Topic: the oddly familiar world of bitcoin economics (Read 1498 times)

Although individual mining nor pool mining will likely never competely cease, most of the mining in the future is likely to be the above example or similar examples.  A brick-n-mortar bank in a city that issues banknotes backed by bitcoins would not really need much of a safe, but would have a vested interest in mining both to help support the security of the system that they depend upon, but also to ensure timely processing of clients' transactions.  Such banks would likely form receprocity agreements to process the free transactions of other banks' customers, as well as advertise their median hashing power to attract customers.  Also, mining need not be looked on as a primary profit goal.  ICeland could become teh bitcoin mining capital of the world, simply becasue they have high levels of geothermal eletric capacity and need the heat.  Banks in the hot places of the world could simply contract with building management companies in ICeland and Siberia to mine in their favor, and the building uses the waste heat.

OMG it's not like anarchy there's like still banks, and like, big guys, it didn't work, you all suck!

Bitcoin functions perfectly as a solid, international, reliable backing for value on the internet. The rest will have to be built on top of that, and this is possible.

Anybody who expects BTC to be held by the typical customer has either no idea about computer security or about the typical customer.

see OP link, comment area.

link please?

Sticky ? I like the comments below:

People having large amounts of coins has never been a problem. It will never be a problem. The only power that comes from that is exchanging it for equitable goods and services.

It is the means and force to distribute and allocate wealth through monetary control and seizure that cause destruction. Money itself is not that powerful of a force.

Of course you don't. You are at the center of a perfect universe. Enjoy it while you can 

I have never used any exchange to either obtain bitcoins, nor cash out into any other currency.  Considering that I'm surely far from unique, by what logic do you state the above?

I do not see the unintended consequences that you seem to see.

The properties of mining pools or how they are supposed to work is all very interesting, of course Bitcoin makes sense within it's own framework. There are dozens of folks around here who can recite the rules of Bitcoin, there don't seem to be many right now who are thinking outside the Bitcoin Box. For example, from my point of view, mining is a crude energy-wasting hack and a sucker game for miners who should and will achieve a near zero rate of return over time. The arms race to mine faster and faster may not affect bitcoin within itself, but does have consequences one would hope weren't by design.

In any case I made a point of leading with the phrase 'The author asserts', as what "Nakamoto" may have anticipated in the design versus actual outcomes simply can't be addressed by others, including those who cite what are *perhaps* postings by him/her/it.

Your response completely overlooks the consequences of the uneven concentration of economic power within the tiny world of Bitcoin in the form of exchanges. In this area the author of the article makes a point which is valid, not to say obvious, irrespective of what the alleged thoughts of Nakamoto may be.

Given the orphan status of Bitcoin's design and implementation, it makes particular sense to look at it as it is, not as it is *supposed* to be. So far it certainly doesn't have a flexible history of adapting to unintended consequences, and explanations to the effect that consequences are within the design are entirely too convenient to spin up out of whole cloth.

This is demostratablely not so.  I've seen posts on this forum by him/her that imply that he expected some consolidation of hashing power into professional mining groups, and that when the time was right, a parrallel transaction clearing network would arise that would leave the main bitcoin network as a kind of user accessible 'backbone'.  It may or may not have occurred as s/he imagined it, but that is part of the point.  The rise of professional financial bitcoin services is not what s/he was trying to prevent; but instead prevent a form of central bank from arising that could dominate the network.  Although it requires that we pay attention, any mining pool that approaches the 51% mark gets knocked around by the membership.  This will no longer be necessary after a certain size, much like it's no longer necessary for us to be too concerned about a single majority attacker today.  The pools, at least, can't really hide their network power.

The author asserts "Nakamoto never intended to have large bitcoin pools concentrated in few hands or to have users hand over a large virtual wallet to online repositories which functioned exactly like the banks that were meant to be made obsolete by the P2P nature of the currency. "

I guess Bitcoin didn't really fix the problem of concentration of control, now did it? This is made even more painful by the small, small size of the bc universe. So small in fact, that it resembles nothing so much as the world of low market capitalization penny stocks, where the total value of shares outstanding in a given issue is so small that it can be manipulated by a single player or a few in collusion.

A private bitcoin wallet in your possession and control is a basic and nifty feature, I have some lunch money in one myself. It would appear that implementing the "possession and control" part is neither clear nor appealing for many individuals. Not my problem, but I've seen a couple of "I think I've been hacked by space aliens" threads here that illustrate why folks may be found who would gravitate to a deposit service, so bitcoin as currently implemented is not addressing their need.

I suspect you would find that if the bulk of bitcoins were in private wallets used for primarily for in-kind exchange there would be less volatility as well, but at some point an exchange needs to take place, for example merchants receiving payment need to pay their bills in the local coin of the realm. Inevitably, these concentrations of value that link bitcoin with other currencies become vehicles of hedging and speculation - can you say Bitcoinica?

This and other issues, for example the mining implementation and perhaps the mining concept itself, make me hope that Bitcoin is not an end state. It's a very clever exercise technically, but I can only hope what we have here is the testing of a prototype that should result in improvement.