Charting bitcoin, it looks good, if you are inclined to gamble on charts. The recent collapse from two hundred dollars tested support at the hundred dollar mark, found plenty of support around there. By and large, it is a good idea to buy at major support levels, since a speculative property is a lot more likely to go up than to break through the support level.  If it did not penetrate the support level for very long during the panic, likely will not do so now.
But I am an intrinsic value investor. What is the intrinsic value of Bitcoin? In one sense, absolutely nothing.
But, in another sense, bitcoin is better than gold.
Moving physical gold from point A to point B in order to settle a transaction is obviously inconvenient and dangerous, so naturally one prefers to leave it locked in the vaults of some power that is famously reliable, trustworthy, and resistant to coercion, such as … The United States after World War I and II … and merely move ownership around.  Banks and nations kept their gold with the United States Federal Reserve, which supposedly kept it in Fort Knox and similar places.
Now, people are increasingly realizing that there is no gold in Fort Knox, and the US Federal Reserve stonewalls increasingly insistent demands for withdrawal. It is the closing of the second gold window.  Paper gold is in slow motion collapse.
This is a major and fundamental advantage of bitcoins – that bitcoins can be moved from being controlled by one secret, to being controlled by a different secret, hence can be moved at speeds that though much slower than light, are faster and more secure than any merely material thing can achieve.
Of course gold has the advantage of history. Gold really is money because it is money, and bitcoins really are not money because they are not, and for bitcoins to become money will take, not as much time and blood as gold took, but still quite a lot of time and blood.
Gold has an enormous advantage of being truly untraceable, in that one lump of gold is indistinguishable from another lump of gold. Bitcoins are, unfortunately, totally traceable, and, contrary to report, not very anonymous at all. Bitcoins, however, being totally unregulated, and even harder to regulate than gold, have wonderfully convenient money laundries. Some of these money laundries are probably NSA fronts (private citizens are not the only people who find untraceable money convenient), but the lack of busts would suggest that none of them are FBI fronts.
The potential value of bitcoin is entirely monetary. The instability of bitcoin undermines its monetary use, indicating an excess of speculators over people actually using bitcoin for monetary purposes.  Supposing that the monetary use of bitcoin is growing, or likely to grow, this is a reasonable equilibrium.
It looks as if bitcoin has support levels at psychological round numbers. For a long time it was steady as a rock around fifty dollars, then it shot up to two hundred dollars, crashed down to one hundred dollars.
Supposing that the monetary use of bitcoin continues to increase, I expect it will sit at one hundred dollars for a while, then wander erratically between one hundred and two hundred dollars, then sit at two hundred dollars for a while. Next support level after that, five hundred dollars. The arbitrary and conventional values of these numbers reflects the fact that they are ratios between two currencies that have only arbitrary and conventional value.
Moldbug, on the other hand, argues that monetary use of bitcoins is vulnerable to state action, that a determined government effort to shut down the monetary use of bitcoins, for example by criminalizing MtGox, would kill it stone dead. And if the monetary use of bitcoins continues to grow, there certainly will be such a determined state action.
I think Moldbug has excessive belief in the power of the state. He thinks governments are always omnipotent, I think they are bluff and theater floating over a storm tossed sea of anarchy. A part of town where order comes from the police is an unsafe part of town. And if one is in that part of town, and feeling nervous, as one should, one ducks into a mall or a McDonalds for safety. That nervous people are inclined to head for the mall, not the police station, leads me to believe that attempts to demonetize bitcoins are likely to fail.
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Moldbug is right that Bitcoin will be shut down, but I think he’s been wrong about why.
There’s no one in USG that says to himself, “Bitcoin is a threat to USG, we need to shut it down.” That doesn’t happen.
However, if Bitcoin sticks around, it will be used to buy drugs, launder money, evade taxes, etc.
Although I think a stable, non-sovereign currency is a threat to existing governments, they don’t see things that way. They’ll shut them down for petty, war-on-drugs/terrorism reasons before it gets to that point anyway.
Bitcoin is a flat P2P network, so shutting it down is impractical. But even if it were practical to shut Bitcoin down, it would require international coordination to shut it down worldwide. So shutting it down is impossible.
You can outlaw it, but IP piracy is outlawed too and that hasn’t made a dent in Bittorrent filesharing.
The vector of attack for Bitcoin is currency exchange – converting between national currencies and Bitcoins is its weak spot. A government could ask for or subpoena records from exchanges in order to link addresses, coins and buyers’ names.
The ability to buy Bitcoins anonymously is therefore very important, to avoid coin purchases being linked to a buyer. Bitcoin ATMs will help.
> You can outlaw it, but IP piracy is outlawed too and that hasn’t made a dent in Bittorrent filesharing.
That’s because no one cares. I’m sure the music lobby is strong — not strong enough. TV, movies? Most have considerable aspects of nu left propaganda, as well as being ‘bread and circus’, so the collective elite mind wants them priced as low as possible, subject to rather loose constraints. Semiconscious collective minds sort of exist and sort of grasp things.
Another way in which people, masses and elites, don’t care, is that they don’t have the will to put 100-thousands or millions to harsh penalty over this, the way they do with drugs. Yet, as with drugs, there are many millions who want to fileshare. It’s not /as/ alluring as drugs, so the penalties wouldn’t have to be /as/ harsh. But it’s not an order of magnitude difference.
You’re quite wrong about IP piracy. Every place the state department goes the first thing they do is force our IP laws on the locals. Megaupload wasn’t targeted by accident.
The entertainment industry is a self funding propaganda arm for the elites. It only works as long as Americans pay huge prices for substandard propaganda filled entertainment. Without that sweet IP protection money rolling in studios would be forced to make shows based on what sells, I.E. without loads of propaganda. This would destroy Washington’s ability to propagandize the entire world.
> Every place the state department goes the first thing they do is force our IP laws on the locals. Megaupload wasn’t targeted by accident.
Watch what they do not what they legislate. –And what they do a lot of, not what they do a little of.
They appear satisfied with the equilibrium as it exists. I certainly don’t hold that they would suffer TV and movies to wind up radically de-funded.
> Without that sweet IP protection money rolling in studios would be forced to make shows based on what sells, I.E. without loads of propaganda
If it makes money on sales/ads, it sells. And accordingly, they are so forced — to a fair extent.
And as Mencius/ his citees point out (recent post from him), propagandees are not tremendously innocent or unwilling. Many men want to hold strong opinions on a rather broad variety of ‘issues’ ; few want to think them through. Fewer want to think them through hard.
>>If it makes money on sales/ads, it sells. And accordingly, they are so forced — to a fair extent.
Passion of the Christ disproves this. If their primary goal was making money they’d make a lot more movies in the same going catering to different politically incorrect groups.
Buy under your own name, run your bitcoins through a laundry.
I suppose the feasibility of laundries depends on the sophistication of blockchain analysis. But it can’t be too hard to convincingly shuffle coins from account to account, surely.
At any rate, there’s Zerocoin coming up, a very interesting development.
IRS can force you to reveal where your bitcoins went. You must be anonymous at every stage.
What do you mean “will beâ€. It is already being used to buy drugs, launder money, and evade taxes. That is why its price has been booming. Speculators are excited to see significant and rapidly increasing monetary demand for bitcoins.
You can get away with a little drug dealing or tax evasion, but there’s a limit. Just like there’s a limit to the amount of file sharing you can get away with. I’m still mourning demonoid.
Blockchain.info estimates three hundred thousand btc of transactions per day, of which about a third, one hundred thousand btc per day are commerce rather than speculation, monetary demand. That is about ten million dollars per day of drug trafficking, tax evasion, and so on and so forth.
The primary practical reason to trade using btc is to avoid regulation, so I am assuming that most monetary use of btc violates some regulation, and there is a lot of monetary use of btc.
Demonoid was shut down, but the pirate bay continues, and if the pirate bay should fail, we have other systems for providing searchable metadata, and can develop better ones.
They also shut down nzbmatrix. The file sharing scene is way smaller than it used to be.
Thanks for posting this Jim.
I agree with you contra Moldbug that USG is not powerful enough to shut it down, nor power enough to drive the price to identically $0.00000000. BTW, Moldbug is now accepting bitcoin at 12jmAcfRptnP7wkvepXQoYUt5yDsYxHRiZ . I sent him some the last Wed, just before the crash. I looked a lot more generous before the crash than after…
Like Namibians in Namibia forced to use the Namibian dollar, there are people forced to use bitcoin in the bitcoin economy on Silk Road. In times when BTC is rising versus the USD, they are quite happy to store more of their dollars in BTC for future purchases in anticipation of lower BTC prices in the future. In times when BTC is falling versus USD, they won’t want to hold BTC and so will purchase only the BTC to complete their transactions. But since buyers and sellers in this market can cash in and out of USD quickly, the are relatively indifferent to BTC volatility.
The Silk Road economy is not going away, period, no matter what US Treasury does.
There is also the legitimate bitcoin economy. According to Bitpay, their March 2013 transactions were about $5 million, which exceeds that estimated for Silk Road. A fair number of legit bitcoin users (and acceptors) are Occupy types who just want to work outside the system, which they (rightly) see as evil. These then are principled users who probably don’t mind take a few percent hit in buys and sells just to use bitcoin. This is to say nothing of the True Anarcho-Libertarian believers, who will have bitcoins pried from their dead cold fingers.
It is not clear whether this economy is going away. Sufficient pressure, yes, will kill it. But at the moment this arm of the economy is growing. How fast? This is something you GOTTA see…
As I’ve suggested elsewhere (I’m really beginning to be a one-trick pony on this… but hey it’s a helluva trick), one of the features of a P2P crypto-currency whose ENTIRE blockchain gets exported continuously to everyone on the entire network is that anyone with a tiny bit of savy can extract mounds of interesting (and rather precise) data from it. The generous, not-for-profit folks over at blockchain.info make some really nice charts for us.
One of these charts is Trade Vs. Transaction Volume which represents (at least an algorithmic attempt at estimating) the ratio of speculative trade (gov’t currencies exchanged for BTC) versus transaction trade (i.e., actual economic activity). The chart, like most of them, is noisy and volatile. you can select a narrower time range, and you can turn on 7-day moving average.
[Many of the BTC charts have periodicities, frequency artifacts, that look to have a period of a about a week. I haven’t seen any (even uber geeky) commentary on this. It could be real–something really happening in a weekly cycle in the BTC economy (e.g., drug/kiddie porn dealers always cashing out on Sun night), or it could just be some artifact of how they’re sampling data… But I digress… hell, this whole comment is a digression…]
Anyway, if you look at Trade/Transaction Volume over this calendar year, during which the USD exchange price went from ~$20 to a top of $266 (over ten-fold) until it corrected over the past 3-4 days, you will see something quite astonishing: the ratio of trade/transaction, while bumpy, is unmistakably going DOWN… which suggests strongly that the so-called bubble was not, at all, a bubble. In fact, if anything, the vertical that we were seeing may not have been vertical enough.
Now what we really need is an experienced economist and currency trader to analyze this stuff… because I personally have no idea what a “healthy” trade/transaction volume would even be for a mature currency, much less one in the midst of a “Monetization Event”. According to a recent Bloomberg article, about $5 trillion worth trades globally on FX every day, so I would not be surprised if the ratio for say USD or EUR would be greater, even much greater than 1. (BTC seems to be currently in the 4 to 6 range.)
So, I dunno… it seems we have a land, call it “Bitland”, with a BTC-based economy, which is very much like Namibia’s in every respect, except for the following:
1) Unlike Namibia, the BTC economy is growing rapidly, rapidly enough to approximately keep pace with an over 10-fold increase in the USD price of its currency over the past 4 months.
2) Unlike Namibia, the BTC economy has no central bank, and therefore no way (outside of a harsh scheduled algorithm) of diluting its currency. Bitland also has no politics, nor political actors of any kind, and therefore there will be a motivation to dilute currency and reward friends and punish enemies. Bitland’s currency is a really lot like gold except for one thing…
3) Unlike the Namibian dollar (and gold), Bitland’s currency can be transferred (literally spent like cash) over the internet, to any country with internet access, without the assistance of a trusted 3rd party (like paypal or credit card).
4) In Namibia, people have taken out loans in Namibian dollars. If the Namibian dollar were to rise 10 or a hundred fold, or infinity-fold, those debts would never be repayed. The debtors would be the least to be worried, but the banks (and this is every bank in Namibia and not a few in South Africa) who made those loans would be quickly wiped out. But in Bitland, no one (yet) has taken out any loans, so a meteoric rise of their currency doesn’t really hurt anyone… in fact almost everyone in Bitland feels quite rich due to the recent rise of their currency versus all the others. If someone in Bitland DID take out a loan, it would probably have a (rather largely) negative interest rate.
5) Almost forgot… almost everyone in Bitland gets paid in other government issued currencies, and makes most purchases in those gov’t issued currencies, and so only keeps a modest fraction of their net worth in BTC at any given time. (There are few nutters in Bitland who hold everthing in BTC. Diversification, they say, is overrated. They will probably get what’s coming to them, either way.)
So among global currencies, is Bitland’s currency a place to invest? Hell, yeah! At what price? Who knows? Maybe any price. We need an econmist, but too many of them are busy blowing smoke up the ass of Paul Krugman and Felix Salmon.
This confirms my unscientific intuition based on casual observation – that the rise in price is a reaction to a rise in monetary demand. The crash was just the market searching for the appropriate higher price. After the crash, value still double what it was a short time previously.
Interesting look into the business side, with the Dread Pirate Roberts (his real, actual pseudonymn), of Silk Road over at Forbes.
BTW, I too accept bitcoin at: 1CTW4aHZJX2tiNFUTJfynyHeWeZRfE6tbu
The other thing, Jim (if I haven’t gone on long enough), and I’ve brought this up over at Nick Land’s, is the question of whether USG speaks or will speak with one voice on BTC. Until BTC is really ready to displace USD the Global Reserve Currency, which is to say: a really long time, it is hard to see how US Treasury (or Fed) cares much about just another global currency. Ya got yer Euros, ya got yer Swedish Krone, ya got yer Swiss Francs, Japenese Yens… and ya got these BTCs. So what? Yeah, BTCs are unique in that they are not in a race to the bottom with the rest… and yeah, that’s kinda dangerous but, you’d have to see about 2 orders of magnitude rise before the Saudis, Russians, and Chinese decide they want BTC more than USD.
So yeah, Treaury and Secret Service today or eventually want to kill BTC. But what about FBI? The LOOOOOVE the fact that bitcoins aren’t nearly as anonymous as US greenbacks. They round up one dealer, take one look at his wallet.dat and find unique identifying info on every BTC that he’s ever received or spent. Sure, it’s pseudo-anonymous, but two and two can at least get put together. US greenbacks are really REALLY anonymous. So who’s to say the FBI and DEA aren’t pressuring Treasury into laying off a bit?
So, I’m with you contra Moldbug on a number of fronts. And truth be told, I am a little peeved at him for spooking me into a BTC sale back in January around $17 (18.0 BTC @ 17.77). It wasn’t my whole stash, but, damn, that ~$316 would be around $1800 at latest print… I know, I know, UR should not be taken as financial advice. You think anybody actually reads that small print shit, Mencius. When you talk, people listen! </kidding>
Another way of seeing this.
> So what? […] before the Saudis, Russians, and Chinese decide they want BTC more than USD.
Bernanke doesn’t care if the peasants are getting into bitcoin. He won’t care until someone he knows personally wants to go all-in. That is, until someone his monkeybrain identifies as a human and not an abstraction. Equivalently, someone who can legitimately threaten his portfolio by buying into bitcoin and out of whatever he’d prefer.
I’m still a bit fuzzy on who exactly has the power to do the things Bernanke is blamed for, though. Pretty sure it’s mostly not actually Bernanke, I’m just using him as a symbol for some real elite.
Bernanke, with a tiny circle of friends, has the power to loan money out of thin air at ~0bps to a very select group of very rich corporations, who with merely a wink, will buy US Treasury debt and earn ~100bps (averaged over a range of maturities). Whatever else he gets blamed for is surely childish pranks compared to that.
“But, in another sense, bitcoin is better than gold.”
Sunday must be your Left Field Day. Sir that is just irresponsible.
It’s dangerous to move gold from point A to point B – arm yourself.
And not nearly as easy to track as IPs.
It seems that Jim and many august commentators seem to think that bitcoin’s principle advantage is in facilitating purchases of illegal goods, laundering money and tax evasion. I think the reality is a bit more nuanced than that. Yes, bitcoin is pretty good for doing those things, but nowhere near as good as regular ol’ gov’t issued cash.
But cash cannot be sent over the internet. So bitcoin is only a game-changer in the sense that it allows these activities to go on over the internet, with no identifiable faces seen, no suitcases of Ben Franklins, lower risks of getting shot. Overall, raising the quality of life, and the odds of living it, for all involved. Heck, it’s probably even attracting a better socialized and more intelligent criminal class. It’s really win-win…
But the ability to send cash over the internet, bitcoin’s (and now similar currencies like it) ONE and ONLY innovation, works just as well for legitimate uses. It eliminates the trusted third party, to whom the buyer or seller (paypal, credit cards, seller; Western Union, the buyer) owes a percentage fee.
What if it is the legitimate uses that are dominating the growth? Mom-n-pop internet operations owe 2% to paypal, double that if they take CCs. As more and more of them accept BTC, more and more of them will want to. The criminals have to weigh the advantages (not getting shot, expanding markets to internet, etc.) of using bitcoin against the potential costs (more traceable/less anonymous than cash). Legitimate businesses have no such dilemma. Well sure, they have to deal with volatility in the USD or Euro price of BTC, but that will subside as the value of the currency, and the size of the economy behind it, grows.
Here is the hope: the legitimate economy grows fast and large enough to make it politically untenable for the Feds to outright ban bitcoin. If it is largely the domain of scoundrels, they can easily get mainstream media to run cover for such a ban. Fox News and Chuck Shumer will come together as one on the subject… But if, in a month or six or whenever, we can put the long sad faces if cupcake bakers, alpaca socks makers, organic farmers, and strapped local governments (!!) who will get screwed by the ban onto the Propaganda Posters, it will make the Feds’ job much more unpleasant. They may be forced politically to nip around the edges, and by so doing fail to bring down what may only much later become an existential to CBs monopoly on money.
Here is the hope: the legitimate economy grows fast and large enough to make it politically untenable for the Feds to outright ban bitcoin.
I was thinking more or less the same thing. But I think what’s even more important is cultural penetration. The more Bitcoin penetrates culture, the harder it is to vilify, and vilifying it is a necessary precondition to banning it. No public fear of Bitcoin, no ban.
So I’d say we’ve either reached the “untenability” point, or at a minimum we’re well on the way. Bitcoin commerce is hardly anything, but the cultural penetration of Bitcoin is probably sufficient by now that any attempts to threaten it will fail.
Bitcoin prohibition would be about as successful as, er, Prohibition. Time is on our side – the more time passes, the more accepted Bitcoin becomes, the more cultural penetration it achieves, the more commerce is transacted in it, etc.
We just need to keep the cathedral away from it for as long as possible. But I think that even if the cathedral decided to crack down on it, it probably wouldn’t succeed. It’s just that more time would cut the chances of success further, so that’s what we should aim for.
Like I said, no public fear of Bitcoin, no ban – which implies that stoking a public fear of Bitcoin would be the most obvious way for the cathedral to legitimise a crackdown on Bitcoin. So if and when the cathedral starts making noises about how dangerous Bitcoin is (e.g. Schumer’s comments on it two years ago), we’ll know the fix is in.
There is a second alternative: Bit USD. The government launches their own version of digital currency thus removing all legitimate reasons to use Bitcoins.
Guys they’re either going to kill Bitcoins or Bitcoins is going to kill the USG. There’s no way they could collect enough taxes if any sizable portion of the economy switched over to an un-taxible system of commence.
It’s not any more untaxable than any other currency. Not inflatable, but taxes are about coming to your home with a gun and asking for money. That’s not going to change.
Reduces the role of trusted third parties, therefore less taxable.
There’s no way they could collect enough taxes if any sizable portion of the economy switched over to an un-taxible system of commence.
There are huge untaxed black markets in everything, and they haven’t caused the collapse of governments or of tax revenues. There’s no reason to believe that Bitcoins will change this.
Bitcoins are just teleportable gold/dollars. It simply allows existing illegal transactions to become easier, and illegal transactions are already untaxed.
They limit the revenue available to government, at the same time as the ever leftwards movement of government requires ever higher revenues.
I gave BitUSD a bit of thought on the way into work today, and I’m wondering exactly how that would work. For BitUSD to stand in for cash, it would either have to be
a) bitcoin-esque, i.e., P2P not dependent on a third trusted party, and therefore decentralized, and therefore in a very real sense a competitor to USD. US greenbacks would be exchanged for BitUSD and destroyed in the process. But because it was a (presumably) less hard currency (USG would print as many as it wished), it would provide weak competition with bitcoin as a store of value;
or
b) centralized in exactly the same way that paypal and CCs are, except now USG would somehow be carrying the exchange “risk”, for which presumably they would have to charge something close to market rates OR give it away for at a loss. Heck USG would probably find a way to lose money even if they charged a 5% premium.
So, even if USG wanted to compete in this market, it isn’t clear how they could do so in a way that wasn’t counterproductive to their interests (assuming they have any).
In a way, paypal and CCs already are BitUSD; and they’re expensive (relatively speaking) to “send” over the internet.
>>In a way, paypal and CCs already are BitUSD;
Yes they are. And you can see why that BitCoin isn’t needed unless it’s used for illicit and/or un-taxable transactions. If you’re looking for a growth area for bit coin, get some bit coin ATMs going in the state legal marijuana shops. The USG currently doesn’t allow such shops to work as a normal business under the tax code and bitcoin would be a great work around.
The end game for the government is everything being forced into nothing but BitUSD. That gives them total control of the money supply and control over you. I’m sure it will be sold as a way to prevent theft or stop terrorism or racism, ect.
It seems we’re arguing in circles… you’re forgetting the one (and only one) innovation that bitcoin has: Since it solves the double-spending problem, they can be actually, literally, verifiably transferred across the internet. Physical cash is still faster, stabler, harder to trace, more anonymous, and easier to launder for Meatspace economic activity. Bitcoin simply brings some of the advantages that inhere to cash to the internet for the first time. Since it doesn’t require 3rd party verification, which 3rd party requires a percentage fee, bitcoins glide through the internet with almost no financial “friction”, thereby cutting out a very rich, politically connected middle man.
… which makes them at least as advantageous for LICIT activity as for illicit.
Nick,
You’re trading one form of friction for another form that doesn’t have graft attached to it yet. The people who run the exchanges place friction on bitcoins just credit card companies do on each transaction. The high cost of CC transactions is the result of a government sponsored monopoly on fiscal transactions. They keep the system going with gifts(read bribes) to members of the official government. If they ever view bitcoin as a threat to their golden goose they’ll have bitcoin shutdown simply on the basis of graft. So if bitcoin exchanges better start greasing the wheels in Washington if they want to survive which will then raise the cost of using bitcoins to something like current credit card levels.
Well, Mt. Gox charges 0.6% for every trade (USD or BTC), so yes there is some friction getting into and out of BTC, but it is still far cheaper than paypal or CC. That’s my own experience: USD->Dwolla ($0.25 for any amt)->Gox (0.6% trade)->Dwolla->USD. Haven’t done the last two steps yet, so I’m a little fuzzy on what fees will be associated.
Can’t speak for all bitcoin exchanges nor for all avenues into and out of Tokyo-based Mt. Gox, but they basically already have become an agent of USG. $1k/day limits, $10k/mo. BTC limits much higher (in $ value). And I had to provide photo ID and utility bill to get that.
So I think the dream of BTC fostering a new and flourishing drug, gun, and kiddie porn trade is a bit over blown. But I still think it is a profoundly destabilizing technology to extant powers, even if just for presumptively licit exchanges.
BTW, fotrkd over at Jim Land pointed out this article by a NZ guy who, because of the additional FX rake, gets his “friction” reduced by much more than just the standard 2-4%…
I think most people here are in favor of illegal goods, laundering money, and tax evasion, at least for the better class of criminal. I earlier posted that drugs should be illegal for people like Trayvon Martin, because they are apt to pay for the drugs by mugging people like George Zimmerman – mugging people who have jobs, support themselves and support their communities. This implies that drugs should be legal for people like George Zimmerman.
The principle of equality before the law leads to intrusive and unreasonable laws. Because the most inferior people cannot handle freedom, equality before the law leads to freedom being banned for everyone. Then the state finds it is dangerous, unprofitable, and politically inconvenient to enforce these laws on the most inferior people, so they wind up being enforced only on superior people – anarcho tyranny, where laws appropriate for the inferior are not enforced on the inferior (anarchy) but are enforced on the superior (tyranny).
I don’t really disagree with what you say here, Jim. I just meant to point out that the actual innovation of bitcoin, verifiable transfer of property over the internet without a fee-collecting (and gov’t compilant) 3rd party, enriches legitimate businesses at least as much as it enriches illegitimate ones.
For criminal economic activity, bitcoin is substantially DIS-advantaged relative to physical cash, as the former is significantly more traceable and less fungible. The criminal has to weigh this cost against the advantage of doing more business over the internet which enlarges his market as well as makes things safer (for him and the client). After all who welcomes the additional risk meeting a junky in person? I mean, I’m sure most of them are wonderful chaps, but its the baddies that give the rest a bad name.
For the legit online businessman, it’s just win-win (except for BTC’s woeful volatility). He gets to keep that 2-4% rake off the top formerly collected by paypal or CC companies. 2-4% doesn’t sound like a lot to us consumers, but if you’re in a 10% margin business, it IS a big deal.
Governments are unlikely to think so. The trusted third party is an instrument of government control.
I absolutely agree, but the question is what, if anything, does government want to do about it? Or is it even proper to speak of a univocal intention of “government” on the topic? Different arms of gov’t may have different views. It is at least as likely that the FBI and DEA prefer bitcoin be left alone than killed. The reason is obvious: it makes dealers easier to catch, not harder.
And then, even if we do believe USG wants to kill it (eventually, of course, they will)… we still have to answer: Can they get the political cover to do so? And if so, do they actually have the ability to do so, assuming it doesn’t want to die?
The Silk Road trade is NOT going anywhere, for example. Chuck Shumer and all the Devil’s Angels couldn’t shut that down. And if Silk Road continues to insist on BTC, BTC will forever have a non-zero trade value.
Nick B Steves says:
That bitcoin transactions do not need a trusted third party makes it inherently difficult to tax them. Thus the bitcoin economy will always be illegitimate under a government that attempts to tax half of people’s product. Prepare to operate underground.
Yes. Just like cash.
The USG taxes large amount of cash with ease. They simply take it where they find it. Get pulled and have enough cash to buy a car? Cops walk away with it. Even the drug trade is taxed by our government in this manner.
Bitcoins are controlled by secrets, which, though too big to carried in one’s head, are nonetheless small enough to be easy to hide.
If you are carrying enough cash in your car to pay for the car, it is because you are making a transaction over distance, the sort of transaction for which you need a trusted third party, because you don’t want to transport cash over distance. Bitcoin takes out the trusted third party. Police check your car, find nothing, except perhaps a smartphone that contains a large secret hidden by a human memorable secret.
Bitcoins are controlled by secrets, which, though too big to carried in one’s head, are nonetheless small enough to be easy to hide.
That is one elegant line, Jim. And it is absolutely true… but… those secrets are also impossible to erase. One million P2P computers all over the world all agree on the precise chain of custody of every fraction of BTC ever in existence. And if the Feds get one less than carefully guarded BTC address from one seized harddrive, that’s all they’ll need to start connecting dots to suppliers and customers.
You buy some bitcoins with your true name for bitcoin address A.
You go to a bitcoin laundry, and bitcoin address A, openly controlled by you in your true name and tax number, hands the bitcoins in.
Your bitcoin address B, secretly controlled by you, subsequently receives an equal number of coins from the laundry.
Your bitcoin address B does something flagrantly illegal with the coins, which action is not traceable to your true name and tax number.
Well, yeah, that’s how you’d launder BTC… about like you’d launder USD, but the trouble is that the chain of custody from every dirty BTC wallets at B to clean BTC wallets at A is still preserved BY THE ENTIRE NETWORK, FOREVER. If the Feds ever crack open one of those dirty wallets on B’s laptop (who knows criminals may be lazy, not choose good passwords, or choose such good passwords that they have to write them down), then the link to A is unmistakable and the whole operation gets taken down quite rapidly.
Despite all of bitcoins relative advantages for internet spending, this would be in meatspace as if every every federal reserve note, with unique serial number, had a chain of custody written right on it for everyone to see (including millions of people who don’t even know the holder). Sure that chain of custody looks like gibberish, but if law enforcement gets “lucky” and identifies any one of those past owners of a note in your pocket, they might be interested in just how it got into your pocket. If that dude happens to be the most recent previous owner, then you’re just dead to rights.
You can have quite a lot pockets, quite a lot of identities. Any bitcoins coming from someone you would rather not be linked with go into your bad money wallet, and is subsequently laundered into your good money pocket.
I repeat the retort I wrote upthread:
The only way to obtain Bitcoins anonymously is mining. And Bitcoin has two big flaws w.r.t. mining:
a) Mining stops 2033
b) Mining doesn’t use scrypt, thus general purpose computers can’t mine.
The other problem is that mining is only anonymous if you can disassociate your IP address from your identity. The powers that be are rapidly closing such means of doing so:
1. Even if the private key is obtained to insure no man-in-the-middle routers controlled by the powers that be, anonymous relays can be targeted because they allow illegal activities and sit at a fixed host and DNS location long enough to be targeted. Plus we can’t guarantee the relay isn’t compromised.
2. Countries that don’t require identity to obtain telcom access with cash are under pressure to do so. Fake ids still work sometimes, but authorities are learning to put holograms on ids, etc..
3. Hosting and domains can be purchased anonymously using Bitcoin, but surely the powers that be can put a stop to this, because they control the upstream backbone so can force compliance from the top-down for whoever wants to connect to the backbone. This is similar to how they force compliance with USA anti-money laundering laws by using the USA banks as the compliance enforcers.
4. Accessing a WiFi anonymously (with a disguise for any cameras) in a hotel or other establishment that doesn’t log the identity can be outlawed in anti-terrorism laws and if for example the hotel records your identity on checkin then gives a anonymous shared access to the internet, the authorities can correlate which name always checkins to multiple hotels and does the same taboo activities.
5. Accessing WiFi from the street that has not been protected by password is being thwarted by jailing those home and business owners who allow their networks to be accessed anonymously.
6. Spoofing IP if unmanaged colocated host (purchased with your identity) doesn’t egress filter (nor maintain packet logs) is being targeted by campaigns such as spoofer.cmand.org.
7. Tor isn’t anonymous because there is no way to be sure the injection relay isn’t compromised. Even if every peer becomes a relay, the powers that be can flood the system with compromised peers.
One solution is to mine now before the above options end, all coins that will ever be mined anonymously.
I propose another solution based on the notion that it will be very impractical for the authorities to require or make illegal tax reporting on small internet transactions made by billions of people in the third world.
Employ a stationary (hosted) relay executing P2P NAT tunneling to route to an ISP hosted server. The owner of the ISP account can be paid in digital coin to route the mining transaction anonymously. People in the third world countries are looking for easy ways to earn money online. The problem remains how to be sure the relays aren’t compromised, as the authorities could masquerade as relays or compromise the user’s computer.
The solution that is likely to remain open from now into the future is to spread a virus to take control of computers and relay through your controlled zombies.
P.S. note the Diverse Double-Compiling doesn’t solve Trusting Trust if the original compiler was compromised.
Suppose I lie.
Suppose that of the bitcoins that went through the laundry, ninety percent are used to buy stuff that is outright illegal, nine percent is used to buy stuff that legal but apt to attract unwanted attention, and one percent spent on stuff that is legal but embarrassing. Well I spent mine on stuff that is legal but embarrassing. How can you prove I did not?
Excuse me, the onion routing I described previously is similar to what Tor does, except I proposed NAT tunnel support and not limiting to 3 hops.
Tor suffers from traffic analysis attacks because its design prioritizes low-latency, bandwidth conserving, long-lived path sessions in order to provide good interaction for web browsing, interactive applications, and not further burden the insufficient relay bandwidth capacity.
Yet mining is low bandwidth (currently 150K per 10 mins), latency probably isn’t that critical to winning the block (since average difficulty is targeted to 10 mins), and a new session could be created for each block which won’t come every 10 mins for the same miner. Sending spend transactions have the same lower requirements. If there is a source of other (not just Bitcoin use) demand for such a fork of Tor, then anonymity could be possibly improved over Tor.
By getting 2 – 5% of the people using the laundry to make the same lie to the IRS.
More importantly the IRS will compel you to reveal to whom you sent the money, and compel the recipient to make disclosures in a tax audit. The recipient will not want to pay taxes on income they did not get from you. Perhaps the IRS won’t hassle you under some threshold (e.g. less than $600 in unreported transactions), but use of Bitcoin as a significant store-of-value and investment will likely exceed thresholds.
The G20 just announced sweeping plans to cooperate to shut down tax avoidance. This will increase because the G20 needs funding for its socialism.
And if 100% make the same lie, how do they tell which ones are lying.?
It is all deniably encrypted. They can compel, and I will lie.
You ignored my point, which is they can compel you to identify who you sent the money to. You have to provide some identity, else that is grounds for prosecuting you individually (independent of the other liars). Then they go to the identity you provided and compel them. Then it is revealed you are lying. If you provide an identity that doesn’t exist, they can prosecute you. This is no different than how they compel people to provide their decryption passwords. If you say you lost it, they still put you in jail for not keeping records for 5 years. You must keep a record of every identity you spent to for at least 5 years.
Even if the above weren’t true (which it is!), we live in a new world now where the constitution doesn’t exist. All the liars could be lumped together and prosecuted since none of them will reveal which one of them is telling the truth. The Iron Curtain is the end-game of collectivism, and you know it from your writings about megadeath. But the first paragraph above is the stronger reason you can’t lie.
Alas, my software failed to keep any records, so they will just have to take my word for it.
P.S. please see my new detailed comment in your Bitcoin scaling blog article wherein I propose two simultaneous blockchains, one is compressed.
Off to jail you go for not keeping records that you are required by law to keep. That your s/w didn’t do what the law requires you to do, is irrelevant.
There is a lot of civil disobedience going on, not only every individual, but Microsoft under Bill Gates. Reality is that so many people don’t keep records that that law is unenforceable.
Indeed it might go that way, but that will be Madmax with complete failure of the state.
But you take a big risk assuming it will go that way. Homeland security has authority to purchase billions of hollow point bullets and 2714 tanks. 50% of the population depends on the state for some subsistence. Food stamp recipients now outnumber job earners.
Why not be safer and obtain your Bitcoins truly anonymously by mining them over a Chaum mix-net (e.g. Tor) or dc-net?
The answer is because mining is broken in Bitcoin because it doesn’t use scrypt, thus you really can’t project well your ROI on an ASIC at this time.
I am planning on fixing this in an altcoin soon. Finishing my Copute language first.
It is very likely the governments will make an example of some Bitcoin users soon so the masses will never consider not leaving a paper trail. They will wait until Bitcoin starts to come into critical mass, so they don’t kill it. Their objective is to nurture Bitcoin while nipping the mass disobedience in the bud. Bitcoin is structured to be controlled by the elite, because mining rewards end 2033 and thus the large corps will take over mining.
The elite want to end anonymous paper money. 47% in the USA now go more than 1 week without using paper money.
Most of the masses are protected from not keeping records because they use the system which tracks everything.
When the Bitcoin crackdown comes, the altcoin with true anonymity is likely to benefit. So far such an altcoin doesn’t exist.
Citing my source on the 43% (not 47%) who go a week without using paper or coin money.
Here is how to do the decentralized block chains you want.
Promise based money system, essentially debt based with a few extra wrinkles to monitor the issuers of debt.
Successful decentralized implementation requires a successful decentralized reputation management system capable of keeping tabs on large numbers of pseudonymous reputations. Thus, underspecified.
Perhaps you missed the key technical innovation. There is no promise nor debt involved. The innovation was the cross-chain P2P exchange between blockchains. With that, multiple blockchains can exist and be fungible.
Can you suggest a low traffic cyrptography forum for me to announce my altcoin on, so the initial test mining isn’t flooded by too many participants? And so I can’t be accused of premining while testing with a smaller group. If my coin goes big, this smaller group will benefit from the low difficulty in the early mining.
Multiple blockchains are multiple currencies, thereby reducing the scaling problem. Unfortunately, Moldbug’s argument applies: There can only be one.
Flooding is likely to be the least of your problems. The more miners the better.
He is correct because of the nature of unit-of-account versus store-of-value (see linked point #2 specifically). However, there could be others that exist not as the unit-of-account, e.g. ones that are more anonymous but shunned by the majority because they are.
If coins are allowed to be moved between blockchains at par (no market exchange variance) and the blockchains don’t exchange coins at par with any blockchains that don’t adhere, the problem remains that 50% attacking the blockchain with the lowest PoW difficulty will infect with ill effects the blockchains with higher difficulty.
[…] Bitcoin as a speculative bet « Jim’s Blog […]
> Passion of the Christ disproves this. If their primary goal was making money they’d make a lot more movies in the same going catering to different politically incorrect groups.
You are kind of breezing past the caveats I made, but the example you adduce seems rather convincing (apparently it did make tons of money), and perhaps my caveats were too weak.
It is certainly a very fine work of art, too. Very. Far more so than his movie about one of the South Ameroid empires ; that was not much. I’m guessing Braveheart is pretty great, though I must have been about sixteen when I saw it.
In any case we agree Jim’s post is in error. States are more powerful than they are reactive and theatrical. At least, they are in our time. Jim was more in the mood to recognize this ten days ago when he took a diachronic look at state power. Well, like an athlete, we students have our on and our off days.
Our state is pretty screwed up, but not because its not powerful. Heck, it’s even willful, even sound — that represents a high degree of power. But somehow it is only willful about special things like exercising power abroad, as if it weren’t also important and dignified to don at least undies and pants before heading out, and eat a good diet. Somethin’ isn’t right — ahh dooon know how ahh know……. well, technically I guess I do have more than an inkling.
>>In any case we agree Jim’s post is in error. States are more powerful than they are reactive and theatrical. At least, they are in our time. Jim was more in the mood to recognize this ten days ago when he took a diachronic look at state power. Well, like an athlete, we students have our on and our off days.
The exact power of the state is very hard to gauge because almost no one with power is challenging the state. Bitcoin will be a very interesting test. If the state fails to destroy or co-opt it that means the state is very weak and ripe for an over throw. If it easily and permanently shuts it down, then the state is still strong. If it only half asses it such as with the war on drugs, then we’re still in limbo on the power of the state.
Remember too that we’re just starting to enter full police state mode. Most police states are quite strong at their inceptions and quite weak once people get an idea how they work and everyone begins acting like a criminal. Thus bitcoin might have shown up at exactly the right time. I’m sure a lot of people will buy up BTCs like crazy if the state fails to crush it.
RS:
Red:
Consider the Stalinist state: In one sense very strong, since it was hopeless to challenge its power, and it was successful in massive predation. On the other hand, the actual economy was not so much a command economy as an illegal black market economy that the official economy predated upon. The military would raid both the black market economy, and official civilian economy, bandit style, for example setting up hidden ambushes on the roads, stopping trucks, and taking what they wanted from the trucks, thus the Stalinist economy, far from being a centrally planned society, was more an anarcho piratist society with severely unequal bandits, the party state predating upon the army state in a fairly organized manner, the army state predating upon the planners and the supposedly planned economy in a chaotic manner, and the planners predating upon the actual economy in an even more chaotic manner.
Lately I heard a couple of claims that most of what was actually accomplished there in the 30s — as far as heavy industry — was managed and structured by Americans, using their knowledge/experience in techne and perhaps in organization/management/logistics.
I think someone said it was done partly in exchange for gold looted from the church (along with whatever else the church had, I’m guessing), and partly out of coziness of the two high elites. Which I guess means USG/ US high elites paid US engineering firms to do this, and/or the firms themselves worked pro bono in part.
The Russkies sure weren’t scared to fight the Germans though. You gotta give em that. Man, they will really fight you.
It was fight the Germans or get killed by their officers. Until the very last week of the war the Russians were loosing 6 men for every German they killed.
Right, that calls to mind that bleak witticism from some high officer: that it takes a brave man to be a coward in the Red Army.
Though I think that sort of thing goes on pretty often in wars, at least in many of them. Pretty commonplace on the Western front of WWI, I seem to vaguely recall.
There’s a lot to be said about a monarch like Stalin. Nations simply just run better when the right man is at the helm and the inherent problems, bad conditions, and inefficacy only really manifest when the strong ruler dies.
That whole thing sounds pretty wild, man. It doesn’t sound very… economical.
Well it didn’t sit in 100 for long
As a former bitcoin multi-thousandaire (now only thousand-aire), this I know Spandrell.
What is interesting is that Trade/Transaction (my magic chart trick that I didn’t invent) has pancaked. To below 1 for the last two days. To put this in perspective, consider the canonical drug buy: Stoner exchange USD for BTC -> trade BTC for pot -> Dealer exchange BTC back to USD. It should result in a Trade/Transaction of 2. To get below 1 means that exchanges (buying stuff) are happening mostly with BTC already in hand. Investors seem to have fled, actually MORE than fled, the market. But the “economy”, number of transactions, continues (if the charts are to be believed) on the high end of recent normal.
One theory that could explain this is panic buying of stuff with BTC already in hand, and a reticence of vendors to exchange back into gov’t currency. The weak point is that panic buying of stuff with BTC where prices are not very sticky is really the same as panic exchange back into gov’t currency, so why would we see normal transactions and low FX trade?
Disclosure: Long BTC and looking to accumulate.
Good points. I think it’s possible that we might see serial booms and crashes with Bitcoin. The first was mid-2011, the second is now, and I think there might be more, because Bitcoin is still in price-discovery mode and its potential is just starting to be tapped.
The characteristic I’d watch for is each bust’s low to be higher than the previous boom’s peak. As I recall, the June 2011 peak was $31.91 at Mt Gox. The recent low seems to be about $50 or so.
As you say (I hope I’m interpreting your point correctly), actual commerce is holding up well, it’s currency trades that have slumped. That’s a good sign, it means the fundamental value/utility of Bitcoin as an instrument of exchange is holding up, and it’s just nuisance speculators and bubble fodder who have fled the market.
Number of transactions rise, because prices expressed in BTC rise. Sellers generally have confidence that BTC will rise from current lows, so do not trade back into BTC.
Thats right, it’s all in units of BTC, I’d ignored that. But the trade/transaction ratio is dimensionless (BTC/BTC). Still to go below 1 (or even 2) probably means the exchanges have way oversold.
On an administrative side note, I have recently added urban dictionary definitions of “Reaction” and “Reactionary” (with uncredited thanks to Jim, Nick L., and Spandrell) to compete with the crappy/snarky ones they had there. Go over and up vote them if you get the chance… or write even better ones!
A bit long perhaps.
Yep.
http://www.theverge.com/2013/4/17/4236876/bitcoin-exchange-bitfloor-shuts-doors
DDOS and hack attack. Need to reduce central points of failure. The http protocol is a problem.
How many bitcoins do you currently own ? I remember you were around Bitcoin discussions even before its mining software were released.
Few.
Hello Jim:
Been lurking for a while. I’ve read much of what you have said about crypto [currency], and although I’m no genius or source to qualify such: you seem to know what you’re talking about.
Back a few years I read a bit about crypto and really just wanted to jump on the bandwagon (too late for early entry into BTC). I thought that the government (or hidden entities) would eventually have a hook into all transactions anyway, but you know… just in case. I also thought then that Hedera’s hashgraph seemed like the best tech, and if I was already accepting eventual overlord control, Hedera’s list of big name “supporters” (enormous and hugely funded) might then make it a good choice. I blew some USD on HBar.
Would you be willing to provide, or point me to a scenario you agree with, on the likely outcome of all these Coins?
Thanks for your time,
Dave
Thought Crime: Women Misbehave.
You know, I have read hundreds of posts on your blog relating to the basis of women [mis]behaving… and I have yet to see a reasonable physiological explanation – as to why they are held in such disdain. However, let me try and address your “Possible Answers”.
Copied from your “Moderation Policy”
Possible answers to the woman question:
1. Capitalism makes them misbehave, by economically incentivizing reckless high time-reference behavior over long-term planning. The capitalist class benefits from one night stands and sterility, as it benefits from third world immigration of spendthrift cheap labor to replace frugal Whites. If it weren’t for capitali$m, women would totally be completely sinless angels.
2. The (((jews))) make these totally innocent angels misbehave, since the jews own the media and the entire entertainment industry from Hollywood down to the tiniest pornography studio, and use them to direct propaganda at women, telling them to fuck Blacks and lowlifes. There’s no way that pure White women desire to be on OnlyFans to whore for money. The jews forced these angels on that website.
3. Sorry, but this is a misleading question. Women don’t misbehave at all. All misbehavior is done by men, who are vile pigs.
4. Lecherous men make them misbehave, since men are ultimately responsible for all female behavior (including misbehavior), and unlike women, men have self-control and moral agency. Thus it logically follows that any female misbehavior would merely reflect bad decisions taken by irresponsible and lustful men. It is men’s fault entirely, so men must be forced to pay for every bad decision done by any random women.
5 They are feral, blindly following ancient instincts from prehistoric times, which instincts tell them to cruise for rape by alpha male Chads, and to resist kicking-and-screaming all attempts to restrain them from pursuing alpha male Chads. Stable monogamy has always been a way to allow each man to own a woman so each man can start a family and raise a future generation for civilization’s survival.
~~~
Hello Jim:
Been lurking for a while. I’ve read much of what you have said about crypto [currency], and although I’m no genius or source to qualify such: you seem to know what you’re talking about.
Back a few years I read a bit about crypto and really just wanted to jump on the bandwagon (too late for early entry into BTC). I thought that the government (or hidden entities) would eventually have a hook into all transactions anyway, but you know… just in case. I also thought then that Hedera’s hashgraph seemed like the best tech, and if I was already accepting eventual overlord control, Hedera’s list of big name “supporters” (enormous and hugely funded) might then make it a good choice. I blew some USD on HBar.
Would you be willing to provide, or point me to a scenario you agree with, on the likely outcome of all these Coins?
Thanks for your time,
Dave
This does not quite pass the shill test, because you did not pick an answer, nor explain your disagreement with answer five. However, giving you a pass for effort.
Giving answer five by itself, or critiquing it, would have been a proper pass. What is a “physiological explanation”? If you have “yet to see a physiological explanation” what would a physiological explanation be?
Plus we do not disdain women. We love women. Women are wonderful. That red pillers disdain women is a shill meme. Noticing that men and women are different is demonized as “disdain”.
Thanks.
I did not pick an answer because I commented on each of the suggested responses – did you miss those words?
Physiological explanation might include things like: the female brain is different and here is proof. Because of that difference, they will resultantly act this way or that way and here is proof.
“Disdain” is just a word, and accurate as to what I have read from your posters. There is no way an objective reader would translate the miscellaneous [negative] commentary into “We love women”. Clearly women and men are different; mentally and physically – mixed together, socially.
As to #5:
My disagreement, as you call it, lies in, again, your lack of evidence – at least that I have [not] seen relevant to “They are feral, blindly following ancient instincts from prehistoric times…”
Conversely, I explicitly AGREED with “Stable monogamy has always been a way to allow each man to own a woman so each man can start a family and raise a future generation for civilization’s survival.” I believe the second of those two to be self-evident. I will also say that I had always fought the idea of pre-arranged marriage, but after reading all over your site and the links, I am now a fan – especially given the questionable stock of ALL young people, female AND male.
~~~
Thanks for the info on Hedera and its mechanisms – I did not know of those shortcomings – I was attracted to the speed aspect more than anything. Seems then that my HBar is going nowhere (as it has demonstrated for more than a year). You had mentioned in one of your more recent posts about snarks and whatnot… building a robust system for your “coin”. Where does that stand – if you don’t mind an update.
Well obviously the female brain is physically different, though since it is impossible to understand the brain, we cannot come conclude from the physical difference what the behavioural difference will be.
But we can infer from evolutionary psychology what the behavioural difference will be, and these predictions are confirmed by red pill field observation of female behaviour. What works for men, is what evolutionary psychology predicts will work. What women will do, as for example be friendly, cooperative, and obedient after you pass a fitness test, is what evolutionary psychology predicts will work.
Nuts. Give an example of this negative commentary. “Feral” is not a negative comment when applied to wolves, because they are born to be wild, it is negative as applied to dogs, because dogs are born to be raised in human company. And women are born to be raised in patriarchy. So it is not their fault that they are feral, it is just something terrible that happened to them. Which is why they are so angry and unhappy. Women need male authority like a child needs a father, and are not getting it. Noticing the situation is not disdain for women. It is a horrifying situation, it is noticing the elephant in the living room.
“There is an elephant in this living room”
“Waaah, you are showing disdain for my living room”
Within living memory, within my memory, the social order has changed radically in ways that are horrifying, tragic, and terrifying, and everyone is acting like this is normal and nothing is wrong.
Post Modernity is for me like one of those horror movies where one character sees monsters and another character does not, and you wonder if the monsters are real or just delusion, until you see someone get eaten by a monster.
Women are not behaving badly just because they are angry. They are behaving badly because they are being hurt. The red pilled movie critics have been having a field day pointing out the anger at men, fans, the movie mythos, and the classic characters in recent woke movies, such as iron woman and miss marvel, which anger is natural, because these movies are being produced and scripted by literal cat ladies. Iron woman complains about anger resulting from being hit on, but women who are hit on are only pretending to be angry, as becomes obvious if you hold frame and pass the ensuing fitness test. Cat ladies really are angry, and have something to be angry about. Not because of patriarchy, which has been utterly destroyed and inverted, not because of hits that they no longer get, other than hitting the wall, but because the patriarchy, being nonexistent, failed to award them to a good man.
I was really impressed by Hedera, but on further analysis – it is broken. It is based on a transliteration of Practical Fault Tolerant Byzantine Consensus to graph theory, which is a very clever trick, but Practical Fault Tolerant Byzantine Consensus inherently fails to scale to large numbers of peers, open entry, and churn.
With Practical Fault Tolerant Byzantine Consensus you get a definitive result after a finite time. At some point you get a definite consensus and before that. Satoshi consensus relaxes this. You never know for sure which consensus is the correct one, but after the old consensus gets enough new ones piled on top of it, one becomes exponentially more likely, and others exponentially less likely.
As Hedera is implemented, it is vulnerable to the sybil attack, because it relies on weight of IP addresses.
For a graph analysis consensus to work in an environment of open entry and churn, it cannot afford to require peers to know every peer that is online, let alone require any single peer to do whole graph analysis. For such an an algorithm to work at scale, each peer would have to perform the analysis relying only on knowledge of its graph neighbourhood, plus its neighbours summary data about their graph neighbourhood.
Graph analysis algorithms can in principle go a whole lot faster than proof of work satoshi consensus, but I have am not aware of a graph analysis algorithm that scales against churn and also against large numbers of non commutative transactions, such as double spends.
Do you think, then, that the initial technical evaluation of Hedera’s hashgraph was purposely skewed to bury its shortcomings? Just another avenue for the Users to burn their dollars? In particular, if this would scale so poorly, how or why did Hedera gain such big name backers – overlord orders?
No update on your system?
No update – right now I am distracted by struggling with c-lightning, Jitsi, and taxes. Spending too much time on linux sysadmin
The technical evaluation correctly evaluated its strengths. And neglected to assess its weaknesses.
Satosh rejected Practical Byzantine Fault Tolerant Consensus, which was at that time the only useful Byzantine Fault Tolerant consensus algorithm, for a reason.
Thanks.
Ultimately, HBar holders and many other Coins will just be hung out and made worthless in favor of some yet unnamed Unit? The big names will just accept this as a loss – cost of gambling? That’s a lot of USD lost, no?
It’s hard to say if a speculative market will ever emerge for bitcoin. http://www.coinsigner.com
[…] demand for the bitcoin currency is exceeding the rise in exchange price? I told the story on Jim’s blog on April 15 and then gave it the most full-thoated defense I could muster on April 17, 2013, again […]
[…] is not precisely the most neurotypical of the reactosphere, was superb in expressing this idea in a comment at Foseti’s some months […]
I know enough about Bitcoin to know that you are able to provide any rational argument in support of your belief