I started this topic to prevent another from going off on a wild tangent.

BitCoin has a lot of critics who call it a scam. It also has a lot of proponents who claim it has compelling advantages over existing fiat currencies.

For BitCoin:

It's an easy way to send payments over the internet with minimal or no fees.
Wealth can be generated by anyone who cares to run a GPU, the more people doing this the better for the network it is.
It can be cheaply and easily stored unlike physical assets.
It's semi-anonymous.
It has no central government control.
The crypto it's based on makes it the most secure form of money currently available.

Against BitCoin:

Wealth is initially allocated unfairly.
It's semi-anonymous.
It has no central government control.
The exchange rate varies wildly.
It's not backed by physical assets ( e.g. gold. )
It's too easy to steal.


Personally I believe BitCoin solves some major problems in the world. It could replace expensive money transfer services like paypal and western union with something very near to free. It could reduce the influence of corrupt bankers on the world and practically eliminate their ability to hold governments to ransom. It opens the tax loopholes that have always existed for the rich to the common man.

I accept it also has downsides. It facilitates transfers of wealth beyond any government or political control which helps organised crime and various forms of bribery.

What do you think?

Why is this a positive?

Because everyone is as entitled to receive wealth as everyone else.

The total amount of coins generated by the entire network is fixed. Anyone can get coins proportional to their share of the network's computing power. There isn't a central agency printing money so there is no risk that that agency will act unfairly.

In the non-BitCoin world these money printing agencies recently printed massive amounts of money and handed it to their banker friends. They rewarded the corrupt for their collective incompetence and in so doing devalued the currency held by everyone else. They robbed the poor to pay the rich. Such things are morally abhorrent as well as bad economics and would be quite impossible with BitCoin.

Yes, I know how bitcoin works.

That wasn't my question.

The question is: why is it "better for the network" if 500 people are running mining rigs, versus just 5 people?

Bitcoins crack me up...

From an add about selling an Open Source FPGA Bitcoin Miner...

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Kevin a.k.a. Dweeber

Well, given that this is /dev/random, everything is a wild tangent by definition.



It is an interesting social experiment, to say the least. I don't think it is necessarily good or bad, nor do I think it can be boiled down to "We should (support|destroy) bitcoin because (benefit|drawback)." So, I generally sit on the sidelines. I have a posted bitcoin address for receiving unsolicited bitcoin, but I don't (openly) accept it as payment for debts, nor do I plan to do anything but convert it to USD.

What I do like about it: it is, essentially, cash. You have it, until you don't. It can be irreversibly destroyed by your own storage mishaps, it doesn't earn interest, and nobody knows how much you have buried in the back yard.

From a practical standpoint, though, I've been hitching my wagon on Dwolla more and more. I've only executed one transaction with Dwolla, but that's mostly because I don't live in Des Moines any more. It went well, though.

What does Dwolla have that Bitcoin lacks? It is actual USD, so I don't have to deal with exchange rates: I can pay for a $1.99 coffee with $1.99, instead of translating the price to 0.38933 bitcoin. But I probably never would have that situation anyway, because Bitcoin is not presently usable in the brick-and-mortar world, where one might buy a cheeseburger or some PVC pipe. I don't think this is an absolute impossibility with Bitcoin, but it would be a lot of work for rather little gain.

I do think it is changing how we think about online currency, though, and that's a good thing. Ironically, while I don't think Bitcoin itself is going to go mainstream, it will likely inspire -- or at least provide practical evidence in support of -- something that's better than our current situation.

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It wasn't totally clear to me what you were asking.

The miners are also the transactions processors and can decide what transactions to process and what fees they want to process them. It's far harder for 500 people to profiteer than it is for 5 as it only takes 1 dissenter to break the profiteering.

I don't think you need to be a miner to be a transaction processor.

That makes no sense.

Only the miners are transaction processors, that is only they take a transaction and add it to the permanent record. Any client can generate a transaction and send it out to the network for a miner to process.

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The maximum number is fixed but each coin is in principle infinitely divisible. The mining system doesn't allocate coins fairly among all members of the human race as there is no way of doing that. It is grossly unfair but then so is every other form of money that anyone has come up with.

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That phrase was only meant to cover newly created bitcoins not all existing wealth. I should have said 'everyone is equally entitled to receive the same share of the initial allocation of bitcoins'.

Of course that's not what actually happens but at least it's better than a central agency holding all the cash and allocating it in a grossly unfair way by giving massive payouts to their buddies.

I, too, could mine Bitcoin if I were fortunate enough to have a pile of GPUs, an ample supply of inexpensive electricity, and the know-how to put them together in a useful fashion. Instead, I mine dollars, which does take more day-to-day involvement but less equipment.

I might say there's two ways to look at the value of currency: intrinsic vs. extrinsic. From the intrinsic standpoint, the $10 bill I have in my wallet is $10, which is more valuable than $5, and less valuable than $20. The accumulation of these results in an increase in value, and the inflationary tendency of the dollar is an everpresent force decreasing the value in its own right. Here, Bitcoin is a serious win: outside its exciting relationships with other currencies, it will reach a point where the value of a hoarded Bitcoin will increase due to the exhaustion of supply.

The extrinsic value is in what that $10 can do. This is usually how I operate, as someone who finds inflation and wealth micromanagement boring and pointless. (I also don't change my own oil.) I know that this $10 will get me a decent lunch tomorrow. However, I also know that this $10 will, on its own, NOT get me a $1.25 soda. Why not? The vending machines won't accept anything larger than a $5, so unless I break it into something the vending machines will accept, it won't have value anywhere in my building. This is a very time-invariant view of money, yes, but not even the richest king or shrewdest investor in the world could buy a soda without anything smaller than a $10.

... and I think I'm getting philosophical here. I don't really have a point, except that I'm going to be boned tomorrow unless I get change for this $10. Anyone?

So when all the bitcoins are mined, people actually think their value will continue to increase?

It's a completely artificial product, when the game is over (i.e. all bitcoins are mined) it's more likely the value will fall to zero.

If they had any intrinsic value what so ever, why are the current bitcoins so cheap? Since it's a known limited supply, why wouldn't they have the value of their future finite supply now?

If I find a piece of land that has a gold vein with ore that can be processed into 15,000 ounces of gold in it, the first gold I mine isn't going to be worth (or sold) for way less then the last few ounces - even though the geologists have already calculated the total amount of gold in that land.

The fact that you have to "process" bits in order to end up with something that is already calculated and numbered, it's financial masturbation to say you're actually producing something.

In the end, bitcoins are nothing but a glorified "find waldo" event that people are dumb enough to assign real value to an imaginary product.

I can only imagine that PT Barnum is laughing his ass off at all the suckers born for this scam.