Topic: The fundamental flaw in bitcoin - page 2. (Read 2326 times)

Bitcoin has a lot of major problems, but a lot of Bitcointalk users own bitcoins and want to earn a lot of money with its help. The only way to do so is to sell the coins to newbies at the highest price. So they avoid discussions that could scare newbies away or make the price to go down.

Of coz, they are still nice ppl. They tell u "Do not invest anything in Bitcoin you can not afford to lose" for conscience sake and this lets them to sleep well.

I'll grant you point 9, but nothing else.  (By-the-way: these points weren't though out in depth they were on-the-spot thinking. So, the fact that I got one wrong is not surprising)

That is exactly what I'm talking about..  No, we aren't quite there yet (I never said we were, I said in the future), but we are getting very close.  The majority of new computers have quite advanced DRM systems-- I believe the new windows actually mandates it.  Very soon the technology will be commonplace and used by default (the media content companies are pushing really hard for it since it will drastically reduce copyright infringement).  Once it is common, then I'm willing to bet that someone will use it to exchange bitcoins.

On that last point search for "Woolong device" on these forums. It was a miserable failure. See also http://www.woolong.com/

"1) instead of being cheap, transactions are now totally free" - Would the smartcards be free? I didn't have to purchase anything to start using bitcoins (unless you count the BTC itself).

"2) instead of taking 10min-1hr to verify, transactions are now instant" - It's only instant because you're not verifying anything!

"3) hackers personally enjoy coding stuff like this" - I'm sure Satoshi, Gavin, and other developers enjoy what they're doing.

"4) a bitcoin business can use it as a selling point" - Businesses could use the opposite as a selling point as well. So far, no one has joined this thread in support of your idea which tells me that there would be customers not interested in it.

"5) transaction can now be totally anonymous" - They can be anonymous now.

"6) it prevents block chain data growing wildly since less transaction processed on net (someone might implement with this good intention without thinking about its long term consequence)" - Not sure I understand this. How would this help anyone play SatoshiDice?

"7) storing a wallet such that is interlinks with a computer's TPM is more secure then storing it on normally on the harddrive" - Many security conscious bitcoiners already avoid storing their BTC on their harddrive.

"8.) someone might actually do this off-network exchange using a smart cards (there have been various proposals already about bitcoin on smart cards) making it easier to carry the wallets around on your person (a lot easier that carrying around your computer)" - Easier than carrying around my phone?

"9) smartcard storages make it easier to store the wallet in a physically secure place (such as a bank vault)" - Easier than a paper wallet which I can do now?

"10) electronic off-net exhange means people without internet but local connectivity (eg: blue-tooth/NFC) can transaction business" - I admit this would be an advantage in those ever-shrinking locations without internet access. Personally, I avoid those like the plague.

"11) phsyical off-network exchange, like casasius coin, allows people without even a  computer" - My phone is often my computer. It seems to me the percentage of the population without near continuous access to sufficient computing power and the internet is rapidly shrinking.

"12) it could be overall easier for people new to bitcoin to learn to use-- since technology like smartcards  and there useage are quite common (such as bus-passes) and the fact that smart card bitcoin would be very similar is use." - Many bitcoiners are working very hard on the issue of making BTC more attractive to the average person. While your idea of a bitcoin smartcard might come to fruition, I don't see more than a few people willing to sacrifice the security and decentralization of the blockchain for something that may be slightly more convenient under certain circumstances.

The problem with what you're suggesting is that once anyone gets a look at the private key, that key becomes worthless to other people. The only way around it is to have a centralized system (a bank), or a peer to peer system for exchanging private keys securely (something like Bitcoin²?). Both of these would be subject to transaction fees of some sort, to pay for the network.

Aren't you? If you're going to do off-chain transactions, you can't actually give away coins by giving people the private key to a wallet. You'll be trading tokens that say "this token is worth 1 BTC" and "this token is worth 0.5 BTC". Even if you can do that securely, at some point you have to trust somebody to hold that coin and cash it in for you. So it's much like one of those countries who have a currency with a fixed parity with a base currency. Or you could call it scrip, gift cards or "barter Bitcoins". In any case you'd have a central (or de-centralized) issuer of these tokens, and you trust them not to empty the tokens of bitcoins (if the token refers to a particular wallet) or you trust them to have reserves of Bitcoin in cold storage to pay you if you want to "cash in" your token.

Edit: Alternatively, you might have some form of DRM/TPM system that makes it possible to trade active bitcoin wallets in a tamper-proof way, so that you know that nobody looked at the private key yet. In that case, sure you could do offline Bitcoin transfer that way, but that's a more advanced system than what we have now. As I said, it might be more fruitful to use it to transfer actual USD if you have such a good system.

I don't quite understand why you are talking about new currency backed by Bitcoin-- I've never mentioned this.

Can you please stop quoting your whole posts?

Also many of the ideas and points you've made have already been discussed many times before, and you're correct about many of them in terms of ease of use etc. but wrong about others.

1: No, it won't be free. The new service will need to get paid somehow. But if doing transactions on the main blockchain is too expensive, then the service will indeed present itself as probably many vendors of intermediate transactions - Bitcoin banks if you will - who will compete on fees, reliability and speed.

2: True. But just like for a bank processing credit card payments, though the payments appear instantly as a reservation in your account, the actual moving of money between the banks will happen on a slower time scale, like over night. Again, just like in banking.

3: Yes, but somebody actually has to run it, maintain it, deal with customer service, legal issues, security vulnerabilites, etc.

4: What you're talking about here is more like gift cards. Sure, my Bitcoin-taking tatami mat store could offer transfers between users, but if my gift cards are being used for de facto banking, I want to charge some fees for that.

5: Total anonymity? I don't think so. Maybe more anonymous than the blockchain until you're raided, broken into, or compelled to give away transaction logs.

6: It would indeed offload some load on the main blockchain. Again, this has been discussed before.

7: Maybe, but that only deals with keeping the private key safe. That is only part of the system.

8: Offline smart card transactions with Bitcoin are just as difficult as to do them with USD or other currency. Not a trivial thing, and if you solve it you're better served selling your solution to Visa or something than to bitcoiners.

9: A paper wallet is just as good, IMO. Or regular memory card. If you trust the safe deposit box anyway..

10: Sure, but see point 8.

11: Sure.

12: Definitely. Bringing Bitcoins from the mining nerd to the cash register is something that many entrepeneurs are working hard at right now, and not being terribly successful.

Oh yeah, I just spent a few more minutes thinking and here are some more..

9) smartcard storages make it easier to store the wallet in a physically secure place (such as a bank vault)
10) electronic off-net exhange means people without internet but local connectivity (eg: blue-tooth/NFC) can transact
11) phsyical off-network exchange, like casasius coin, allows people without even a  computer
12) it could be overall easier for people new to bitcoin to learn to use-- since technology like smartcards  and there useage are quite common (such as bus-passes) and the fact that smart card bitcoin would be very similar is use.

Why would anyone make a new cryptocurrency backed by Bitcoin?

If they get highly desireable, and somehow the developers fail to gain acceptance for a fork with more divisibility, or if transaction costs become too high, that might happen some time in the future. This has already been considered, and it's more likely that a fork will be made, IMO.

Ok, I just spend a minute thinking about it and here are some more

5) transaction can now be totally anonymous
6) it prevents block chain data growing wildly since less transaction processed on net (someone might implement with this good intention without thinking about its long term consequence)
7) storing a wallet such that is interlinks with a computer's TPM is more secure then storing it on normally on the harddrive
8.) someone might actually do this off-network exchange using a smart cards (there have been various proposals already about bitcoin on smart cards) making it easier to carry the wallets around on your person (a lot easier that carrying around your computer)

....


The reason why someone whould do it is because:
1) instead of being cheap, transactions are now totally free
2) instead of taking 10min-1hr to verify, transactions are now instant
3) hackers personally enjoy coding stuff like this
4) a bitcoin business can use it as a selling point
and if I spent a bit more time thinking about it could probably find more reasons...


Also, where has it been long considered.   I've been reading this forum (lightly, and not all boards/topic streams) for over a year and have never seen it mentioned.

Negatively, sure.  But catastrophicly so?  Tell me this, why would anyone bother to develop and off-network method of transacting in Bitcoin unless the transaction fees for the main blockchain were high enough to justify that?  How does the fee get high enough to justify such an off-network transaction method, unless there are fee paying transactions?  The fee for inclusion into a block is market based, when the space is tight the fee to get included will increase.  When the blocks are regularlly full, an off network transaction method will be economicly justifiable.  Not until.

This also, has been long considered.

If off-network exchange become the most common way to exchange coins, it doesn't take till 2130 (when the block subsidy reduces to zero) for it to negatively affect the hash rate.  Think about it and you'll see why. (think about especially why miners mine-- ie: to make a profit).

Not forever.  No rational vendor is going to continue to accumulate bitcoin private keys without flushing those values on occasion, because no matter what technology that is used, there is no way (outside of the blockchain) to be certain that those private keys have not been copied by some talented hacker somewhere along the way.  The blockchain is the very novel use of technology that makes digital currencies work without a centralized authority.  Any use of off network transactions (and I have no doubt that such transactions will become commonplace, but never universal) would require some degree of trust, most likely in the institution that created the off-blockchain processing network.  We call such institutions "banks", and sometimes they fail.

It also presumes that, even with world changing success for Bitcoin, another greater cryptocurrency doesn't come along and eat Bitcoin's lunch before the block subsidy is gone.  Since that won't be until 2130 or so, I think that it's not a pressing problem.  I think that I'll continue to use it in the meantime.

Yes, you need to trust someone when you exchange *physically*, but when you exchange electronically you only need to trust a computer (and of course whoever wrote the program-- but with open source with is not such an issue).
Such electronic transfers in the real world already exist, but currently require special hardware-- eg: smart transport cards for public transport where you load money onto the card.  This technology is becoming available on desktop computers-- it is being installed on the desktop to prevent piracy: eg, remote attestation, secure booting, etc..

As regards the fact that it still needs an on-network transaction to load the wallet-- it only needs to be done *once*.  Once it is off-network, it can stay off-network forever and still be exchanged.

beeblebrox, your idea rests on two fatal flaws itself:
- One would have to trust the new system, either as a central authority or as a whole new meta-crypto currency that contains Bitcoins.
- That Bitcoin ever would progress so far that somebody would find value in such a service (i.e. that it would survive in any meaningful way after bottom falls out of the mining rush).

So you want to establish denominations again? In a digital currency where we finally have a chance to get rid of this absurd kludge? Why? Why add all that completely unneccessary complexity just to get out of a miniscule tax dedicated to keeping the system running?