0x6763

No, I was referring to mining on Amazon's GPU systems.

A single ATI Radeon HD 5970 can do 600 mhash/sec. See https://en.bitcoin.it/wiki/Mining_hardware_comparison#AMD

I updated that forum post with new numbers showing that at the current difficulty it might cost over $700 to generate a single block, and at the estimated difficulty which will happen tomorrow, it will cost over $1000 to generate a single block.

Generating a block currently gives you 50 bitcoins that are worth about $45 at the current market price.

You seem to assume the value of BTC is not going to increase despite them becoming increasingly hard to generate.

/economics fail

Difficulty to generate bitcoins does not cause them to increase in value. Their increase in value drives up the investment in mining, which then drives up the difficulty.

"I used to be fascinated by this type of centralized system and spent a lot of time studying and designing them. Unfortunately, there is pretty much always a way to overthrow/overtake them with lies and large groups as long as there is a central authority. Looking at the government's somewhat arcane approach and apparent lack of verification of its methods, I highly doubt that it would be different from all the others."

It also isn't a currency anymore;

This isn't the result of free markets, but a result of the actions of violent institutions.

The "durable value" it had in the decoration field is gone. The durability isn't a matter of decoration. The durability matters most in that it's not going to rot/rust away, so that an ounce of gold remains and ounce of gold rather than turning into half an ounce of gold.

If it were ever actually put to the test it would collapse to a much lower value reflecting its actual industrial and decorative values which are nothing like what they used to be.

You're forgetting it's value for trading and as a good store of value, which are most like among the biggest reasons it is valued by most people.

The subjectivity of value is why backing is so important if your currency isn't to collapse. Something's got to stop the subjective system from just deciding the value is 0, aka, hyperinflation. Or, more accurately, realizing the value is zero.

The "backing" is also subjectively valued...everything that is valued is valued subjectively. The universe doesn't set some standard value for things that humans are supposed to agree with.

but call me when you've actually got a functional currency that corresponds to what you claim is possible and even remotely resembles the real world market size of even Microsoft Points or Eve Online's currency. BitCoin is not it, and it won't ever be it.

Bitcoin just started as a grassroots project that is growing and growing quickly. You'll be hearing more news about it's further successes, I'm sure. Maybe after a few years of watching it grow, you'll decide you're ready for it.

First, those that get the coins first aren't "distributing" them into larger circulation. If they generate a block and get the reward, they either save the bitcoins or buy goods/services with them. This is not "distributing", but just normal trade.

Second, how else do you bring coins into the market? Be forced to buy them from the system's founder? I doubt that would catch on. Reserve a set number for each person onthe planet and give it to them when they ask for them? I don't think I could count all of the problems with that idea. Hand them out some arbitrary number of some supply in a first come first serve manner? I don't see how that would be an improvement.

The system needs people to generate blocks in order to provide the security of the system, but generating blocks has costs associated with it (hardware, electricity). Why not reward those block generators that are providing the system's security with new coins for each block they generate, at least until the number of transactions per block grow to a point that block generators can charge transaction fees?

Block generators aren't just generating blocks for the fun of it...they want bitcoins so they can spend them, which means those bitcoins will go to others, who can then further spend them, etc. Anyone can do it. GPU mining is profitable for most who wish to make the investment. There's no central authority choosing who gets to generate new blocks. Each person chooses whether they want to generate blocks or not.

If you don't want to generate blocks, but still want bitcoins, then you offer goods/services for bitcoins.

So far no one has thought of any less arbitrary way to introduce bitcoins into the network while continuing to support the security of the network at the same time.

And the term "proof-of-work" is misleading. They're generating blocks in such a way to deliberately make it difficult for someone else to attack the network by generating replacement blocks in an attempt to double-spend their bitcoins. They're not doing these calculations as an attempt to prove they're not some malicious node. Block generators do the work of creating a block, and if someone wants to double-spend their money, they have to generate that block and every single block that's been generated afterwards with at least the same total difficulty of the other blocks. This can only theoretically be accomplished if they have more processing power than the entire bitcoin network, and even then it would take a long time to do unless they had a lot more. Otherwise they just fall further and further behind as the bitcoin network block generators increase in power and the difficulty increases. Contrary to the opinions of some, these calculations are not wasteful, but are a necessary part of the system's security.

If bitcoins become so valuable, this by definition means that people are offering and trading MORE goods and services to get bitcoins, not less. Prices will adjust! Trades will continue to be made. That is not what I would call an economy grinding to a halt. This is the opposite of grinding to a halt.

You do realize that bitcoins are extremely divisible, right?

You have heard of Time Preference, right? People aren't going to stop buying goods and services altogether because they believe they could buy more in the future. Sure they'll actually save more than they would with a money that loses value over time, but they still have necessities they want to buy, and toys they want to play with now rather than later, old goods that wear out, need new cars, want a new house (or another house), etc. Why do you think people want money in the first place? To live a long destitute life and maybe spend it if they don't die first?

People have used gold as money for thousands of years...how come suddenly current generations are trying to stock up on it more than previous generations? This surely couldn't have anything to do with the insane economic environment created by the various governments, their central banks, and the giant businesses practically created by those governments!?

Bitcoins will never become "too rare" for internet transactions. The protocol currently supports the total bitcoin supply being divided into 2,100,000,000,000,000 units, and that can always be changed if most bitcoin users think they need it to be divided further.

"Bitcoins are a creation by some who don't understand what a currency is."

How ironic that someone would say such a thing, and then immediately post a few paragraphs displaying their own misunderstandings of what a currency is.

Do you know what a "hard money" is? Bitcoin is a digital hard money.

You talk so much about backing...backing is nonsense. Gold isn't backed by anything. It's just matter, like everything else. The value of that specific form of matter is in the eye of the beholder. Lookup the Subjective Theory of Value. Then go to http://mises.org

Someone proposed 21 million coins, and others, by voluntarily choosing to run the software, agreed to the 21 million coin limit. That's not a central authority...just an agreement between individuals.

In all of your statements you're conflating a protocol, and voluntary social agreement, with a central authority.

Anyone is free to fork the software and change the rules to create their own protocol for people to use! If they like the rules, they join...if they don't like the rules, they don't join. Freedom.

To ensure that all debt can be paid back with interest the money supply must continually grow - FALLACY! See this simple google spreadsheet - http://bit.ly/f2yE4D

Intrinsic value - FALLACY! Behold, the Subjective Theory of Value - http://en.wikipedia.org/wiki/Subjective_theory_of_value

Concerned about long-term viability of bitcoins? Maybe your concern should be with learning logic and economics first.

The only part of the economy that's "destroyed" is access to some of the bitcoins. All the goods and services that were there before the wallet is destroyed are still there after the wallet is destroyed. The effects of a destroyed wallet are limited to the owner of the wallet and their plans for the money...A good reason to learn how to backup your wallet!!

It has almost all of the same characteristics of gold, though in some ways more convenient. Bitcoins are rare, portable, fungible, divisible, durable, etc. The system is fairly anonymous, completely decentralized, completely free market. And for many, it's more accessible than gold/silver. Bitcoins have increased in value and are expected to continue increasing in value for some time, unlike government fiat currencies.

If you look at some of the charts from the trading websites, you can see they weren't all that valuable right away. But as more people learned of bitcoin and the way the system is designed with it's anonymity and security, as well as it's hard money qualities, it started to catch on.

A single U.S. penny used to be able to buy lots of bitcoins. At this moment, not even $1 USD can buy a whole bitcoin. It's generally expected that it will take many USDs to buy a single bitcoin before too long.

All I did was download the client and run it. It "just worked" for me without doing any special on either Linux or Windows (XP). This was with the current version 0.3.19.

Those are prices that people are buying and selling bitcoins at. Many thousands are traded every day on mtgox.com alone.