Topic: Gold collapsing. Bitcoin UP. - page 935. (Read 2032272 times)

I don't remember him talking about money much. I thought the whole idea was interesting... based on many assumptions, but given the right conditions, this could be done. On the other hand: maybe it's just an academic exercise.

btw regarding all the discussion about mining. I can't wait for the cost do double sometime in 2016

There is alot in a name. (I thought it was a parody)  This chap overlooks a fiew fundamental problems with money like how to distribute it and what gives it value.

Nice summary, thanks!  I'd just like to point out that the real difference here is the lack of a captive market.  If the banks overinvest in infrastructure, they can raise rates on their target audience.  If miners overinvest, all they can do is drop out and take their losses.

Also interesting in this context: Proof of Idle

It's been going on ever since GPU mining started.

Nobody really likes watching their profit margins shrink because of competition, no matter how inevitable it is, or how beneficial it is for an economy as a whole.

There's always some group of people in any economic situation who believe they deserve their profit margins forever, and will appeal to any external force they can contact in order to keep the playing field tilted towards them.

Taxi drivers try to get the state to ban Uber and Lyft, and bitcoin miners invent scrypt mining and PoS.

Re the two articles from BOE: Basically, progress.

They now fully understands the technology and the invention. (First article).

The second article basically says that it is conceivable bitcoin could take over, but it is extermely unlikely.

They don't know, I don't know, so their guess is as good as mine.

They base this likelihood on some perceived defects in the system, and some money theory I disagree with.

a) The three functions of money. They note that houses can be money in the storage of money function, but not in the exchange function. This is wrong, because if you can not exchange, it can also not be money. The fact that you normally exchange houses for fiat is not relevant; money can be changed for money, it is also an exchange. Houses are not good money of course, the fact that they are money is only due to the failure of fiat money as a long time store of value.

They note that bitcoin is not a unit of account. This is only correct since bitcoin is not used much at all, but again, it can not be money unless it can also be a unit of account, the crucial traits here are that they are divisible and fungible, bitcoins are the best money in that regard.

b) They focus on volatility, not understanding that all money are volatile. Bitcoin is more volatile than some fiats at the moment, but have the potential to be just as stable as the pound. Some fiat money going to zero is also volatility.

c) They believe that transaction fees will have to go up, to be more expensive than current transaction costs in the bank system. This should be the result of miners overinvesting, this point of view is an instance of the labour theory of value, which is bogous.

The price of transactions is market based, and after block rewards they can be higher, but, with high costs, transactions will be supplied by businesses, with only clearing transactions performed on the block chain. There are lots of other reasons for this to be true.

They also conflate block reward and transaction fees. They add up the total cost of the system, but as a payer you do not consider the block reward, only the fee. So the transaction cost is the fee.

d) They believe that an eventual contraction of mining power will lead to a monopoly. Heck, their arguments should logically lead them to believe that monopoly in mining will occur in all cases. Anyway, they do not understand that the only relevant monopolies occur with the help of government restrictions with subsequently extended privileges. An eventual monopoly in mining would be based on merit, be short lived, and is not more likely than in any submarket. Only if you define the market narrowly, you can find monopolies, and if you define the markets to be indivisibly small, they are all monopolies.

e) Maybe the most important part of the article is the money management aspects. Seen from a statist view, bitcoin is a threat to stability. They do not consider the master slave tendency of the current system, because they are close to the masters.

It's not inevitable for all the reasons elucidated throughout this thread numerous times.  

51% attack is inevitable, that is if bitcoin gets anywhere, which it probably won't.

Thanks for the reference this is big news for those not aware of the dynamic something's got to give, I'm not sure what it is either way I felt getting back into mining was a good hedge.

Re PoW it's not time to change it, if or when Bitcoin hits the next order of magnitude in value, every one is going to know about it and energy choice people and collectives (city's) make are going to bring in more efficiencies as we'll be re-assessing the value of electricity. It's going to have global impact and a profound reevaluation on consumers priorities.   

Bitcoin will go virtual and the disruption will be monumental.

It always surprises me how common this line of reasoning is (I'm referring to the OP in the linked thread), even among those who've been involved with bitcoin for a while.  In addition to the likely-unresolveable technical problem regarding nothing-at-stake with PoS [cue kodtycoon], people miss the fact that the "mining cost" is due to the inflation schedule rather than strictly due to the PoW.  If there's 25 BTC up for grabs each 10 minutes, and the process to win those 25 BTC is competitive, then somehow the average cost to acquire those new bitcoins must approach the price to buy 25 bitcoins from an exchange.  The reason is that market participants will be happy to consume up to 24.9xx BTC worth of real resources to compete for them.  

The only way to avoid this is to eliminate the competition for the block reward, for instance, by awarding new coins in proportion to how many coins we already hold.  But that's no different than moving the decimal point and then pretending we all have 10X as many coins!  It's completely missing the point of bitcoin's inflation schedule (which is to distribute coins to a wider number of people).  


Agreed.  

In the following, the author argues that it's counter-intuitively the other way around for bitcoin: http://cryptonomics.org/2014/09/16/some-crypto-quibbles-with-threadneedle-street/



Some interesting points made in that piece (a bunch of which I disagree with (on first pass, at least), but interesting nonetheless).

The following passage seems especially relevant to the PoS discussion recently:

Re: It's about time to turn off PoW mining
and
Re: Projected Minimum Cost per BTC over the next year

It is speeding up if you zoom in the next difficulty is 18% on top of about a 10% increase. The short term is going to be around 15% every 2 weeks as planned inventory comes online and we may plateau if price falls (like 2011)

I'm sure China and Russia stand ready to help the US in any way that it can 

Indeed, I think those calcs are pretty interesting....and I hadn't realized just how much power the Three-Gorges Dam generates....wow.

The ridiculous 51% attack scenario is probably secret nuclear-powered datacenters. With new nuclear power-plants in the 1.5GW range, the hashrate only needs to grow another 2-4 orders of magnitude to be relatively safe from that. Of course, I agree with molecular that a brute-51%-force attack is really unlikely. Bitcoin is far more likely to be attacked in the censorship-via-regulation vein; but then, you have to get pretty tight regulatory-agreement amongst essentially all developed jurisdictions in the world in order for it to be ultimately effective.

Co opting pool owners is going to be very hard to do. Many of these guys are libertarians at heart and more likely to fight back by going to the press or hiring lawyers. Lavabit is a great example.

Plus, there are secret ways of notifying others that you're under duress.  

Those are interesting numbers.

I've made this argument in the past; that an attack by an NSA would more likely have to come from one location for maximum security and secrecy purposes.  These figures make me more comfortable.

With regards to distributing across many datacenters: hence my "several orders of magnitude more" requirement. ... But co-opting pools is another issue. That could get interesting; eg, how much censorship has to happen before individual miners jump to P2Pool? Then the game is to co-opt a sufficient number of huge individual miners.

Here's an interesting calculation:  

With the current block reward (25 BTC), each hour approximately 150 BTC (6 x 25) are produced.  At an exchange rate of $400/BTC, that's $60,000 of coins.  

In a competitive market, the price of a commodity tends to its cost of production.  As a "rough estimate," let's assume that this production cost is entirely electricity.  At $0.05 / kW-hr, one could purchase 1.2 GW of electricity to produce those 150 BTC:  

     ($60,000/hr)  /  ($0.05/kW-hr) = 1,200,000 kW = 1.2 GW.

Assuming an attacker was adding new hashing power to conduct the 51% attack, the attack miners would need to consume approximately the same amount of electrical power. That's the same order of magnitude as the installed capacity at the Hoover dam (2.08 GW) on the Colorado River:




The dam with the largest installed capacity is the Three-Gorges Dam on the Yangtze River in China (22.5 GW) shown below.  If the bitcoin price were $7500, it would require this dam running at fully capacity powering bitcoin miners to 51% attack the network.  




It's interesting to imagine all that water in the dam's reservoir pushing the wheels inside the dam's turbines, which then push electrons through the gates of a bunch of SHA256 ASICs.  That's the scale of power required to conduct an attack.

After Uber, San Francisco Has Seen a 65-Percent Decline in Cab Use

http://www.theatlantic.com/technology/archive/2014/09/what-uber-is-doing-to-cabs-in-san-francisco-in-1-crazy-chart/380378/