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  • Bitcoin

    I'm kind of surprised I haven't seen anyone discussing Bitcoin here yet. Is there anyone who doesn't know about Bitcoin is at this point? Watch the video here: http://www.weusecoins.com/

    tl;dr: Bitcoins are a new kind of peer-to-peer crypto currency.

    Bitcoins are presently worth $18.50, and have been going up in value quickly. They were worth less than $1 in the beginning of April.

    Transactions are secure, anonymized, but fully traceable. The history of all transactions, known as the "block chain", is public by necessity and propagates throughout the peer network. Several news sites have been mistakenly describing Bitcoin transactions as "untraceable" when in fact the system is very much the opposite: all transfers are made in a public history that all nodes share.

    Reaction to Bitcoin has spanned from "this is a ponzi scheme, or at best, the equivalent of fad value ala pogs or beanie babies" to "ZOMG BITCOINS ARE GOING TO CAUSE THE ECONOMIC SINGULARITY"

    Bitcoin seems like a ripe system to game by mining, and so far many people have been doing just that by investing in Bitcoin mining hardware, mining Bitcoins, and selling them at a profit. This guy invested $8000 in hardware and netted $35,000 in Bitcoins. He used $7.20/day in power to get 150-200 per day.

    Among the various things you can buy with Bitcoins, fans of They Might Be Giants can purchase their own their own blue canary night light ala the song Birdhouse In Your Soul[url]. You can also buy Alpaca Socks with them.

    Bitcoin drew a lot of attention recently with a news article about Silk Road, a web site Wired Magazine claims lets you "buy any drug imaginable". Silk Road can only be accessed through the Tor anonymizing network, and provides an eBay-style sight where buyers and sellers can conduct transactions using Bitcoins.

    What do you think about Bitcoins? Are they a scam, a fad, or something that will stick around?
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  • #2
    Re: Bitcoin

    Originally posted by bascule View Post
    .

    Bitcoin drew a lot of attention recently with a news article about Silk Road, a web site Wired Magazine claims lets you "buy any drug imaginable". Silk Road can only be accessed through the Tor anonymizing network, and provides an eBay-style sight where buyers and sellers can conduct transactions using Bitcoins.

    What do you think about Bitcoins? Are they a scam, a fad, or something that will stick around?
    I think Bitcoin has a real future and is a step toward the science fiction-y "cred chip" but sadly the ill-thought out Gawker article regarding Silk Road may be Bitcoin's downfall. It has been brought to the attention of the screaming media and is now on the road toward definite legal battles I am afraid. If it can be classified as "money laundering" it will be shut down as a monetary system.
    "They-Who-Were-Google are no longer alone. Now we are all Google."

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    • #3
      Re: Bitcoin

      Interesting. I hadn't heard of Bitcoins before. The one big thing I'd question about them, is the lack of something of value to back them. My understanding is that, in theory, economies can run without a gold or silver standard (or something) to back them, but that such economies have never worked well in real life.

      However, whether or not the Bitcoins will work in the long run without some standard to back them is really just an intellectual exercise. Until I can walk into the corner convenience store any buy a gallon of milk with them, the concept of Bitcoins will only be mildly interesting.
      Thorn
      "If you can't be a good example, then you'll just have to be a horrible warning." - Catherine Aird

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      • #4
        Re: Bitcoin

        Honestly, I wasn't too familiar with them until LulzSec brought them to my attention. Interesting concept. I have no idea if it'll make any headway into anything more than a way to "keep score".

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        • #5
          Re: Bitcoin

          If we assume supply is guaranteed, it is only a question of demand, which I'll define here as people being willing and able to provide a compensation desired by those that have mined or posses bitcoins.

          The claims to security or anonymity will be tested, however.

          There are two great concerns in the realm of BitCoin over the next 2 years, if they remain in demand:

          * Audit trails for law enforcement: who bought what from whom, and when: criminal cases, law enforcement, showing incentive, punishing people that contribute to those that governments don't want people to contribute resources.
          * Audit trails for taxes: if governments are like pimps, then tax-payers are like whores, and the government has, "gots tah be paid!" (must be paid!) Without an audit trail, especially for large transactions, the government may "smack their bitch up." (penalize taxpayers.)

          Over the next two years, if BitCoins become popular and go mainstream, I expect both of these areas of interest to governments around the world will lead governments to threaten the fabrication of new laws unless the government gets visibility to these private transactions through changes in the protocol, or backdoors. (Think BlackBerry and the US, or India, or China, or nearly any government that wants to be able to snoop on communications between different parties.)

          An element of security (audit) is often desired by governments that wish to follow money trails. If a law exists to penalize people that donate money to those that governments claim as criminals/terrorists, or as payment for people that governments claim commit crimes, governments want visibility to who exactly is involved in these transactions, or at the very least, a method to get access to information with search warrant, on who was sending money to whom. If BitCoin is effective at denying governments from observing these transactions, governments will not be happy.

          It is difficult to build cases and show motive, when no method exists to show financial incentive. Governments (federal, state and local) want their "cut" of transactions, too. VAT/Sales-Taxes, gasoline tax, tobacco tax, alcohol taxes and more apply to goods based on the sales price and/or quantity. When the "price" is ambiguous when a product is not sold in, "US dollars," can percentage-based taxes not based on quantity be eliminated from transactions, and if so, what if the government finds out it did not get its piece of the transaction? Governments make laws to address this with cash-money as currency by limiting how much you may carry on you as a person when entering or leaving the country without declaring it, documenting a potential transaction. The same is true on deposits to banks of cash money as currency, and extra forms are required when you exceed this threshold, so governments can audit transactions.

          BitCoins will be attacked by all 5 major players, and it will be interesting to see how this unfolds:
          1) Organized crime: if they find a way to exploit it, their information will almost certainly be kept private.
          2) Government Spies: if they find a way to exploit it, their information will almost certainly be kept private.
          3) Law Enforcement: as a matter of court record to establish how evidence was acquired, once found, would be published.
          4) Law Makers: threaten to make, or make use, possession, transmission, reception, conversion, etc. of them illegal, or impose requirements for backdoors (which would be public as a matter of it being OpenSource.)
          5) Hackers (all types): with some publishing their findings and others selling or abusing their findings.

          Prediction over 2 years?

          If popular enough for mainstream use, governments will make new laws to demand visibility or make their use illegal. One of these will defeat a big reason to use bitcoins, and the other will push them to be used in realms of organized crime.
          Last edited by TheCotMan; June 7, 2011, 16:17.

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          • #6
            Re: Bitcoin

            Originally posted by TheCotMan View Post
            If popular enough for mainstream use, governments will make new laws to demand visibility or make their use illegal. One of these will defeat a big reason to use bitcoins, and the other will push them to be used in realms of organized crime.
            Making US dollar exchanges illegal within the US alone is enough to give law enforcement access to wire transfer information from foreign exchanges, as I understand it. I believe all international electronic funds transfers are monitored by the government.

            A funds transfer to a foreign exchange, combined with the Bitcoin block chain, is probably enough information to deduce the history of a funds exchange made over Bitcoin. At that point you've lost anonymity, especially if you're buying Bitcoins just to make an exchange with a known drug dealer.

            In that regard, Bitcoin is a lot more like a highly traceable form of cash. There's also worries they'll need to introduce transaction fees once all of the Bitcoins have been mined.

            Ed:

            Bitcoin lets you defend against this by creating a new address for you for each transaction. By using your new address with every transaction you improve anonymity.
            Last edited by bascule; June 7, 2011, 18:18.
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            • #7
              Re: Bitcoin

              When bitcoins were $7 I was going to buy a few, but the purchase trail defeats the entire purpose. I can easily buy silver at the coin store for cash and never show ID, use a bank card, or create an account to do so.

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              • #8
                Re: Bitcoin

                Originally posted by astcell View Post
                When bitcoins were $7 I was going to buy a few, but the purchase trail defeats the entire purpose. I can easily buy silver at the coin store for cash and never show ID, use a bank card, or create an account to do so.
                The reason to buy (or mine) Bitcoins right now is their skyrocketing value. If you can take advantage of the rising hype and get out before the market collapses, you stand to make a lot of money.

                I've discovered in trying to buy some myself that the time it takes to do the wire transfers is pretty excessive and if you're buying some commonly purchased amount it would probably be difficult to correlate the wire transfer to a particular purchase from an exchange.
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                • #9
                  Re: Bitcoin

                  They said that about houses too.

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                  • #10
                    Re: Bitcoin

                    And in the news...

                    http://www.chicagotribune.com/news/p...,6328122.story

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                    • #11
                      Re: Bitcoin

                      Another problem with anonymity and loss of visibility to audit traiils:

                      Claims a BitCoin wallet was stolen (possibly with malware) and value transferred to another account.

                      Like cash dollars as currency, theft of a physical world wallet also is difficult to trace, but at least with the physical world, physical access to cash dollars as currency is required to steal cash dollars as physical currency. Certainly, an analogy with "pick pockets" could be made, but malware can be distributed across many victims, attack several targets very quickly, and after passing a balance through intermediates with unique ID for each, hard to track. It would also be possible to use infected hosts as intermediates to aggregating found coins until the final few hops, causing different bitcoin holders to blame each other and cause dissension and distrust among people in the group of users of bitcoins, giving the criminal time to push the money through more transactions to hide its final destination.

                      If the claim on theft of wallet through malware is true, then it is likely that either organized crime or so-called, "back hat," hackers have entered the game. Though, "Government Spies," might be responsible, it seems unlikely. There may be some advantage to sewing distrust into the bitcoin market, I would expect successful attacks would be kept private and used when the result was worth the risk of exposing the method used. This does not seem like something that would be worth the risk of exposure that there is an active exploit against bitcoin wallets in the wild. All of this decreases the probability for government spies to be behind something so trivial.
                      Last edited by TheCotMan; June 14, 2011, 14:05.

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                      • #12
                        Re: Bitcoin

                        http://arstechnica.com/security/news...ur-bitcoin.ars

                        Looks like it's getting more mainstream every day
                        Aut disce aut discede

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                        • #13
                          Re: Bitcoin

                          http://www.pcworld.com/article/23037...es_500000.html

                          And the first urban legend arises...

                          $500K worth? Doubtful.
                          'jazz

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                          • #14
                            Re: Bitcoin

                            Glad I'm not wasting my money: http://forum.bitcoin.org/index.php?topic=20207.0
                            "\x74\x68\x65\x70\x72\x65\x7a\x39\x38";

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                            • #15
                              Re: Bitcoin

                              EFF bails on bitcoin... https://www.eff.org/deeplinks/2011/06/eff-and-bitcoin
                              'jazz

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