1.4 million chips and 5,000 Raspberry Pis
April 2, 2014 2:42 PM Subscribe
Dave Carlson runs North America's largest (known) Bitcoin mining operation, taking 10% to 20% all bitcoins made. It was reputed to be mining $8 million dollars a month during the peak prices a few months ago. The operation takes up two warehouses (video) and apparently Carlson has special deals on bulk electricity, near Columbia River hydro-power in Eastern Washington. Carlson partnered with a shadowy Ukrainian known only by his handle "Bitfury" who designed a custom ASIC chip controlled by a Raspberry Pi, "he taught himself microprocessor engineering and designed his chip by hand at his kitchen table".
What a total waste of talent, electricity, and computing resources.
posted by Mitrovarr at 2:57 PM on April 2, 2014 [47 favorites]
posted by Mitrovarr at 2:57 PM on April 2, 2014 [47 favorites]
This is so not sustainable.
It's like someone digitized Libertarianism.
posted by Sphinx at 2:58 PM on April 2, 2014 [43 favorites]
It's like someone digitized Libertarianism.
posted by Sphinx at 2:58 PM on April 2, 2014 [43 favorites]
With Bitcoin, I always imagine trying to explain the whole thing to a visiting alien. I mean, money itself would be hard enough but...
"Well, what we do is we take some black rocks or gas and burn it to boil water, or we flood an area and run water through a small spot, this is all so we get these magnets to turn even if they don't want to. Then we bake sand in to very intricate shapes, which also takes a lot of that fresh-squeezed magnet juice we were talking about earlier. So you put all that magnet-juice in to the sand, and you get certain numbers, and these numbers can be exchanged for food because... well as you can see the numbers are really hard to get! So we figure they must be worth a lot of food."
posted by Pertz at 2:59 PM on April 2, 2014 [141 favorites]
"Well, what we do is we take some black rocks or gas and burn it to boil water, or we flood an area and run water through a small spot, this is all so we get these magnets to turn even if they don't want to. Then we bake sand in to very intricate shapes, which also takes a lot of that fresh-squeezed magnet juice we were talking about earlier. So you put all that magnet-juice in to the sand, and you get certain numbers, and these numbers can be exchanged for food because... well as you can see the numbers are really hard to get! So we figure they must be worth a lot of food."
posted by Pertz at 2:59 PM on April 2, 2014 [141 favorites]
I don't know if I would go so far to say it's a waste but this is the part of bitcoins I hate, it's an artificially inflated currency that people are clinging onto hoping that it becomes mainstream when truthful all someone has to do is offload a ton and it will make them worthless once again. The idea (philosophy?) behind bitcoins where it's a decentralized virtual currency is awesome but after the last bubble, I truly fail to see how it's any different then what people use to do in terms of hording whatever the commodity was (gold for instance). I often compare it to diamonds in the fact that the only reason diamonds are still expensive is because it's been a tightly controlled supply market for so long - it's the same thing with bitcoins.
posted by lpcxa0 at 2:59 PM on April 2, 2014 [2 favorites]
posted by lpcxa0 at 2:59 PM on April 2, 2014 [2 favorites]
More power to him (literally, I guess) but I'm not even remotely tempted to join this gold rush... What a waste, indeed.
posted by RedOrGreen at 3:00 PM on April 2, 2014 [1 favorite]
posted by RedOrGreen at 3:00 PM on April 2, 2014 [1 favorite]
Okay, I read the articles and one thing I do not understand is how he's converting bitcoin to currency. There seems to be a caveat at each mention of his wealth in dollars that it is converted from bitcoin (the number, not the actual bitcoin.) The only clue to actual income, unless I missed something, is that he sells hardware and computing time, and has a magnaminous investor. So, am I reading about a captain of industry here, or the proprietor of the world's biggest tulip farm?
posted by griphus at 3:01 PM on April 2, 2014 [8 favorites]
posted by griphus at 3:01 PM on April 2, 2014 [8 favorites]
I wonder what the overlap between Bitcoin enthusiasts and guys who used to spend a lot of time playing online poker is....it seems like a similar mentality
posted by thelonius at 3:01 PM on April 2, 2014 [2 favorites]
posted by thelonius at 3:01 PM on April 2, 2014 [2 favorites]
Tulips were and are a perfectly legitimate industry.
posted by LogicalDash at 3:05 PM on April 2, 2014 [19 favorites]
posted by LogicalDash at 3:05 PM on April 2, 2014 [19 favorites]
If he is really mining $8 million in Bitcoin per month, then he would owe about $38 million in taxes per year under the IRS rules. Hope he has a way of converting that much Bitcoin into USD because the IRS doesn't accept Bitcoin.
posted by ultraviolet catastrophe at 3:06 PM on April 2, 2014 [18 favorites]
posted by ultraviolet catastrophe at 3:06 PM on April 2, 2014 [18 favorites]
I do not understand is how converte bitcoin to currency.
Watch the video linked in the first comment, starting at about 9:00 minutes. SPOILER: you don't actually get currency, but if you try to convert at the same bar they did you get to listen to some Smashmouth.
posted by benito.strauss at 3:06 PM on April 2, 2014 [3 favorites]
Watch the video linked in the first comment, starting at about 9:00 minutes. SPOILER: you don't actually get currency, but if you try to convert at the same bar they did you get to listen to some Smashmouth.
posted by benito.strauss at 3:06 PM on April 2, 2014 [3 favorites]
Also that $8m figure seems to be based on a valuation of bitcoin at its peak, which is dishonest at best.
posted by griphus at 3:07 PM on April 2, 2014 [1 favorite]
posted by griphus at 3:07 PM on April 2, 2014 [1 favorite]
griphus you use one of these services, all of which have presumably bought into the idea that Bitcoins are going to be a thing long enough that its worth it to provide such services. Maybe not Mt. Gox though, as I think they just declared bankruptcy.
posted by Wretch729 at 3:07 PM on April 2, 2014
posted by Wretch729 at 3:07 PM on April 2, 2014
one thing I do not understand is how convert bitcoin to currency
I think the Bitcoiner's answer to this is that one day Bitcoin will BE currency, so if you just hang on to it until then....
Mmhmm. Anyway, otherwise I think the only large scale conversion option would be to operate as an exchange, selling Bitcoins to many smaller investors for US dollars. It's basically running a whole separate business.
Folks who own small amounts of Bitcoins can sometimes use an exchange to turn them into dollars, although options for that get smaller all the time. Or they can arrange to meet someone in person to make an exchange, which is sometimes successful and sometimes a set-up for armed robbery.
In short: bitcoins, lol.
posted by jess at 3:07 PM on April 2, 2014 [1 favorite]
I think the Bitcoiner's answer to this is that one day Bitcoin will BE currency, so if you just hang on to it until then....
Mmhmm. Anyway, otherwise I think the only large scale conversion option would be to operate as an exchange, selling Bitcoins to many smaller investors for US dollars. It's basically running a whole separate business.
Folks who own small amounts of Bitcoins can sometimes use an exchange to turn them into dollars, although options for that get smaller all the time. Or they can arrange to meet someone in person to make an exchange, which is sometimes successful and sometimes a set-up for armed robbery.
In short: bitcoins, lol.
posted by jess at 3:07 PM on April 2, 2014 [1 favorite]
At least tulips look pretty. Decorating with bitcoins would require a bit more imagination.
posted by T.D. Strange at 3:08 PM on April 2, 2014 [5 favorites]
posted by T.D. Strange at 3:08 PM on April 2, 2014 [5 favorites]
If he is really mining $8 million in Bitcoin per month, then he would owe about $38 million in taxes per year under the IRS rules. Hope he has a way of converting that much Bitcoin into USD because the IRS doesn't accept Bitcoin.
On the other hand, if he doesn't have any way of converting to USD, then he has no income in USD, and thus owes no taxes. Or could I be mistaken?
posted by echo target at 3:08 PM on April 2, 2014 [4 favorites]
On the other hand, if he doesn't have any way of converting to USD, then he has no income in USD, and thus owes no taxes. Or could I be mistaken?
posted by echo target at 3:08 PM on April 2, 2014 [4 favorites]
Also I have to say one of the most surreal experiences I've had recently is watching my friend fill out the capital gains taxes paperwork for the IRS because of the money he made off of what is to me magical pretend reddit money. Weird.
posted by Wretch729 at 3:10 PM on April 2, 2014 [5 favorites]
posted by Wretch729 at 3:10 PM on April 2, 2014 [5 favorites]
Folks who own small amounts of Bitcoins can sometimes use an exchange to turn them into dollars, although options for that get smaller all the time.
How do you reconcile this with the list Wretch729 linked to? Did it used to be twice as long or something?
posted by Mapes at 3:12 PM on April 2, 2014
How do you reconcile this with the list Wretch729 linked to? Did it used to be twice as long or something?
posted by Mapes at 3:12 PM on April 2, 2014
if he doesn't have any way of converting to USD, then he has no income in USD, and thus owes no taxes. Or could I be mistaken?
According to the IRS rules (PDF) released last week, "when a taxpayer successfully 'mines' virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income," so he would owe it regardless of whether he has a way of converting it to USD.
posted by ultraviolet catastrophe at 3:12 PM on April 2, 2014 [23 favorites]
According to the IRS rules (PDF) released last week, "when a taxpayer successfully 'mines' virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income," so he would owe it regardless of whether he has a way of converting it to USD.
posted by ultraviolet catastrophe at 3:12 PM on April 2, 2014 [23 favorites]
What a total waste of talent, electricity, and computing resources.
Indeed. Imagine what those kinds of resources could do applied to, say, protein modeling or drug design, improving the quality of life for many more people. Instead it just pours out waste heat for nothing.
posted by Blazecock Pileon at 3:13 PM on April 2, 2014 [15 favorites]
Indeed. Imagine what those kinds of resources could do applied to, say, protein modeling or drug design, improving the quality of life for many more people. Instead it just pours out waste heat for nothing.
posted by Blazecock Pileon at 3:13 PM on April 2, 2014 [15 favorites]
With Bitcoin, I always imagine trying to explain the whole thing to a visiting alien.
I am that alien. No matter how hard I try to understand it, or how many sources I read about it, I just can't wrap my head around this imaginary money thing that is somehow worth billions of dollars.
posted by mudpuppie at 3:13 PM on April 2, 2014 [13 favorites]
I am that alien. No matter how hard I try to understand it, or how many sources I read about it, I just can't wrap my head around this imaginary money thing that is somehow worth billions of dollars.
posted by mudpuppie at 3:13 PM on April 2, 2014 [13 favorites]
@mitrovar
Transaction costs are a huge reality of the world. If we had a benevolent God who told each of us what to specialize in and buy/sell, that would be optimal. Otherwise we need to not look at all finance/law as a drain, but accept it as a testament to our immense increase in efficiency and lowering of transaction costs.
Was mining gold throughout history for currency a waste of talent and energy? No absolutely not. While it would be nicer to have gold drop from the sky in intervals, we didn't have that. And there was no efficient internet using central bank. So the decentralized system of gold as a currency was a whimsical discovery that allowed us to create a decentralized central bank handled by mother nature herself.
Since that point fiat currency and the wonders of technology have increased efficiency. But in our new age new problems threaten to emerge, such as being tracked. Not to mention demand for a commodity not managed by humans (e.g. metals) has not left. I promise you mining bitcoins is more efficient than mining a metal from an actual mine. And as it is being treated as a modern-day substitute (granted the verdict is still out), it is even in some ways possible to say this might be lowering the opportunity cost of maintaining commodity/value storing currencies!
tl;dr economics isn't easy, but there is a reason those of us who study it see the potential for efficiency in these new systems.
posted by jjmoney at 3:13 PM on April 2, 2014 [11 favorites]
Transaction costs are a huge reality of the world. If we had a benevolent God who told each of us what to specialize in and buy/sell, that would be optimal. Otherwise we need to not look at all finance/law as a drain, but accept it as a testament to our immense increase in efficiency and lowering of transaction costs.
Was mining gold throughout history for currency a waste of talent and energy? No absolutely not. While it would be nicer to have gold drop from the sky in intervals, we didn't have that. And there was no efficient internet using central bank. So the decentralized system of gold as a currency was a whimsical discovery that allowed us to create a decentralized central bank handled by mother nature herself.
Since that point fiat currency and the wonders of technology have increased efficiency. But in our new age new problems threaten to emerge, such as being tracked. Not to mention demand for a commodity not managed by humans (e.g. metals) has not left. I promise you mining bitcoins is more efficient than mining a metal from an actual mine. And as it is being treated as a modern-day substitute (granted the verdict is still out), it is even in some ways possible to say this might be lowering the opportunity cost of maintaining commodity/value storing currencies!
tl;dr economics isn't easy, but there is a reason those of us who study it see the potential for efficiency in these new systems.
posted by jjmoney at 3:13 PM on April 2, 2014 [11 favorites]
Why is paper worth anything just 'cos it's got some guy's head stamped on it? There's nothing to get.
posted by LogicalDash at 3:14 PM on April 2, 2014 [1 favorite]
posted by LogicalDash at 3:14 PM on April 2, 2014 [1 favorite]
Why is paper worth anything just 'cos it's got some guy's head stamped on it? There's nothing to get.
Shhh! Don't ruin it for everybody!!
posted by crazy_yeti at 3:17 PM on April 2, 2014 [4 favorites]
Shhh! Don't ruin it for everybody!!
posted by crazy_yeti at 3:17 PM on April 2, 2014 [4 favorites]
Tulips were and are a perfectly legitimate industry.
As a penny costs almost half a nickle to manufacture, clearly cost of a bit of currency is not directly related to it's viability and use in society. Can a bitcoin be "manufactured" for less than the cost of bitcoin? Or close?
A non-physical non-counterfeit-able internet-transferable currency will certainly be in common usage at some point. The finite limit on the number of coins seems as problematic as the gold standard. I'd think some small banking oriented country would have set one up by now.
posted by sammyo at 3:18 PM on April 2, 2014 [2 favorites]
As a penny costs almost half a nickle to manufacture, clearly cost of a bit of currency is not directly related to it's viability and use in society. Can a bitcoin be "manufactured" for less than the cost of bitcoin? Or close?
A non-physical non-counterfeit-able internet-transferable currency will certainly be in common usage at some point. The finite limit on the number of coins seems as problematic as the gold standard. I'd think some small banking oriented country would have set one up by now.
posted by sammyo at 3:18 PM on April 2, 2014 [2 favorites]
Don't think of bitcoin as money; think of it as a decentralized version of paypal. What's useful about it is not that it stores value, but that it can be used to securely transfer value, globally, with no intermediary.
posted by Mars Saxman at 3:19 PM on April 2, 2014 [13 favorites]
posted by Mars Saxman at 3:19 PM on April 2, 2014 [13 favorites]
Why is paper worth anything
You can say the same of gold, by the way. Show me where in the gold molecule is the "value" part?
posted by thelonius at 3:19 PM on April 2, 2014 [5 favorites]
You can say the same of gold, by the way. Show me where in the gold molecule is the "value" part?
posted by thelonius at 3:19 PM on April 2, 2014 [5 favorites]
I am that alien. No matter how hard I try to understand it, or how many sources I read about it, I just can't wrap my head around this imaginary money thing that is somehow worth billions of dollars.
How is one billion paper US Dollars worth something? It's worth something because it's useful for us to agree that it's worth something. Bitcoin is no more or less imaginary. People had the same arguments about imaginary money when the US Dollar was no longer backed up by gold.
The only difference is that the agreement that the US Dollar is worth something is agreed upon by vastly more people (and is backed up by the ability of the US government to make life unpleasant for people who decide to not agree).
posted by the jam at 3:20 PM on April 2, 2014 [5 favorites]
How is one billion paper US Dollars worth something? It's worth something because it's useful for us to agree that it's worth something. Bitcoin is no more or less imaginary. People had the same arguments about imaginary money when the US Dollar was no longer backed up by gold.
The only difference is that the agreement that the US Dollar is worth something is agreed upon by vastly more people (and is backed up by the ability of the US government to make life unpleasant for people who decide to not agree).
posted by the jam at 3:20 PM on April 2, 2014 [5 favorites]
jjmoney: Not to mention demand for a commodity not managed by humans (e.g. metals) has not left. I promise you mining bitcoins is more efficient than mining a metal from an actual mine.
Yeah, but here's the thing; when you mine metal, you get metal. Gold is super useful for many, many things and someday we'll probably utilize a lot of that gold we dug up. When you mine for numbers you get numbers. And if Bitcoins ever become useless or worthless (which I think is almost guaranteed to occur) all of those numbers are 100% worthless.
Treating the energy used as a 'transaction cost' doesn't help, because bitcoins have a very low number of transactions relative to other currencies, yet use a lot of power. Compared to the digital trading of fiat currancy, the energy efficiency is god-awful. So they lose out there, too.
posted by Mitrovarr at 3:21 PM on April 2, 2014 [8 favorites]
Yeah, but here's the thing; when you mine metal, you get metal. Gold is super useful for many, many things and someday we'll probably utilize a lot of that gold we dug up. When you mine for numbers you get numbers. And if Bitcoins ever become useless or worthless (which I think is almost guaranteed to occur) all of those numbers are 100% worthless.
Treating the energy used as a 'transaction cost' doesn't help, because bitcoins have a very low number of transactions relative to other currencies, yet use a lot of power. Compared to the digital trading of fiat currancy, the energy efficiency is god-awful. So they lose out there, too.
posted by Mitrovarr at 3:21 PM on April 2, 2014 [8 favorites]
one thing I do not understand is how convert bitcoin to currency
I believe you sell it to suckers
posted by fshgrl at 3:22 PM on April 2, 2014 [31 favorites]
I believe you sell it to suckers
posted by fshgrl at 3:22 PM on April 2, 2014 [31 favorites]
It's like someone digitized Libertarianism.
If it keeps Libertarians occupied with something that isn't rolling back our safety standards and good governance and wider consumer protections, then I think I have to come out as "for" it.
If that does not count as a currency being backed by genuine value, what does?
posted by anonymisc at 3:22 PM on April 2, 2014 [15 favorites]
If it keeps Libertarians occupied with something that isn't rolling back our safety standards and good governance and wider consumer protections, then I think I have to come out as "for" it.
If that does not count as a currency being backed by genuine value, what does?
posted by anonymisc at 3:22 PM on April 2, 2014 [15 favorites]
The paper with dead guys on it is worth something because the US government says it's legal tender for all debts, public and private, and enough people believe them (or don't realize you can't actually trade it in for gold from the feds anymore) for it to work, and even be accepted in exchange for goods and services as well.
Bitcoin has value so long as people are willing to believe it does. Same with all mediums of exchange.
posted by Wretch729 at 3:23 PM on April 2, 2014 [6 favorites]
Bitcoin has value so long as people are willing to believe it does. Same with all mediums of exchange.
posted by Wretch729 at 3:23 PM on April 2, 2014 [6 favorites]
You guys do realize that using digital USD for transactions also requires a whole bunch of microprocessors, electricity, and cryptography?
posted by zscore at 3:24 PM on April 2, 2014 [3 favorites]
posted by zscore at 3:24 PM on April 2, 2014 [3 favorites]
If it keeps Libertarians occupied with something that isn't rolling back our safety standards and good governance and wider consumer protections, then I think I have to come out as "for" it.
Bitcoin: a laser pointer for the libertarian cat
posted by brundlefly at 3:24 PM on April 2, 2014 [56 favorites]
Bitcoin: a laser pointer for the libertarian cat
posted by brundlefly at 3:24 PM on April 2, 2014 [56 favorites]
Yeah, but here's the thing; when you mine metal, you get metal. Gold is super useful for many, many things and someday we'll probably utilize a lot of that gold we dug up.
So very little of gold's value comes from this. Gold would only be worth a very small fraction of it's current price if you were only basing things on its use as a physical metal.
posted by the jam at 3:25 PM on April 2, 2014 [3 favorites]
So very little of gold's value comes from this. Gold would only be worth a very small fraction of it's current price if you were only basing things on its use as a physical metal.
posted by the jam at 3:25 PM on April 2, 2014 [3 favorites]
Wretch729:
the important difference is that bitcoin does not demand taxes paid to it in bitcoin, and has no standing army / police force / prison system ready to enforce said paying of taxes. The dollar (as well as any other actually used fiat currency) isn't fiction, it is a strongly worded suggestion backed up with violence.
posted by idiopath at 3:25 PM on April 2, 2014 [8 favorites]
the important difference is that bitcoin does not demand taxes paid to it in bitcoin, and has no standing army / police force / prison system ready to enforce said paying of taxes. The dollar (as well as any other actually used fiat currency) isn't fiction, it is a strongly worded suggestion backed up with violence.
posted by idiopath at 3:25 PM on April 2, 2014 [8 favorites]
Was mining gold throughout history for currency a waste of talent and energy? No absolutely not.
Yes, of course it was. The fact that we need systems for organising the distribution of goods and labour does not mean that many of those systems aren't grossly inefficient at doing so. The systems we've had so far have been the best we've managed to do at the time, but pretending they weren't and aren't wasteful is like pretending that horse carts were as effective as steam engines.
I wonder if the problem with Bitcoin enthusiasts is a tendency to worship the development of all technologies apart from the really relevant technology - the economy.
posted by howfar at 3:27 PM on April 2, 2014 [7 favorites]
Yes, of course it was. The fact that we need systems for organising the distribution of goods and labour does not mean that many of those systems aren't grossly inefficient at doing so. The systems we've had so far have been the best we've managed to do at the time, but pretending they weren't and aren't wasteful is like pretending that horse carts were as effective as steam engines.
I wonder if the problem with Bitcoin enthusiasts is a tendency to worship the development of all technologies apart from the really relevant technology - the economy.
posted by howfar at 3:27 PM on April 2, 2014 [7 favorites]
I really don't understand how leased hashpower is supposed to work. Suppose I pay someone, in BTC, to rent time on their hardware and mine new BTC. If make any net profit, then the hardware owner is losing money by renting it to me rather than just keeping all the coins themselves. If I don't make any net profit, then all the lease does is slowly drain my wallet. There's no way for anyone to benefit unless one party is looking for a complicated way to give away money.
posted by echo target at 3:27 PM on April 2, 2014 [3 favorites]
posted by echo target at 3:27 PM on April 2, 2014 [3 favorites]
Wretch729, actually I think it's that enough people believe in the US' police forces and army's willingness to forcibly maintain the charade... as well as the US Federal Reserve's desire to maintain credibility.
Bitcoinage lacks either of these elements - when the bubble pops, there will be no one around to reinflate it. I just hope lots of scumbag libertarian tax dodgers lose their money.
posted by wilful at 3:31 PM on April 2, 2014 [1 favorite]
Bitcoinage lacks either of these elements - when the bubble pops, there will be no one around to reinflate it. I just hope lots of scumbag libertarian tax dodgers lose their money.
posted by wilful at 3:31 PM on April 2, 2014 [1 favorite]
what's the lead time to get a third party fab to produce a super small production run ASIC? What sort of quantity do you need to produce to make it not prohibitively expensive?
posted by JPD at 3:34 PM on April 2, 2014
posted by JPD at 3:34 PM on April 2, 2014
Was mining gold throughout history for currency a waste of talent and energy?
It was an environmental disaster in Calfornia so bad that hydraulic mining was banned in 1884, eight years before the Sierra Club was founded.
posted by morganw at 3:44 PM on April 2, 2014 [14 favorites]
It was an environmental disaster in Calfornia so bad that hydraulic mining was banned in 1884, eight years before the Sierra Club was founded.
posted by morganw at 3:44 PM on April 2, 2014 [14 favorites]
Oh lawd are we really going to do the whole "what gives a piece of paper with some dead dudes face on it value >:)" thing again?
Is there really a discussion to be had on a currency backed by a world superpower, with a massive military, that controls what currency oil is bought and sold in vs some nerds who can't stop scamming each other and absconding with the loot on the Internet?
That level of discussion makes me feel line im in some bizarroworld message board dedicated to bitcoins where everyone has drank the koolaid. How can anyone rationally look at this and not think it's unsustainable? This is like tech bubble 1.0 stuff.
posted by emptythought at 3:46 PM on April 2, 2014 [12 favorites]
Is there really a discussion to be had on a currency backed by a world superpower, with a massive military, that controls what currency oil is bought and sold in vs some nerds who can't stop scamming each other and absconding with the loot on the Internet?
That level of discussion makes me feel line im in some bizarroworld message board dedicated to bitcoins where everyone has drank the koolaid. How can anyone rationally look at this and not think it's unsustainable? This is like tech bubble 1.0 stuff.
posted by emptythought at 3:46 PM on April 2, 2014 [12 favorites]
Five minutes ago I watched someone buy a lime on IRC using bitcoin.
posted by xiw at 3:52 PM on April 2, 2014 [6 favorites]
posted by xiw at 3:52 PM on April 2, 2014 [6 favorites]
> I really don't understand how leased hashpower is supposed to work. Suppose I pay someone, in BTC, to rent time on their hardware and mine new BTC.
While Nimbus mining through Butterfly takes BTC for mining, my guess is that there's enough fiat currency running into Bitcoin businesses from direct BTC speculators, Bitcoin startup VCs and people looking to conduct black market transactions over the internet that a small amount of fiat can flow out too.
If someone's done an analysis of how much the last BTC from a $multi-million holding might be sold for, I'd like to see it.
Overstock & Tiger aren't taking BTC. They're taking fiat from someone like coinbase (funded with $VC) who's taking BTC.
posted by morganw at 3:53 PM on April 2, 2014 [2 favorites]
While Nimbus mining through Butterfly takes BTC for mining, my guess is that there's enough fiat currency running into Bitcoin businesses from direct BTC speculators, Bitcoin startup VCs and people looking to conduct black market transactions over the internet that a small amount of fiat can flow out too.
If someone's done an analysis of how much the last BTC from a $multi-million holding might be sold for, I'd like to see it.
Overstock & Tiger aren't taking BTC. They're taking fiat from someone like coinbase (funded with $VC) who's taking BTC.
posted by morganw at 3:53 PM on April 2, 2014 [2 favorites]
We got an email from IT today about the fact that someone had been mining bitcoins on a company server and please don't do that. I tried to explain it to one of my co-workers who had never heard of it and I was having the hardest time trying to get my explanation to not sound insane.
posted by octothorpe at 3:54 PM on April 2, 2014 [30 favorites]
posted by octothorpe at 3:54 PM on April 2, 2014 [30 favorites]
echo_target, the owner of the hardware gets money now by leasing it out, while the lessee gets to speculate. The former is lower risk and potentially lower return.
posted by zippy at 3:56 PM on April 2, 2014 [1 favorite]
posted by zippy at 3:56 PM on April 2, 2014 [1 favorite]
I have a completely serious question: can Mt. Gox, having filed bankruptcy, pay its creditors in Bitcoins? If the creditors say no, Bitcoins are worthless, then Mt. Gox doesn't really owe them anything, correct?
posted by SPrintF at 3:57 PM on April 2, 2014 [2 favorites]
posted by SPrintF at 3:57 PM on April 2, 2014 [2 favorites]
> someone had been mining bitcoins on a company server and please don't do that.
Did they fire him immediately? Or is he part of the management team?
posted by bukvich at 3:58 PM on April 2, 2014 [5 favorites]
Did they fire him immediately? Or is he part of the management team?
posted by bukvich at 3:58 PM on April 2, 2014 [5 favorites]
Oh lawd are we really going to do the whole "what gives a piece of paper with some dead dudes face on it value >:)" thing again?
Is there really a discussion to be had on a currency backed by a world superpower, with a massive military, that controls what currency oil is bought and sold in vs some nerds who can't stop scamming each other and absconding with the loot on the Internet?
You don't really mean to suggest that the basis of whether money has value is whether it is issued by a superpower with a massive military that controls what currency oil is bought and sold in.
All that superpower military oil stuff isn't going to lend any value to your paper when you're trying to buy something to eat at 3am in New Zealand. You'll quickly discover that the value you need is found in paper that doesn't have all that superpower oil stuff.
posted by anonymisc at 3:59 PM on April 2, 2014 [4 favorites]
Is there really a discussion to be had on a currency backed by a world superpower, with a massive military, that controls what currency oil is bought and sold in vs some nerds who can't stop scamming each other and absconding with the loot on the Internet?
You don't really mean to suggest that the basis of whether money has value is whether it is issued by a superpower with a massive military that controls what currency oil is bought and sold in.
All that superpower military oil stuff isn't going to lend any value to your paper when you're trying to buy something to eat at 3am in New Zealand. You'll quickly discover that the value you need is found in paper that doesn't have all that superpower oil stuff.
posted by anonymisc at 3:59 PM on April 2, 2014 [4 favorites]
All that superpower military oil stuff isn't going to lend any value to your paper when you're trying to buy something to eat at 3am in New Zealand. You'll find that the value you need is found in paper that doesn't have all that superpower oil stuff.
Yeah, about that
posted by Benjy at 4:00 PM on April 2, 2014 [1 favorite]
Yeah, about that
posted by Benjy at 4:00 PM on April 2, 2014 [1 favorite]
How can anyone rationally look at this and not think it's unsustainable?
The number of miners or amount of mining power doesn't need to sustainably increase, though, does it. The bitcoin network works perfectly well even if 50%, 90%, or 99.9% of the miners stop, because the difficulty of mining adjusts automatically so that the transactional ledger is always updated approximately every 10 minutes.
posted by Mapes at 4:00 PM on April 2, 2014 [1 favorite]
The number of miners or amount of mining power doesn't need to sustainably increase, though, does it. The bitcoin network works perfectly well even if 50%, 90%, or 99.9% of the miners stop, because the difficulty of mining adjusts automatically so that the transactional ledger is always updated approximately every 10 minutes.
posted by Mapes at 4:00 PM on April 2, 2014 [1 favorite]
what's the lead time to get a third party fab to produce a super small production run ASIC? What sort of quantity do you need to produce to make it not prohibitively expensive?
Extreme guesstimating: for a super small run (~10k units) of simple chips, 3 months for a sample run and another 3 months for the actual production? And something like $400k total, with much of that being non-recurring costs (so a follow-up 100k unit run might be $50k instead).
Those numbers are probably low, but it's ballpark.
posted by ReadEvalPost at 4:02 PM on April 2, 2014 [1 favorite]
Extreme guesstimating: for a super small run (~10k units) of simple chips, 3 months for a sample run and another 3 months for the actual production? And something like $400k total, with much of that being non-recurring costs (so a follow-up 100k unit run might be $50k instead).
Those numbers are probably low, but it's ballpark.
posted by ReadEvalPost at 4:02 PM on April 2, 2014 [1 favorite]
I really don't understand how leased hashpower is supposed to work. Suppose I pay someone, in BTC, to rent time on their hardware and mine new BTC.
Yeah, for the person with the hardware, it's all about having guaranteed periodic returns (rent on their chip time). With a couple ASICs you might get a block once a decade, given recent trends. And yeah, that block would be worth a lot, but you have to pay your electricity bills in the meantime. So you join a mining pool, and get a share of the mining output proportional to the amount of computing time you're contributing. Minus a bit for the coordinators of the pool, of course.
posted by kaibutsu at 4:02 PM on April 2, 2014
Yeah, for the person with the hardware, it's all about having guaranteed periodic returns (rent on their chip time). With a couple ASICs you might get a block once a decade, given recent trends. And yeah, that block would be worth a lot, but you have to pay your electricity bills in the meantime. So you join a mining pool, and get a share of the mining output proportional to the amount of computing time you're contributing. Minus a bit for the coordinators of the pool, of course.
posted by kaibutsu at 4:02 PM on April 2, 2014
I have a completely serious question: can Mt. Gox, having filed bankruptcy, pay its creditors in Bitcoins?
It partially will. The problem is that it owes more bitcoins than it owns. That's why it failed for bankruptcy in the first place - it had its bitcoins stolen, not its cash.
posted by anonymisc at 4:03 PM on April 2, 2014 [2 favorites]
It partially will. The problem is that it owes more bitcoins than it owns. That's why it failed for bankruptcy in the first place - it had its bitcoins stolen, not its cash.
posted by anonymisc at 4:03 PM on April 2, 2014 [2 favorites]
Yeah, about that
Historically then, it's been the non-superpower-oil paper that has been the backing of the superpower-oil paper. Even better! ;-)
posted by anonymisc at 4:04 PM on April 2, 2014
Historically then, it's been the non-superpower-oil paper that has been the backing of the superpower-oil paper. Even better! ;-)
posted by anonymisc at 4:04 PM on April 2, 2014
Does every single Metafilter discussion about Bitcoin have to devolve into "why does currency have value"? We've had this conversation literally 10 times here. No one has anything new to say this time. Next up: "Is Bitcoin a scam?"
In the meantime the fabulous articles linked here describe a really interesting compute farm, with odd ASICs and a unique datacenter setup. Not to mention a sort of crazy financing setup. That's a lot more interesting to talk about than sophistry about the economics of value.
posted by Nelson at 4:11 PM on April 2, 2014 [28 favorites]
In the meantime the fabulous articles linked here describe a really interesting compute farm, with odd ASICs and a unique datacenter setup. Not to mention a sort of crazy financing setup. That's a lot more interesting to talk about than sophistry about the economics of value.
posted by Nelson at 4:11 PM on April 2, 2014 [28 favorites]
Overstock is holding 10% of BTC income as BTC.
posted by save alive nothing that breatheth at 4:11 PM on April 2, 2014 [1 favorite]
posted by save alive nothing that breatheth at 4:11 PM on April 2, 2014 [1 favorite]
Did they fire him immediately? Or is he part of the management team?
No one was missing this afternoon so I don't think that there was a firing but we don't know who was the guilty party.
posted by octothorpe at 4:14 PM on April 2, 2014
No one was missing this afternoon so I don't think that there was a firing but we don't know who was the guilty party.
posted by octothorpe at 4:14 PM on April 2, 2014
one thing I do not understand is how convert bitcoin to currency
The only way I know of is -- assuming you bought it -- to trade it back to the person you bought it from, in exchange for money they got from other 'investors.' Yeah.
posted by Sys Rq at 4:15 PM on April 2, 2014 [1 favorite]
The only way I know of is -- assuming you bought it -- to trade it back to the person you bought it from, in exchange for money they got from other 'investors.' Yeah.
posted by Sys Rq at 4:15 PM on April 2, 2014 [1 favorite]
Ah, the tiresome Ponzi scheme comparison, right on schedule. Except that the technology can continue to benefit those who use it, even if not one single additional person buys in.
posted by Mapes at 4:20 PM on April 2, 2014 [2 favorites]
posted by Mapes at 4:20 PM on April 2, 2014 [2 favorites]
No one was missing this afternoon so I don't think that there was a firing but we don't know who was the guilty party.
Maybe he works in the IT department and thus can cover his tracks, like this guy.
posted by Jacqueline at 4:26 PM on April 2, 2014 [4 favorites]
Maybe he works in the IT department and thus can cover his tracks, like this guy.
posted by Jacqueline at 4:26 PM on April 2, 2014 [4 favorites]
According to the IRS rules (PDF) released last week, "when a taxpayer successfully 'mines' virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income," so he would owe it regardless of whether he has a way of converting it to USD.
This is crazy to me. It seems analagous to a famous painter needing to declare as gross income a new painting she makes because it has market value.
When does a non-money something get considered "income"? Where's the line?
posted by wemayfreeze at 4:35 PM on April 2, 2014 [1 favorite]
This is crazy to me. It seems analagous to a famous painter needing to declare as gross income a new painting she makes because it has market value.
When does a non-money something get considered "income"? Where's the line?
posted by wemayfreeze at 4:35 PM on April 2, 2014 [1 favorite]
> You guys do realize that using digital USD for transactions also requires a whole bunch of microprocessors, electricity, and cryptography?
You're comparing a bag of apples to a bag of apples and oranges.
The resource costs of storing and exhanging USD and bitoin online are not dissimilar. The resource costs of mining for $1 worth of bitcoin vs. the Fed declaring that a $1 more of USD exists are somewhat different.
(Not to mention, the cost of producing $1 of bitcoin will become infinite if the currency itself loses all value.)
posted by Foosnark at 4:41 PM on April 2, 2014 [2 favorites]
You're comparing a bag of apples to a bag of apples and oranges.
The resource costs of storing and exhanging USD and bitoin online are not dissimilar. The resource costs of mining for $1 worth of bitcoin vs. the Fed declaring that a $1 more of USD exists are somewhat different.
(Not to mention, the cost of producing $1 of bitcoin will become infinite if the currency itself loses all value.)
posted by Foosnark at 4:41 PM on April 2, 2014 [2 favorites]
wemayfreeze, I'm neither a tax accountant nor a lawyer, but the rules around when stock (company ownership shares) has value are similarly complex and not necessarily intuitive. I believe that there are situations where you have stock or options in a company that has not , that company takes outside investment which means the stock suddenly has value, but it doesn't really because those outside investors are buying based on you thinking that your stock is going to be worth a lot more so you're going to keep working, but suddenly you owe capital gains. Unless you've got all your paperwork just right.
I've been involved in at least one startup where the company lawyer said "you can do anything else you want to with your taxes this year, hell, don't even bother to file, but make absolutely sure that the IRS gets these two forms signed by you. Otherwise when we hit a funding event you are well and truly screwed."
posted by straw at 4:44 PM on April 2, 2014 [3 favorites]
I've been involved in at least one startup where the company lawyer said "you can do anything else you want to with your taxes this year, hell, don't even bother to file, but make absolutely sure that the IRS gets these two forms signed by you. Otherwise when we hit a funding event you are well and truly screwed."
posted by straw at 4:44 PM on April 2, 2014 [3 favorites]
jess: Folks who own small amounts of Bitcoins can sometimes use an exchange to turn them into dollars, although options for that get smaller all the time. Or they can arrange to meet someone in person to make an exchange, which is sometimes successful and sometimes a set-up for armed robbery.Not that I doubt the risk, but has that actually happened already?
posted by Coventry at 4:54 PM on April 2, 2014
the the 'pico stocks' funding paper talking about the project claims the process node is < 65nm. guessing that it's TSMC's 40nm LP process, the NREs there were at least $3 million in 2008. now of course it's ~5 years later but i'd have to guess the NRE must be on the order of $1M.
they seem to have designed something that's reasonably fault-tolerant, so the yields should be pretty good at the cost of reduced performance.
posted by joeblough at 4:56 PM on April 2, 2014 [1 favorite]
they seem to have designed something that's reasonably fault-tolerant, so the yields should be pretty good at the cost of reduced performance.
posted by joeblough at 4:56 PM on April 2, 2014 [1 favorite]
If I were working for the IRS I'd probably be proposing an initiative to trace bitcoins to mining operations, rasing assessments for taxes owing, then seizing mining rigs. Ultimately repeating the process until we had enough hardware under our control to attempt to take over the network. The only justification for this would be to make online libertarians piss themselves; which I will concede falls outside the remit of the Internal Revenue Service or the appropriate functions of government. Still. I would at least workshop the idea it around to my co-workers, see if we could get funding for a feasibility study.
posted by Grimgrin at 4:58 PM on April 2, 2014 [3 favorites]
posted by Grimgrin at 4:58 PM on April 2, 2014 [3 favorites]
I'm halfway through the process of setting up a way for my etsy store to take bitcoins. Not because I really want them or believe in speculating on them, but because I think they're a goofy fad and I want to be able to say to future young people, "Oh yeah, I think I've still got some Bitcoins on a cloud drive somewhere…"
posted by klangklangston at 5:04 PM on April 2, 2014 [1 favorite]
posted by klangklangston at 5:04 PM on April 2, 2014 [1 favorite]
Was mining gold throughout history for currency a waste of talent and energy? No absolutely not.
I guess I have to disagree with you there. Mining gold was, and is, a tremendous waste of resources and a staggeringly large, needless source of environmental degradation for no real purpose whatsoever, once the (relatively small) demand for jewelry and industrial gold is fulfilled. Unlike, say, the mining of iron or tin, where the demand is linked to productive ends and the mining therefore has a sort of arguable cost/benefit analysis to justify its ongoing existence, gold mining largely takes place only because it has been arbitrarily assigned value for largely historic reasons. It's a fiat currency nearly as much as Bitcoins are, albeit a much older one.
One of the main problems with gold-backed currencies is that they assign a disproportionate amount of resources to the mining of gold, far in excess of the actual demand for that particular element in any rational world.
posted by Kadin2048 at 5:05 PM on April 2, 2014 [7 favorites]
I guess I have to disagree with you there. Mining gold was, and is, a tremendous waste of resources and a staggeringly large, needless source of environmental degradation for no real purpose whatsoever, once the (relatively small) demand for jewelry and industrial gold is fulfilled. Unlike, say, the mining of iron or tin, where the demand is linked to productive ends and the mining therefore has a sort of arguable cost/benefit analysis to justify its ongoing existence, gold mining largely takes place only because it has been arbitrarily assigned value for largely historic reasons. It's a fiat currency nearly as much as Bitcoins are, albeit a much older one.
One of the main problems with gold-backed currencies is that they assign a disproportionate amount of resources to the mining of gold, far in excess of the actual demand for that particular element in any rational world.
posted by Kadin2048 at 5:05 PM on April 2, 2014 [7 favorites]
Yeah, I'd ask an indigenous Central or South American how they feel about the input value for mining gold.
posted by klangklangston at 5:06 PM on April 2, 2014 [8 favorites]
posted by klangklangston at 5:06 PM on April 2, 2014 [8 favorites]
one thing I do not understand is how convert bitcoin to currency
Are we really being this willfully ignorant about this? It's an asset; you convert it to currency by selling to someone who wants to buy it. There are exchanges that will help you; here is a link to one.
While you can certainly argue the value is based on speculation, to pretend to not understand how to "convert" them is odd to say the least. Besides the facts that the exchanges are new and unregulated and vulnerable to failure, it's really not very different than dot-com stocks- the companies have value mostly because people agree they do, there's an exchange, buyers buy and sellers sell.
posted by drjimmy11 at 5:07 PM on April 2, 2014 [3 favorites]
Are we really being this willfully ignorant about this? It's an asset; you convert it to currency by selling to someone who wants to buy it. There are exchanges that will help you; here is a link to one.
While you can certainly argue the value is based on speculation, to pretend to not understand how to "convert" them is odd to say the least. Besides the facts that the exchanges are new and unregulated and vulnerable to failure, it's really not very different than dot-com stocks- the companies have value mostly because people agree they do, there's an exchange, buyers buy and sellers sell.
posted by drjimmy11 at 5:07 PM on April 2, 2014 [3 favorites]
I think what creates a lot of confusion for people trying to read this stuff is the talk of "mining bitcoins". Bitcoins aren't like this thing you get - it's like your bank account balance. It's just a balance associated with an id.
So this guy isn't doing the digital equivalent of panning for gold - he's not really "mining" the bitcoins. He's doing useful work for the bitcoin network - he's solving a difficult math problem involving the most recent transactions in the network. The fact that this problem takes a lot of computing power to solve is used by the bitcoin network to "prove" that those transactions were valid at that time, and not faked. In exchange for doing this work, the network awards him with an increased balance of bitcoins, which is part of the protocol everyone agrees to.
Bitcoin could be more than just the digital equivalent of beanie babies though. People are expending all this computing power to create an authoritative distributed transaction log. By inserting pieces of information into that log, you could use the bitcoin network as a kind of digital notary, providing that you know something at a certain point of time. This could be used for example to record predictions, or to prove you had a particular idea at a particular point in time.
posted by heathkit at 5:07 PM on April 2, 2014 [7 favorites]
So this guy isn't doing the digital equivalent of panning for gold - he's not really "mining" the bitcoins. He's doing useful work for the bitcoin network - he's solving a difficult math problem involving the most recent transactions in the network. The fact that this problem takes a lot of computing power to solve is used by the bitcoin network to "prove" that those transactions were valid at that time, and not faked. In exchange for doing this work, the network awards him with an increased balance of bitcoins, which is part of the protocol everyone agrees to.
Bitcoin could be more than just the digital equivalent of beanie babies though. People are expending all this computing power to create an authoritative distributed transaction log. By inserting pieces of information into that log, you could use the bitcoin network as a kind of digital notary, providing that you know something at a certain point of time. This could be used for example to record predictions, or to prove you had a particular idea at a particular point in time.
posted by heathkit at 5:07 PM on April 2, 2014 [7 favorites]
In addition, if you visit the Coinbase website, you'll see how merchants can set up to accept them, which is another way to convert them to goods or services.
I don't own any bitcoins, and I personally think the whole thing is interesting but fraught with serious problems. But that's no reason to willfully fail to understand the very very basics of how the system is meant to work.
posted by drjimmy11 at 5:11 PM on April 2, 2014 [2 favorites]
I don't own any bitcoins, and I personally think the whole thing is interesting but fraught with serious problems. But that's no reason to willfully fail to understand the very very basics of how the system is meant to work.
posted by drjimmy11 at 5:11 PM on April 2, 2014 [2 favorites]
I just hope that higher end amd video cards come down in price sometime in the near future. Which by the way, if you do a search for "mining" in your local city's craigslist for sale section, will show you all sorts of interesting home built bitcoing mining set ups (and often appear to be serious fire hazards).
posted by Mr Mister at 5:11 PM on April 2, 2014
posted by Mr Mister at 5:11 PM on April 2, 2014
How does this all work?
'A' bitcoin is a limited commodity. Supposedly, there will only ever be 12 million Bitcoins (about half have already been 'mined').
People who want to own a bitcoin, or any commodity item, will exchange 'real' money for one in some sort of market.
As observers of that market see that the price people are willing to pay for one bitcoin rise or fall, they will speculate accordingly, hoping that they can 'buy low, sell high' (or sell short, or sell futures, etc.)
Therefore ownership of a bitcoin is 'worth' whatever the next guy will pay you for it. Maybe nothing, maybe a perpetual lease on the Empire State Building.
cf http://en.wikipedia.org/wiki/Greater_fool_theory
posted by bartleby at 5:12 PM on April 2, 2014
'A' bitcoin is a limited commodity. Supposedly, there will only ever be 12 million Bitcoins (about half have already been 'mined').
People who want to own a bitcoin, or any commodity item, will exchange 'real' money for one in some sort of market.
As observers of that market see that the price people are willing to pay for one bitcoin rise or fall, they will speculate accordingly, hoping that they can 'buy low, sell high' (or sell short, or sell futures, etc.)
Therefore ownership of a bitcoin is 'worth' whatever the next guy will pay you for it. Maybe nothing, maybe a perpetual lease on the Empire State Building.
cf http://en.wikipedia.org/wiki/Greater_fool_theory
posted by bartleby at 5:12 PM on April 2, 2014
What happens after the 21 million bitcoins are mined? What's the incentive to keep the computer resources verifying transactions when there are no more bitcoins left to mine?
posted by stbalbach at 5:12 PM on April 2, 2014 [3 favorites]
posted by stbalbach at 5:12 PM on April 2, 2014 [3 favorites]
make absolutely sure that the IRS gets these two forms signed by you.
Those would be 83b election forms. The IRS position on mining strikes me as a little odd, FWIW, but whatever.
posted by jpe at 5:13 PM on April 2, 2014 [1 favorite]
Those would be 83b election forms. The IRS position on mining strikes me as a little odd, FWIW, but whatever.
posted by jpe at 5:13 PM on April 2, 2014 [1 favorite]
...and often appear to be serious fire hazards...
Wait a second, this is just a moonshine still plugged into a broke microwave! I want my money back!
posted by griphus at 5:14 PM on April 2, 2014
Wait a second, this is just a moonshine still plugged into a broke microwave! I want my money back!
posted by griphus at 5:14 PM on April 2, 2014
"The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence. At this point, Bitcoin miners will probably be supported exclusively by numerous small transaction fees."
posted by Mapes at 5:16 PM on April 2, 2014
posted by Mapes at 5:16 PM on April 2, 2014
I've posted this before on another forum, but the following has basically been my takeaway from the last couple of months of bitcoin:
Gox.
Gox (...gox).
Fox.
Fox (...fox).
Box.
Box (...box).
THE GOX FOX FOUND ALL THE COINS IN HIS SOCKS WHICH HE HID IN A BOX FULL OF ROCKS BUT GOT DOXXED BY GUY FAWKES ON HIS WAY TO BUY LOX AT THE DOCKS OH YEAH!
oh yeah...
posted by TheWhiteSkull at 5:23 PM on April 2, 2014 [8 favorites]
Gox.
Gox (...gox).
Fox.
Fox (...fox).
Box.
Box (...box).
THE GOX FOX FOUND ALL THE COINS IN HIS SOCKS WHICH HE HID IN A BOX FULL OF ROCKS BUT GOT DOXXED BY GUY FAWKES ON HIS WAY TO BUY LOX AT THE DOCKS OH YEAH!
oh yeah...
posted by TheWhiteSkull at 5:23 PM on April 2, 2014 [8 favorites]
Wait a second, this is just a moonshine still plugged into a broke microwave! I want my money back!
Now hold on there. Let's have a look inside the still, first.
posted by clockzero at 5:24 PM on April 2, 2014 [2 favorites]
Now hold on there. Let's have a look inside the still, first.
posted by clockzero at 5:24 PM on April 2, 2014 [2 favorites]
You know that reminds of this amazing yard sale deal and that may be exactly what people purchasing bitcoin mining hardware are expecting.
posted by griphus at 5:27 PM on April 2, 2014 [9 favorites]
posted by griphus at 5:27 PM on April 2, 2014 [9 favorites]
Sorry, I call BS to it. Alex Trebek walks up to you on a street corner. He says Warren Buffet has selected YOU to pick ONE of three boxes on a large table. You get to keep, for all time, whatever is in the box you choose. Box 1 is filled with 100 thousand US dollars, Box 2 is filled with 75 oz of 24k gold, box 3 is 50 thousand Bitcoin(s)......you have to choose NOW. Bull freakin shit anyone takes the bitcoins. Hard cash is hard cash.
posted by shockingbluamp at 5:37 PM on April 2, 2014
posted by shockingbluamp at 5:37 PM on April 2, 2014
No, he's actually running his famous live-action version of the prisoner's dilemma. It's a hobby of his.
posted by TheWhiteSkull at 5:49 PM on April 2, 2014 [3 favorites]
posted by TheWhiteSkull at 5:49 PM on April 2, 2014 [3 favorites]
Wow, the amount of dismissal in this thread is really disheartening. Bitcoin is an incredibly interesting thing, an Internet-native currency and an amazing piece of technology — and it, as a concept if not as the currency itself, threatens to upset economic principles that have been in place for centuries. This thread reads like the comments on a science article at Yahoo News.
posted by BlackLeotardFront at 5:51 PM on April 2, 2014 [6 favorites]
posted by BlackLeotardFront at 5:51 PM on April 2, 2014 [6 favorites]
Bull freakin shit anyone takes the bitcoins. Hard cash is hard cash.
Alternative scenario:
You already have heaps and heaps of 24K gold, but all you have is solid gold. Do you keep all your eggs in one basket, or do you diversify into a range of other things?
Alternative scenario 2:
Box 1 is filled with 100 thousand US dollars, Box 2 is filled with 75 oz of 24k gold, box 3 is 50 thousand Bitcoin(s)......you have to choose NOW..... then we release the hounds, and the fence (and safety) is two hundred yards away. If you still have your box with when you get over the fence (IF you get over the fence) IT'S YOURS!!! Cameras are rolling, and... CHOOSE YOUR BOX!
Note: Alternative Scenario 2 is actually a lot more plausible than the scenario you present. :-/
Despite your imagined scenario, real people use real cash to buy bitcoins in the real world. There are more reasons for a transaction than OMG WHICH BOX OF FREE MONIES?!!
posted by anonymisc at 5:51 PM on April 2, 2014
Alternative scenario:
You already have heaps and heaps of 24K gold, but all you have is solid gold. Do you keep all your eggs in one basket, or do you diversify into a range of other things?
Alternative scenario 2:
Box 1 is filled with 100 thousand US dollars, Box 2 is filled with 75 oz of 24k gold, box 3 is 50 thousand Bitcoin(s)......you have to choose NOW..... then we release the hounds, and the fence (and safety) is two hundred yards away. If you still have your box with when you get over the fence (IF you get over the fence) IT'S YOURS!!! Cameras are rolling, and... CHOOSE YOUR BOX!
Note: Alternative Scenario 2 is actually a lot more plausible than the scenario you present. :-/
Despite your imagined scenario, real people use real cash to buy bitcoins in the real world. There are more reasons for a transaction than OMG WHICH BOX OF FREE MONIES?!!
posted by anonymisc at 5:51 PM on April 2, 2014
> But that's no reason to willfully fail to understand the very very basics of how the system is meant to work.
> This thread reads like the comments on a science article at Yahoo News.
The main reason most people don't understand it is that it hasn't been very well explained by media or pundits talking about it. Hell, I had no idea that "mining" meant "verifying transactions" until reading this thread; I figured there was some BS prime number crypto thing that required brute force to calculate, and the first person to unlock a code wins that coin or something.
So yes, it is partially out of ignorance that a lot of people have their opinions on bitcoin. That, plus the hilariously inevitable theft and backstabbing that has widely gone on with it so far.
What happens after the 21 million bitcoins are mined? What's the incentive to keep the computer resources verifying transactions when there are no more bitcoins left to mine?
That's the other part that's confusing. It's not just that no more enters the economy, it's that suddenly an "unofficial" currency no longer can be traded and... loses its value?
posted by Foosnark at 5:53 PM on April 2, 2014
> This thread reads like the comments on a science article at Yahoo News.
The main reason most people don't understand it is that it hasn't been very well explained by media or pundits talking about it. Hell, I had no idea that "mining" meant "verifying transactions" until reading this thread; I figured there was some BS prime number crypto thing that required brute force to calculate, and the first person to unlock a code wins that coin or something.
So yes, it is partially out of ignorance that a lot of people have their opinions on bitcoin. That, plus the hilariously inevitable theft and backstabbing that has widely gone on with it so far.
What happens after the 21 million bitcoins are mined? What's the incentive to keep the computer resources verifying transactions when there are no more bitcoins left to mine?
That's the other part that's confusing. It's not just that no more enters the economy, it's that suddenly an "unofficial" currency no longer can be traded and... loses its value?
posted by Foosnark at 5:53 PM on April 2, 2014
Bitcoin is an incredibly interesting thing
Conceptually fascinating. Pragmatically problematic. I think RSS is one of the greatest things in the world but it only caught on (if it even did) once the tools became usable and understandable to mainstream folks. I'm fine with Bitcoin vanguardists being evangelical about the stuff--activism is activism and it helps move the ball forward--but there are many smart techie people here and elsewhere who say that this does not solve a problem for them and you can call them names all you want but the user-facing stuff with Bitcoin isn't there yet.
I understand and respect the tech. I dislike the way I have to interact with it, so far. Call me when I can spend it on a single real-life thing within 50 miles of me and we'll talk. Otherwise I'm content to just read about it and be curious and interested. I've said this often on this site but everyone isn't just a bad version of (the general) you. People have their own "is this worth it" assessments. If people want this to catch on they have to do more than just holler about how it's going to upset economic principles. That is actually not a selling point to as many people as you might think.
posted by jessamyn at 5:58 PM on April 2, 2014 [23 favorites]
Conceptually fascinating. Pragmatically problematic. I think RSS is one of the greatest things in the world but it only caught on (if it even did) once the tools became usable and understandable to mainstream folks. I'm fine with Bitcoin vanguardists being evangelical about the stuff--activism is activism and it helps move the ball forward--but there are many smart techie people here and elsewhere who say that this does not solve a problem for them and you can call them names all you want but the user-facing stuff with Bitcoin isn't there yet.
I understand and respect the tech. I dislike the way I have to interact with it, so far. Call me when I can spend it on a single real-life thing within 50 miles of me and we'll talk. Otherwise I'm content to just read about it and be curious and interested. I've said this often on this site but everyone isn't just a bad version of (the general) you. People have their own "is this worth it" assessments. If people want this to catch on they have to do more than just holler about how it's going to upset economic principles. That is actually not a selling point to as many people as you might think.
posted by jessamyn at 5:58 PM on April 2, 2014 [23 favorites]
What happens after the 21 million bitcoins are mined?
That's when the IPO phase ends and no more BTC are issued; they can still be traded just fine but you'll have to negotiate a fee with whoever processes/verifies your trade.
posted by ceribus peribus at 6:01 PM on April 2, 2014
That's when the IPO phase ends and no more BTC are issued; they can still be traded just fine but you'll have to negotiate a fee with whoever processes/verifies your trade.
posted by ceribus peribus at 6:01 PM on April 2, 2014
and it, as a concept if not as the currency itself, threatens to upset economic principles that have been in place for centuries
What economic principles are these?
posted by kithrater at 6:03 PM on April 2, 2014 [4 favorites]
What economic principles are these?
posted by kithrater at 6:03 PM on April 2, 2014 [4 favorites]
Bitcoin is at least two different things - the technology and the unit of value - and it's hard to have a discussion about it without being really clear on which aspect you're discussing. Both aspects of bitcoin are complex: the technology, at least, can be easily defined. The unit of value - well, then we go down the rabbit hole of what such a thing actually is.
It's like quantum physics. Is a photon a wave or a particle? Wrong question: a photon is a photon, and you can consider it as either - but only in the right contexts.
Bitcoin-the-technology is genuinely new and genuinely a thing. It has potential and pitfalls like nothing else previously; it will not go away and it will change things. Think of it like the discovery of nuclear physics.
Bitcoin-the-unit-of-value is harder to pin down: it's a product of the technology, like an atomic bomb or a nuclear reactor is a product of nuclear physics. Other products are available: the thing you have in your hands right now may not be a sustainable, useful or desirable thing in its own right.
Right now - the regulators and operators of the current financial way of existence are trying to find a way to deal with both atomic bombs (or, if you prefer, energy-too-cheap-to-meter nuclear power stations) and nuclear physics. The differences are that we can all play along at home, and it won't kill people in large numbers very quickly if we get it wrong. At least as a first order effect. But bitcoin-the-technology has most certainly the potential to change the entire structure of capital flow in our economy, and for a resolutely capitalist culture that is pretty scary stuff.
If you prefer, you can think of analogies in terms of Maxwell's equations and how they changed the cultural landscape through radio stations, or the arrival of IP networks and how that's panning out for all of us in our personal and work lives.
posted by Devonian at 6:05 PM on April 2, 2014 [2 favorites]
It's like quantum physics. Is a photon a wave or a particle? Wrong question: a photon is a photon, and you can consider it as either - but only in the right contexts.
Bitcoin-the-technology is genuinely new and genuinely a thing. It has potential and pitfalls like nothing else previously; it will not go away and it will change things. Think of it like the discovery of nuclear physics.
Bitcoin-the-unit-of-value is harder to pin down: it's a product of the technology, like an atomic bomb or a nuclear reactor is a product of nuclear physics. Other products are available: the thing you have in your hands right now may not be a sustainable, useful or desirable thing in its own right.
Right now - the regulators and operators of the current financial way of existence are trying to find a way to deal with both atomic bombs (or, if you prefer, energy-too-cheap-to-meter nuclear power stations) and nuclear physics. The differences are that we can all play along at home, and it won't kill people in large numbers very quickly if we get it wrong. At least as a first order effect. But bitcoin-the-technology has most certainly the potential to change the entire structure of capital flow in our economy, and for a resolutely capitalist culture that is pretty scary stuff.
If you prefer, you can think of analogies in terms of Maxwell's equations and how they changed the cultural landscape through radio stations, or the arrival of IP networks and how that's panning out for all of us in our personal and work lives.
posted by Devonian at 6:05 PM on April 2, 2014 [2 favorites]
What economic principles are these?
Thou shalt pay Visa two pieces of every transaction thou makest?
posted by anonymisc at 6:06 PM on April 2, 2014
Thou shalt pay Visa two pieces of every transaction thou makest?
posted by anonymisc at 6:06 PM on April 2, 2014
Thou shalt pay Visa two pieces of every transaction thou makest?
"The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence. At this point, Bitcoin miners will probably be supported exclusively by numerous small transaction fees."
Economic principles gonna principle.
posted by kithrater at 6:07 PM on April 2, 2014 [8 favorites]
"The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence. At this point, Bitcoin miners will probably be supported exclusively by numerous small transaction fees."
Economic principles gonna principle.
posted by kithrater at 6:07 PM on April 2, 2014 [8 favorites]
Economic principles gonna principle.
Given the moral choice between paying my fee-money to Visa, or to some quasi-underground drug-running crime gang processing blocks on malware-zombied botrings, this is my "FINALLY! SUCK IT VISA!" face. :)
posted by anonymisc at 6:13 PM on April 2, 2014 [3 favorites]
Given the moral choice between paying my fee-money to Visa, or to some quasi-underground drug-running crime gang processing blocks on malware-zombied botrings, this is my "FINALLY! SUCK IT VISA!" face. :)
posted by anonymisc at 6:13 PM on April 2, 2014 [3 favorites]
Serious question:
Has there ever been a currency that recovered after losing 2/3rds of its value in a few months?
posted by graphnerd at 6:13 PM on April 2, 2014
Has there ever been a currency that recovered after losing 2/3rds of its value in a few months?
posted by graphnerd at 6:13 PM on April 2, 2014
Bitcoin miners will probably be supported exclusively by numerous small transaction fees.
And these fees, they will be kept small because .... the miners love us so much?
posted by benito.strauss at 6:13 PM on April 2, 2014
And these fees, they will be kept small because .... the miners love us so much?
posted by benito.strauss at 6:13 PM on April 2, 2014
Has there ever been a currency that recovered after losing 2/3rds of its value in a few months?
IIRC, Bitcoin did.
The real question is "Has there ever been a currency that recovered after losing 2/3rds of its value in a few months, after having preciously already lost 2/3rds of its value in a few months and recovering?" :)
posted by anonymisc at 6:16 PM on April 2, 2014
IIRC, Bitcoin did.
The real question is "Has there ever been a currency that recovered after losing 2/3rds of its value in a few months, after having preciously already lost 2/3rds of its value in a few months and recovering?" :)
posted by anonymisc at 6:16 PM on April 2, 2014
Given the moral choice between paying my fee-money to Visa, or to some quasi-underground drug-running crime gang processing blocks on malware-zombied botrings, this is my "FINALLY! SUCK IT VISA!" face. :)
Wow, such principle, much upset, so paradigm.
posted by kithrater at 6:17 PM on April 2, 2014
Wow, such principle, much upset, so paradigm.
posted by kithrater at 6:17 PM on April 2, 2014
I find this interesting because one of my last research and writing gigs was on alternative currency, and I still don't understand Bitcoin.
What I got from my research was that it is really difficult to sustain an alternative currency for a long time. Most of them die out.
So more power (!) to the Bitcoin people, I guess, but I won't be investing.
posted by Marie Mon Dieu at 6:21 PM on April 2, 2014
What I got from my research was that it is really difficult to sustain an alternative currency for a long time. Most of them die out.
So more power (!) to the Bitcoin people, I guess, but I won't be investing.
posted by Marie Mon Dieu at 6:21 PM on April 2, 2014
On the one hand, the current system of transferring money (in the US at least) leaves much to be desired, and I think it's good Bitcoin is offering some new solutions. Why do we still have paper checks? Why do bank transfers arbirarily take days on either end? Why does Visa/MasterCard get to skim off money from merchants every time we use a credit card?
On the other hand, I really don't get why an arbitrary FX cross into bitcoins has to be introduced. There is the obvious problem of currency volatility; if you receive bitcoin in exchange for goods, but your costs are in USD, you have huge risk if bitcoin collapses (and vice versa). And unless you trade bitcoin in person, you are still tied to the "old" system in wiring your real money to an exchange and back (not to mention massive credit risk). Is there any way to structure an e-payment system with (most of) the benefits of bitcoin without creating a separate currency?
posted by pravit at 6:22 PM on April 2, 2014
On the other hand, I really don't get why an arbitrary FX cross into bitcoins has to be introduced. There is the obvious problem of currency volatility; if you receive bitcoin in exchange for goods, but your costs are in USD, you have huge risk if bitcoin collapses (and vice versa). And unless you trade bitcoin in person, you are still tied to the "old" system in wiring your real money to an exchange and back (not to mention massive credit risk). Is there any way to structure an e-payment system with (most of) the benefits of bitcoin without creating a separate currency?
posted by pravit at 6:22 PM on April 2, 2014
pravit:
The ubiquitous tool in Kenya is mPesa. It's essentially using your phone balance as a bank account: you can put money on your phone, and take money out from any of the (totally ubiquitous) mpesa-enabled shops. You can also transfer credit quite easily to other people; it initially gained popularity as an easy way for people working in the city to send money back to their families.
It solved lots of problems all at once in Kenya, and since almost everyone has a mobile phone, it was really easy for it to become ubiquitous. There also aren't the kinds of banking regulations in Kenya as there are in the US to run afoul of...
posted by kaibutsu at 6:29 PM on April 2, 2014 [3 favorites]
The ubiquitous tool in Kenya is mPesa. It's essentially using your phone balance as a bank account: you can put money on your phone, and take money out from any of the (totally ubiquitous) mpesa-enabled shops. You can also transfer credit quite easily to other people; it initially gained popularity as an easy way for people working in the city to send money back to their families.
It solved lots of problems all at once in Kenya, and since almost everyone has a mobile phone, it was really easy for it to become ubiquitous. There also aren't the kinds of banking regulations in Kenya as there are in the US to run afoul of...
posted by kaibutsu at 6:29 PM on April 2, 2014 [3 favorites]
I used to work for McDonnell Douglas Payment Systems, and yes, we did indeed skim money off every transaction. .004 cents each, I believe. Because we owned Tymnet, which transferred the data.
Taking cash is free.
But every time someone swipes a card, the merchant, the bank, they all have to pay a fee to the network. Think of it as every time you make a phone call, it goes over a network. Someone has to pay for that. Electronic data transfer is not free. It is faster, yes, but someone has to process the batch transactions in the middle of the night and transfer them from the cardholder's account via the restaurant and the restaurant's merchant account to the varying banks and accounts in question. And it all has to run smoothly. So yes, there is a fee.
There is a reason for fees.
But that does not explain Bitcoin to me.
posted by Marie Mon Dieu at 6:32 PM on April 2, 2014 [1 favorite]
Taking cash is free.
But every time someone swipes a card, the merchant, the bank, they all have to pay a fee to the network. Think of it as every time you make a phone call, it goes over a network. Someone has to pay for that. Electronic data transfer is not free. It is faster, yes, but someone has to process the batch transactions in the middle of the night and transfer them from the cardholder's account via the restaurant and the restaurant's merchant account to the varying banks and accounts in question. And it all has to run smoothly. So yes, there is a fee.
There is a reason for fees.
But that does not explain Bitcoin to me.
posted by Marie Mon Dieu at 6:32 PM on April 2, 2014 [1 favorite]
Sorry, I call BS to it. Alex Trebek walks up to you on a street corner. He says Warren Buffet has selected YOU to pick ONE of three boxes on a large table.
I would like to counter-call BS
posted by clockzero at 6:32 PM on April 2, 2014 [2 favorites]
I would like to counter-call BS
posted by clockzero at 6:32 PM on April 2, 2014 [2 favorites]
Is there any way to structure an e-payment system with (most of) the benefits of bitcoin without creating a separate currency?
Yes, such a massively improved system is not difficult, but the existing players don't want anyone to take away their gravy train and they have immense power to stop you (precisely because of the immense size of their gravy train and how many players are riding on it). So it's the usual obstacles (corruption, ossification, established vested interest) and you see the results all through US systems in every sphere, not just finance. Countries with less corruption and ossification tend to do better on these fronts because vested interests consequently tend to have less power.
posted by anonymisc at 6:34 PM on April 2, 2014
Yes, such a massively improved system is not difficult, but the existing players don't want anyone to take away their gravy train and they have immense power to stop you (precisely because of the immense size of their gravy train and how many players are riding on it). So it's the usual obstacles (corruption, ossification, established vested interest) and you see the results all through US systems in every sphere, not just finance. Countries with less corruption and ossification tend to do better on these fronts because vested interests consequently tend to have less power.
posted by anonymisc at 6:34 PM on April 2, 2014
Has there ever been a currency that recovered after losing 2/3rds of its value in a few months?
Bitcoin, multiple times. People are cashing out now to pay taxes. It'll go back up around June-ish, I think.
posted by empath at 6:35 PM on April 2, 2014
Bitcoin, multiple times. People are cashing out now to pay taxes. It'll go back up around June-ish, I think.
posted by empath at 6:35 PM on April 2, 2014
Nearly everyone complaining about Bitcoin mining millionaires is insanely jealous and will say anything to feel better about missing what was 'obvious' (not obvious, and rarer than winning the lottery, so relax.)
In a world full of criminals, unethical business activities and government corruption, making money by winning a faddish electricity-spending race contrasts favorably.
posted by michaelh at 6:36 PM on April 2, 2014 [1 favorite]
In a world full of criminals, unethical business activities and government corruption, making money by winning a faddish electricity-spending race contrasts favorably.
posted by michaelh at 6:36 PM on April 2, 2014 [1 favorite]
I am very much in favor of the idea of cryptocurrency and I'm not even that worried about what's backing it, necessarily, because done right it should have features that give it obvious appeal. But the inherently deflationary nature of Bitcoin has always seemed like a bad idea that will inevitably screw the whole thing up.
posted by atoxyl at 6:38 PM on April 2, 2014 [1 favorite]
posted by atoxyl at 6:38 PM on April 2, 2014 [1 favorite]
If there are any actual millionaires in USD, yes, I am definitely jealous of them. The millionaires in Bitcoin I am just sort of tilting my head at like a dog confused by a washing machine changing cycles.
posted by griphus at 6:39 PM on April 2, 2014 [6 favorites]
posted by griphus at 6:39 PM on April 2, 2014 [6 favorites]
So which would provide more returns for initial investment in privately owned solar or wind electricity generation: bitcoin mining, or a grow-op?
posted by TheWhiteSkull at 6:40 PM on April 2, 2014 [1 favorite]
posted by TheWhiteSkull at 6:40 PM on April 2, 2014 [1 favorite]
Has there ever been a currency that recovered after losing 2/3rds of its value in a few months?
Deutschemark?
posted by thelonius at 6:42 PM on April 2, 2014
Deutschemark?
posted by thelonius at 6:42 PM on April 2, 2014
Okay so Alex Trebek comes up to you with two boxes and one has 50K bitcoin in it and the other has a lid of some kine bud.
You don't have to pick or anything, this is just what hanging out with Alex Trebek is like.
posted by griphus at 6:44 PM on April 2, 2014 [28 favorites]
You don't have to pick or anything, this is just what hanging out with Alex Trebek is like.
posted by griphus at 6:44 PM on April 2, 2014 [28 favorites]
Right, griphus. If people think Bitcoins are worth something, they're jealous of owning lots of Bitcoins (rare.) If not, then just of the ones who sold at a good rate (extremely rare.)
posted by michaelh at 6:45 PM on April 2, 2014
posted by michaelh at 6:45 PM on April 2, 2014
Don't think of bitcoin as money; think of it as a decentralized version of paypal. What's useful about it is not that it stores value, but that it can be used to securely transfer value, globally, with no intermediary.
Except, AFAIK, it is a really inefficient and limited way to do that. Updating the blockchain consumes a lot of resources; all the mining resources people are talking about are actually blockchain processing resources that happen to be paid (for now) from seigniorage. Even with that BTC has a very limited number of transactions it can process per day. Right now that isn't a problem, mostly because so few people use it for transactions. My understanding is that the majority of BTC denominated transactions happen in what are basically BTC denominated paypals that don't hit the blockchain except for withdrawls / deposits. BTC enthusiasts handwave moore's law to solve this problem, but I am not as sure.
The idea that BTC will stay decentralized isn't so compelling either. My understanding is that you already have large mining groups as the dominant forces because you can smooth out your rough returns and perhaps have slightly more efficient mining. Once you get 30% you can start doing hijinks, and once you get 50% of compute you can really screw people over. Those aren't theoretical concerns; there were realized concentrations in that neighborhood this year. The specialized hardware requirements mean that this is quickly going to be a big-player game and not massively decentralized.
Finally, once the coins stop rolling and you have to pay a fee to get on the blockchain updates, the illusion of no intermediary is gone.
posted by a robot made out of meat at 6:56 PM on April 2, 2014 [3 favorites]
Except, AFAIK, it is a really inefficient and limited way to do that. Updating the blockchain consumes a lot of resources; all the mining resources people are talking about are actually blockchain processing resources that happen to be paid (for now) from seigniorage. Even with that BTC has a very limited number of transactions it can process per day. Right now that isn't a problem, mostly because so few people use it for transactions. My understanding is that the majority of BTC denominated transactions happen in what are basically BTC denominated paypals that don't hit the blockchain except for withdrawls / deposits. BTC enthusiasts handwave moore's law to solve this problem, but I am not as sure.
The idea that BTC will stay decentralized isn't so compelling either. My understanding is that you already have large mining groups as the dominant forces because you can smooth out your rough returns and perhaps have slightly more efficient mining. Once you get 30% you can start doing hijinks, and once you get 50% of compute you can really screw people over. Those aren't theoretical concerns; there were realized concentrations in that neighborhood this year. The specialized hardware requirements mean that this is quickly going to be a big-player game and not massively decentralized.
Finally, once the coins stop rolling and you have to pay a fee to get on the blockchain updates, the illusion of no intermediary is gone.
posted by a robot made out of meat at 6:56 PM on April 2, 2014 [3 favorites]
More to the point than the US being a military power, it is a country where the state has the power of law enforcement and reasonably robust resources for enforcing tax and currency laws and regulating financial services, so it's not so much that the US could nuke New Zealand tomorrow that matters as the fact that if you don't pay taxes on your BTC mining, you are going to go to jail.
posted by spitbull at 7:12 PM on April 2, 2014 [1 favorite]
posted by spitbull at 7:12 PM on April 2, 2014 [1 favorite]
Wired has an article this month and they described a scene at a dinner table with a bunch of wealthy VCs. One of the VCs asked everyone to download a Bitcoin wallet to their smartphones (they had otherwise never used Bitcoin before). He then transfered $250,000 to the person sitting next to him by way of one phone taking a picture of the other phone's generated QR code. In this way the 250 grand was transferred around the table, from person to the next, back to the original owner. That is pretty remarkable because it is the dream of a purely electronic currency with no transaction fees as easy (or easier) to use as cash. Why do we need cash anymore? Of course cash will never disappear, but it may become as quaint as local radio, daily newspaper delivery and phone books to future generations, a sort of niche product of a former age. I suspect the thing holding Bitcoin back is not any technical flaw, but the timing is not right for mass acceptance that cash is old school, but it will come, and that is what the Bitcoin holders are banking on.
posted by stbalbach at 7:14 PM on April 2, 2014
posted by stbalbach at 7:14 PM on April 2, 2014
Mars Saxman: Don't think of bitcoin as money; think of it as a decentralized version of paypal. What's useful about it is not that it stores value, but that it can be used to securely transfer value, globally, with no intermediary.
Yeah, a version of paypal with absolutely no protections for either a buyer or a seller of any kind, nor any protections against money laundering, tax evasion, or other illegal activity. It would be a terrible idea for anyone to use it who wasn't a criminal, except maybe as a niche thing for microtransactions.
That's one of the things that annoys me the most about bitcoin - the idea that a service that allows people to securely transfer value, globally, with no intermediary, would be a good thing. You know, instead of something that would enable about a million kinds of illegal activity, most of which is the kind of thing that's illegal for excellent reasons. The idea that you can't transfer money globally without it being tracked and regulated by government isn't a bad thing, and something that lets you bypass that is only going to make the world a worse place.
posted by Mitrovarr at 7:16 PM on April 2, 2014 [4 favorites]
Yeah, a version of paypal with absolutely no protections for either a buyer or a seller of any kind, nor any protections against money laundering, tax evasion, or other illegal activity. It would be a terrible idea for anyone to use it who wasn't a criminal, except maybe as a niche thing for microtransactions.
That's one of the things that annoys me the most about bitcoin - the idea that a service that allows people to securely transfer value, globally, with no intermediary, would be a good thing. You know, instead of something that would enable about a million kinds of illegal activity, most of which is the kind of thing that's illegal for excellent reasons. The idea that you can't transfer money globally without it being tracked and regulated by government isn't a bad thing, and something that lets you bypass that is only going to make the world a worse place.
posted by Mitrovarr at 7:16 PM on April 2, 2014 [4 favorites]
Right now that isn't a problem, mostly because so few people use it for transactions.
It won't be as much of a problem in the future because it's a software limit. Mining has already been centralized into asic farms, which basically means that bandwidth and storage caps are more or less moot. They can turn on the firehouse of more transactions with a software update.
posted by empath at 7:24 PM on April 2, 2014
It won't be as much of a problem in the future because it's a software limit. Mining has already been centralized into asic farms, which basically means that bandwidth and storage caps are more or less moot. They can turn on the firehouse of more transactions with a software update.
posted by empath at 7:24 PM on April 2, 2014
He then transfered $250,000 to the person sitting next to him by way of one phone taking a picture of the other phone's generated QR code.
Based on what though? I don't doubt that they easily sent bitcoin around a table, but based on what was it $250K USD? And at what moment in time? The currency is volatile enough that it could've become $200K or $300K during even the short period of that experiment. There are bigger problems to a volatile currency being used almost exclusively for speculation than people not being ready to adopt it.
posted by griphus at 7:27 PM on April 2, 2014 [2 favorites]
Based on what though? I don't doubt that they easily sent bitcoin around a table, but based on what was it $250K USD? And at what moment in time? The currency is volatile enough that it could've become $200K or $300K during even the short period of that experiment. There are bigger problems to a volatile currency being used almost exclusively for speculation than people not being ready to adopt it.
posted by griphus at 7:27 PM on April 2, 2014 [2 favorites]
That's one of the things that annoys me the most about bitcoin - the idea that a service that allows people to securely transfer value, globally, with no intermediary, would be a good thing.
I think one of the under-appreciated aspects of cryptocurrency is that it actually does more than that -- it allows decisions about money to be made by decentralized, anonymous programs. You can code algorithms into the blockchain that enable contracts and so on. It's something that's barely been touched on so far. You could have an ai corporation making purchasing and decisions, collecting money, etc without any human oversight at all.
posted by empath at 7:27 PM on April 2, 2014 [2 favorites]
I think one of the under-appreciated aspects of cryptocurrency is that it actually does more than that -- it allows decisions about money to be made by decentralized, anonymous programs. You can code algorithms into the blockchain that enable contracts and so on. It's something that's barely been touched on so far. You could have an ai corporation making purchasing and decisions, collecting money, etc without any human oversight at all.
posted by empath at 7:27 PM on April 2, 2014 [2 favorites]
empath: I think one of the under-appreciated aspects of cryptocurrency is that it actually does more than that -- it allows decisions about money to be made by decentralized, anonymous programs.
Hmm. On one hand, we could have decisions about our currency being made by anonymous programs, probably coded into the system by the libertarians who made the currency, and who are allowed to benefit from manipulating the currency. On the other hand, we could have decisions made my our constitutional, representative democracy. I wonder which one would better represent the interests of the people.
I appreciate that our government has problems, a large one of which is that it's largely in the pocket of moneyed interests, but I don't think it would be an improvement to put those decisions in the hands of some other group which has absolutely no accountability, nor any reason to be anything but owned by those moneyed interests.
posted by Mitrovarr at 7:43 PM on April 2, 2014 [5 favorites]
Hmm. On one hand, we could have decisions about our currency being made by anonymous programs, probably coded into the system by the libertarians who made the currency, and who are allowed to benefit from manipulating the currency. On the other hand, we could have decisions made my our constitutional, representative democracy. I wonder which one would better represent the interests of the people.
I appreciate that our government has problems, a large one of which is that it's largely in the pocket of moneyed interests, but I don't think it would be an improvement to put those decisions in the hands of some other group which has absolutely no accountability, nor any reason to be anything but owned by those moneyed interests.
posted by Mitrovarr at 7:43 PM on April 2, 2014 [5 favorites]
He then transfered $250,000 to the person sitting next to him by way of one phone taking a picture of the other phone's generated QR code.
Here's the article.
It's a neat demonstration. But, I can write a cheque for $250,000, and pass it around the table. Would you rather the cheque, or the bitcoins? Which do you think would be easier and faster to turn into actual currency in your hand?
Still not finding any shattered economic principles. There's bound to be the pieces of one around here somewhere.
posted by kithrater at 7:47 PM on April 2, 2014 [4 favorites]
Here's the article.
It's a neat demonstration. But, I can write a cheque for $250,000, and pass it around the table. Would you rather the cheque, or the bitcoins? Which do you think would be easier and faster to turn into actual currency in your hand?
Still not finding any shattered economic principles. There's bound to be the pieces of one around here somewhere.
posted by kithrater at 7:47 PM on April 2, 2014 [4 favorites]
Wired has an article this month and they described a scene at a dinner table with a bunch of wealthy VCs. One of the VCs asked everyone to download a Bitcoin wallet to their smartphones (they had otherwise never used Bitcoin before). He then transfered $250,000 to the person sitting next to him by way of one phone taking a picture of the other phone's generated QR code. In this way the 250 grand was transferred around the table, from person to the next, back to the original owner.
You know, after they waited around for the transaction to confirm at each step.
http://blockchain.info/charts/avg-confirmation-time
It may be great for transferring $250,000, but I'm not going to sit around for 6 minutes waiting to start pumping my gas. And there's a hell of a lot more of those transactions than there are rich guys sitting around running up a bar tab while they text each other 5 times the median household income.
posted by Benjy at 7:53 PM on April 2, 2014 [4 favorites]
You know, after they waited around for the transaction to confirm at each step.
http://blockchain.info/charts/avg-confirmation-time
It may be great for transferring $250,000, but I'm not going to sit around for 6 minutes waiting to start pumping my gas. And there's a hell of a lot more of those transactions than there are rich guys sitting around running up a bar tab while they text each other 5 times the median household income.
posted by Benjy at 7:53 PM on April 2, 2014 [4 favorites]
Not that I doubt the risk, but has [in-person bitcoin theft] actually happened already?
Indeed it has! I can think of two cases off the top of my head. One was a fellow who was trying to sell his bitcoins and the other was someone who agreed over craigslist to meet in person and buy a set of headphones with his bitcoins. (To be fair the second case wasn't armed robbery, but robbery nonetheless.)
How do you reconcile this with the list Wretch729 linked to? Did it used to be twice as long or something?
That list is not an entirely accurate representation of the current exchange options, in my opinion. Other people have already mentioned that Mt.Gox, one of the largest exchanges, recently went bankrupt. Another one on that list, for example, won't let you withdraw USD but instead exchanges your BTC for Linden Dollars, the very volatile currency used in Second Life, and then you can sell your Linden Dollars for USD.
posted by jess at 8:02 PM on April 2, 2014 [1 favorite]
Indeed it has! I can think of two cases off the top of my head. One was a fellow who was trying to sell his bitcoins and the other was someone who agreed over craigslist to meet in person and buy a set of headphones with his bitcoins. (To be fair the second case wasn't armed robbery, but robbery nonetheless.)
How do you reconcile this with the list Wretch729 linked to? Did it used to be twice as long or something?
That list is not an entirely accurate representation of the current exchange options, in my opinion. Other people have already mentioned that Mt.Gox, one of the largest exchanges, recently went bankrupt. Another one on that list, for example, won't let you withdraw USD but instead exchanges your BTC for Linden Dollars, the very volatile currency used in Second Life, and then you can sell your Linden Dollars for USD.
posted by jess at 8:02 PM on April 2, 2014 [1 favorite]
a volatile currency being used almost exclusively for speculation
and pancakes and waffles
It's a neat demonstration. But, I can write a cheque for $250,000
Then write a check if you want. It's the same conversation as digital vs paper book, do whatever you want. It's just another tool.
I'm not going to sit around for 6 minutes waiting to start pumping my gas
Then don't use them. Or use it for something else besides gas. Like pancakes and waffles.
posted by stbalbach at 8:14 PM on April 2, 2014
and pancakes and waffles
It's a neat demonstration. But, I can write a cheque for $250,000
Then write a check if you want. It's the same conversation as digital vs paper book, do whatever you want. It's just another tool.
I'm not going to sit around for 6 minutes waiting to start pumping my gas
Then don't use them. Or use it for something else besides gas. Like pancakes and waffles.
posted by stbalbach at 8:14 PM on April 2, 2014
Yeah, a version of paypal with absolutely no protections for either a buyer or a seller of any kind, nor any protections against money laundering, tax evasion, or other illegal activity.
What, you mean, like.... cash? But more secure, since there's a global, verifiable ledger of transactions?
posted by Mars Saxman at 8:22 PM on April 2, 2014 [2 favorites]
What, you mean, like.... cash? But more secure, since there's a global, verifiable ledger of transactions?
posted by Mars Saxman at 8:22 PM on April 2, 2014 [2 favorites]
Okay so Alex Trebek comes up to you with two boxes and one has 50K bitcoin in it and the other has a lid of some kine bud.
You don't have to pick or anything, this is just what hanging out with Alex Trebek is like.
Then he shows you his boat, his buzzer-actuated hookah, oh this is turning into a Leonard Cohen song
posted by clockzero at 8:45 PM on April 2, 2014 [5 favorites]
You don't have to pick or anything, this is just what hanging out with Alex Trebek is like.
Then he shows you his boat, his buzzer-actuated hookah, oh this is turning into a Leonard Cohen song
posted by clockzero at 8:45 PM on April 2, 2014 [5 favorites]
I'm loving this discussion about the philosophy of money.
The thing that triggered me is the "cheap hydro power" bit, which, living near the Columbia river and voluntarily paying extra to my power company (Enron rebranded) to get renewable power, because a whole bunch of the power up here still needs to be generated with gas and coal-burning plants. Yet somehow there is cheap Hydro if you've got the right connections? WHA?? I sorta understood it back in the aluminum smelting days, but today? For tulip-mining? (excuse me while I go breathe into a paper bag)
posted by dylanjames at 8:53 PM on April 2, 2014 [1 favorite]
The thing that triggered me is the "cheap hydro power" bit, which, living near the Columbia river and voluntarily paying extra to my power company (Enron rebranded) to get renewable power, because a whole bunch of the power up here still needs to be generated with gas and coal-burning plants. Yet somehow there is cheap Hydro if you've got the right connections? WHA?? I sorta understood it back in the aluminum smelting days, but today? For tulip-mining? (excuse me while I go breathe into a paper bag)
posted by dylanjames at 8:53 PM on April 2, 2014 [1 favorite]
I can write a cheque for $250,000, and pass it around the table. Would you rather the cheque, or the bitcoins?
Well obviously the bitcoin. A cheque isn't money until it's been honoured by a bank. I can see a Bitcoin transaction is legal (i.e. the funds are available) instantly, and the transaction becomes irreversible within a few minutes.
posted by topynate at 8:54 PM on April 2, 2014 [1 favorite]
Well obviously the bitcoin. A cheque isn't money until it's been honoured by a bank. I can see a Bitcoin transaction is legal (i.e. the funds are available) instantly, and the transaction becomes irreversible within a few minutes.
posted by topynate at 8:54 PM on April 2, 2014 [1 favorite]
Bitcoin in a nutshell: A clever mathematician or two worked out a great replacement for cash on the internet. Internet Libertarian types have mistaken this as being a replacement for gold.
posted by DoctorFedora at 8:55 PM on April 2, 2014 [9 favorites]
posted by DoctorFedora at 8:55 PM on April 2, 2014 [9 favorites]
He then transfered $250,000 to the person sitting next to him by way of one phone taking a picture of the other phone's generated QR code. In this way the 250 grand was transferred around the table, from person to the next, back to the original owner.
Not a smart move. Any transactions of over $13,000 in fair market value are subject to gift tax. Everyone in that room should be taking $233,000 off of their lifetime exemption, no?
posted by Ndwright at 9:00 PM on April 2, 2014 [5 favorites]
Not a smart move. Any transactions of over $13,000 in fair market value are subject to gift tax. Everyone in that room should be taking $233,000 off of their lifetime exemption, no?
posted by Ndwright at 9:00 PM on April 2, 2014 [5 favorites]
Mars Saxman: What, you mean, like.... cash? But more secure, since there's a global, verifiable ledger of transactions?
Introduction a form of uncontrolled cash to the internet has the same problems I mentioned above (i.e. it's a gift for criminal activity). Also, people aren't treating it like cash. Bitcoins would be a lot less insane if people kept their Bitcoins in accredited, insured banks and used Bitcoin credit and debit cards with consumer protections for online transactions. Instead, their keep all of their coins on their hard drives or in dodgy unprotected institutions online and transfer them directly without intermediaries. Which is ok if you're buying a burger for $6 but stupid if you're buying something for hundreds of dollars and flat-out crazy if you're buying something big, like a car.
Basically, it's the digital equivalent of keeping all of your money in a pile under your bed and doing business with suitcases of cash, and there's an excellent reason that a almost nobody does that in first-world countries except drug dealers and some poor people who can't get accounts at banks - it's because it's a terrible idea. Making the cash digital only makes it worse, because your computer is easier to break into than your house and it's easier to rip you off when it's not in person.
posted by Mitrovarr at 9:14 PM on April 2, 2014 [2 favorites]
Introduction a form of uncontrolled cash to the internet has the same problems I mentioned above (i.e. it's a gift for criminal activity). Also, people aren't treating it like cash. Bitcoins would be a lot less insane if people kept their Bitcoins in accredited, insured banks and used Bitcoin credit and debit cards with consumer protections for online transactions. Instead, their keep all of their coins on their hard drives or in dodgy unprotected institutions online and transfer them directly without intermediaries. Which is ok if you're buying a burger for $6 but stupid if you're buying something for hundreds of dollars and flat-out crazy if you're buying something big, like a car.
Basically, it's the digital equivalent of keeping all of your money in a pile under your bed and doing business with suitcases of cash, and there's an excellent reason that a almost nobody does that in first-world countries except drug dealers and some poor people who can't get accounts at banks - it's because it's a terrible idea. Making the cash digital only makes it worse, because your computer is easier to break into than your house and it's easier to rip you off when it's not in person.
posted by Mitrovarr at 9:14 PM on April 2, 2014 [2 favorites]
In all seriousness I would use bitcoin to buy legitimate LSD. That's it.
posted by gucci mane at 10:32 PM on April 2, 2014
posted by gucci mane at 10:32 PM on April 2, 2014
What? Is this true? I thought that Bitcoin generated a block every 10 minutes or so, and the gold standard (hah!) for an "irreversible" transaction is 6 blocks
The more confirmations there are, the less likely that a double spend attack is possible. If you're buying a DVD, you probably don't even need to wait for one confirmation. For 250k, you'd probably want to wait for a few. But it's still faster than waiting for a check to clear.
posted by empath at 11:07 PM on April 2, 2014 [1 favorite]
The more confirmations there are, the less likely that a double spend attack is possible. If you're buying a DVD, you probably don't even need to wait for one confirmation. For 250k, you'd probably want to wait for a few. But it's still faster than waiting for a check to clear.
posted by empath at 11:07 PM on April 2, 2014 [1 favorite]
Yeah, a version of paypal with absolutely no protections for either a buyer or a seller of any kind, nor any protections against money laundering, tax evasion, or other illegal activity.
People keep saying this, but there's no reason you can't build all those protections into a third party service that handles bitcoin transactions -- in fact there's no reason that consumers need to be exposed to bitcoins at all -- you can do anything with bitcoin accounting that you can do with cash, including loan them out, have fractional reserve banking whatever. For some reason, bitcoin people like to imagine that all of that is impossible to do with bitcoin, but I'm 90% sure the financial industry will figure all of that out soon enough.
posted by empath at 11:10 PM on April 2, 2014
People keep saying this, but there's no reason you can't build all those protections into a third party service that handles bitcoin transactions -- in fact there's no reason that consumers need to be exposed to bitcoins at all -- you can do anything with bitcoin accounting that you can do with cash, including loan them out, have fractional reserve banking whatever. For some reason, bitcoin people like to imagine that all of that is impossible to do with bitcoin, but I'm 90% sure the financial industry will figure all of that out soon enough.
posted by empath at 11:10 PM on April 2, 2014
People keep saying this, but there's no reason you can't build all those protections into a third party service that handles bitcoin transactions
But what will the point be over something like paypal? paypal already handles exchanges between various currencies transparently(and without additional fee, as i remember). They're already byzantine and randomly take peoples money, and they charge a fee.
Who would set up a service like this and not charge a fee? hell, even the proponents mention fees becoming a larger thing once all the coins are mined.
I just don't see what this brings to the table. If BitPal decides to take your money or otherwise disappears it like gox did, what can you do? there's no "reverse transaction" button. And honestly, the gox thing reminded me of what has happened to tons of people with paypal. Hell, check any thread about paypal on mefi.
A lot of bitcoin promoters main talking points are that it doesn't have the restrictions you discuss. Once you add them, what makes it any different than paypal? What's the actual point?
You're putting your money into their service which converts it, they hold on to it, and then convert it back for the person at the receiving end. What's the value-add over existing services?
posted by emptythought at 11:20 PM on April 2, 2014
But what will the point be over something like paypal? paypal already handles exchanges between various currencies transparently(and without additional fee, as i remember). They're already byzantine and randomly take peoples money, and they charge a fee.
Who would set up a service like this and not charge a fee? hell, even the proponents mention fees becoming a larger thing once all the coins are mined.
I just don't see what this brings to the table. If BitPal decides to take your money or otherwise disappears it like gox did, what can you do? there's no "reverse transaction" button. And honestly, the gox thing reminded me of what has happened to tons of people with paypal. Hell, check any thread about paypal on mefi.
A lot of bitcoin promoters main talking points are that it doesn't have the restrictions you discuss. Once you add them, what makes it any different than paypal? What's the actual point?
You're putting your money into their service which converts it, they hold on to it, and then convert it back for the person at the receiving end. What's the value-add over existing services?
posted by emptythought at 11:20 PM on April 2, 2014
Bitcoin is the natural outgrowth of a certain geek subculture. Such as BOINC and other groups who work collaboratively to break codes, fold proteins or model climate, forming teams and building special-purpose rigs that use the GPU with spreadsheets showing team rankings. Many have taken this very seriously, put in years of time and lots of money to get into the top rankings, and get nothing in return other than satisfaction of competition and contributing to some greater project. So someone came up with a clever way to monetize this form of competition, it's very pure, getting paid for computing competitively. I don't see where or how it will end. It's just too bad this couldn't be "nudged" into doing good at the same time, such as highly detailed climate models that also generate Bitcoins.
posted by stbalbach at 11:29 PM on April 2, 2014
posted by stbalbach at 11:29 PM on April 2, 2014
For me, it actually is easier to get cash for BTC than cash for a check, though that is a peculiarity of location - I am in Manhattan and there is a Bitcoin Center. This would also be true for those lucky enough to live near a real Bitcoin ATM. (The industry is calling Bitcoin vending machines "Bitcoin ATMs" and calling actual ATMs "two way ATMs".)
g.m.: I still buy my weed with fiat but there's definitely gotta be some silk road 3 or 4s out there, go for it.
A point I would like to make is that any criticisms that come down to "these numbers are wrong in the Bitcoin source code" are as easy to correct as numbers in the Bitcoin source code. These fall into two classes - there are those like transactions/second which will be changed without too much fanfare as need and technology progress. To be clear, the Bitcoin network is not running at anything like full load or "at its limit." The current power consumption is due to competing miners, not to transaction volume.
The users and miners (that is, mining pool operators and the odd solo guy with a warehouse like this) would tend to support that change as giving BTC more value. Other parameters of Bitcoin would be trivial to change technologically but not socially. It would be difficult to announce Bitcoin 1.1 where 21 million coins are now mined every year. Dr. Fedora is quite correct in that many of the more political BTC early adopters are treating it as BitGold rather than Bitcoin. The either have the Ron Paul sentiment or they think they're some kind of precious metals investor or commodities day trader. This does make them in particular quite attached to current Bitcoin parameters. However, the qualitative parameter space of the Bitcoin protocol is pretty well explored already. New coins are generally released with a standardish spec sheet listing their stats at this point.
Jessamyn, would Burlington be alright? 60 miles? I could probably make Burlington happen, they have college kids out there. Give me a like a year. There's a good chance it will be Dogecoin or god knows what instead of Bitcoin but if needs be I will turn on BTC just for you as long as it's still Bitcoin protocol.
posted by save alive nothing that breatheth at 11:37 PM on April 2, 2014 [1 favorite]
g.m.: I still buy my weed with fiat but there's definitely gotta be some silk road 3 or 4s out there, go for it.
A point I would like to make is that any criticisms that come down to "these numbers are wrong in the Bitcoin source code" are as easy to correct as numbers in the Bitcoin source code. These fall into two classes - there are those like transactions/second which will be changed without too much fanfare as need and technology progress. To be clear, the Bitcoin network is not running at anything like full load or "at its limit." The current power consumption is due to competing miners, not to transaction volume.
The users and miners (that is, mining pool operators and the odd solo guy with a warehouse like this) would tend to support that change as giving BTC more value. Other parameters of Bitcoin would be trivial to change technologically but not socially. It would be difficult to announce Bitcoin 1.1 where 21 million coins are now mined every year. Dr. Fedora is quite correct in that many of the more political BTC early adopters are treating it as BitGold rather than Bitcoin. The either have the Ron Paul sentiment or they think they're some kind of precious metals investor or commodities day trader. This does make them in particular quite attached to current Bitcoin parameters. However, the qualitative parameter space of the Bitcoin protocol is pretty well explored already. New coins are generally released with a standardish spec sheet listing their stats at this point.
Jessamyn, would Burlington be alright? 60 miles? I could probably make Burlington happen, they have college kids out there. Give me a like a year. There's a good chance it will be Dogecoin or god knows what instead of Bitcoin but if needs be I will turn on BTC just for you as long as it's still Bitcoin protocol.
posted by save alive nothing that breatheth at 11:37 PM on April 2, 2014 [1 favorite]
I have a completely serious question: can Mt. Gox, having filed bankruptcy, pay its creditors in Bitcoins?
This is actually a very serious question. As I understand it, Mt. Gox filed for bankruptcy protection they claimed only the real dollar amounts they owned customers as debts. Thus, they made the claim that the bitcoins they held were legally worthless.
posted by heathkit at 11:44 PM on April 2, 2014 [1 favorite]
This is actually a very serious question. As I understand it, Mt. Gox filed for bankruptcy protection they claimed only the real dollar amounts they owned customers as debts. Thus, they made the claim that the bitcoins they held were legally worthless.
posted by heathkit at 11:44 PM on April 2, 2014 [1 favorite]
With regards to times - one alternative comparison to consider is clearing time. Credit cards take forever to clear, you are subject to chargebacks for quite some time. A lot of transfers like ACH take 3-4 days. Faster things get expensive. Bitcoin transmits at Internet speed, and confirms every ten minutes. Six confirms or one hour is the "clearing" time though most people consider one sufficient for general use. Dogecoin is #2 in transactions and confirms every minute.
posted by save alive nothing that breatheth at 11:58 PM on April 2, 2014
posted by save alive nothing that breatheth at 11:58 PM on April 2, 2014
jcreigh: You can spend unconfirmed transactions, transactions with a couple of confirmations, etc. The nodes themselves will accept them as legal spends of transactions they've previously seen. On the other hand people will check how many confirmations there are before they do something else like hand over goods. Plus, if transaction B depends on transaction A, then B can't get confirmations until A does.
(Technical detour) The "six transactions is enough" meme is inaccurate. What you are doing when you wait for confirmations is making it harder for someone with a lot of mining power to create blocks that double-spend the transaction you're using. The probability of this happening goes to zero as the number of blocks the attacker needs to create increases, but more slowly as the attacker's mining power increases. An exception, which is theoretical for now and hopefully forever, is if the attacker has more than 50% of total mining power he can double-spend any transaction with probability one (the '51% attack').
However, it's not economical to create secret blocks with the aim of making a double-spend against you, unless the reward from doing so outweighs the probability that the rest of the network will 'run-away' from the attacker, creating a lead of more blocks than he can hope to catch up with - in which case he gives up the reward he could have got simply by publishing those blocks. Here is the paper analyzing where that cross-over point is: you can see from table 2 that for the $250K case (approximately 620 bitcoin) waiting for 3 confirmations is enough to make it uneconomical for an attacker with 20% of network hash power to try to defraud you. On the other hand, against an attacker with 30% of hash power you should wait for 7 confirmations. (end detour)
While the above can be hard to get your head around, most people will not make $250K transactions very often. For anything up to several thousands of dollars even one confirmation is very unlikely to be double-spent. For anything where you can tolerate an occasional double-spend attempt, which is actually rather hard to do, you can get by on zero confirmations, simply by waiting a few seconds for any attempted double-spend transaction to propagate across the network. This is fine for small merchant sales, bar tabs etc. Rule of thumb: can I tolerate losing a couple of these payments? If so, zero-confirmations. Is it a small amount of money? One or two confirmations. Am I dealing with life-changing amounts of money and feeling paranoid? Why not wait for ten or fifteen confirmations? Fifteen is about two and a half hours.
Compare to a cheque, which can be countermanded, counterfeited or made bad by withdrawing funds from the account, over a period of days.
posted by topynate at 12:28 AM on April 3, 2014 [4 favorites]
(Technical detour) The "six transactions is enough" meme is inaccurate. What you are doing when you wait for confirmations is making it harder for someone with a lot of mining power to create blocks that double-spend the transaction you're using. The probability of this happening goes to zero as the number of blocks the attacker needs to create increases, but more slowly as the attacker's mining power increases. An exception, which is theoretical for now and hopefully forever, is if the attacker has more than 50% of total mining power he can double-spend any transaction with probability one (the '51% attack').
However, it's not economical to create secret blocks with the aim of making a double-spend against you, unless the reward from doing so outweighs the probability that the rest of the network will 'run-away' from the attacker, creating a lead of more blocks than he can hope to catch up with - in which case he gives up the reward he could have got simply by publishing those blocks. Here is the paper analyzing where that cross-over point is: you can see from table 2 that for the $250K case (approximately 620 bitcoin) waiting for 3 confirmations is enough to make it uneconomical for an attacker with 20% of network hash power to try to defraud you. On the other hand, against an attacker with 30% of hash power you should wait for 7 confirmations. (end detour)
While the above can be hard to get your head around, most people will not make $250K transactions very often. For anything up to several thousands of dollars even one confirmation is very unlikely to be double-spent. For anything where you can tolerate an occasional double-spend attempt, which is actually rather hard to do, you can get by on zero confirmations, simply by waiting a few seconds for any attempted double-spend transaction to propagate across the network. This is fine for small merchant sales, bar tabs etc. Rule of thumb: can I tolerate losing a couple of these payments? If so, zero-confirmations. Is it a small amount of money? One or two confirmations. Am I dealing with life-changing amounts of money and feeling paranoid? Why not wait for ten or fifteen confirmations? Fifteen is about two and a half hours.
Compare to a cheque, which can be countermanded, counterfeited or made bad by withdrawing funds from the account, over a period of days.
posted by topynate at 12:28 AM on April 3, 2014 [4 favorites]
But what will the point be over something like paypal? paypal already handles exchanges between various currencies transparently(and without additional fee, as i remember)
I exchange currencies through Paypal on a weekly basis (I accept various currencies from my collectors, for their convenience), and can assure you that there is indeed a 'fee', in the fact that the conversion rate they offer at any given moment is a clear 2% lower what such a transaction at a normal bank would be.
Call me when I can spend it on a single real-life thing within 50 miles of me and we'll talk.
Whenever you're ready for some more woodblock prints, Jessamyn-san! I recently added Bitcoin to the list of currencies that I accept from my collectors. This is - again - primarily for their convenience, but also as a way to get familiar with how this sort of currency works. Whether Bitcoin will survive or not I of course can't foresee - and the extreme volatility that will persist until (and unless) it matures is certainly problematic, but I am sure that this sort of digital settlement system will prevail eventually.
posted by woodblock100 at 12:51 AM on April 3, 2014
I exchange currencies through Paypal on a weekly basis (I accept various currencies from my collectors, for their convenience), and can assure you that there is indeed a 'fee', in the fact that the conversion rate they offer at any given moment is a clear 2% lower what such a transaction at a normal bank would be.
Call me when I can spend it on a single real-life thing within 50 miles of me and we'll talk.
Whenever you're ready for some more woodblock prints, Jessamyn-san! I recently added Bitcoin to the list of currencies that I accept from my collectors. This is - again - primarily for their convenience, but also as a way to get familiar with how this sort of currency works. Whether Bitcoin will survive or not I of course can't foresee - and the extreme volatility that will persist until (and unless) it matures is certainly problematic, but I am sure that this sort of digital settlement system will prevail eventually.
posted by woodblock100 at 12:51 AM on April 3, 2014
Also, for those who are still confused about the mechanics of how Bitcoin works, there is a quite good - and lengthy - FAQ here, at the website of one of the major wallets.
posted by woodblock100 at 12:55 AM on April 3, 2014
posted by woodblock100 at 12:55 AM on April 3, 2014
How is it that it makes sense to use thousands of raspberry pis? I don't understand bitcoin mining at all, but that sounds like a hobby project naively multiplied up to huge scales.
posted by Segundus at 1:12 AM on April 3, 2014
posted by Segundus at 1:12 AM on April 3, 2014
With regards to times - one alternative comparison to consider is clearing time. Credit cards take forever to clear, you are subject to chargebacks for quite some time. A lot of transfers like ACH take 3-4 days. Faster things get expensive.
This is the case in the US because the banks that run the network and collect transaction fees have no incentive to upgrade to a better system. The Faster Payments Service in the UK allows people to transfer money between different banks and clears in a couple hours, and is typically free for small transactions.
Planet Money did an interseting story a while back on how the ACH works and why it is the way it is. Dwolla is a payment system that charges a flat fee of $0.25 on transactions over $10. My roommate pays his share of the rent with it. Of course, there's still the ACH delay getting money in and out of banks, but hopefully that becomes less of an issue as more places accept Dwolla payments.
posted by heathkit at 1:14 AM on April 3, 2014
This is the case in the US because the banks that run the network and collect transaction fees have no incentive to upgrade to a better system. The Faster Payments Service in the UK allows people to transfer money between different banks and clears in a couple hours, and is typically free for small transactions.
Planet Money did an interseting story a while back on how the ACH works and why it is the way it is. Dwolla is a payment system that charges a flat fee of $0.25 on transactions over $10. My roommate pays his share of the rent with it. Of course, there's still the ACH delay getting money in and out of banks, but hopefully that becomes less of an issue as more places accept Dwolla payments.
posted by heathkit at 1:14 AM on April 3, 2014
The raspberry pis are just being used as controllers for the ASICs - it's not economical to take up space on an ASIC chip with anything except mining circuitry, and according to the article the Pi is cheaper than any other suitable microcontroller.
posted by topynate at 1:18 AM on April 3, 2014
posted by topynate at 1:18 AM on April 3, 2014
I'll say this out loud, so you can thank me later: Bitcoin (and any other essentially worthless e-coin) is a large-scale scam.
When I initially studied the topic, I came to the conclusion, that someone created the system of "mining" coins to harness the computing power for some shady purpose, I don't know, to crack heavy passwords or encryption. It was built as a classic pyramid operation to lure in suckers - get in first, become rich eventually; and a boon to the masters who get free computing power and eventually see their bitcoin holdings rise and buy actual stuff and services from other suckers.
Actually, the fraud is even more crass - the masters are not even using the computing energy for any useful purpose. Some sell worthless equipment to suckers, and some "mine" like this guy. Bitcoin is a clear pyramid - you mine first, you get on top, come last, get relative peanuts.
Of course, it all eventually depends on whether suckers adopt bitcoin as currency, (i.e. exchanging it for real stuff and services) - once this happens (and the masters are trying their best to tell us this will happen), guess who'll have the greatest buying power. A more democratic way would be to issue a limited number of bitcoins to everybody and just see what people do with them.
Real currency does not quite work like bitcoin. You don't have to look farther than alternative currencies, which made it to the blue on previous occasions - those are covered by real value (human labour), even though the tokens may be meaningless.
posted by Laotic at 3:34 AM on April 3, 2014 [2 favorites]
When I initially studied the topic, I came to the conclusion, that someone created the system of "mining" coins to harness the computing power for some shady purpose, I don't know, to crack heavy passwords or encryption. It was built as a classic pyramid operation to lure in suckers - get in first, become rich eventually; and a boon to the masters who get free computing power and eventually see their bitcoin holdings rise and buy actual stuff and services from other suckers.
Actually, the fraud is even more crass - the masters are not even using the computing energy for any useful purpose. Some sell worthless equipment to suckers, and some "mine" like this guy. Bitcoin is a clear pyramid - you mine first, you get on top, come last, get relative peanuts.
Of course, it all eventually depends on whether suckers adopt bitcoin as currency, (i.e. exchanging it for real stuff and services) - once this happens (and the masters are trying their best to tell us this will happen), guess who'll have the greatest buying power. A more democratic way would be to issue a limited number of bitcoins to everybody and just see what people do with them.
Real currency does not quite work like bitcoin. You don't have to look farther than alternative currencies, which made it to the blue on previous occasions - those are covered by real value (human labour), even though the tokens may be meaningless.
posted by Laotic at 3:34 AM on April 3, 2014 [2 favorites]
Of course, it all eventually depends on whether suckers adopt bitcoin as currency, (i.e. exchanging it for real stuff and services) - once this happens (and the masters are trying their best to tell us this will happen), guess who'll have the greatest buying power. A more democratic way would be to issue a limited number of bitcoins to everybody and just see what people do with them.
Bitcoin doesn't have to work this way - it's just that the protocol tries to mimic a gold standard by limiting the amount of currency created for mining. For example, Dogecoin has inflation built into it, which disincentives hoarding.
Actually, one could picture a cryptocurrency that was actually redistributive. Like, maybe in every transaction, the party with the larger wallet pays the transaction fee. The transaction fee could be scaled, with a portion paid to the miner and the rest payed out throughout the network as a kind of guaranteed basic income.
I'm not saying it'll solve the world's problems, but I think there's an interesting social experiment in there somewhere.
posted by heathkit at 3:45 AM on April 3, 2014
Bitcoin doesn't have to work this way - it's just that the protocol tries to mimic a gold standard by limiting the amount of currency created for mining. For example, Dogecoin has inflation built into it, which disincentives hoarding.
Actually, one could picture a cryptocurrency that was actually redistributive. Like, maybe in every transaction, the party with the larger wallet pays the transaction fee. The transaction fee could be scaled, with a portion paid to the miner and the rest payed out throughout the network as a kind of guaranteed basic income.
I'm not saying it'll solve the world's problems, but I think there's an interesting social experiment in there somewhere.
posted by heathkit at 3:45 AM on April 3, 2014
Amusingly, to "mine" bitcoins you need someone else (probably oppressed) to "mine" coal and coltan.
Comes down to whether you think a 21st century effort to create a stateless currency has a chance in hell. Seems to me like a bet that major states are failing and major currencies are losing purchasing power.
That's a sucker's bet. No states will mean bullets and food are worth more than BTC. Sorry, Ayn Rand fans.
The transaction cost issues can be addressed with non-currency technologies, possibly including open crypto-transaction technology. But for most people who would be able to use bitcoin, that is not a serious problem that needs solving unless you have a reason to need fast, relatively anonymous (not really, suckers), tax evading liquidity, which means you are likely a criminal.
The supposed benefits for the poor and unbanked will not come as long as BTC is subject to speculative pricing. I'll believe all those libertarians give a shit about poor Guatemalans when I see them embrace policies that help poor Americans.
posted by spitbull at 4:05 AM on April 3, 2014 [4 favorites]
Comes down to whether you think a 21st century effort to create a stateless currency has a chance in hell. Seems to me like a bet that major states are failing and major currencies are losing purchasing power.
That's a sucker's bet. No states will mean bullets and food are worth more than BTC. Sorry, Ayn Rand fans.
The transaction cost issues can be addressed with non-currency technologies, possibly including open crypto-transaction technology. But for most people who would be able to use bitcoin, that is not a serious problem that needs solving unless you have a reason to need fast, relatively anonymous (not really, suckers), tax evading liquidity, which means you are likely a criminal.
The supposed benefits for the poor and unbanked will not come as long as BTC is subject to speculative pricing. I'll believe all those libertarians give a shit about poor Guatemalans when I see them embrace policies that help poor Americans.
posted by spitbull at 4:05 AM on April 3, 2014 [4 favorites]
Comes down to whether you think a 21st century effort to create a stateless currency has a chance in hell. Seems to me like a bet that major states are failing and major currencies are losing purchasing power.
Bitcoin is a bet that it will either work as:
A) A store of value
B) A means of transmitting money.
It doesn't need to be useful in all cases or replace all uses of money. In order to have some value, it just needs to be useful in some cases.
posted by empath at 4:27 AM on April 3, 2014 [1 favorite]
Bitcoin is a bet that it will either work as:
A) A store of value
B) A means of transmitting money.
It doesn't need to be useful in all cases or replace all uses of money. In order to have some value, it just needs to be useful in some cases.
posted by empath at 4:27 AM on April 3, 2014 [1 favorite]
Bitcoin is a bet that you can leave someone else holding the bag
posted by Benjy at 5:03 AM on April 3, 2014
posted by Benjy at 5:03 AM on April 3, 2014
what's the lead time to get a third party fab to produce a super small production run ASIC? What sort of quantity do you need to produce to make it not prohibitively expensive?
MOSIS is the cheapest access to ASIC fabrication, but generally you need an affiliation to a university or institution. (I don't know if that question was answered upthread.)
posted by newdaddy at 5:09 AM on April 3, 2014 [1 favorite]
MOSIS is the cheapest access to ASIC fabrication, but generally you need an affiliation to a university or institution. (I don't know if that question was answered upthread.)
posted by newdaddy at 5:09 AM on April 3, 2014 [1 favorite]
empath,
How can BTC actually work as either a store of money or a transactional currency if its value fluctuates so violently? Is there anything about it / the market that suggests that it could become less volatile over time?
posted by graphnerd at 5:18 AM on April 3, 2014
How can BTC actually work as either a store of money or a transactional currency if its value fluctuates so violently? Is there anything about it / the market that suggests that it could become less volatile over time?
posted by graphnerd at 5:18 AM on April 3, 2014
Wow, I am apparently only the second most knowledgeable person in the field of Bitcoin on Metafilter at most. A guy or two on bitcointalk actually think we've got Satoshi in the room...
posted by save alive nothing that breatheth at 5:30 AM on April 3, 2014
posted by save alive nothing that breatheth at 5:30 AM on April 3, 2014
I'm curious about the mechanics of transaction confirmation. Suppose you sold your solid gold Gulfstream to some guy at the airport who might have influence over 25% or so of the network, and you're hoping he doesn't invalidate the payment he sent you after he flies off in it. Would it be possible to see a double-spending attempt in process by watching the block chain, in the form of two mutually incompatible transactions bouncing around the network until one of them gets outvoted by the other? Or could everything look innocent until the 4th confirmation round, when suddenly your payment vanishes and is replaced with the illicit one?
posted by moonmilk at 5:43 AM on April 3, 2014
posted by moonmilk at 5:43 AM on April 3, 2014
It depends how it's done. If someone just blasted both transactions out into the network you'd soon see the incompatible transactions. To spend out from under you after 4 confirmations is where the 51% thing comes in. If it's currently at block N, you have to start from block N-4 and mine enough blocks to get to N+1 with a rewritten history, which means you need to outcompute everyone else in Bitcoin. (difficulty - the bitcoin network factor that determines how hard the block is to find - factors into which chain wins as well, more of a technical detail)
There are a number of attacks that depend on solving a block and then holding on to it. This requires you to be able to solve blocks with some regularity, which is difficult and pooled enough that probably well under a hundred people command the necessary resources, and then you have a sure-thing 25 BTC you're risking because someone else could solve a block while you're holding one to run an attack. Bitcoin often secures itself by making cooperation more profitable.
posted by save alive nothing that breatheth at 5:55 AM on April 3, 2014 [3 favorites]
There are a number of attacks that depend on solving a block and then holding on to it. This requires you to be able to solve blocks with some regularity, which is difficult and pooled enough that probably well under a hundred people command the necessary resources, and then you have a sure-thing 25 BTC you're risking because someone else could solve a block while you're holding one to run an attack. Bitcoin often secures itself by making cooperation more profitable.
posted by save alive nothing that breatheth at 5:55 AM on April 3, 2014 [3 favorites]
You know, I would totally buy it that Satoshi would turn out to be "MeFi's own 'fooledusuckers'" or some such.
posted by spitbull at 5:57 AM on April 3, 2014 [2 favorites]
posted by spitbull at 5:57 AM on April 3, 2014 [2 favorites]
Getting back to that $250,000 check example...
If somebody had $250,000 worth of BTC, then what would be the cheapest, quickest, easiest, most reliable way of exchanging that BTC for USD? I mean, I see this link here, but it's unclear which trustworthy exchanges would actually allow you to reliably exchange such a large amount of USD. What are the real world experiences of people converting large amounts of BTC into USD?
posted by Sticherbeast at 8:13 AM on April 3, 2014
If somebody had $250,000 worth of BTC, then what would be the cheapest, quickest, easiest, most reliable way of exchanging that BTC for USD? I mean, I see this link here, but it's unclear which trustworthy exchanges would actually allow you to reliably exchange such a large amount of USD. What are the real world experiences of people converting large amounts of BTC into USD?
posted by Sticherbeast at 8:13 AM on April 3, 2014
You get to keep, for all time, whatever is in the box you choose. Box 1 is filled with 100 thousand US dollars, Box 2 is filled with 75 oz of 24k gold, box 3 is 50 thousand Bitcoin
If you have to "keep for all time" whatever you choose, then they are all equally worthless.
posted by We had a deal, Kyle at 8:34 AM on April 3, 2014 [2 favorites]
If you have to "keep for all time" whatever you choose, then they are all equally worthless.
posted by We had a deal, Kyle at 8:34 AM on April 3, 2014 [2 favorites]
If you have to "keep for all time" whatever you choose, then they are all equally worthless.
not if you turned the gold into a crown and wore it all the time for peacocking purposes
posted by Sticherbeast at 8:41 AM on April 3, 2014 [3 favorites]
not if you turned the gold into a crown and wore it all the time for peacocking purposes
posted by Sticherbeast at 8:41 AM on April 3, 2014 [3 favorites]
No, bitcoin isn't especially interesting. Its design is based on a massive failure to understand economics. It's a speculative bubble among other speculative bubbles, and different from the others because it is based on information (the key to a wallet) rather than a physical artifact.
Currencies are valuable because they have governments that explicitly promise to use violence to hold them up. Bitcoin is a fad.
posted by idiopath at 9:00 AM on April 3, 2014 [1 favorite]
Currencies are valuable because they have governments that explicitly promise to use violence to hold them up. Bitcoin is a fad.
posted by idiopath at 9:00 AM on April 3, 2014 [1 favorite]
And these fees, they will be kept small because .... the miners love us so much?
I would think the fees will presumably be smaller than Visa fees because there is no barrier to entry for you doing your own mining. Because that "you" encompasses millions of different people and businesses and infrastructures (unlike the near-monolith of the Visa+collusion crowd), plenty of outfits will presumably offer to sell computation and thus transaction fees might become subject to actual competition, which seems like a night-and-day difference.
posted by anonymisc at 10:04 AM on April 3, 2014
I would think the fees will presumably be smaller than Visa fees because there is no barrier to entry for you doing your own mining. Because that "you" encompasses millions of different people and businesses and infrastructures (unlike the near-monolith of the Visa+collusion crowd), plenty of outfits will presumably offer to sell computation and thus transaction fees might become subject to actual competition, which seems like a night-and-day difference.
posted by anonymisc at 10:04 AM on April 3, 2014
there is no barrier to entry for you doing your own mining
What? Of course there is. Look at what the post is about.
posted by Sticherbeast at 3:25 PM on April 3, 2014 [2 favorites]
What? Of course there is. Look at what the post is about.
posted by Sticherbeast at 3:25 PM on April 3, 2014 [2 favorites]
I really don't understand how leased hashpower is supposed to work. Suppose I pay someone, in BTC, to rent time on their hardware and mine new BTC. If make any net profit, then the hardware owner is losing money by renting it to me rather than just keeping all the coins themselves. If I don't make any net profit, then all the lease does is slowly drain my wallet. There's no way for anyone to benefit unless one party is looking for a complicated way to give away money.
This has already been answered, basically, but whoever came up with that idea is one of the smartest people involved in this whole thing.
You're exchanging money for bitcoins immediately. Yea, you might get a slightly lower exchange rate, but no one is ever going to get large scale money turned into fiat. The entire thing will collapse instantly as soon as people start trying to cash out 5 figure sums, much less 6 or 7.
So you sell people the opportunity to get bitcoins slightly cheaper than market value, and they get to GENERATE them. Like the smart guys did early on! They aren't just a sucker who bought some on an exchange and let someone else cash out, they made their own.
It's like build a bear workshop, but if the bears were made of some kind of raw material or waste that's hard to get cash for. You take raw materials that have theoretical value, but are cheaper than you're charging for you to acquire. You let someone else put them together so they feel that they "really worked on and created something!", bam, instant money.
The people running leased hashpower are going to be the only ones who make serious money off of this, except for maybe some people involved in coinbase and a few other places. Everyone just holding coins and waiting to cash out at an exchange at some ??? time in the future is going to get fucked. I'm not saying bitcoins will instantly be worthless, but this guy is making a lot more money selling the ability to mine now than coins will be worth in say, two years.
I will be utterly amazed if i'm wrong. I called it way early on when they were like ~$50 that they were going to spike up to a thousand+ and we were going to get all the bitbeards freaking out and going "zomg change the world".
posted by emptythought at 3:39 PM on April 3, 2014
This has already been answered, basically, but whoever came up with that idea is one of the smartest people involved in this whole thing.
You're exchanging money for bitcoins immediately. Yea, you might get a slightly lower exchange rate, but no one is ever going to get large scale money turned into fiat. The entire thing will collapse instantly as soon as people start trying to cash out 5 figure sums, much less 6 or 7.
So you sell people the opportunity to get bitcoins slightly cheaper than market value, and they get to GENERATE them. Like the smart guys did early on! They aren't just a sucker who bought some on an exchange and let someone else cash out, they made their own.
It's like build a bear workshop, but if the bears were made of some kind of raw material or waste that's hard to get cash for. You take raw materials that have theoretical value, but are cheaper than you're charging for you to acquire. You let someone else put them together so they feel that they "really worked on and created something!", bam, instant money.
The people running leased hashpower are going to be the only ones who make serious money off of this, except for maybe some people involved in coinbase and a few other places. Everyone just holding coins and waiting to cash out at an exchange at some ??? time in the future is going to get fucked. I'm not saying bitcoins will instantly be worthless, but this guy is making a lot more money selling the ability to mine now than coins will be worth in say, two years.
I will be utterly amazed if i'm wrong. I called it way early on when they were like ~$50 that they were going to spike up to a thousand+ and we were going to get all the bitbeards freaking out and going "zomg change the world".
posted by emptythought at 3:39 PM on April 3, 2014
And these fees, they will be kept small because .... the miners love us so much?.
If you count the current block reward + the current fees the actual real fee per bitcoin transaction is about $25.
posted by Iax at 4:25 PM on April 3, 2014
What? Of course there is. Look at what the post is about
No, the post is about an enormous mining operating that is pulling in millions of dollars a month. You don't need to be big to contribute to the processing - that's the whole point, that's how the biggest fish doesn't get to rewrite the block chain.
posted by anonymisc at 4:37 PM on April 3, 2014
No, the post is about an enormous mining operating that is pulling in millions of dollars a month. You don't need to be big to contribute to the processing - that's the whole point, that's how the biggest fish doesn't get to rewrite the block chain.
posted by anonymisc at 4:37 PM on April 3, 2014
The return for a user without a big mining rig nil. You are wasting electricity and throwing money away.
posted by humanfont at 5:31 PM on April 3, 2014 [1 favorite]
posted by humanfont at 5:31 PM on April 3, 2014 [1 favorite]
Sticherbeast: Coinbase consumer limit is 50 BTC/day at verification level 2, I believe. That's currency conversion like at an airport, not a market, so you pay a premium but it is quick, easy, and reliable. If you were a merchant or they cared to make a special deal for those Bitcoins I imagine they offer more coin at once.
The proper exchange to use depends on your location and desired currency. For USA/USD, the volume is on BitStamp, BTC-e, and BitFinex. BitStamp is the one I'd use if I used a BTC exchange. They started as a Slovenian computer store and they now have $10 million++ in serious funding. BTC-e is just way too opaque. BitFinex I know nothing about except the volume. For Euros you want Kraken, and others I don't know about have decent volume.
posted by save alive nothing that breatheth at 5:43 PM on April 3, 2014 [1 favorite]
The proper exchange to use depends on your location and desired currency. For USA/USD, the volume is on BitStamp, BTC-e, and BitFinex. BitStamp is the one I'd use if I used a BTC exchange. They started as a Slovenian computer store and they now have $10 million++ in serious funding. BTC-e is just way too opaque. BitFinex I know nothing about except the volume. For Euros you want Kraken, and others I don't know about have decent volume.
posted by save alive nothing that breatheth at 5:43 PM on April 3, 2014 [1 favorite]
humanfont - I think you're talking about mining for bitcoin, that's different.
posted by anonymisc at 7:08 PM on April 3, 2014
posted by anonymisc at 7:08 PM on April 3, 2014
Now that there is formal guidance from the Irs and so on about what exactly bitcoin is, legally, it should be a lot easier to move around with legitimate services, and that should increase liquidity and make the price more stable.
posted by empath at 7:24 PM on April 3, 2014
posted by empath at 7:24 PM on April 3, 2014
The return for a user without a big mining rig nil. You are wasting electricity and throwing money away.
Eh. I picked up a "Block Erupter" a 336 megahash mining ASIC for about 25 kDOGE (about 25 dollars at the time) a few weeks back basically as a souvenir. It's already obsolete but on 2.5W it earns me a penny few pennies a day. More than my bank account earns in interest. I mean I don't know if I'll ever pay back that $25 capital investment but I'm not throwing electricity away - and when I get a chance, though heating season is ending this year, I want to put it in someone's place where there is electric heat. If you have electric heat still going this season and a GPU you are throwing money away not to mine a Scrypt coin while you still practically can.
posted by save alive nothing that breatheth at 8:21 PM on April 3, 2014
Eh. I picked up a "Block Erupter" a 336 megahash mining ASIC for about 25 kDOGE (about 25 dollars at the time) a few weeks back basically as a souvenir. It's already obsolete but on 2.5W it earns me a penny few pennies a day. More than my bank account earns in interest. I mean I don't know if I'll ever pay back that $25 capital investment but I'm not throwing electricity away - and when I get a chance, though heating season is ending this year, I want to put it in someone's place where there is electric heat. If you have electric heat still going this season and a GPU you are throwing money away not to mine a Scrypt coin while you still practically can.
posted by save alive nothing that breatheth at 8:21 PM on April 3, 2014
save alive nothing that breatheth, yes, you're still making paper out of trees only to crumple it and throw in the bin.
Mining is just pure waste, but so are many other gainful activities, I suppose.
posted by Laotic at 3:11 AM on April 4, 2014
Mining is just pure waste, but so are many other gainful activities, I suppose.
posted by Laotic at 3:11 AM on April 4, 2014
Mining is just pure waste, but so are many other gainful activities, I suppose.
It could certainly be done more efficiently, but it's not pure waste. The mining process is just a way to keep a decentralized ledger.
posted by empath at 3:17 AM on April 4, 2014
It could certainly be done more efficiently, but it's not pure waste. The mining process is just a way to keep a decentralized ledger.
posted by empath at 3:17 AM on April 4, 2014
While there's a reasonable argument that if you're going to heat something with electrical energy then your heater might as well be a piece of silicon doing useful computational work rather than a piece of resistive metal that isn't, there's a real ethical problem in choosing computational work that is deliberately scaled up in difficulty to generate a 'useful' result.
Ethically, I think it is wrong to mine bitcoins to generate heat when you could be doing computational tasks with greater value to society, and ones that scale proportionally to total available computing power rather than remaining constant in difficulty no matter how much silicon is thrown at it.
posted by edd at 3:21 AM on April 4, 2014 [1 favorite]
Ethically, I think it is wrong to mine bitcoins to generate heat when you could be doing computational tasks with greater value to society, and ones that scale proportionally to total available computing power rather than remaining constant in difficulty no matter how much silicon is thrown at it.
posted by edd at 3:21 AM on April 4, 2014 [1 favorite]
I guess we can agree to disagree on how valuable to society keeping a distributed ledger is.
posted by empath at 3:37 AM on April 4, 2014 [1 favorite]
posted by empath at 3:37 AM on April 4, 2014 [1 favorite]
empath, respectfully, I don't think this is about a distributed ledger.
A distributed ledger is a fair thing if implemented correctly, although I can already envisage a couple of problems - (a) what if 50% of computers show a balance A and 50% show a balance B? What would the resolution process be? (b) all data is virtual - for all purposes, it does not exist beyond our civilization, it does not even exist beyond the next generation HW/SW change.
There already is a very workable distributed ledger in place - it's what you actually, physically have.
What concerns me more is the way in which Bitcoin in particular is set to be originally acquired - wastefully, unfairly, unsustainably.
If you want the most efficient house heating, look for heat pumps or solar. If you want to heat your pot of coffee, look to microwaves or induction, but it sounds a little crazy to call running chips "heating".
posted by Laotic at 3:47 AM on April 4, 2014
A distributed ledger is a fair thing if implemented correctly, although I can already envisage a couple of problems - (a) what if 50% of computers show a balance A and 50% show a balance B? What would the resolution process be? (b) all data is virtual - for all purposes, it does not exist beyond our civilization, it does not even exist beyond the next generation HW/SW change.
There already is a very workable distributed ledger in place - it's what you actually, physically have.
What concerns me more is the way in which Bitcoin in particular is set to be originally acquired - wastefully, unfairly, unsustainably.
If you want the most efficient house heating, look for heat pumps or solar. If you want to heat your pot of coffee, look to microwaves or induction, but it sounds a little crazy to call running chips "heating".
posted by Laotic at 3:47 AM on April 4, 2014
A distributed ledger is a fair thing if implemented correctly, although I can already envisage a couple of problems - (a) what if 50% of computers show a balance A and 50% show a balance B? What would the resolution process be?
That is precisely what the bitcoin protocol is meant to solve and why it uses proof of work and difficulty algorithms, and so on. As I said above, you can do it using more energy-efficient algorithms (scrypt is one example), but you can't do it without a lot of computational power thrown at the problem.
posted by empath at 3:52 AM on April 4, 2014
That is precisely what the bitcoin protocol is meant to solve and why it uses proof of work and difficulty algorithms, and so on. As I said above, you can do it using more energy-efficient algorithms (scrypt is one example), but you can't do it without a lot of computational power thrown at the problem.
posted by empath at 3:52 AM on April 4, 2014
Laotic: I certainly approve of heat pumps, and of course I approve of solar power heating systems and the like, but unfortunately not everyone has the option to remove their heating systems and replace them with those options. In the case when someone already has electric heating as their method of staying warm, running a chip isn't likely to be terrible at least (with some caveats I might concede to). And you certainly can't expect to heat your coffee pot with a chip as they don't run hot enough of course.
empath: I'd concede the difficulty scaling is required in the bitcoin protocol to protect the blockchain from attackers with too much computational power, but I'd argue the obvious solution to this is to not use this sort of decentralised protocol and have a central authority authenticate transactions. I personally don't think the supposed benefits of bitcoin outweigh the ethical problem of encouraging people to throw as much computing power as can be economically afforded at verifying the blockchain.
posted by edd at 4:44 AM on April 4, 2014
empath: I'd concede the difficulty scaling is required in the bitcoin protocol to protect the blockchain from attackers with too much computational power, but I'd argue the obvious solution to this is to not use this sort of decentralised protocol and have a central authority authenticate transactions. I personally don't think the supposed benefits of bitcoin outweigh the ethical problem of encouraging people to throw as much computing power as can be economically afforded at verifying the blockchain.
posted by edd at 4:44 AM on April 4, 2014
I'd concede the difficulty scaling is required in the bitcoin protocol to protect the blockchain from attackers with too much computational power, but I'd argue the obvious solution to this is to not use this sort of decentralised protocol and have a central authority authenticate transactions.
Well, you've already got that, and it's not as if that's particularly energy efficient. Think of how many employees work for those companies, the amount of money spent on gas commuting to work, lighting and air conditioning the buildings they work in, moving checks around, etc, etc.
posted by empath at 4:51 AM on April 4, 2014
Well, you've already got that, and it's not as if that's particularly energy efficient. Think of how many employees work for those companies, the amount of money spent on gas commuting to work, lighting and air conditioning the buildings they work in, moving checks around, etc, etc.
posted by empath at 4:51 AM on April 4, 2014
I really think that in order to make a rational judgement about how wasteful the bitcoin protocol, you have to say what you're comparing it to. Compared to Western Union? The Federal Reserve? Visa? The entire US banking system?
posted by empath at 4:55 AM on April 4, 2014
posted by empath at 4:55 AM on April 4, 2014
The banking system has an economic incentive to keep its own costs and therefore energy expenditures down - they don't increase their income by simply employing more people and running more computers. If a bitcoin miner can make a certain amount of money for a certain hardware investment and energy cost then his incentive is to get as much of that hardware and use as much of that energy as they can - they've got an incentive to buy as much electricity as they can in order to make their profit.
posted by edd at 4:58 AM on April 4, 2014
posted by edd at 4:58 AM on April 4, 2014
There are a lot of arguments against trying to do various sorts of "useful" work with blockchain proof of work functions. Primecoin finds prime numbers, and that seems workable. Besides that, though, many of these ideas for "useful" work at not suitable at the current tech level. For one thing, it would incentivize people to try and make something that looks like they solved a climate model while in reality spending minimal computing time to come up with something that passes the requirements to win a block, even if that means bad answers.
Bitcoin specifically is not efficient and a lot of people think the "proof of work" concept (in opposition to "proof of share" where coins pay interest and other distribution algorithms) probably ought to be replaced when someone figures out a good solution.
The most efficient house heating is generally not electric, but many people don't have houses equipped to burn oil or natural gas or heat with solar. So if you would otherwise be running electricity through plain heating elements, a computer serves effectively as efficiently as a space heater except for the initial capital. (they do waste a tiny bit when the status LEDs shine out the window)
If you want to think of it as unsustainable then be pleased to consider that I think relative to degree of adoption and number of users the current levels of mining will not be sustained. Basically I think many coin miners will never see their hardware investment repaid even if they hook up below-market electricity, because the technology will get away from them. This guy is hooked up with the ASIC guy, so I imagine he sees a profit, but I could also see him continuing to expand his hardware purchases until one day SHA256 coins drop in popularity and all of a sudden he's in the red on expensive hardware that can mine obsolete-ish (and now low value) coin.
I haven't heard of too much scandal coming out of cloud hashing. I've paid some kids or whoever a few hundred-thousands DOGE from time to time to mine various scrypt coins for me on their gaming rigs for a little bit and I've had no trouble. One thing you can say in libertarian true believers' favor when that's relevant is that they do tend to honor a contract. The different capital/risk/profit profiles for DIY mining and contracted mining are obvious enough for both sides...
Where there is scandal like this is in ASIC manufacturing. Often enough ASIC manufacturers will take preorder money, make up chips, and then subject them to a nice lengthy period of "testing." Sometimes for long enough that the customers don't receive the ASIC until it's basically obsolete. Right now we're watching as one entity controls about 20 scrypt gigahash - for comparison Litecoin and Dogecoin combined have about 250 gigahash total.
posted by save alive nothing that breatheth at 5:03 AM on April 4, 2014
Bitcoin specifically is not efficient and a lot of people think the "proof of work" concept (in opposition to "proof of share" where coins pay interest and other distribution algorithms) probably ought to be replaced when someone figures out a good solution.
The most efficient house heating is generally not electric, but many people don't have houses equipped to burn oil or natural gas or heat with solar. So if you would otherwise be running electricity through plain heating elements, a computer serves effectively as efficiently as a space heater except for the initial capital. (they do waste a tiny bit when the status LEDs shine out the window)
If you want to think of it as unsustainable then be pleased to consider that I think relative to degree of adoption and number of users the current levels of mining will not be sustained. Basically I think many coin miners will never see their hardware investment repaid even if they hook up below-market electricity, because the technology will get away from them. This guy is hooked up with the ASIC guy, so I imagine he sees a profit, but I could also see him continuing to expand his hardware purchases until one day SHA256 coins drop in popularity and all of a sudden he's in the red on expensive hardware that can mine obsolete-ish (and now low value) coin.
I haven't heard of too much scandal coming out of cloud hashing. I've paid some kids or whoever a few hundred-thousands DOGE from time to time to mine various scrypt coins for me on their gaming rigs for a little bit and I've had no trouble. One thing you can say in libertarian true believers' favor when that's relevant is that they do tend to honor a contract. The different capital/risk/profit profiles for DIY mining and contracted mining are obvious enough for both sides...
Where there is scandal like this is in ASIC manufacturing. Often enough ASIC manufacturers will take preorder money, make up chips, and then subject them to a nice lengthy period of "testing." Sometimes for long enough that the customers don't receive the ASIC until it's basically obsolete. Right now we're watching as one entity controls about 20 scrypt gigahash - for comparison Litecoin and Dogecoin combined have about 250 gigahash total.
posted by save alive nothing that breatheth at 5:03 AM on April 4, 2014
If a bitcoin miner can make a certain amount of money for a certain hardware investment and energy cost then his incentive is to get as much of that hardware and use as much of that energy as they can - they've got an incentive to buy as much electricity as they can in order to make their profit.
Up to a point. They can only make a profit as the difficulty rises if the price of bitcoin also rises. It's dropped over 60% from the all time high, and those ASIC farms can't be making the profit that they were before. It's probably not worth throwing a bunch more computational resources and power at bitcoin right now. So the difficulty should start to remain steady or even drop at some point.
Which is all another way of saying that the power usage of the bitcoin network should scale with the value of bitcoins, which should match the demand for bitcoins, which should match the usefulness of bitcoins.
posted by empath at 5:14 AM on April 4, 2014
Up to a point. They can only make a profit as the difficulty rises if the price of bitcoin also rises. It's dropped over 60% from the all time high, and those ASIC farms can't be making the profit that they were before. It's probably not worth throwing a bunch more computational resources and power at bitcoin right now. So the difficulty should start to remain steady or even drop at some point.
Which is all another way of saying that the power usage of the bitcoin network should scale with the value of bitcoins, which should match the demand for bitcoins, which should match the usefulness of bitcoins.
posted by empath at 5:14 AM on April 4, 2014
Empath: yes what I meant was "while still making a profit" - it obviously caps out.
The thing I don't like is that any other business that finds a way to make an efficiency saving either reduces its costs (which is a particularly good thing when it comes to energy from a non renewable source) or generates more useful output.
ASIC mining was clearly a massive jump in efficiency for hashing but those savings haven't translated into a proportionately lower energy cost, have they?
posted by edd at 5:25 AM on April 4, 2014
The thing I don't like is that any other business that finds a way to make an efficiency saving either reduces its costs (which is a particularly good thing when it comes to energy from a non renewable source) or generates more useful output.
ASIC mining was clearly a massive jump in efficiency for hashing but those savings haven't translated into a proportionately lower energy cost, have they?
posted by edd at 5:25 AM on April 4, 2014
ASICs absolutely use less energy, and since the primary cost of mining is energy costs, most mining operations go where the cheapest, cleanest power is -- hydroelectric and geothermal. You're not going to make a ton of money in a region that depends on coal powered plants for electricity.
posted by empath at 5:53 AM on April 4, 2014
posted by empath at 5:53 AM on April 4, 2014
"ASICs absolutely use less energy"
except you end up using more because the network difficulty adjusts -
"the power usage of the bitcoin network should scale with the value of bitcoins"
I recognise that there's an incentive to use cheaper power and cheaper power may be cleaner, but that cheaper power is also limited in how much is available and you're therefore sucking up clean energy that could be used on more economically productive and important things than an arbitrarily difficult number crunching problem, and potentially forcing other customers to less friendly sources of electricity by driving up demand for no good reason.
posted by edd at 6:03 AM on April 4, 2014 [1 favorite]
except you end up using more because the network difficulty adjusts -
"the power usage of the bitcoin network should scale with the value of bitcoins"
I recognise that there's an incentive to use cheaper power and cheaper power may be cleaner, but that cheaper power is also limited in how much is available and you're therefore sucking up clean energy that could be used on more economically productive and important things than an arbitrarily difficult number crunching problem, and potentially forcing other customers to less friendly sources of electricity by driving up demand for no good reason.
posted by edd at 6:03 AM on April 4, 2014 [1 favorite]
But again you have to compare it to what it's replacing.
posted by empath at 6:08 AM on April 4, 2014
posted by empath at 6:08 AM on April 4, 2014
Sticherbeast: Coinbase consumer limit is 50 BTC/day at verification level 2, I believe. That's currency conversion like at an airport, not a market, so you pay a premium but it is quick, easy, and reliable. If you were a merchant or they cared to make a special deal for those Bitcoins I imagine they offer more coin at once.
Thanks for the helpful answer. So, at the consumer level for Coinbase, that transaction would take ~11 days and cost the "airport" rate. How would the rate be determined when the transaction takes several days? If somebody was cashing out $250,000, they couldn't just dump it all in one go, at one agreed-upon price? (I mean, of course anybody could voluntarily negotiate to a specific agreement, but there's no inherent rule saying that any exchange would have to agree to such a thing.)
The proper exchange to use depends on your location and desired currency. For USA/USD, the volume is on BitStamp, BTC-e, and BitFinex. BitStamp is the one I'd use if I used a BTC exchange. They started as a Slovenian computer store and they now have $10 million++ in serious funding. BTC-e is just way too opaque. BitFinex I know nothing about except the volume. For Euros you want Kraken, and others I don't know about have decent volume.
I wonder how long it would take to cash out on BitStamp. What is their daily trading volume? Would cashing out $250,000 worth of BTC create a significant change in their schedule?
The reason behind my line of questioning is that, whenever I see something like "so-and-so has $1M worth of BTC", I always wonder what that really means in a practical, day-to-day sense. Yes, you could buy $1M worth of items from merchants who accept BTC, but that's not the same thing.
I've never had to exchange more than $5,000 in foreign currency, so I don't know how the experience would compare. If I had $250,000 worth of Euro, how would I best convert that into USD?
...
Something I find interesting about BitStamp is how they had started in Slovenia, but then moved the UK, owing to "political and economic pressures" in Slovenia and the lighter regulatory touch in the UK. I wonder if those pressures had something to do with Slovenia's current machinations to avoid going down the same tubes as Italy, Spain, and Greece. For better and for worse, Slovenia has been working overtime to appear shiny for Moody's, S&P, etc.
Anyway, it's funny to me how people on SomethingAwful's Buttcoin thread will refer to Slovenia as this sketchy Eastern European backwater, because 1) it's not anything like that at all, not even a little bit, not even slightly, 2) it seems that they had left Slovenia because it was too orderly, regulated, and conservative, and 3) years ago, BitStamp left Slovenia for the UK, which nobody ever refers to as a Borat-style backwater.
...
humanfont - I think you're talking about mining for bitcoin, that's different.
I'm honestly confused. I was also talking about mining for BTC. I may have misunderstood you, just as I may be still not understanding the different senses of "mining", but my understanding was that one's ability to mine for BTC was very much pegged to one's relevant computing power. If you've got a warehouse of ASICs with a special deal on hydroelectric electricity, then you're much better situated than somebody with a laptop in Queens. My understanding, however incorrect, is that one earns more as one computes more.
posted by Sticherbeast at 6:10 AM on April 4, 2014
Thanks for the helpful answer. So, at the consumer level for Coinbase, that transaction would take ~11 days and cost the "airport" rate. How would the rate be determined when the transaction takes several days? If somebody was cashing out $250,000, they couldn't just dump it all in one go, at one agreed-upon price? (I mean, of course anybody could voluntarily negotiate to a specific agreement, but there's no inherent rule saying that any exchange would have to agree to such a thing.)
The proper exchange to use depends on your location and desired currency. For USA/USD, the volume is on BitStamp, BTC-e, and BitFinex. BitStamp is the one I'd use if I used a BTC exchange. They started as a Slovenian computer store and they now have $10 million++ in serious funding. BTC-e is just way too opaque. BitFinex I know nothing about except the volume. For Euros you want Kraken, and others I don't know about have decent volume.
I wonder how long it would take to cash out on BitStamp. What is their daily trading volume? Would cashing out $250,000 worth of BTC create a significant change in their schedule?
The reason behind my line of questioning is that, whenever I see something like "so-and-so has $1M worth of BTC", I always wonder what that really means in a practical, day-to-day sense. Yes, you could buy $1M worth of items from merchants who accept BTC, but that's not the same thing.
I've never had to exchange more than $5,000 in foreign currency, so I don't know how the experience would compare. If I had $250,000 worth of Euro, how would I best convert that into USD?
...
Something I find interesting about BitStamp is how they had started in Slovenia, but then moved the UK, owing to "political and economic pressures" in Slovenia and the lighter regulatory touch in the UK. I wonder if those pressures had something to do with Slovenia's current machinations to avoid going down the same tubes as Italy, Spain, and Greece. For better and for worse, Slovenia has been working overtime to appear shiny for Moody's, S&P, etc.
Anyway, it's funny to me how people on SomethingAwful's Buttcoin thread will refer to Slovenia as this sketchy Eastern European backwater, because 1) it's not anything like that at all, not even a little bit, not even slightly, 2) it seems that they had left Slovenia because it was too orderly, regulated, and conservative, and 3) years ago, BitStamp left Slovenia for the UK, which nobody ever refers to as a Borat-style backwater.
...
humanfont - I think you're talking about mining for bitcoin, that's different.
I'm honestly confused. I was also talking about mining for BTC. I may have misunderstood you, just as I may be still not understanding the different senses of "mining", but my understanding was that one's ability to mine for BTC was very much pegged to one's relevant computing power. If you've got a warehouse of ASICs with a special deal on hydroelectric electricity, then you're much better situated than somebody with a laptop in Queens. My understanding, however incorrect, is that one earns more as one computes more.
posted by Sticherbeast at 6:10 AM on April 4, 2014
"Well, you've already got that, and it's not as if that's particularly energy efficient. Think of how many employees work for those companies, the amount of money spent on gas commuting to work, lighting and air conditioning the buildings they work in, moving checks around, etc, etc."
I'd also like to note that ACH and the banking system in general are not quite so directly comparable to the process of cryptographically approving the blockchain, so comparing the energy costs is not really very fair.
posted by edd at 6:12 AM on April 4, 2014 [1 favorite]
I'd also like to note that ACH and the banking system in general are not quite so directly comparable to the process of cryptographically approving the blockchain, so comparing the energy costs is not really very fair.
posted by edd at 6:12 AM on April 4, 2014 [1 favorite]
Coinbase is about 4 days for me to buy Bitcoin and I thought it was the same to sell BTC though I've never cashed out that way. Coinbase merchant agreement probably has some language about how much they'll take but I don't know other than they talk about millions a month plus in their informational materials. $250k single transactions from consumers is not really their market niche though.
Bitstamp moved about ten million in the last 24h but I think that's kinda high. Maybe expect around five million with a lot of variance on a normal day? I don't have that history to hand or really follow those numbers too closely. Volumes definitely vary a lot too though. People are moving a lot of money to fiat for tax purposes right now. So $250k is big but doable - you would be well advised to spread some to BitFinex if they check out and to use standard techniques to avoid moving the market.
You do need to make some kind of capital investment to mine BTC today and soon enough for the Scrypt coins that don't try to fight ASICs with Scrypt-N or something. I see the SHA256 miners I have now on offer for a few bucks with the warning they might never pay themselves back and are basically souvenirs/collectibles. (That would be hilarious, an entire secondary bubble of collectible BTC miners.) That pays me much more than the interest on my bank accounts, though. If I was looking to really invest a few grand gets you real capacity but I would consider it risky.
posted by save alive nothing that breatheth at 6:33 AM on April 4, 2014
Bitstamp moved about ten million in the last 24h but I think that's kinda high. Maybe expect around five million with a lot of variance on a normal day? I don't have that history to hand or really follow those numbers too closely. Volumes definitely vary a lot too though. People are moving a lot of money to fiat for tax purposes right now. So $250k is big but doable - you would be well advised to spread some to BitFinex if they check out and to use standard techniques to avoid moving the market.
You do need to make some kind of capital investment to mine BTC today and soon enough for the Scrypt coins that don't try to fight ASICs with Scrypt-N or something. I see the SHA256 miners I have now on offer for a few bucks with the warning they might never pay themselves back and are basically souvenirs/collectibles. (That would be hilarious, an entire secondary bubble of collectible BTC miners.) That pays me much more than the interest on my bank accounts, though. If I was looking to really invest a few grand gets you real capacity but I would consider it risky.
posted by save alive nothing that breatheth at 6:33 AM on April 4, 2014
at transaction would take ~11 days and cost the "airport" rate. How would the rate be determined when the transaction takes several days? If somebody was cashing out $250,000, they couldn't just dump it all in one go, at one agreed-upon price?
If you are selling and the price of bitcoins goes up, they will process it at the rate you agreed at the start. If the price has gone way down they will cancel the transaction with a made up excuse and make you re-execute.
This happened on almost all the bitcoin selling places when the price crashed last time.
Unregulated = no problems.
posted by Iax at 8:23 AM on April 4, 2014 [1 favorite]
If you are selling and the price of bitcoins goes up, they will process it at the rate you agreed at the start. If the price has gone way down they will cancel the transaction with a made up excuse and make you re-execute.
This happened on almost all the bitcoin selling places when the price crashed last time.
Unregulated = no problems.
posted by Iax at 8:23 AM on April 4, 2014 [1 favorite]
Box 1 is filled with 100 thousand US dollars, Box 2 is filled with 75 oz of 24k gold, box 3 is 50 thousand Bitcoin(s)......you have to choose NOW. Bull freakin shit anyone takes the bitcoins.
I'm somewhere between skeptical and agnostic on the various aspects of bitcoin, but let's see..
I'd owe taxes on the roughly $22.5MM USD, and I don't have that kind of scratch on hand. But otherwise, I'd only have to trade my way out of a few hundred bitcoin at anywhere near current prices in order to come out ahead. My largest risk would be cashing out to USD/EUR through an exchange, but who wouldn't expect enormous risk for a potential 20,000% return? The tax complication is the only thing that would give me pause.
posted by malocchio at 9:43 AM on April 4, 2014
I'm somewhere between skeptical and agnostic on the various aspects of bitcoin, but let's see..
I'd owe taxes on the roughly $22.5MM USD, and I don't have that kind of scratch on hand. But otherwise, I'd only have to trade my way out of a few hundred bitcoin at anywhere near current prices in order to come out ahead. My largest risk would be cashing out to USD/EUR through an exchange, but who wouldn't expect enormous risk for a potential 20,000% return? The tax complication is the only thing that would give me pause.
posted by malocchio at 9:43 AM on April 4, 2014
No problems except for the millions of dollars people have lost in MtGox and elsewhere by the ongoing market manipulation of insiders. No problems except for the looming tax liability issues. No problems except for those with tens of thousands dollars in accumulated bitcoin holdings who have been unable to successfully convert their coins.
posted by humanfont at 12:33 PM on April 4, 2014 [1 favorite]
posted by humanfont at 12:33 PM on April 4, 2014 [1 favorite]
Another bitcoin bank CEO ran off with tens of thousands of real dollars.
Neo and Bee's Danny Brewster
posted by Iax at 8:09 PM on April 4, 2014
Neo and Bee's Danny Brewster
posted by Iax at 8:09 PM on April 4, 2014
Thanks for the helpful answer. So, at the consumer level for Coinbase, that transaction would take ~11 days and cost the "airport" rate. How would the rate be determined when the transaction takes several days? If somebody was cashing out $250,000, they couldn't just dump it all in one go, at one agreed-upon price?
Oh, let's say you're a customer and you decide to cash out that much on Coinbase without trying to get in on a merchant agreement or special deal with Coinbase - you'd just do daily transactions for a bit, separate sells each at Coinbase's price that day. Each bundle of funds takes that 3-4 days I mentioned to transfer but the price is locked in when you confirm on Coinbase.
This Google Ventures backed thing Buttercoin is coming up, supposed to be easymode Bitcoin of some sort.
posted by save alive nothing that breatheth at 6:06 AM on April 5, 2014
"The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence. At this point, Bitcoin miners will probably be supported exclusively by numerous small transaction fees."
And what form of currency will these transaction fees take?
posted by kisch mokusch at 7:08 AM on April 5, 2014
And what form of currency will these transaction fees take?
posted by kisch mokusch at 7:08 AM on April 5, 2014
And what form of currency will these transaction fees take?
IMG TAG PLZ KTHX
posted by save alive nothing that breatheth at 8:04 AM on April 5, 2014
IMG TAG PLZ KTHX
posted by save alive nothing that breatheth at 8:04 AM on April 5, 2014
My understanding, however incorrect, is that one earns more as one computes more.
This is not quite true. What happens when you "mine" bitcoins is you're searching for a number that, when added to the most recent set of transactions, has a certain mathematical property. The only way to find these numbers is with guess and check, and there's some small probability each try that you'll find the right one. In a sense, it's kind of like buying a bunch of lottery tickets.
When someone finds this number, they package it together with the set of transactions as a "block", then share this block with the network. If someone makes a valid block before you do, you give up and try for the next one. The first creator of a valid block gets a transaction fee from all the originators of transactions in that block, and also everyone agrees they can award themselves a 'bounty' of bitcoins, essentially created out of thin air.
So, more computing power essentially means you can buy more lottery tickets per second, and that it's more likely you'll get a payout. But functionally, it's not really all that different from gambling.
posted by heathkit at 12:54 PM on April 5, 2014
This is not quite true. What happens when you "mine" bitcoins is you're searching for a number that, when added to the most recent set of transactions, has a certain mathematical property. The only way to find these numbers is with guess and check, and there's some small probability each try that you'll find the right one. In a sense, it's kind of like buying a bunch of lottery tickets.
When someone finds this number, they package it together with the set of transactions as a "block", then share this block with the network. If someone makes a valid block before you do, you give up and try for the next one. The first creator of a valid block gets a transaction fee from all the originators of transactions in that block, and also everyone agrees they can award themselves a 'bounty' of bitcoins, essentially created out of thin air.
So, more computing power essentially means you can buy more lottery tickets per second, and that it's more likely you'll get a payout. But functionally, it's not really all that different from gambling.
posted by heathkit at 12:54 PM on April 5, 2014
Well, it performs a useful function in securing the network and processing transactions.
Seriously this is light years ahead of credit cards. Credit cards are secured by making everyone pay for the massive fraud that goes on.
You can remove much of the chance element with pooled mining. It's still the same process, but with a pool internal difficulty that's much lower. These solutions prove to the pool you are doing work, and then when someone hits a full difficulty solution the entire pool is paid. You can receive funds multiple times a minute on this system - there are various minorly different payout schemes. A problem is the pool ops become powerful individuals. There is peer to peer pooled mining but I haven't looked into it and apparently it's about 1%...
BTC is the first and it is indeed probably too watt intensive...
posted by save alive nothing that breatheth at 2:26 PM on April 5, 2014
Seriously this is light years ahead of credit cards. Credit cards are secured by making everyone pay for the massive fraud that goes on.
You can remove much of the chance element with pooled mining. It's still the same process, but with a pool internal difficulty that's much lower. These solutions prove to the pool you are doing work, and then when someone hits a full difficulty solution the entire pool is paid. You can receive funds multiple times a minute on this system - there are various minorly different payout schemes. A problem is the pool ops become powerful individuals. There is peer to peer pooled mining but I haven't looked into it and apparently it's about 1%...
BTC is the first and it is indeed probably too watt intensive...
posted by save alive nothing that breatheth at 2:26 PM on April 5, 2014
I'm kind of surprised nobody actually answered the "moving $250k" question. Bitstamp's current order book is definitely deep enough to cover that, you'd push the price down by about 1.3% right now which isn't nothing but also doesn't sound insane as currency conversion prices go. Bitstamp is fairly well regarded, they've been audited in an informal way by some bitcoin-famous people in bitcoin-clever ways but there's nothing like FDIC or SIPC in place.
Then there's Second Market which has started to do block trades for >25BTC. They're a US-regulated by FINRA/SEC company so it's a bit less wild-west than some servers in Slovenia. They don't publish an order book so I have no idea what price they'd give you for your $250k. They've also announced an intention to become an exchange of sorts though the details are murky and intertwined with their BIT investment trust thingie.
I find the bitcoin true-believers equally annoying as the knee-jerk haters. It's a complicated concept and so many of the 'arguments' on both sides are just incoherent that any discussion is just an exercise in frustration.
posted by Skorgu at 7:56 AM on April 6, 2014 [1 favorite]
Then there's Second Market which has started to do block trades for >25BTC. They're a US-regulated by FINRA/SEC company so it's a bit less wild-west than some servers in Slovenia. They don't publish an order book so I have no idea what price they'd give you for your $250k. They've also announced an intention to become an exchange of sorts though the details are murky and intertwined with their BIT investment trust thingie.
I find the bitcoin true-believers equally annoying as the knee-jerk haters. It's a complicated concept and so many of the 'arguments' on both sides are just incoherent that any discussion is just an exercise in frustration.
posted by Skorgu at 7:56 AM on April 6, 2014 [1 favorite]
They're a US-regulated by FINRA/SEC company so it's a bit less wild-west than some servers in Slovenia
United Kingdom. Not Slovenia. They moved from Slovenia some years ago. The UK has been much more hands-off. Slovenia is not even remotely a "wild west" kind of place.
That said, a FINRA-regulated company is of course more regulated than an unregulated company, in the UK or elsewhere.
posted by Sticherbeast at 2:18 PM on April 6, 2014 [1 favorite]
United Kingdom. Not Slovenia. They moved from Slovenia some years ago. The UK has been much more hands-off. Slovenia is not even remotely a "wild west" kind of place.
That said, a FINRA-regulated company is of course more regulated than an unregulated company, in the UK or elsewhere.
posted by Sticherbeast at 2:18 PM on April 6, 2014 [1 favorite]
Anyway, Slovenia aside, thank you both for your helpful and informative answers. I'm just trying to get a sense of what the day-to-day reality would be when dealing with such numbers.
posted by Sticherbeast at 2:20 PM on April 6, 2014 [1 favorite]
posted by Sticherbeast at 2:20 PM on April 6, 2014 [1 favorite]
Seriously this is light years ahead of credit cards. Credit cards are secured by making everyone pay for the massive fraud that goes on.
I don't think comparing Bitcoin to existing payment systems is valid. Yes, credit cards are incredibly susceptible to fraud. Yes, the ACH system is incredibly slow and inefficient. These systems aren't that way for technical reasons. Bitcoin doesn't solve these problems any better than existing solutions do. The problem is the entities that maintain this system in the US have no incentive to change it, and they tend to lobby for legislation and collude to preserve the status quo. The technology to make these systems better exists now, and is generally well known.
The only problem that Bitcoin solves is how to have secure transactions without a central authority. Of course, in practice people store their Bitcoin balance at places like Mt. Gox, so it doesn't even really solve that problem particularly well. And not everyone agrees that this is a problem particularly worth solving, at least not for financial transactions.
The Bitcoin protocol maintains a decentralized, verifiable record of history. That's... actually pretty cool, but I think the best applications for this idea have yet to be found.
posted by heathkit at 7:29 PM on April 6, 2014
I don't think comparing Bitcoin to existing payment systems is valid. Yes, credit cards are incredibly susceptible to fraud. Yes, the ACH system is incredibly slow and inefficient. These systems aren't that way for technical reasons. Bitcoin doesn't solve these problems any better than existing solutions do. The problem is the entities that maintain this system in the US have no incentive to change it, and they tend to lobby for legislation and collude to preserve the status quo. The technology to make these systems better exists now, and is generally well known.
The only problem that Bitcoin solves is how to have secure transactions without a central authority. Of course, in practice people store their Bitcoin balance at places like Mt. Gox, so it doesn't even really solve that problem particularly well. And not everyone agrees that this is a problem particularly worth solving, at least not for financial transactions.
The Bitcoin protocol maintains a decentralized, verifiable record of history. That's... actually pretty cool, but I think the best applications for this idea have yet to be found.
posted by heathkit at 7:29 PM on April 6, 2014
Right. The ledger of accounts is just a basic function of the system...
posted by save alive nothing that breatheth at 8:00 PM on April 6, 2014
posted by save alive nothing that breatheth at 8:00 PM on April 6, 2014
I actually thought of another way to explain bitcoins to people.
The number of bitcoins you have is just a balance associated with a private key. A 'private key' is really just a very big number. Really, it's just a password. A 64 character randomly generated password. The password is associated with a public address, like a username. Let's call this a 'wallet'. Anyone who knows the wallet can send money to it, and they also know how much money it has. In order to spend the money associated with that wallet, you need to know the password for it. Anyone who does can spend as much as it has, even the whole balance in one go. They can't spend more money than the wallet has, since everyone knows how much that is.
You can have as many wallets as you want and move money between them freely. You can send your money to other wallets, without having to go to any kind of website or service. There's a record of which wallets sent money to which other wallet and when, and that record cannot be modified unless you control more than 50% of the machines in the bitcoin network. There's nothing about the wallet that identifies you, but if you buy dollars with money in that wallet, that's a big clue that you know the password for it.
The 64 character random password is pretty much impossible to memorize, so people tend to do stuff like write them down on paper, or put them in a file on a USB drive. If you leave that password on your computer or send it in an email, someone can use it to take all the money in that wallet. They can do this at anytime, from anywhere in the world. They can even automate it. If your money gets stolen because someone got your password, there is no way to get it back. No dispute resolution, no chargebacks. It's just gone.
Sites like bitcoin generate a new wallet for you, and only they know the password for it. They don't share it with anyone, and they're the only people who know it. They can use this password to send money on your behalf. If they lose the password, or use it to steal from the wallet, there is nothing you can do about it. It's just gone.
posted by heathkit at 8:34 PM on April 6, 2014 [1 favorite]
The number of bitcoins you have is just a balance associated with a private key. A 'private key' is really just a very big number. Really, it's just a password. A 64 character randomly generated password. The password is associated with a public address, like a username. Let's call this a 'wallet'. Anyone who knows the wallet can send money to it, and they also know how much money it has. In order to spend the money associated with that wallet, you need to know the password for it. Anyone who does can spend as much as it has, even the whole balance in one go. They can't spend more money than the wallet has, since everyone knows how much that is.
You can have as many wallets as you want and move money between them freely. You can send your money to other wallets, without having to go to any kind of website or service. There's a record of which wallets sent money to which other wallet and when, and that record cannot be modified unless you control more than 50% of the machines in the bitcoin network. There's nothing about the wallet that identifies you, but if you buy dollars with money in that wallet, that's a big clue that you know the password for it.
The 64 character random password is pretty much impossible to memorize, so people tend to do stuff like write them down on paper, or put them in a file on a USB drive. If you leave that password on your computer or send it in an email, someone can use it to take all the money in that wallet. They can do this at anytime, from anywhere in the world. They can even automate it. If your money gets stolen because someone got your password, there is no way to get it back. No dispute resolution, no chargebacks. It's just gone.
Sites like bitcoin generate a new wallet for you, and only they know the password for it. They don't share it with anyone, and they're the only people who know it. They can use this password to send money on your behalf. If they lose the password, or use it to steal from the wallet, there is nothing you can do about it. It's just gone.
posted by heathkit at 8:34 PM on April 6, 2014 [1 favorite]
Of course if anyone ever finds out your secret number, then your wallet can be emptied and you have no way to recover the funds. Also one math prodigy or breakthrough in computation and your magic crypto money will vanish in a poof of logic.
posted by humanfont at 9:01 PM on April 6, 2014
posted by humanfont at 9:01 PM on April 6, 2014
I somehow missed that Bitstamp had moved to the UK, thanks Sticherbeast!
posted by Skorgu at 6:24 PM on April 7, 2014
posted by Skorgu at 6:24 PM on April 7, 2014
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