What Bitcoin Is, and Why It Matters

http://www.technologyreview.com/computing/37619/?mod=chfeatured&a=f

by TuxPirate • 15 years ago

121 53 15 years ago

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• 15 years ago

question: Is the Bitcoin approach to distributed, secure transactions useful (and is it novel?) without the currency generation component? Are they potentially separable?

kiba• 15 years ago

If you need the distributed approach for ultimate survivability and security, yes.

tptacek3• 15 years ago

Doesn't Bitcoin imply nonderministic and potentially large delays in transaction settlement?

trevelyan2• 15 years ago

I 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.

Groxx4• 15 years ago

In 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.

caf• 15 years ago

There's a project that repurposes Bitcoin's block chain distributed notarisation to implement a decentralised replacement for DNS.

jasonkolb2• 15 years ago

Wow. 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.

dstein• 15 years ago

If 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.

A554551N4710N2• 15 years ago

I think whoever came up with that deserves some type of Nobel Prize... If he/she can get it implemented!

wladimir2• 15 years ago

They'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• 15 years ago

Its 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• 15 years ago

Bored with bitcoin, please stop posting regarding this topic.

cheez• 15 years ago

Better than "Facebook integrates with Spotify". I thought this was Hacker News, not Slacker News!

Brashman• 15 years ago

There's some interesting discussion about Bitcoin on this Quora question: http://www.quora.com/Is-the-cryptocurrency-Bitcoin-a-good-id...

joe_the_user4• 15 years ago

Excellent 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..

erikpukinskis4• 15 years ago

You 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.

nandemo2• 15 years ago

I 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.

woadwarrior01• 15 years ago

I found a part of Sean Lynch's comment to be very insightful.

Bitcoin's deflationary nature, ironically, will almost certainly cause it to suffer from Gresham's law, in fact it probably is right now: when the novelty of using Bitcoin to pay for things wears off, we'll all come to our senses and start using our inflationary fiat currencies to pay for things, and spend the rest to buy deflationary Bitcoin, and nearly all Bitcoin transactions will be for a fiat currency or for something illegal or that otherwise has very high transaction costs with fiat currencies.

weavejester2• 15 years ago

The top poster in that discussion doesn't make a very good argument. He starts out with casual slander, makes it clear he has little understanding of how Bitcoin works, and then goes on to claim that it will fail because it will indefinitely appreciate in value at such a rate that no-one will ever want to spend it.

jasonkolb2• 15 years ago

Good 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• 15 years ago

I'd be more interested to see what happens when said exchange files for bankruptcy.

juiceandjuice2• 15 years ago

Bitcoin could be to quantum computing what Sputnik was to NASA.

bdhe• 15 years ago

Bitcoin 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?

juiceandjuice2• 15 years ago

http://en.wikipedia.org/wiki/Shors_algorithm

daliusd• 15 years ago

The 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.

weavejester2• 15 years ago

The majority of normal financial transactions are also secured by public key encryption that is potentially vulnerable to a quantum computer.

ender7• 15 years ago

To 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?

erikpukinskis4• 15 years ago

Bitcoin 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• 15 years ago

The 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...

tocomment• 15 years ago

Where do ya all buy bitcoins?

TuxPirate• 15 years ago

There 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) other ways to buy them is through markets such as mtgox (http://mtgox.com)

qntm• 15 years ago

Does 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?

A554551N4710N2• 15 years ago

yes, which is a major problem... hopefully one which they can release an update to rectify

joe_the_user4• 15 years ago

But 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.

What Bitcoin Is, and Why It Matters

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