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What Bitcoin Is, and Why It Matters
Recent weeks have been exciting for a relatively new kind of currency speculator. In just three weeks, the total value of a unique new digital currency called Bitcoin has jumped four times, to over $40 million.
- aheilbut 15y agoquestion: Is the Bitcoin approach to distributed, secure transactions useful (and is it novel?) without the currency generation component? Are they potentially separable?
- kiba 15y agoIf you need the distributed approach for ultimate survivability and security, yes.
- tptacek 15y agoDoesn't Bitcoin imply nonderministic and potentially large delays in transaction settlement?
- trevelyan 15y agoI didn't downvote you, but I'd answer yes and point out that the same criticism applies to email as a communications channel. And while you might not buy a house with a single BTC transaction, it's not that risky as a channel to send a modest payment to someone with a trustworthy reputation or with whom you have an ongoing relationship. There are a lot of businesses that have to deal with outlandishly high rates charged by companies that process credit card payments for non-US companies. I'd find it far more convenient to send a bitcoin payment to a supplier in China than have to go to the bank and handle the conversion that way and would also love it if I could exchange BTC for HKD or CLP the next time I'm travelling in Hong Kong or Latin America.
- deleted 15y ago[deleted]
- tptacek 15y agoRespectfully, that criticism applies to carrier pigeons too, which is why we don't use carrier pigeons or email for online transactions; we use payment processors that clear transactions in low single digit seconds.
- trevelyan 15y agoThe same criticism applies to cheques as well as COD, but I don't see anyone saying they don't serve a purpose. Assuming BTC becomes a generic unit of exchange, the currency promises to save me around $50 to $100 per international money wire and cut the time it takes to transfer funds down to a few minutes. I've had zero failures using the system to date (max transfer time of 20 min), and would need to see a 10% failure rate before it stopped making sense. And that's without even calculating the costs of relying on monopolistic intermediaries like banks for currency exchange.
- deleted 15y ago[deleted]
- Groxx 15y agoIn a very technical sense, yes. And miners can choose to not include your transaction in the block (ie, if you don't meet the fee requirement they chose). It's entirely possible for your transaction to be continually pending and never accepted. In practice, it takes within about 10 minutes for the first confirmation to go through, and 10 more for each one after that. Most merchants will likely be interested in waiting for a few more blocks to be added before totally accepting, but that can be solved by middle-men that provide insurance against double-spending, allowing immediate transactions. And transactions move across the network quite quickly - I tend to see them appear well within a minute.
- erikpukinskis 15y agoI don't see why waiting for blocks is necessary. If a large portion of the network consenses within some small number of seconds, the likelihood that a rogue portion of the network would confirm conflicting transactions and then have that confirmation confirmed by that consensing network is vanishingly small.
- Groxx 15y agoIn general, yes. But I do somewhat doubt that it'll be seen that way by many merchants - greater confidence they got paid is... greater confidence they got paid. Especially for internet purchases, a 10-20 minute delay is often unimportant.
- erikpukinskis 15y agoFWIW, there's a pretty extensive discussion of the fast transaction problem here: http://forum.bitcoin.org/?topic=3441.0 http://forum.bitcoin.org/?topic=3441.0
- tptacek 15y agoAm I reading that right? On Internet purchases, 10 minute delays are unimportant? I chose who to buy Cisco routers from because of the specter of a 5-minute delay. Can you flesh that statement out a bit?
- caf 15y agoThere's a project that repurposes Bitcoin's block chain distributed notarisation to implement a decentralised replacement for DNS.
- jasonkolb 15y agoWow. Yet another reason why I think governments will attempt to squash it, DNS is the only way to even marginally effectively shut down a site right now.
- wmf 15y agoHas route blackholing been tried yet? It seems like it would be pretty effective.
- wladimir 15y agoYes, it has been tried. But it is impractical, because of collateral damage: - Many sites are hosted on massively shared hosts. Blocking those IPs will cause a lot of services to be unreachable, not just the one to be blocked. - People find you with your domain name, not your IP, so a service could avoid filtering by switching subnets every day and just keep updating the DNS entry. After a certain time, the govt will be blackholing a large part of the internet.
- getsat 15y agoIt is. Remember when Pakistan blocked half the world from being able to access Youtube in 2008?[1] (Though that was more incompetence by network engineers than legitimacy of the method) [1] http://www.ripe.net/internet-coordination/news/industry-developments/youtube-hijacking-a-ripe-ncc-ris-case-study http://www.ripe.net/internet-coordination/news/industry-deve...
- dstein 15y agoIf that kind of thing is possible, then I wonder what other things could be replaced. I'm thinking along the lines of a distributed SSL authentication service.
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- wladimir 15y agoThey're separable in theory, but if you take out 'mining' you'll need to find a different way to create the incentive to maintain the network which also needs a solid proof of work to prevent people from cheating. Also you'll need a different way to do the initial currency distribution which is also cheater-proof. These are very hard problems.
- TruthElixirX 15y agoIts already built in. Once all the coins are mined (or it is no longer profitable to do so) one can still run bitcoin but charge transaction fees for processing transactions.
- anonymous 15y agoBored with bitcoin, please stop posting regarding this topic.
- cheez 15y agoBetter than "Facebook integrates with Spotify". I thought this was Hacker News, not Slacker News!
- Brashman 15y agoThere's some interesting discussion about Bitcoin on this Quora question: http://www.quora.com/Is-the-cryptocurrency-Bitcoin-a-good-idea http://www.quora.com/Is-the-cryptocurrency-Bitcoin-a-good-id...
- joe_the_user 15y agoExcellent discussion - in the sense that he rightly tears the idea to shreds. I was tempted to go through a full economic analysis but he's save me the trouble. Good show..
- erikpukinskis 15y agoYou get high marks for boastful overconfidence, but frankly, I think anyone who claims to know with certainty what will happen with bitcoin, including you, is grossly overestimating their predictive talents. The truth is, we have not seen a currency with exactly these properties ever before. The discussion on Quora highlights for me just how little consensus there is about what will happen. Bitcoin is interesting precisely because we have no idea how important it will turn out to be.
- nandemo 15y agoI find the top answer to be very biased and poor. For starters, he clearly misunderstands what it means for the Fed to print money. When you increase the money supply, somebody is getting "free money", even if it's indirectly. The more dollars there are, the less each individual dollar is worth. If everybody got their share of the newly minted money there would be no difference, but in practice just a few institutions will be the direct recipients of the new money. For instance, when the Fed prints money then uses it to buy California-issued bonds, the California government is indirectly getting free money. > Or at least have constant in rate of growth? Yes, of course you would, because that's the only way to actually accommodate more people using it. This is an elementary mistake. Bitcoins can be subdivided almost indefinitely. If they go up 1000 times in value, we'd just start using milibitcoins. > As a quick thought experiment, let's say demand for Bitcoin grew as more people found out about them. Well, you'd expect the price of Bitcoin in dollars to grow rapidly. Now assume I own one Bitcoin. I also have a dollar bill. I would like to purchase a Pepsi. Which one of those will I spend? Obviously the devaluing dollar gets spent before the skyrocketing Bitcoin. This is nonsense. A transaction takes 2 willing participants. If bitcoin's value is expected to go up, then naturally the merchant will prefer getting paid in bitcoins rather than the dollars. The main problem of Bitcoin is that currencies are like social networks: they're only useful if other people are using it, and often they never achieve the critical mass necessary to be successful. This, and the large risk of being outlawed by governments.
- jasonkolb 15y agoGood explanation. It'll be interesting to see what happens if someone ever attempts to run a major exchange within the US. My money says they'll be labeled a terrorist.
- cynusx 15y agoI'd be more interested to see what happens when said exchange files for bankruptcy.
- juiceandjuice 15y agoBitcoin could be to quantum computing what Sputnik was to NASA.
- bdhe 15y agoBitcoin could be to quantum computing what Sputnik was to NASA. Could you elaborate? Does mining bitcoins become easier with quantum computers? Is there some other connection I'm missing?
- juiceandjuice 15y agohttp://en.wikipedia.org/wiki/Shors_algorithm http://en.wikipedia.org/wiki/Shors_algorithm
- daliusd 15y agoThe reason why private-public key mechanism works is that it is really hard to get private key from public key. With quantum computers it is trivial task. In theory you could steal other people's bitcoins. In reality I wouldn't be so enthusiastic about quantum computing exploding because of bitcoin. Private-public key encryption is used now everywhere and having quantum computer would give you benefit in lot of situations.
- Groxx 15y agoPrior to such an explosion, we'd have more interest in quantum-resistant public-key crypto: http://pqcrypto.org http://pqcrypto.org One will likely end up being usable, and things will shift to it / others.
- weavejester 15y agoThe majority of normal financial transactions are also secured by public key encryption that is potentially vulnerable to a quantum computer.
- ender7 15y agoTo me, Bitcoin just seems like a form of electronic gold. Limited supply; no significant intrinsic value; no backing government or other body. Conversion to real currency is commonplace but not exactly convenient. Is this way of looking at it a poor predictor for the way it will behave in the market?
- erikpukinskis 15y agoBitcoin has properties A, B, and C. Currency Q also has properties A, B, and C. Therefore Bitcoin will behave like Currency Q. Except that Bitcoin has properties D, E, and F. Will D, E and F impact how it behaves in the market? Probably.
- cbare 15y agoThe question is, which will be the more stable currency 5 or 10 years from now, BitCoin or the US Dollar? See The Future of Money: http://pragmaticpoliticaleconomy.blogspot.com/2010/03/future-of-money.html http://pragmaticpoliticaleconomy.blogspot.com/2010/03/future...
- tocomment 15y agoWhere do ya all buy bitcoins?
- TuxPirate 15y agoThere are different ways to buy bitcoin. The first one worth mentioning is through #bitcoin-otc or #bitcoin-pit on irc.freenode.net (http://wiki.bitcoin-otc.com/wiki/Using_bitcoin-otc http://wiki.bitcoin-otc.com/wiki/Using_bitcoin-otc) other ways to buy them is through markets such as mtgox (http://mtgox.com http://mtgox.com)
- qntm 15y agoDoes everybody in the world who uses Bitcoins also keep a copy of the global transaction record? Isn't that going to become colossal very quickly?
- A554551N4710N 15y agoyes, which is a major problem... hopefully one which they can release an update to rectify
- joe_the_user 15y agoBut first you'd have to figure-out how to solve the problem. "Everyone" keeps a record to keep everyone else honest. If only some people kept records, they'd become the authorities and this would stand in the way of the system being decentralized.
- deleted 15y ago[deleted]
- minikomi 15y agoIs it not possible to periodically start fresh, from an agreed upon point?
- joe_the_user 15y agoI am not sure how you would do it. As I understand it, the bitcoin distributed hash approach relies on transactions being "verifiable" to avoid the process of actively and complete verifying everything. But any "restart" would have to actually do this active verification. Still, perhaps someone who knows could describe how this could work. Further, even a restart would involve everyone in the world having a record of how much money everyone else in the world had. Anyway, the mind boggles thinking about how this could possibly work.