Topic: Dispelling the Bitcoin myths (Read 1131 times)

I subscribe to 2 message boards where I pay a membership fee so I pay over 320$ per year now. IF i were able to make mico-payments to sites similar to these I could benefit through signing up for trial offers I would prefer to use bitcoins to avoid plastering my financials all over websites.

BitDreams, what is total micropayments you've sent relative to total coins you've owned (even if sold later for FX)?

I don't need $, just relative ratio.

If I am worried about a transaction being anonymous I have an instawallet with a bit on it, I send when I need to top it off then send to whoever I am buying from.

By using a shared wallet service you jump off the blockchain and onto a private ledger and then back on at another point. If you are really paranoid you can jump between many shared wallets.

for me most important attribute is that I can send micro amounts of money anywhere. If I like an author on of a blog I can give him 1 penny for free. Try giving anyone a penny for free. It's hard to do sometimes, even if they are standing there looking at you they probably won't take the penny. Imagine people piling 10,000 pennies on your doorstep, you'd take them then! regardless if it is bitcoin or some other cryptocurrency the ability to tip the smallest amount for free can't be duplicated with any of the traditional financial tools. In one form or another it's here to stay.

So then what is the important attribute of Bitcoin for you?

I am seeing so many people say "I heard about Bitcoin 3 years ago and now I need to be in this". Why? Simple. The value jumped from $10 to $70 in 3 months.

So I think Bitcoin is all about greed (getting something for free without creating any prosperity for others). See this:

https://bitcointalksearch.org/topic/m.1668244

Humanity never changes.

So what is better about Bitcoin for you?

(I am seriously evaluating whether there is any reason to invest my time in developing software for this market, so i need to know what drives the market. I may prefer to focus on my other projects in my markets that demand more long-term utility and not just ponzi greed)

I am personally not a goldbug. I also do not believe anonymity is important for Bitcoin; however, this is my personal opinion. Different people will use Bitcoin for different reasons.

Can you provide any evidence or is this just intuitive conjecture?

Because every single interaction I have with Bitcoiners so far is they are goldbugs and believe in a gold backed money whose money supply can't be controlled by any central authority. And the foundation white paper for Bitcoin specifically says its debasement curve is modeled on gold (which is absurdly false and surprised no one has noticed, because it occurs over a decade or two and gold's was over millennia).

You claim they don't want to replace the Fed and are content to be symbiotic.

As what I see, the Bitcoiners SUBCONSCIOUSLY want Bitcoin to become the dominant currency, because it can't become a stable currency until it is:

http://bitcoin.stackexchange.com/questions/8639/how-can-bitcoins-be-used-for-daily-currency-if-their-value-changes-erratically/8647#8647

Also I don't think many people have yet realized that the recent FinCEN action essentially killed Bitcoin, because now it is impossible to remain anonymous unless you only hold and spend and never exchange for other currency, yet this requires a stable value. A massive chicken-and-egg dilemma now for Bitcoin that FinCEN created.

Any way, I would like to hear your thoughts?

Bump, because of this:

http://bitcoin.stackexchange.com/questions/799/can-i-download-the-whole-block-chain-from-somewhere/8661#8661

People hate what they cannot conquer,

Fear most what they do not understand.

Sensationalist journalism thats why

Why bitcoin have this kind of reputation then?

Correct.... These days there is a ton of news regarding legit use... mega, namecheap, etc... 

Mainstream adoption comes closer...

Well, to be specific, the idea that Bitcoin is used to buy/sell drugs is not false; just the implication that the main (or perhaps only) use for Bitcoin is in illicit trade.

That implication (or express statement, if one was given) is, in fact , patently false.

As far as I know, $USD is still far and away the #1 payment system for drugs.

That being said, when "the people who control the money" stop laughing at us and start fighting us, it will start with them attempting to mislead the populous into thinking everyone who transacts in Bitcoin must somehow be a criminal, or is doing so with criminal intent.  (If preferring to pay less than 3-5%++ in transaction fees for electronic payments makes me a criminal, then I guess by that definition I might be.  In most other respects*, I am not.)

* Minor driving offenses notwithstanding.

And another news article comes out stating that Bitcoin is used for drugs. This is patently false.

But does assuming a bitcoin address belongs to somebody just because btc is sent to that address frequently count as a proof? Say a drug dealer sells a good amount of drugs for btc and then transfers his btc on his mtgox account. How would anybody be able to take any action against this?

Theymos can state this better than I: "Even if you use Bitcoin through Tor, the way transactions are handled by the network makes anonymity difficult to achieve. Do not expect your transactions to be anonymous unless you really know what you're doing."

The network makes every transaction public, including the sending/receiving addresses and a very good sense of how much was transacted. This makes Bitcoin require technical expertise to be anonymous, something many drug dealers don't have. Bitcoin therefore can't become a haven for drug dealers, as it requires considerable investment in anonymizing techniques. This is in contrast to cash, which is anonymous even if you're on cloud nine.

While it's difficult to prove somebody owns a certain wallet outright, it is possible to run an analysis on where their coins come from/flow to.  For example, if you tie your forum ID to it through a donation link or posting it asking for a payment, we now know you own a certain address.

If that address sends coins to another known address, we know that the other output from the transaction is a change address that is also controlled by you with high certainty.  A more complex analysis could be done to identify common payees/payors to increase the certainty that you are in control of other addresses, even though you have not linked yourself to them publicly.

How exactly is it difficult to keep transactions anonymous? I thought it was the other way around.

Below are a few falsities about Bitcoin and its communities. Suggestions are welcome.

1. A majority of Bitcoin transaction volume is composed of mining pool payouts and gambling transactions.
Status: Myth

Blockchain.info provides an estimated transaction volume. In the past 30 days, 8772900 BTC were transacted. Let's take a look at gambling and mining pool payouts, and see how they stack up:

• Mining pool payouts. An upper bound of this is the amount mined in total, as no more can be payed out. An average 30-day period would see 109500 BTC mined (including transaction fees), and so the amount of transaction volume for mining pool payouts is at most 1.3%. So much for that idea.
• Gambling. While there's no question that gambling is a large part of the Bitcoin economy, the idea that it's the only part is grossly mistaken. Most gambling is centralized by one company, SatoshiDICE. SatoshiDICE processes approximately 330000 BTC every month. If we assume it is only half of gambling volume, that's still only 700000 XBTC gambled every 30 days. How much of transaction volume is gambling? Less than 8%.

2. Bitcoin is used only by criminals.
Status: Myth

This is an easy one to debunk. Silk Road processes $22 million annually, according to a recent study. Bitcoin's blockchain, which doesn't even include Silk Road activity and other off-blockchain transactions, is over $1000 million annually. This is a fraction of total transactional volume, which is likely billions of dollars annually.

By comparison, US GDP is around $15000 billion, of which at least $30 billion is drug trade.

There is little evidence that guns, child pornography, or any other illegal goods are sold with significant volume.

Bitcoin is not suitable for widespread criminal use because of how difficult it is to keep it anonymous, and in fact the drug market is stagnating. Far fewer criminals use Bitcoin than many would believe.

3. Bitcoin supporters hate fiat currency and the Federal Reserve.
Status: Myth

Whilst it is true that Bitcoiners tend to reject the Keynesian school of economics, the world's dominant school has no reason to fear Bitcoin. Bitcoin does not eliminate the Federal Reserve; rather, it contemplates it. Many Bitcoin supporters see Bitcoin not a challenge to central banks, but rather a novel way of sending currency the central banks issue. Companies like Bitpay advocate for holding zero Bitcoin, and instead using it as a system to instantly send money from one hemisphere to another.

The beauty of Bitcoin is that it can be used how one wishes. Many Bitcoin supporters identify with pro-Fed political factions, such as the Republicans. In fact, Bitcoiners represent a wide political spectrum; there are socialists, liberals, greens, libertarians, conservatives, and just about any other party represented. See this study to better reflect upon the diverse political beliefs of Bitcoiners.

In conclusion, Bitcoin is apolitical. It is fantastical to assume that all Bitcoin users identify with Ron Paul or other anti-fiat factions.

4. ASIC miners will cause blockchain size to increase.
Status: Myth

ASIC miners do not affect the rate of blocks beyond a one-time catch-up effect. Bitcoin is designed so that the rate of blocks always converges to 10 minutes per block. Although it is true that ASIC miners will increase this block rate, this increase will in short order be caught up to by the blockrate adjustment algorithm. The blocks mined during this adjustment period will be the only faster-than-normal blocks ASIC miners create.

On average, Bitcoin's blockrate will actually be faster than 10 minutes per block, thanks to Moore's law. The law states that hardware will increase in power steadily (exponential growth). So long as this law holds, the Bitcoin network's difficulty adjustment will always lag behind the betterment of technology. Thus the temporary blockrate increase caused by ASIC miners is not an unusual instance, and stronger increases have happened before thanks to GPU technology and software improvements.

5. One must mine to own significant quantities of bitcoins.
Status: Myth

Mining is not any more productive than any other Bitcoin-related industry. Indeed, most small-scale miners will find themselves squeezed by high operating costs, unexpected equipment depreciation, and an uncertain future. In contrast, other industries can often fare well. Starting an exchange, stock exchange, payment processor, or middle-man can be a very profitable endeavour.

Miners make up around 1% of the network's gross profits, and often have large operating expenses. Services often earn more and cost less, but usually carry an unfortunate risk of hacking. If one feels disillusioned by both, one can simply work a regular job and convert a portion of the wages to Bitcoin. Mining certainly isn't needed to be Bitcoin-rich.