Re: Ask Rushy about Bitcoins.
« Reply #80 on: January 31, 2014, 08:27:57 PM »
Rama is correct. Doing the accounting for bitcoin wouldn't be any different than working with any other capital asset like shares.
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Offline Rushy

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Re: Ask Rushy about Bitcoins.
« Reply #81 on: February 01, 2014, 02:33:53 AM »
Can you tell me how you exchange currencies into Bitcoins?

Through various online exchanges or in person using a site called Localbitcoins. Each one has its positives and negatives. Coinbase is certainly the easiest but it is primarily for US residents. Assuming you live in the UK, Bitstamp would probably be the best option. People who use Localbitcoins normally charge a 10% premium simply because the risk they take meeting in person and exchanging large volumes of cash.

I still don't understand how that would even cause a problem.
Does the bitcoin masters send transaction processing to random pools/individuals and thus if that pool isnt doing anything with transactions, the transaction is resent elsewhere after a timeout period?

I've read this question over and over but I still have no idea what you're asking. Please rephrase it.

Namely, for #3, what's stopping people from doing that? Is there a downside they'd suffer or something?

Yes and no. Like I was saying in an earlier post, having 51% of the network would cost you upwards of $100 million, meaning a group of really devoted very, very rich people could tank Bitcoin.

The funny thing is, if you own 51% of the network, at current bitcoin prices you would make about $2 million... a day. To most sane people that isn't a small amount of money, especially to be taking in on a per diem basis. Why the hell would you crash a network that is rewarding you with $2 million a day?

By the time anyone with enough money and time to do this (i.e. governments), Bitcoin will cost billions (possibly more) to overtake. I'm not worried about this, some conspiracy theorists might be, though.

For #2—this one's mostly curiosity—how would you even go about figuring out taxes from bitcoins? Is it literally just converting what you spent to what bitcoins were worth at the time you spent it, or...?

This has not been ruled on by the IRS yet. "Best guesses" include treating Bitcoin as a capital asset (because no country on the planet currently recognizes it as currency). The IRS really, truly doesn't know because it has never encountered this before. See Rama's explanation of capital asset taxation.

« Last Edit: February 01, 2014, 03:58:08 AM by Irushwithscvs »

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Offline Lord Dave

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Re: Ask Rushy about Bitcoins.
« Reply #82 on: February 01, 2014, 03:42:50 AM »

I still don't understand how that would even cause a problem.
Does the bitcoin masters send transaction processing to random pools/individuals and thus if that pool isnt doing anything with transactions, the transaction is resent elsewhere after a timeout period?

I've read this question over and over but I still have no idea what you're asking. Please rephrase it.
You said that to mine an empty block, (which is bad for the network) a miner must not add transactions to the network.  What does this mean?

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Re: Ask Rushy about Bitcoins.
« Reply #83 on: February 01, 2014, 03:47:54 AM »
You said that to mine an empty block, (which is bad for the network) a miner must not add transactions to the network.  What does this mean?

Basically all miners are default programmed to take any transactions they pick up from the network and add them to the block the miner is currently working on, with priority given to transactions with higher fees.

A miner can instead, choose to ignore them. All of them. This will result in him mining an empty block, a block that does not confirm any transactions whatsoever. If a miner that has enough computer power to do this over and over again, Bitcoin comes to a halt and the network will no longer function.

This is a theoretical possibility, but not a real concern. A miner with enough power to stop the network would probably continue to support the network because the miner would make more money supporting Bitcoin than destroying it.

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Re: Ask Rushy about Bitcoins.
« Reply #84 on: February 01, 2014, 02:02:17 PM »
Quote
This has not been ruled on by the IRS yet. "Best guesses" include treating Bitcoin as a capital asset (because no country on the planet currently recognizes it as currency). The IRS really, truly doesn't know because it has never encountered this before. See Rama's explanation of capital asset taxation.

As I understand it, the UK government is treating bitcoins like gold.

See, this is one area which doesn't conern me about bitcoins. Regardless of the value, you can just take x% of the coins as taxes.

For instance, if someone buys something for 1Bc, then you owe 0.2Bc in Value Added Tax.

The only problem would be that it isn't easy to track which transactions are made, but we have an identical problem with cash-in-hand work and transactions.

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Offline Lord Dave

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Re: Ask Rushy about Bitcoins.
« Reply #85 on: February 01, 2014, 02:25:31 PM »
You said that to mine an empty block, (which is bad for the network) a miner must not add transactions to the network.  What does this mean?

Basically all miners are default programmed to take any transactions they pick up from the network and add them to the block the miner is currently working on, with priority given to transactions with higher fees.

A miner can instead, choose to ignore them. All of them. This will result in him mining an empty block, a block that does not confirm any transactions whatsoever. If a miner that has enough computer power to do this over and over again, Bitcoin comes to a halt and the network will no longer function.

This is a theoretical possibility, but not a real concern. A miner with enough power to stop the network would probably continue to support the network because the miner would make more money supporting Bitcoin than destroying it.
I thought a block was a chunk of encrypted data that you just decrypted with brute force. 
Its also transactions using bitcoin?

Why would the network stop working?  Wouldn't someone else just take the transaction?  Or is the transaction so complex that it takes a long time to process? (Like mining new bitcoin)

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Re: Ask Rushy about Bitcoins.
« Reply #86 on: February 01, 2014, 04:29:47 PM »
As I understand it, the UK government is treating bitcoins like gold.

No major government other than Germany and Russia has let out any official statements regarding Bitcoin. Germany loves it and Russia is hostile to it.

See, this is one area which doesn't conern me about bitcoins. Regardless of the value, you can just take x% of the coins as taxes.

For instance, if someone buys something for 1Bc, then you owe 0.2Bc in Value Added Tax.

The only problem would be that it isn't easy to track which transactions are made, but we have an identical problem with cash-in-hand work and transactions.

Unless you're transacting in thousands of dollars then the easiest way is to... pretend it never happened.

I thought a block was a chunk of encrypted data that you just decrypted with brute force. 
Its also transactions using bitcoin?

Yes, blocks are what confirm transactions and add them to the blockchain. Without them, transactions would not exist.

Why would the network stop working?  Wouldn't someone else just take the transaction?  Or is the transaction so complex that it takes a long time to process? (Like mining new bitcoin)

Once you mine a block the hash target changes and miners must all start trying to mine a new block. If one exceptionally powerful miner is mining all the blocks, no one else will get any at all.

Mining new bitcoin and confirming transactions is the same thing. The new bitcoins are the miner's reward for mining blocks.

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Re: Ask Rushy about Bitcoins.
« Reply #87 on: February 01, 2014, 04:33:30 PM »
Quote
Unless you're transacting in thousands of dollars then the easiest way is to... pretend it never happened.

The tax man may not see it that way.

If there's any value at all in bitcoins, you can be sure as hell the inland revenue is interested in their exchange.

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Re: Ask Rushy about Bitcoins.
« Reply #88 on: February 01, 2014, 05:01:26 PM »
The tax man may not see it that way.

If the tax man were to have his way, you'd be adding sales tax at your yard sale.

If there's any value at all in bitcoins, you can be sure as hell the inland revenue is interested in their exchange.

Of course they're interested in it, but if I buy soap off some dinky little site with Bitcoin, I doubt they're really going to miss that 5 cents in taxes.

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Re: Ask Rushy about Bitcoins.
« Reply #89 on: February 01, 2014, 05:08:03 PM »
I thought a block was a chunk of encrypted data that you just decrypted with brute force. 
Its also transactions using bitcoin?

Yes, blocks are what confirm transactions and add them to the blockchain. Without them, transactions would not exist.
So by being able to add a transaction to the blockchain is a way for the system to confirm that it's an authentic transaction?
 
Quote
Why would the network stop working?  Wouldn't someone else just take the transaction?  Or is the transaction so complex that it takes a long time to process? (Like mining new bitcoin)

Once you mine a block the hash target changes and miners must all start trying to mine a new block. If one exceptionally powerful miner is mining all the blocks, no one else will get any at all.

Mining new bitcoin and confirming transactions is the same thing. The new bitcoins are the miner's reward for mining blocks.
I see.  So the chain would get longer and longer without being processed.  Makes sense.

Question:
Couldn't someone hijack a lot of zombie PCs and use them?  I realize you'd need millions of PCs operating at 10-20% processing to the mining but do you think that would be enough?

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Offline Rushy

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Re: Ask Rushy about Bitcoins.
« Reply #90 on: February 01, 2014, 05:20:30 PM »
So by being able to add a transaction to the blockchain is a way for the system to confirm that it's an authentic transaction?

Correct. If the transaction is not on the blockchain, it doesn't exist.
 
Couldn't someone hijack a lot of zombie PCs and use them?  I realize you'd need millions of PCs operating at 10-20% processing to the mining but do you think that would be enough?

You'd need more than millions, the entire world's home computers could try to mine Bitcoin and that wouldn't be enough to damage the network. The Bitcoin network is more powerful than the top 500 super computers... combined. And it only gets stronger every day.

And even if you did have that many computers... why would you hurt the network when you could make enough money to be the richest man in the world within a year?
« Last Edit: February 01, 2014, 05:22:04 PM by Irushwithscvs »

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Re: Ask Rushy about Bitcoins.
« Reply #91 on: February 01, 2014, 06:06:06 PM »
Couldn't someone hijack a lot of zombie PCs and use them?  I realize you'd need millions of PCs operating at 10-20% processing to the mining but do you think that would be enough?

You'd need more than millions, the entire world's home computers could try to mine Bitcoin and that wouldn't be enough to damage the network. The Bitcoin network is more powerful than the top 500 super computers... combined. And it only gets stronger every day.

And even if you did have that many computers... why would you hurt the network when you could make enough money to be the richest man in the world within a year?
Wait, what?  How the hell does the network have more power than the top 500 super computers combined yet to make a dent would require all the home PCs in the world?
What, are super computers too generic for the bitcoin decryption algorithm?  Do they have have such a poor optimization compared to the actual bitcoin network?

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Re: Ask Rushy about Bitcoins.
« Reply #92 on: February 01, 2014, 08:13:11 PM »
Wait, what?  How the hell does the network have more power than the top 500 super computers combined yet to make a dent would require all the home PCs in the world?

Super computers aren't designed to hash SHA-256 and in comparison to a specialized computer they are actually pretty slow.

What, are super computers too generic for the bitcoin decryption algorithm?

In a word: yes.

  Do they have have such a poor optimization compared to the actual bitcoin network?

Super computers are generally designed to solve an array of complex problems. Bitcoin miners are designed to solve one very simple problem and to solve it quickly.

The CPU in my computer has a much higher clock rate and more cores than most bitcoin miners out there, but a CPU is designed to solve all sorts of problems, and as a result it isn't particularly good at solving any of them. My 3770k must calculate ~13,000 operations to hash SHA-256. A specialized miner can calculate it with one.

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Re: Ask Rushy about Bitcoins.
« Reply #93 on: February 02, 2014, 12:40:10 AM »
Quote
Unless you're transacting in thousands of dollars then the easiest way is to... pretend it never happened.

The tax man may not see it that way.

If there's any value at all in bitcoins, you can be sure as hell the inland revenue is interested in their exchange.

There's money in WOW's money too...

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Re: Ask Rushy about Bitcoins.
« Reply #94 on: February 02, 2014, 02:59:08 AM »
There's money in WOW's money too...
You do not own WoW money at any point in time, though. You're also not allowed to sell it (partially because you don't own it).
Read the FAQ before asking your question - chances are we've already addressed it.
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Re: Ask Rushy about Bitcoins.
« Reply #95 on: February 02, 2014, 04:50:05 AM »
There's money in WOW's money too...
You do not own WoW money at any point in time, though. You're also not allowed supposed to sell it (partially because you don't own it).
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Re: Ask Rushy about Bitcoins.
« Reply #96 on: February 02, 2014, 04:56:20 AM »
Wait, what?  How the hell does the network have more power than the top 500 super computers combined yet to make a dent would require all the home PCs in the world?

Super computers aren't designed to hash SHA-256 and in comparison to a specialized computer they are actually pretty slow.

What, are super computers too generic for the bitcoin decryption algorithm?

In a word: yes.

  Do they have have such a poor optimization compared to the actual bitcoin network?

Super computers are generally designed to solve an array of complex problems. Bitcoin miners are designed to solve one very simple problem and to solve it quickly.

The CPU in my computer has a much higher clock rate and more cores than most bitcoin miners out there, but a CPU is designed to solve all sorts of problems, and as a result it isn't particularly good at solving any of them. My 3770k must calculate ~13,000 operations to hash SHA-256. A specialized miner can calculate it with one.

If Intel were smart, they'd get their R&D department to develop a very powerful miner, and then run R&D as a self-funded enterprise.
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Re: Ask Rushy about Bitcoins.
« Reply #97 on: February 02, 2014, 05:05:55 AM »
If Intel were smart, they'd get their R&D department to develop a very powerful miner, and then run R&D as a self-funded enterprise.

Actually from an investment standpoint that'd be really stupid. A company as large as Intel can't afford to risk millions of dollars on R&D and waste precious foundry resources trying to money grab from Bitcoin, especially when their interaction alone could crash the currency because people would wonder if they can trust Intel.

Larger companies will become interested once Bitcoin is larger. Until then they won't touch it with a ten foot pole and I really don't blame them.

Re: Ask Rushy about Bitcoins.
« Reply #98 on: February 02, 2014, 06:10:36 AM »
What, in your opinion, is the biggest downside with Bitcoin compared with traditional currency?
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Offline Rushy

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Re: Ask Rushy about Bitcoins.
« Reply #99 on: February 02, 2014, 03:59:01 PM »
What, in your opinion, is the biggest downside with Bitcoin compared with traditional currency?

That it takes at least 10 minutes just to start verifying a transaction.

Transactions are, technically, instant, and most clients by default prevent you from what is called "double spending" or sending your money to two addresses. When you double spend, only one address truly gets the coins. For example, if I went to a Subway that accepts bitcoins, and I get a sandwich, I can send them an instant transaction and they'll see on the network that I have sent them 0.03 bitcoin. What I can then do is send that same 0.03 bitcoin to an address that I own. Typically whatever transaction is sent first gets the coin. Meaning if I'm going to double spend I will send them to myself first and then to Subway, so that Subway thinks I paid them. 10 minutes later when I have left the store with my sandwich, Subway is going to find out that they have been cheated.

Obviously anyone making a large payment (i.e. a car) would wait for verification. That's fine and dandy, but if something like a fast food chain is accepting bitcoins they open themselves up to at least a small percent of customers that are going to bamboozle them.

Whereas cash once I give someone a 20 dollar bill they aren't going to find out they don't have 20 dollars 10 minutes later. Unless it was counterfeit or something and they didn't check.