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If public key crypto fails then so does banking and the internet. Loss of BTC will be the last of people's worries!

Nothing backing gold either but people seem to value it rather highly.

You're right about the built-in deflation though.

Not wanting to sound like too much of a goldbug, but I would say that gold is backing gold! The price of gold in fiat currencies is fairly unimportant as gold is highly valued because it is rare and has always been, I don't think modern technology has changed that, although some economists think so. It can't be created, only found, and it is a highly durable material. It is always likely to maintain a high value when compared to other commodities. You could put all your wealth into rice or sugar but I'm not sure if they're durable enough to survive the next 5000 years! Will bitcoin be about 5000 years! That's why prefer precious metals!

As far as the crypto key is concerned, I obviously lack some understanding of Internet protocol's but from what I understand if the crypto key was to fail and there was widespread fraud affecting all online currency transfers, your losses from government backed institutions will be insured? Maybe? Would any lost bit coins be returned to you?

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Shoot me down, but a few members seems a bit obsessed with this thread.  There are a lot of threads on HOUSEpricecrash and other things to do in general than aggressively defend Bitcoin (e.g. see fami

They could certainly put various things in place to try and stop but I just don't seem them doing it. Obviously they could make dealing, trading, holding or using bitcoin punishable with 10 years

Bitcoin Cash can and will scale on chain. The technology advance within the next decade will allow it to happen with ease and always remain ahead of demand. What Core have done to Bitcoin is criminal

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will someone create a program that can break the protocol?

There is no computationally cheap way of breaking modern cryptography waiting to be discovered by some wizz kid like you see in the movies. Its the reason why TPTB absolutely hate the fact that such technology is freely available for anyone to use.

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There is no computationally cheap way of breaking modern cryptography waiting to be discovered by some wizz kid like you see in the movies. Its the reason why TPTB absolutely hate the fact that such technology is freely available for anyone to use.

As I say I am not programmer and I'm definitely lacking understanding of this new technology. Anything you guys can tell me about it, benefits or problems, would be much appreciated! :)

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This seems a bit suspect to me, limited withdrawals but they are presumably happy to take deposits:

Due to the volume of withdrawals requests, each customer is currently only allowed 1 withdrawal every 20 days (estimate)

Situation as of 16 October 2013: We are currently processing withdrawals requested five weeks ago. (Users with several withdrawals in the queue must take the 20 day rule above into account)

https://support.mtgox.com/entries/21649594-Withdrawals-and-Deposits

Nobody can sell and the price keeps going up, sounds a bit like the housing market!

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This seems a bit suspect to me, limited withdrawals but they are presumably happy to take deposits:

Due to the volume of withdrawals requests, each customer is currently only allowed 1 withdrawal every 20 days (estimate)

Situation as of 16 October 2013: We are currently processing withdrawals requested five weeks ago. (Users with several withdrawals in the queue must take the 20 day rule above into account)

https://support.mtgox.com/entries/21649594-Withdrawals-and-Deposits

Nobody can sell and the price keeps going up, sounds a bit like the housing market!

This sort of thing has been going on for months at MtGox. That's why the MtGox BTC price is usually about 5-15% higher than the other big exchanges - it's easier to get your money out via BTC than state fiat.

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This seems a bit suspect to me, limited withdrawals but they are presumably happy to take deposits:

Due to the volume of withdrawals requests, each customer is currently only allowed 1 withdrawal every 20 days (estimate)

Situation as of 16 October 2013: We are currently processing withdrawals requested five weeks ago. (Users with several withdrawals in the queue must take the 20 day rule above into account)

https://support.mtgox.com/entries/21649594-Withdrawals-and-Deposits

Nobody can sell and the price keeps going up, sounds a bit like the housing market!

Yes MtGox has been insolvent for a while now. It all started around early summer when they were served with a multimillion dollar lawsuit by a former business partner and then it got worse when they had an account with $5million frozen.

They might be able to trade their way back to health but I'd still consider them risky. Much better alternatives around at the moment e.g Bitstamp, Coinbase, Kraken, Localbitcoins.....

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Not wanting to sound like too much of a goldbug, but I would say that gold is backing gold! The price of gold in fiat currencies is fairly unimportant as gold is highly valued because it is rare and has always been, I don't think modern technology has changed that, although some economists think so. It can't be created, only found, and it is a highly durable material. It is always likely to maintain a high value when compared to other commodities. You could put all your wealth into rice or sugar but I'm not sure if they're durable enough to survive the next 5000 years! Will bitcoin be about 5000 years! That's why prefer precious metals!

As far as the crypto key is concerned, I obviously lack some understanding of Internet protocol's but from what I understand if the crypto key was to fail and there was widespread fraud affecting all online currency transfers, your losses from government backed institutions will be insured? Maybe? Would any lost bit coins be returned to you?

That's just a tautology, but hiding in there is an interesting point - value is entirely subjective.

If people value something for what it is you don't need to back it with anything.

Gold is rubbish for online shopping, as you can't post it down a internet pipe. Sure, you can put it in a vault and then trade promises to withdraw it (like banks started off), but that is trading promises of gold not the gold itself. You are exposed to counter party risk, because you need to trust the vault operator to keep the gold safe, then return it on request.

Bitcoin is probably most revolutionary (and also head mashing) because you can transfer ownership, without counter party risk, irrespective of geographic distance. You don't need to move vans of notes/metal about, nor trust any vault operator (bank). Ownership is changed in moments, irreversibly.

Ofc, it does lots of other things, such as allow digital transfers without banking gatekeepers (like credit cards), doesn't have a central controller/point of trust, can be transferred quickly and cheaply, is pseudo anonymous (with potential to become fully anonymous in the future) etc.

Yellow, shiny, metal is only considered valuable because of an ongoing belief that it is worth something. This doesn't make it any more or less rational than valuing anything else. However, gold has pretty good properties for being used as money, but Bitcoin is arguably a better money for the modern era (IMO).

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What about atomic computers?

My understanding is that atomic computers are no magic bullet for breaking all encryption techniques, especially not the one which Bitcoin uses. However, should it become breakable, Bitcoin can be updated to use one which isn't.

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My understanding is that atomic computers are no magic bullet for breaking all encryption techniques, especially not the one which Bitcoin uses. However, should it become breakable, Bitcoin can be updated to use one which isn't.

Not to mention the Bitcoin network is THE largest linked computer system in the world. Currrently about 2600 Terahash running at 33000 petaFLOPS. When mining I am a tiny 500 megahash part of that network.

It's bigger than all worldwide government computer systems combined and bigger than all Supercomputers combined.

edit. Checking Wikipedia the 2013 Chinese supercomputer Tianhe-2 has a max peak calculation speed of 54.902 petaFLOPS. This means the Bitcoin network has computing power 600 times the worlds most power Supercomputer!!!!!!!

Awsome!

M

Edited by markyh
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That's just a tautology, but hiding in there is an interesting point - value is entirely subjective.

If people value something for what it is you don't need to back it with anything.

Gold is rubbish for online shopping, as you can't post it down a internet pipe. Sure, you can put it in a vault and then trade promises to withdraw it (like banks started off), but that is trading promises of gold not the gold itself. You are exposed to counter party risk, because you need to trust the vault operator to keep the gold safe, then return it on request.

Bitcoin is probably most revolutionary (and also head mashing) because you can transfer ownership, without counter party risk, irrespective of geographic distance. You don't need to move vans of notes/metal about, nor trust any vault operator (bank). Ownership is changed in moments, irreversibly.

Ofc, it does lots of other things, such as allow digital transfers without banking gatekeepers (like credit cards), doesn't have a central controller/point of trust, can be transferred quickly and cheaply, is pseudo anonymous (with potential to become fully anonymous in the future) etc.

Yellow, shiny, metal is only considered valuable because of an ongoing belief that it is worth something. This doesn't make it any more or less rational than valuing anything else. However, gold has pretty good properties for being used as money, but Bitcoin is arguably a better money for the modern era (IMO).

I think you make some interesting points and I may have overlooked some of the fundamental benefits that bit coins have.

Indeed I aggree that all value is entirely subjective. Something/anything is only worth something when is traded, whether that is your time for a salary or apples for pears. The only advantage that gold has is its proven longevity as a currency or backing for currencies.

I suppose only time will tell if bit coins prove to be a viable long-term currency, that and the future possibility that I may be being paid in bit coins, geez, I don’t even have a smart phone yet!

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As anyone doing a background check on my HPC posts will see, I got into Bitcoins relatively early, starting buying after the first $30 - $3 crash in July 2011. I have since bought hundreds of Bitcoins spending less than £2000 on the lot of them and now find my stash worth over £150K! Absolutely delighted with Bitcoin and my unwittingly shrewd investments.

Actually, not really. I did infact get into buying Bitcoins early and hundreds of them have indeed passed through my hands, 99.99% of them purchased at sub £10 or even sub , £5 prices, but every single one of them, I spent on Silk Road. Having stood well back from Bitcoins as the 'bubble' started (I warned people not to touch as they shot through $30 in Dec 2012), after the price popped at around £175, and plopped back down to around £60, I discovered that I had a bit of loose change in my Silk Road account, which had turned around £3.50 into £80.....so that this was the sum total of my gain from the 2nd great Bitcoin bubble. Needless to say, I spent it on Silk Road.

For those who doubt on the basis that this all has to collapse because it sounds too good to be true, what you're seeing is the first of a new breed of currency/commodity going through an expansion phase. It isn't too good to be true because no one has a clue if it will work and because in order for it to be successful then periods of rapid expansion are absolutely to be expected.

It's a grand and quite glorious experiment that may be studied by economists for years afterwards.

Yeah. Digital decentralised crypto-currency is an idea that is not going to go away. Whilst Bitcoin may be the pioneer, who is to say that it will develop into the 'Google' and not the 'Alta Vista' of the digitial currency world? I can already see signs of Bitcoin becoming a bit unwieldy to use. For example, my Bitcoin client has corrupted my block chain. It took me 2 days of leaving my gaming PC connected to the network to correct this....and then it happened again. Last year, this block chain was about 5Gb in size. It is now 30Gb in size. If it continues to grow at this rate, next year it will be 180Gb in size. Now, for something that is projected to be used by people on their mobile devices to pay for Kaffee und Kuchen or whatever, I can see a very obvious problem not to far down the line from now.

Perhaps a digital crypto-currency is the future and will even serve as the saviour of mankind, from a Book of Revelations style 'Coming of the Great Beast' who proceeds to enforce his mark being stamped upon peoples heads or arms (microchips) in order for them to buy or sell. But perhaps we are still waiting on a much smarter more versatile version of Bitcoin to come along. Perhaps it already exists, perhaps it is Litecoin, or perhaps it isn't/doesn't.

Fundamentally there is still nothing backing bit coins and although there is a top limit of bit coins can be produced there is no limit to how many fractions a bit coin could be split into. The other major problem with bit coins becoming a viable currency is the fact that they keep appreciating rapidly, leading to people hoarding them and not spending them, creating a classical deflationary situation.

Still would have minded picking up a few when they were still $20! But again that merely demonstrates that they are acting more like a speculative investment, much like spread betting on an indice!

What needs to grow, is the market for real world Bitcoin transactions. However, for this to really occur. Bitcoin needs to stabilise in value. Money that shoots up 50% in value one day and then do 70% the next day is no money at all, but a speculative vehicle. But the speculative value of Bitcoin is based upon its value as a means of exchange for goods n services, whereas its ability to become a reliable means of exchange in any market place, was assisted by speculators creating a market, thus providing liquidity for Btc in the first place, placing a bet that Bitcoin markets would one day flourish. Bitcoin relies on speculative capital. But too much, and the Bitcoin market will cannibalise itself. Everytime a bubble blows up and then pops, those conducted real economic transactions for real word goods n services are likely to get burned. This has happened twice, each time on a scale a magnitude of order larger than the last. I believe that this is intentional and that history will repeat itself until it hits a scale large enough for a tipping point to be found, where Bitcoin sinks into the collective conscious as a way to losing large sums of capital to speculative investors, and the real Bitcoin economy starts to retract. At this point, when Bitcoin is seen as nothing more than a speculative play-toy, too hot to handle for those involved with the economy of real goods n services, then the whole thing will implode beyond recovery.

I dont believe the sh1te about MtGox servers being overloaded, thus leading to the last two crashes. I think both the 'bubbles' and the 'pops' were engineered by agents of financial establishment as a means of sabotaging what could become a very potent competitor to their hegemony on global finance. I think this, and I think it will happen again, until that tipping point that I describe above, finally comes. The capital required to do this, would be a drop in the ocean for the big banks, and they could even profit from it just as any big player cna profit from instigating a stampede and then standing back to let all the mugs pile in.

Edited by BobBobson
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Personnal I wouldn't put too much faith into bit coins. They are only ever going to be as good as their security and although the security protocols are currently very good nobody knows what will happen in future, will a competing online currency become more popular or will someone create a program that can break the protocol?

As already mentioned, it's obviously very difficult to break the cryptography underpinning Bitcoin. Every Bitcoin address(or wallet) has a public and private key. You could try a brute force approach to find the private key of a wallet you would like to steel the coins from, but this would take a very very long time with the current computational power we have available. For example, here we can see bitcoin uses keys which are 256 bit long Private Keys.

Wikipedia says the following:

AES permits the use of 256-bit keys. Breaking a symmetric 256-bit key by brute force requires 2128 times more computational power than a 128-bit key. 50 supercomputers that could check a billion billion (1018) AES keys per second (if such a device could ever be made) would, in theory, require about 3×1051 years to exhaust the 256-bit key space.

Wikipedia

And remember, this is the time it would take just to crack one wallet.

Even if we develop a way to crack these codes in a reasonable length of time, the bitcoin protocol can be modified providing more than 50% of the mining computational power agree to this change. Which would go something like:

Developers: "Hey we have this new version of the protocol, which will make it more secure, should we all run it?"

Miners: "Hell yeah!"

Thus the protocol can be improved upon, providing the majority agree.

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1) The Mt Gox thing was exceptionally unlikely to be any dubious agents. There are far better ways to destroy Bitcoin that a handful of DDOS attacks on one exchange, even if it were the primary one. That was almost certainly done for pure financial gain. Meanwhile, Mt Gox's systems got overloaded as well.

2) Bitcoin is a currency, a commodity, a system of trust-less contracts, and shortly a token ownership/exchange system. All incredibly secure. It is not the best currency and I don't expect it ever will be, but it is looking like a good commodity and a great platform for other systems to be built on. As a currency that can be used on-line, I see it more as a prototype and a reserve currency. I think better options may come along. They also might not.

3) Blockchain bloat is already being addressed. Most clients people use now do not need to download the blockchain so that's really not a user concern. There is work being done to improve systems which don't require the full blockchain. Moreover, increasing amounts of transactions will take place off the blockchain, e.g . within the Coinbase network or within a Bitcoin bank. Indeed, even current 'discussion points' such as reversible transactions and credit can be added in this way (for better or worse).

4) Bitcoin is bizarrely easy to use. It is freaky lobbing thousands of pounds around just like that. Today I shifted nearly $20k of funds from a trading platform to a wallet. No fees. No not knowing when it will arrive (approx 30 minutes). I can see the transaction taking place. No money getting lost.

However, Bitcoin software and some technical stuff surrounding Bitcoin (e.g. address format) is confusing - this will change in time.

5) The cryptography behind Bitcoin, and an awful lot of what you do on the Internet, is attacked constantly by the very best academics and professionals in the business. Forget what you read about hackers, this is not something a script kiddie is going to break from his bedroom unless he is a 1 in a billion genuis (who would be the toast of the maths/crypto world for doing it) AND it is even possible. Even if that happens, Bitcoin is designed to switch crypto systems virtually overnight. There would be a few hours tops of issues, which wouldn't be good obviously, and then the blockchain would be reverted, blockchain based movements frozen (which are increasingly unlikely to be the vast majority of them) and the software updated.

Meanwhile, an awful lot of other systems used on the web, by banks, by credit cards, and by the military would be absolutely screwed. They cannot change their systems overnight. If such a thing were to happen and fraud happened on a massive scale, there is no chance you're getting all your money back.

However, the above event is exceptionally unlikely to happen in any short space of time, if ever. The way crypto gets broken tends to be very gradually, so everyone tends to get years of warning before it could present a real danger. And, as I said, Bitcoin uses multiple crypto algorithms.

The flaw in all this is implementation, including in bitcoin's core software. There have been and there will be problems with the software implementation. For example, the most well known recent case was a flaw in Android's random number generator. That's not a Bitcoin flaw, that's a flaw elsewhere that means any crypto implementation is flawed if using that function on an Android system. When Sony's PS3 got effectively rooted, it wasn't a crypto flaw but a serious implementation screw up (amateur hour in fact). It will definitely be years not months before the security side is suited to 'my dad' and there are going to be more screw ups.

6) Advancing computing techniques such as quantum computing need to be far better to affect Bitcoin. It's extremely unlikely that will happen without people knowing, even with the military. Current quantum computers do very specific jobs and aren't quite the real deal. Moreover, this was already planned for. Only parts of Bitcoin are affected (basically, if you're spending from the same address multiple times there is some exposure and the time to defeat one of the hashing functions halves) and the relevant algorithms can be easily changed (and will be I'm sure). Most likely there would be years of warning but it could be done virtually overnight if necessary. And once again non Bitcoin security has much bigger problems. This is my current understanding as I haven't read up to post this - may need to be corrected but broadly speaking I'm definitely correct.

7) Anyone who genuinely thinks it's a ponzi scheme doesn't know what a ponzi scheme is. Bitcoin very much benefits early adopters though, I'll give you that.

A very good way to see Bitcoin is as a web start-up where you can trade the shares easily. So as people think Bitcoin is worth more, they pay more for the shares - which happen to be a digital entity rather than some piece of paper or whatever. And yes, Bitcoin is very possibly going to be used for share dealing soon enough since a satoshi can be made to represent anything given the right software.

8) Mt Gox may or may not be insolvent, but they certainly have banking issues. Getting money in is ok, getting money out is more tricky. I would suggest Bitstamp or BitBargain. You will need to provide ID these days - that's how governments have clamped down on the money laundering side. If you want Bitcoin-Fiat conversions, they are going to know about it.

So will Bitcoin work? Who knows!

Edited by miggy
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Snipped for brevity.

Interesting post.

Learned some things i didn't know and amn't going to argue with the rest. However, I wouldn't be so ready to believe all the 'spin' about the last bubble popping due to MtGox DDOS attacks. This 'fact' came from MtGox themselves in order to try and restore some calm amongst the panic. The previous bubble, was in my opinion, a classic pump n dump. Plain and simple, perhaps with DDOS attacks, perhaps not.

If this were the case, then it would also be perfectly conceivable that the primary pumpers n dumpers were from the large investment banks. They would have access to the funds to turn the Bitcoin market into their personal slapping bitch, they could make a good profit in this activity, and from an established finance point of view, they would be help in the crippling of a phenomena that could turn into a serious competitor if allowed to run its course unmollested.

Some may say 'conspiracy theorist', but I would say, 'go and read some history books'.

Edited by BobBobson
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100,000 is very hopeful indeed I would say. If he is right then getting in now will be fine! Bit pie in the sky if you ask me. It would have to have become the de facto commodity and web currency worldwide for that to happen. Unlikely. Though it would mean a few people would be seriously rich if they held that long.

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100,000 is very hopeful indeed I would say. If he is right then getting in now will be fine! Bit pie in the sky if you ask me. It would have to have become the de facto commodity and web currency worldwide for that to happen. Unlikely. Though it would mean a few people would be seriously rich if they held that long.

There are going to be an absolute maximum of 21m bitcoins.

The market cap of gold is $8tr.

For each bitcoin to be worth $100,000, all bitcoins in existence only need to be worth (at today's prices) 25% of the above ground gold reserves ($2tr).

Also, global GDP is about $70tr. $2tr compared to that figure is pretty small - under 3%.

The global black market GDP is estimated at over 20% of global GDP, which is about $14tr. A good portion of that trade may appreciate a largely anonymous currency.

Ofc, this isn't an apples vs apples comparison, as GDP isn't a commodity, but it's interesting nevertheless. While $100k sounds completely bonkers, if Bitcoin becomes very successful, these figures will naturally arrive with it.

Edited by Traktion
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Define 'intrinsic value'? Please explain how you measure it objectively.

The intrinsic value of gold/silver is actually the gold/silver content of your bar/coin. Even if its nominal/market price go to zero, you can still wear it or use it as an electrical conductor.

The intrinsic value of a currency note is the value of the paper itself.

The intrinsic value of a Bitcoin is zero, because it is stored in a cryptographic key, that has no value outside its electric/digital context.

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The intrinsic value of gold/silver is actually the gold/silver content of your bar/coin. Even if its nominal/market price go to zero, you can still wear it or use it as an electrical conductor.

The intrinsic value of a currency note is the value of the paper itself.

The intrinsic value of a Bitcoin is zero, because it is stored in a cryptographic key, that has no value outside its electric/digital context.

So, what is the intrinsic value of gold? Please provide a unit of notation and a way to measure it.

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