Topic: Bitcoin's Biggest Downfall (Read 9364 times)

They also no longer have a way to pay for their power.

Bitcoin must be removed from the grid, and the exchange expanded to commodities and decentralized

Thanks for the time you took to respond. Finally some thought put into a response. I appreciate the donation.

1.) Couldn't agree more with risk being a much better word and way to look this.

Solar may have been too pointed of a word. Distributed generation would be a better term. The combination of alternative technologies to sustain power.

When I say solar I am also not speaking of panels. I am talking about steam engines and solar concentrators.

I don't see how a data center that is off the grid is anymore susceptible to being destroyed by accident, by weather, or by a deliberate attack.

Amount of power-line electricity is not the issue. Right now power is generated centrally. Remember those blackouts all over the place a few years ago? We also use nonrenewable resources to power the grid. Cuba in 1990 is a perfect example of what happens

Our control of nonrenewable resources to continue power generation relies on American Military power to secure the physical land where the resources are. This is a house of cards.

The risk it mitigates is not having to rely on a central source of power.  If there were deliberate attacks on major power generation sources as things stand today, you could wipe out power for millions.

With a distributed electric generation grid, if one data center loses its power source, the rest are unaffected.

Its the same concept of the distributed database.


There is a requirement by power companies that you pay them in a national government currency. You must convert your bitcoins to dollars to pay for your electric.

My proposal for the distributed generation data center seeks to eliminate the need to convert totally.



As you said,  if an event destroys all of the Internet, then our problems are much greater than could be solved with solar-powered data centers. I am not making the argument that solar powered data centers are going to solve all our problems. Just a small number of problems that particularly pertain to the stability of bitcoin and advancing it to a currency that can stand on its own and replace national currencies.


Why is the gold market unaffected by this scenario? What's the difference between bitcoin and gold?

"What if somebody bought up all the gold in the world? Well, by attempting to buy it all, the buyer would just drive the prices up until he runs out of money.

Not all Bitcoins are for sale. Just as with gold, no one can buy a Bitcoin that isn't available for sale. "

So yes they can keep buying and holding them and driving up the price but this just make the holders with less have more value. Once they dump sell orders, well now you've just made a ton of bitcoins really cheap to a bunch of people who want them and want to buy them up on the cheap. What's so bad about that?

That's part of the reasoning behind the distributed generation data center. By removing all national currency dependence the bitcoin can stand on its own and survive price fluctuations and being to price goods and services in its own terms just like gold.

    
Couldn't agree more that the network needs to grow in size fast for the mentioned reasons.

Good points Marcus and well put.

The entry ways into the market are tiny so I don't think they could perform the manipulation you describe without opening exchanges for themselves. Maybe the entries to the market will only grow at the same rate as the network? Who knows.

     This is a highly valuable topic.
Thank you, Anderxander, for thinking about it and posting.
As a "thank you" tip for doing that, I have just sent 1.14 Bitcoins to the address in your signature line.

     Now to dig into the topic more.
I'm a newcomer to Bitcoin, but I have half a century of experience with computers and networks.
Forgive me, and please correct me, if, in what follows, I make some conceptual mistakes about the structure of Bitcoin.

1.) The word "downfall" introduces confusion to a very important subject.
The main worry here is "risk".
Bitcoin may or may not "fall down", but there are always risks.
If we analyze risk, then we have a chance of mitigating it.
Not eliminating it, but reducing the probabilities.

     A solar powered data center is very trendy concept.
But, no, a solar-powered data center is not a good idea.
It doesn't mitigate any risk other than lack of power-line electricity.
And it adds the risk that a data center could be destroyed by accident, by weather, or by deliberate attack.

2.) To spend Bitcoin, there is no requirement to convert to any national government currency.
It may be easier to spend by converting first, but it's not required.
And, if Bitcoin grows as many here expect it will, there will be even less need to convert in the future.
I'll offer you 5,000 Bitcoin for your 1957 Corvette.
Or, you offer me 1 Bitcoin for a cheese and sausage pizza from my pizza shop.
Deals, big or small, can be done without any currency, without any banks at all.
And without any "Feds" at all.

3.) Yes, operation of Bitcoin does require the Internet, or some network than can transfer data.
So one risk factor is that all data networks disappear.
An asteroid striking earth could do that.
Or electromagnetic pulse attack at key points around the world.
But if an event destroys all of the Internet, then our problems are much greater than could be solved with solar-powered data centers.
So I'm not going to try to lay-off the risk that the Internet will suddenly disappear.

4.) The biggest risk in the Bitcoin system is the risk of market manipulation.
Market manipulation would be easy to do, quick, and cheap.

     Let's put ourselves in the place of the "dark side" and think this through.
The central banking powers will hate Bitcoin, guaranteed.
They will want to destroy it, and plow salt into the concept so nothing like it ever grows again.

     It would not take any laws at all to completely destroy Bitcoin.
The dark side would simply take advantage of Bitcoin's single point of vulnerability: it's small market size.
What could they do?
Simple: The dark side will buy Bitcoins.

     Bitcoin's small market can be "cornered" easily, for only a few millions of US Dollars.
The dark side could simply allocate those millions from their petty cash fund.
Then place orders on every exchange and every forum to buy up every Bitcoin offered for sale.
The price of Bitcoin would shoot up to the sky.
Wouldn't take much.

     Countless people would try to catch the trend and pour their life savings into Bitcoin.
Many others would run up their personal credit card debt to buy mining rigs.
Some might quit their normal jobs to be "day miners", trying to make a living digging for Bitcoin.
The price would go parabolic, due to dark-side money pouring in week after week.

     Then what?
The dark side would sell.
And sell, and sell, without stopping until they had sold every last Bitcoin they had.
They would overwhelm every exchanger and every forum, with sell orders.
Bitcoin would plummet to the depths.
Countless Bitcoin faithful, who had invested their money and dreams in Bitcoin ventures, would be destroyed.
And all Bitcoin miners would suffocate.

     It could be accomplished in a month or two.
Maybe it has already started with the recent jump in the price of Bitcoin.

     And the final chapter would be written by the mainstream news media.
They would relentlessly attack the foolishness and risks of Bitcoin.
And that would bury the concept for at least one generation, maybe more.

     The only way to mitigate the risk of small market size, is to grow big quickly.
Personally, I think Bitcoin can get big enough, fast enough, to stay ahead of the risk of an attack from big money.
So I'm buying Bitcoin.
But I'm not sure about this.
It's a gamble: for me and for all who are investing in Bitcoin.
Only time will tell if Bitcoin can survive the attack which is sure to come.

     At this stage, Bitcoin's biggest risk is the small size of its market.
It is vulnerable to deliberate attack by those who wish to destroy it.
I wonder what are other risks inherent in Bitcoin, both now and in the near future.
And, please, what are the shortcomings in my risk analysis here?

Yes thats what I want to do. But the technology is in development. They need donations to finish production runs. They accept bitcoin donations. If enough support is shown it maybe enough to convince them to offer their products in bitcoins.

So what. It is using the old system to bootstrap the new. Wouldn't be the first tech. to do that ... or maybe you can start marketing solar/wind/hydro tech. to miners instead of just talking about "it'll never work", if you are genuinely concerned that is.

Having the underwater cables cut vs. overcoming the problems that caused other digital currencies to fail are two different things.

Not doing anything about these weaknesses and letting them go is what makes projects like this fail.

If bitcoin did not have to pay for it's electricity, it would have a major advantage over previous digital currencies. The sun, wind, and water flowing, would be running it. Not oil secured through war and shipped back or some other finite controllable resource like natural gas or coal.

It's a strategic separation.

Bitcoin's value rests on the whole underlying system of dollars, which it seeks to replace, to function, in order for it to pay for its electricity.

At present the system has a lot of weaknesses. There is no bitcoin economy in which a lot of goods get traded that independent of the central economy.

Electricity alone wouldn't help you anyway. Bitcoin depends on global internet access. If the intercontinental cables would be cut Bitcoin would probably be dead.
Full independence could take a decade.

Till then it's much better to focus on providing goods and services via Bitcoin that people actually want to buy.

If you have to rely on the national currency to pay for the electric. The bitcoin is only as good as the dollars you have to get to pay for the electricity to run the system. The OTC and f2f exchanges don't address the issue. You still have to convert to the currency you seek to replace to fund the currency you want to see in its place.

The problem is you're using a centralized currency to pay for centralized electric to run a decentralized system.

It's a weakness.




Look at Fator - E - Farm and their solar concentrator and steam engine.

This are a tiny cost in comparison to solar and wind and biodiesel.

though to run a data center you would need a combination of technologies.

Bio-diesel? From switch-grass?

As long as you can convert to some other form of exchange and then buy the necessary equipment it is boot-strapping itself. Not being able to buy electricity or equipment with BTC is a moot point if the network resources can be got with alternative exchange mechanisms, albeit with fees and friction, not ideal but no biggie. The exchanges are a central weakness but there is the otc, f2f exchanges and other avenues springing up every day, it will work around any obstacles thrown up, the incentives are velly strong.

Maybe we can get a state to officially accept it as legal tender.  Utah just passed a law that makes gold a legal tender in their state.  Raise enough awareness in one state and that may be doable for bitcoin.

The problem is that you can't buy electricity with Bitcoins.  You are dependent upon exchanges, which can be shut down.

Diesel doesn't help, it hurts.  Paying $0.30/kWh is ludicrous.  And you can't buy diesel with Bitcoins either.

What exactly is the problem? Electricity? The world is running out of electricity now? Lights are still on here.

I read somewhere that someone was using diesel generators for his Bitcoin rig. Sounds like a damn fine idea if you have the capital cost already sunk in the kit and all you need is diesel to run it.

It's a problem.  I've said so before.  Most people here don't see it as a problem, though.

someone has yet to answer my question of electricity.

I see the biggest drawbacks as lack of physical presence and value fluctuation. The others seem to me to be soon fixed.

Kinda a contradiction in terms.

... you lost me at this point here ...

As far as I'm concerned, they ccan go right ahead.  In fact, I'd expect that from a small, responsive and truly representative government such as Iceland.  Most governments, however, can't deal with new ideas.

Once bitcoins come on to the scene in a serious way smart governments would smart to put their super computers to work generating bitcoins.  They could suddenly start hogging all the mining revenue.  And after bit coins can't be made any more they would be collecting most of the transaction fees.  At the end of the day they may not need to tax any more.  I think smart governments won't have too much of a problem if they embrace bitcoin instead of outlaw it.  They will have bigger problems with the emerging decentralized internet powers.