[Rushy]

As titled ask plain and concise questions about the Bitcoin protocol or bitcoins in general.

The other thread basically turned into people who haven't looked into Bitcoin trying to discuss Bitcoin with more people who haven't looked into Bitcoin. I think it's important at least some of you learn about cryptocurrency now rather than later.

[Snupes]

What are Bitcoins and why do they matter?

[Rama Set]

How often is the algorithim difficulty upped and who has the job of making that crucial decision?

[Alchemist21]

Why are you so obsessed with bitcoins?

And isn't asking for donations basically being a cyber-beggar?

[Rushy]

What are Bitcoins and why do they matter?

Well first I'd like to point out a major difference between Bitcoin (the protocol/network) and bitcoins, the currency. Bitcoin is a system that solves, from an engineering standpoint, the Byzantine Generals' Problem (http://en.wikipedia.org/wiki/Byzantine_fault_tolerance). What this ultimately means is the Bitcoin is a network in which everyone can agree with each other without knowing each other over just about any line of communication. Essentially Bitcoin does not require the Internet per se, but the Internet makes what it does a lot easier. The protocol itself is an autonomous Peer-to-Peer client that communicates with other clients like itself. In no way can any one person modify their client and damage the network. For example I could modify my client to say some nonsense, like I have 10 billion bitcoins. Other clients wouldn't agree with mine, and therefore mine would be ignored by the majority.

Bitcoins on the other hand, refers to the currency, which is actually just a result of the network keeping track of keys attached to addresses. The currency itself is still revolutionary, as it is a financial system in which transactions are not censored and can not be reversed. A bitcoin can not be duplicated and it is impossible to spoof the network into thinking that you have money when you really don't. The currency itself is the next logical step in the evolution of finance. The technology Bitcoin has put forward will do to finance what the Internet did to communication.

How often is the algorithim difficulty upped and who has the job of making that crucial decision?

Bitcoin mining (the process of adding transactions to the network) is, quite simply, SHA-256 hashing. The network protocol determines what SHA-256 hash it is looking for, this also determines how hard it is to find the hash. Every 2040 blocks the network calculates how much time it took to reach 2040 blocks. It should take 20,400 minutes, or two weeks, to find 2040 blocks. If the protocol computes that it has been less than two weeks, it increases the difficulty, if it has been more than two weeks, it will decrease the difficulty. Bitcoin difficulty does not have to up or down, although it is very rare to have the difficulty go down. It should always, on average, take about 10 minutes for the network to find a block.

Why are you so obsessed with bitcoins?

And isn't asking for donations basically being a cyber-beggar?

1. Everyone needs a hobby. I also genuinely think Bitcoin technology is the future.

2. Yes.

[spoon]

My economics class has taught me that an effective currency has six basic characteristics:

-Portability
-Durability
-Divisibility
-Uniformity
-Limited Supply
-Acceptability

Please explain how bitcoin is "the future" by qualifying it as superior to other currencies, such as paper, in each of these six categories.

If their are downsides to bitcoin, explain how the benefits outweigh those downsides.

If improvements need to be made to bitcoin before it surpasses other currencies in effectiveness, state what those improvements are and how they are going to happen.

[Rushy]

-Portability

Bitcoin itself is available anywhere you have Internet access. You can print out your own physical notes with verification codes for physical portability outside of Internet zones. It is important to note that you shouldn't make transactions with people you don't trust if you don't have Internet access.

-Durability

Bitcoins can not be destroyed. They can, however, be lost. Exactly how many are lost is unknown.

-Divisibility

Bitcoin is divisible up to 10^8. If for example a single bitcoin is worth $1 million, then you could still send cents in a transaction.

-Uniformity

This is actually an interesting concern. Because a bitcoin can be traced back to all of its transactions, it is possible to "taint" a bitcoin by using it for something illegal. For example if a person with bitcoin address x smuggled drugs, and later made a legitimate purchase somewhere and sent his bitcoin to address y, address y now has a technically "tainted" bitcoin. This can be avoided using high transaction addresses or coin tumblers. For example an exchange may deal with thousands of bitcoins every day, so it becomes impossible to determine who received what bitcoin from the exchange.

In other words, bitcoin addresses can be tracked, but individual bitcoins can not.

-Limited Supply

Well this is certainly interesting. The US dollar doesn't have a limited supply, but Bitcoin does, most economists don't agree Bitcoin is the better currency, so clearly your class taught you a concept most economists don't agree on.

Anyway, there will only ever be 21 million bitcoins. Right now there are ~12 million. Miners bring more into existence until the year ~2140, where the protocol will no longer create new coins.

-Acceptability

This is a problem with Bitcoin, but it is being solved over time. Overstock and TigerDirect now take Bitcoin whereas they didn't before. Bitcoin can overcome the "no one uses it so no one uses it" problem, it will just take time.

[Vindictus]

Why is there so much turmoil in the Reddit bitcoin community? The subreddit regularly appears in subredditdrama.

[Rushy]

Why is there so much turmoil in the Reddit bitcoin community? The subreddit regularly appears in subredditdrama.

Put fanatical libertarians, anarchists, capitalists, investors, and developers all in tiny ass room and watch the fireworks.


There are a lot of different kind of people in Bitcoin and I can tell you it used to be a lot worse. People that think taxes are theft, banks are demonic, think Bitcoin is made by the NSA and controlled by the NWO/Illuminati etc. Alternate currencies are always coming in trying to stir shit up. Litecoin (a coin I consider to not be secure) trying to pull people over to their side, etc. Bitcoin is a perfect storm of politics and money. Drama is unavoidable.

[spoon]

Disregarding 'Acceptability' for obvious reasons:

Portability: Paper currency printed by a central government wins. Hassles like internet access and printing + verification codes make it much more complicated than what is already in place.

Durability: What do you mean by lost? I don't want to cast judgment before I know what you mean. Physical money can obviously be lost. That amount is not easy to determine either.

Divisibility: Alright, point bitcoin.

Uniformity: At a glance, the idea of tracking monetary transactions seems to be an invasion of privacy. Besides that, I don't see anything wrong with "tainted" money. I'd be willing to bet that a substantial portion of the currency in circulation has been used in an illegal transaction. What exactly happens to a tainted bitcoin?

Limited Supply: There is currently a limited supply of USD in circulation. That amount changes, but there isn't some cave that hasn't been discovered full of trillions of hundred dollar bills. If I understand correctly, the amount of bitcoin in circulation is dependent on miners and an algorithm. Correct me if I'm wrong. To answer the question of which is more effective in terms of limited supply, it is a matter of opinion. Do you trust an algorithm more than you trust the people that make decisions about how much money is in circulation?

--

All things considered, I can't see it sweeping the world any time soon.

[Rushy]

Portability: Paper currency printed by a central government wins. Hassles like internet access and printing + verification codes make it much more complicated than what is already in place.

E-mail is more complicated than good old fashioned snail mail, but the benefits of learning how to use it outweigh the benefits of keeping snail mail. Will things other than bitcoin exist? Of course. But using Bitcoin is more advantageous in the long run than not using it.

Durability: What do you mean by lost? I don't want to cast judgment before I know what you mean. Physical money can obviously be lost. That amount is not easy to determine either.

As in never to be recovered. If I have 10 bitcoins on a hard drive and I light the hard drive on fire, those bitcoins are gone. Forever. This can be avoided by keeping backups and not forgetting your encryption password.

Uniformity: At a glance, the idea of tracking monetary transactions seems to be an invasion of privacy. Besides that, I don't see anything wrong with "tainted" money. I'd be willing to bet that a substantial portion of the currency in circulation has been used in an illegal transaction. What exactly happens to a tainted bitcoin.

Because addresses can be generated at free will, privacy isn't a large concern (it is a concern, though). You can generate a new address every time you receive any sum of coin. There are 2^256 possible addresses. To give you an idea of how big that number is, if I hooked a computer up to the sun (for energy) and this computer generated 1 billion addresses every second... the sun would burn out before it generates even half of the addresses.

Limited Supply: There is currently a limited supply of USD in circulation. That amount changes, but there isn't some cave that hasn't been discovered full of trillions of hundred dollar bills. If I understand correctly, the amount of bitcoin in circulation is dependent on miners and an algorithm. Correct me if I'm wrong. To answer the question of which is more effective in terms of limited supply, it is a matter of opinion. Do you trust an algorithm more than you trust the people that make decisions about how much money is in circulation?

I can tell you exactly how many bitcoins will be generated. Can you tell me how many dollars will be printed? The federal reserve can print how ever much it wants whenever it wants, the Bitcoin protocol, however, can only generate what is allowed.

Asking if I "trust" the protocol is irrelevant. Do I trust 2 + 2 to equal 4? Bitcoin is open source, you're welcome to look at the protocol's code yourself.

[Alchemist21]

Is it possible for 2 people to select who the third-party is in a transaction?

[spoon]

E-mail is more complicated than good old fashioned snail mail

Irrelevant.

Will things other than bitcoin exist? Of course. But using Bitcoin is more advantageous in the long run than not using it.

Justify this statement.

As in never to be recovered. If I have 10 bitcoins on a hard drive and I light the hard drive on fire, those bitcoins are gone. Forever. This can be avoided by keeping backups and not forgetting your encryption password.

As far as destruction of currency is concerned, paper money wins. It can be regulated if the amount lost is significant enough to be noticed. As you have said, the amount of bitcoin in circulation is much more rigid. Backups, encryption passwords? Is this a joke? It's my money and I need it now!

Because addresses can be generated at free will, privacy isn't a large concern (it is a concern, though). You can generate a new address every time you receive any sum of coin. There are 2^256 possible addresses. To give you an idea of how big that number is, if I hooked a computer up to the sun (for energy) and this computer generated 1 billion addresses every second... the sun would burn out before it generates even half of the addresses.

What is the process involved in "generating a new address"?

I can tell you exactly how many bitcoins will be generated. Can you tell me how many dollars will be printed? The federal reserve can print how ever much it wants whenever it wants, the Bitcoin protocol, however, can only generate what is allowed.

Asking if I "trust" the protocol is irrelevant. Do I trust 2 + 2 to equal 4? Bitcoin is open source, you're welcome to look at the protocol's code yourself.

Flexibility of a currency != unlimited supply.

[xasop]

If I install Bitcoin, will I get a virus?

[spank86]

As in never to be recovered. If I have 10 bitcoins on a hard drive and I light the hard drive on fire, those bitcoins are gone. Forever. This can be avoided by keeping backups and not forgetting your encryption password.

As far as destruction of currency is concerned, paper money wins. It can be regulated if the amount lost is significant enough to be noticed. As you have said, the amount of bitcoin in circulation is much more rigid. Backups, encryption passwords? Is this a joke? It's my money and I need it now!

Perhaps if you considered bitcoin or similar to be an online banking tool?

When compared to that a lot of the negatives in terms of losses and ease of access disappear.

[Ghost Spaghetti]

How much, roughly, (in old-skool currency) have you managed to spend with bitcoins and how much did you spend acquiring them?

[markjo]

I can tell you exactly how many bitcoins will be generated. Can you tell me how many dollars will be printed? The federal reserve can print how ever much it wants whenever it wants, the Bitcoin protocol, however, can only generate what is allowed.

What's to stop someone from changing the protocol to allow for more bitcoins to be generated?  Also, if the number of bitcoins is to be limited, how can they generate enough for everyone to use?  What's to prevent bitcoin hoarding?

[EnigmaZV]

Why would anyone mine bitcoins if it's cheaper just to purchase them? Conversely, what happens in 2140 when mining stops, and nobody devotes any more of their processing time to bitcoin?

Also,

You mean the equipment or the electricity? At 1.5 W/Gh/s it costs roughly $16M to churn out $4.4M in Bitcoin. The equipment itself varies, based on the tech (65nm vs 20nm) and availability (preorder vs shipping).

1. ASIC miners make a shitload of money. They are literally money printers and people are paying through the nose to grab one.

How can both of these statements simultaneously be true?

[Benjamin Franklin]

The US dollar doesn't have a limited supply

Incorrect.

most economists don't agree Bitcoin is the better currency

[Citation Needed]

so clearly your class taught you a concept most economists don't agree on.

Based on what he said in his post, incorrect.

[Rushy]

Irrelevant.

Hardly.

Justify this statement.

Read this thread.

As far as destruction of currency is concerned, paper money wins. It can be regulated if the amount lost is significant enough to be noticed. As you have said, the amount of bitcoin in circulation is much more rigid. Backups, encryption passwords? Is this a joke? It's my money and I need it now!

You don't have to worry about paper money being destroyed because it's like monopoly money, the government can print unlimited amounts forever. Everyone knows the government is just great at regulating the economy.

What is the process involved in "generating a new address"?

I've made it a point not to get too technical in this thread, but generating a new address is basically creating a private key, public key, and a hash of the public key (which is the address). All addresses are created via SHA-256 and RIPEMD160 and start with a ECDSA key.

What that all means is that you can create as many addresses as you want. The process of address creation intrinsically has nothing to do with the Bitcoin protocol. There is no record of generated addresses or anything. Only addresses that receive or transmit bitcoins are shown on the blockchain.

Flexibility of a currency != unlimited supply.

Unlimited means there is no limit to how much can be created. Gold is limited. Bitcoins are limited. Dollars are unlimited. The government can print however many they want, and they typically do just that. It's like having an economic cheat code.

If I install Bitcoin, will I get a virus?

That depends on what client you install. You shouldn't install a client that is not open source and you should always verify the PGP signature. Why am I even telling you this? You should already know all that.

How much, roughly, (in old-skool currency) have you managed to spend with bitcoins and how much did you spend acquiring them?

I don't make a habit of talking about my personal finances on the interwebs.

What's to stop someone from changing the protocol to allow for more bitcoins to be generated?

Nothing. The problem lies in that you will be the only one to have changed your protocol. You are now a bitcoin network of 1. Congratulations on your expansive but worthless collection of Markjo-coins.

  Also, if the number of bitcoins is to be limited, how can they generate enough for everyone to use?

You can have 10^-8 bitcoin.

  What's to prevent bitcoin hoarding?

Nothing. Additionally, there is nothing wrong with hoarding.

Why would anyone mine bitcoins if it's cheaper just to purchase them?

They probably wouldn't.

Conversely, what happens in 2140 when mining stops, and nobody devotes any more of their processing time to bitcoin?

This is when transaction fees will increase. Right now transaction fees are very tiny because miners care more about the large block of coins in their reward.

How can both of these statements simultaneously be true?

Some people mine on GPUs, which use a lot of energy for very little reward. I said ASICs specifically make a shitload of money.

@Ben Franklin, either ask a question or make a real argument. I have no time for your petty one word replies.