Bitcoin and Digital Currencies

If I understand how Bitcoin works correctly, then I have a feeling it's going to eventually become unusable. Doesn't the blockchain grow with each transaction? and processing a transaction involves processing the entire blockchain? Eventually, I have a feeling that the amount of power required to process a transaction will start growing much faster than the amount of available power, and transactions will start running unacceptably slow.

The first part yeah, but this is the first I've heard about the second part.

Even if it's true, it's just a hashing operation. Growing the blockchain shouldn't significantly raise the energy requirements. The amount of energy it takes probably has more to do with how many people are mining than how big the blockchain is.

Anyways, if bitcoin itself starts to become unusable, we can supplement it with other crypto-currencies, using its value as backing to help others get started.

edited 16th Apr '13 5:06:23 PM by Topazan

I'm less concerned with energy requirements here and more the time to process a transaction.

Ah. Well, I'm not really sure whether or not that's increasing. I haven't heard anyone mention it.

If it's the case, though, then like I said we could supplement it with other currencies. Litecoin bills itself as "silver to bitcoin's gold". Given that it's much less popular than bitcoin, if there is a slowdown it would experience it later. So, litecoin could be used for smaller transactions, then converted to bitcoin for major transactions, for instance.

Verifying a transaction requires the historical data in the blockchain, but that can be indexed for O(log n) performance. There are many potential optimizations that don't affect the economic side of things, apart from some possibly requiring a mass software upgrade to take effect.

I think the technical side of Bitcoin is reasonably solid; what's going to sink-or-swim it are the whole deflation-plus-speculation destabilizers.

edited 16th Apr '13 6:23:14 PM by Tangent128

Do you highlight everything looking for secret messages?

In the articles I've seen that are critical of Bitcoin, when the topic of mining is brought up they only treat it as the source of new bitcoins. It's more than that as it is the process through which transactions are verified, and the release of new bitcoins is only implemented as the reward for mining as the initial incentive that will continue at a diminishing rate until the 21 million BTC cap is met. The main payment for mining will end up being transaction fees which are currently most common with transactions drawing coins from many different addresses.

Bitcoins and the homeless:

http://www.wired.com/wiredenterprise/2013/09/bitcoin-homeless/

http://www.wired.co.uk/news/archive/2013-12/09/bitcoin-homeless-redux

A two part story.

Dumbo

"...Since setting up a bitcoin wallet about three or four months ago, he has earned somewhere between four or five bitcoins — about $500 to $630 today — through You Tube videos, Bitcoin Tapper, and the occasional donation. And when he does odd jobs for people around Pensacola — here in the physical world — he still gets paid in bitcoin..."

An interesting development. From the second article:

"...Today, after finding a house they can rent with a little help from the government, the trio is off the streets, and life is even better than it was before — except that a bitcoin is now worth over $1,000 (£610). "The $600 (£366) we spent would now be worth $6,000 (£3669)," says Angle. "I wish we had gone hungry."

His buddy Kantola feels much the same way. "We're definitely kicking ourselves. We spent $5,000 (£3,055) or $6,000 on food!" he says. "Back in 2009, you could have bought four bitcoins for a dollar. If I could go back [and buy some then], I wouldn't be here right now. I'd probably be in a mansion."

This is the conundrum that now hangs over the burgeoning Bitcoin economy. The digital currency is beginning to streamline the way we pay for things, transfer money, and make donations, but because its value is rising so steadily, spending it can seem like a bad idea."

If you go back in the thread a bit, you will see that I've been discussing that aspect of it for years. Bitcoin is used more for hoarding and investment purposes than as a form of currency (except, apparently, for drug dealers). If Bitcoin is going to become a real form of exchange, it has to find a way to stabilize it's real world value.

edited 9th Dec '13 8:39:31 PM by demarquis

"We learn from history that we do not learn from history."

With the current high bitcoin prices, and the advent of me-too alternative cybercurrencies, cloud hosting providers are having to deal with lots of fraudulent accounts being used to mine currencies. Bitcoin may not be profitable to mine with CPU or even GPU anymore, but that only matters if you're actually intending to pay for what you're using ...

A brighter future for a darker age.

Over the last few months, Bitcoin difficulties have risen so dramatically that even botnet mining isn't really worth the bother anymore, or so I've heard.

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The Economist recently reported that Bitcoin values show all the signs of a classic bubble.

"We learn from history that we do not learn from history."

Rational wiki also points out bitcoin is unbelievably bad for the environment (and thus runs on libertarians externalizing their costs to the rest of us): according to blockhain, 127,497.87 megawatt hours in the last 24 hours, to be precise. Or, to put that in perspective, 65 Large Hadron Colliders, or over 4 million homes.

(Rational wiki's info is out of date, this is me updating).

edited 16th Dec '13 2:53:37 AM by Achaemenid

Schild und Schwert der Partei

That's a plus of Litecoin, it doesn't take near as much power to process its proof-of-work.

Funny thing with Litecoin - I converted 1 bitcoin into 35 litecoins. I sold 7 of them to my brother in exchange to physical cash. A week later, my remaining 28 litecoins combined were worth... slightly over 1 bitcoin. Awesome.

I converted them back and shifted them over to Mt. Gox.

I'm up for joining Discord servers! PM me if you know any good ones!

You are a person for our time, my friend.

"We learn from history that we do not learn from history."

so its basically what every Libertarian thinks.

"freedom to do whatever I want. Even if doing what I want screws everyone else. because fuck them."

To be fair, libertarians arent really thinking that. This is what Bitcoin itself says on their web page:

"Spending energy to secure and operate a payment system is hardly a waste. Like any other payment service, the use of Bitcoin entails processing costs. Services necessary for the operation of currently widespread monetary systems, such as banks, credit cards, and armored vehicles, also use a lot of energy. Although unlike Bitcoin, their total energy consumption is not transparent and cannot be as easily measured.

Bitcoin mining has been designed to become more optimized over time with specialized hardware consuming less energy, and the operating costs of mining should continue to be proportional to demand. When Bitcoin mining becomes too competitive and less profitable, some miners choose to stop their activities. Furthermore, all energy expended mining is eventually transformed into heat, and the most profitable miners will be those who have put this heat to good use. An optimally efficient mining network is one that isn't actually consuming any extra energy. While this is an ideal, the economics of mining are such that miners individually strive toward it."

"We learn from history that we do not learn from history."

so how do you buy these things anyway? with the huge spikes occasionally I wouldn't mind throwing in a few bucks and seeing if I could make a few more.

I'm baaaaaaack

that sounds like a hell of a lot of babble.

Then again, my basic feeling towards libertarians is at best, theyre largely the type of people who believe theyre doing the right thing while being largely ignorantr to the human costs of their actions.

Joesolo: To buy 'em you go through an exchange, such as Mt Gox.

If you're thinking bitcoins are too expensive (their price currently has dropped to about $700), bear in mind you can buy bitcoins in fractions as small as 0.0000001 bitcoins. So you could choose to spend $150 or even less, even if the cost of a bitcoin were enormously high.

I'm up for joining Discord servers! PM me if you know any good ones!

That doesn't make them a good investment.

Bitcoins are basically like gold minus 4000 years of shared delusion.

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Well they seem to have a stable point they stay around, and they shoot up once in awhile. If your not a greedy ass and sell em when they're high, you could make a tidy profit.

It's like stocks though, you dont know what your gonna get.

I'm baaaaaaack

thats a bad comparison, really.

if you're investing in stock , you're likely at least doing some research into the companies you invest in and their chances of success unless you're an idiot.

I think the biggest reason to be skeptical of bitcoins is that it's not clear what advantage they are supposed to have over real currencies. Longterm viability requires it to satisfy some purpose that existing currencies don't.

I'm guessing that most demand currently comes from people who are either a) want it for illegal purposes, b) are cyber goldbugs, or c) want to get in because it's a hot investment

a) won't work in the long run since the government is more than capable of tracking it or intervening if necessary. Plus Silk Road got shut down. b) is bad for the same reason gold is a poor investment. and c) is what you call a bubble

So when it comes down to it, I just don't see any reason for Bitcoin to exist.

edited 17th Dec '13 11:15:24 PM by storyyeller

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