sort of time-lock or trusted partner would be a good busines idea, so that someone couldn't just come with a gun to your head. It can't become a world currency because it makes people too personally vulnerable... at least as it stands now, but it's a really good start.
Some top HN members criticized BitCoin heavily. I, for one, invested $0 in BitCoin.
But we can be sure about something: Bitcoin is weird, new and innovative. It's something completely new and has no rules. The game is open. How the market will react will not depend on your limited (or wide) experience.
Bitcoin can go all the way down to $0 and the rest is history. It can go up and widely used that it changes history. I'll be just watching though.
2. Bitcoin has rules and those rules are strictly followed and very strictly specified in actual software.
The point is not to have a perfect system (which is impossible), but to have proper motivations for everyone to play along instead of cheating and stealing.
I guess I would be happy if you always posted a disclaimer with such claims, something like "But of course all software has bugs and who knows how severely a given bug in the bitcoin software will impact the network".
If bitcoins are to be used as a niche instrument to make financial transactions easier, the total value of all bitcoins should probably be more more than a few billion dollars.
Thing is, this fluctuations are not connected with any sort of events that make sense or justify the price sky-rocketing which makes me think that the whole thing is driven, manually.
When the whale leaves the sea, BTC will turn into peanuts. Till then...
Is this just because there has been a constant stream of people switching their traditional currencies for bitcoins at a rate faster than bitcoins can be mined?
Presumably at some point bitcoin will stop being deflationary if it ever wants to be useful as a currency. When does that happen?
Why do people buy bitcoins if it isn't really useful as a currency yet? I mean, there are supposedly 3.5 billion USD worth of bitcoins in existence, but if I want to buy any sort of physical product or pay for utilities, I have to use a traditional currency.
Currently it appears that bitcoins are most popularly used for less than legal purposes (payment for drugs, payment for services to avoid taxes, payment for blackhat services). Does this mean that by buying into bitcoin, I'm essentially providing USD to these black market activities which might not have had USD to begin with?
Many questions I don't understand...
I've been waiting more than 24 hours for a BTC withdrawal. It's not even showing up on blockchain.info yet. Search the forums there are a lot of people this is happening to. Some with more than 3 days.
I'd be EXTREMELY cautious and suspicious about Mt.Gox right now. Make very sure you can get your BTC/USD out of Gox before you trust it.
This is happening to a lot of people.