Bitcoin, a new "peer-to-peer currency"

[columbia]

I'm surprised I hadn't heard of this until now.

Bitcoin is a P2P currency that could topple governments, destabilize economies and create uncontrollable global bazaars for contraband. (...) After month of research and discovery, we've learned the following:
1. Bitcoin is a technologically sound project.
2. Bitcoin is unstoppable without end-user prosecution.
3. Bitcoin is the most dangerous open-source project ever created.
4. Bitcoin may be the most dangerous technological project since the internet itself.
5. Bitcoin is a political statement by technotarians (technological libertarians).*
6. Bitcoins will change the world unless governments ban them with harsh penalties.

http://www.boingboing.net/2011/05/15/bi ... eer-t.html" onclick="window.open(this.href);return false;

[AlexPKeaton]

I'm watching that this week in startups episode about it, seems like it is a really cool idea.

[yubb]

BitCoin is really already illegal in the U.S. I don't see how it wouldn't be considered illegal since it's a form of currency not minted by the Federal Reserve.

Competing currencies are key, though, to help stop inflation. As a Libertarian (and apparently a technotarian) I fully support alternate currencies.

[Kraftster]

Wow. Extremely interesting.

[bhaw]

So how do you get bitcoin to start? Do you trade US$ or another currency at an exchange rate to get your initial bitcoinage?

[columbia]

So how do you get bitcoin to start? Do you trade US$ or another currency at an exchange rate to get your initial bitcoinage?

I'm still trying to figure that part out too.

[Kraftster]

How can I get Bitcoins?
There are three ways to get Bitcoins:
Buy them on an exchange such as Mt. Gox or #bitcoin-otc on FreeNode.
Accept Bitcoins as payment for goods or services
Create a new block (currently yields 50 Bitcoins)

[pittsports87]

[viva la ben]

When do the hackers figure out how to make their accounts worth a gazillion dollars?

[Kraftster]

When do the hackers figure out how to make their accounts worth a gazillion dollars?

The two guys who spoke on the Startups episode suggested that hacking of the Bitcoin network will not be an issue at all, but that you could see viruses and trojans designed to scope out computers for bitcoin and steal them. That's no different than current threats, though.

[pittsports87]

I'll give it a month before someone hacks it.

[Kraftster]

I hope it doesn't get hacked, and I don't think it will after reading a lot about it.

1) There's no central bitcoin "bank" to hack. Better to devote efforts to hacking one central site that holds a bunch of money generating information.
2) Bitcoins are generated when your cpu solves the algorithm. The algorithm that is used to generate bitcoins is ever-changing so its not as if the answer (the key to generating BTCs) can be hacked. If you or I downloaded the software right now and clicked the button to generate a bitcoin, it would take 5-10 years and the more people that are generating, the longer it takes. It would basically use up all your cpu's juice too.

I could be talking out of my butt, but it sounds legit.

[bhaw]

How can I get Bitcoins?
There are three ways to get Bitcoins:
Buy them on an exchange such as Mt. Gox or #bitcoin-otc on FreeNode.
Accept Bitcoins as payment for goods or services
Create a new block (currently yields 50 Bitcoins)

So how is this different than credits or something you would get at an online site?

As more people buy into bitcoins, wouldn't it follow the laws of inflation? As more bitcoins are generated, the current bitcoins become less valuable? In addition, if you can create a "block" (whatever that is), you are generating currency similar to the Fed just printing more money. That seems like it would cause inflation as well...

Lastly, it seems like it is going to be attached to a real dollar value in the end. For example, if you are selling a computer online that would go for $400 real dollars, it seems logical that you would only accept $400 worth of bitcoins.

At the end of the day, this just seems like a way to quantify online barter, which is already done all over the place. The problems arise when you have to pay your rent or a bill in real money. Most banks, utilities, credit cards, etc don't accept bitcoins, so you would eventually have to cash into real money.

Maybe they addressed all this but I didn't see it in the original article.

[Kraftster]

Well, I think its different than site-specific credits because its at least trying to be a sort of universal online currency.

It seems to have an attempt at built in inflation control so that it will be more like a scarce commodity with increasing value the more people buy into bitcoins, because (1) as its currently written, there is a hard ceiling of like 21MM BTCs or something and (2) the more people that try to generate BTCs, the harder it becomes to generate them. Generating a block as it stands right now takes 5-10 years on a standard PC, the more people that are trying the harder it will get and it will take even longer than that.

It will be attached to a real dollar value in the same way that gold or silver is, but it has a greater chance of being traded as BTC qua BTC than gold or silver do -- or maybe we're actually close to passing around gold and silver for goods in the not-too-distant future the way things are going.

[bh]

So how is this different than credits or something you would get at an online site?

credits are only able to be redeemed at certain sites. They are not universal. They are not tracked the way these bitcoins are. It's kind of opposite of a bank.
From wiki:

Bitcoins contain the current owner's public key (address). When user A transfers some to user B, A relinquishes ownership on them by adding B’s public key (address) to those coins and signing them with his own private key.[18] He then broadcasts these bitcoins in an appropriate message, the transaction, on the peer-to-peer network. The rest of the network nodes validate the cryptographic signatures and the amounts of the transaction before accepting it.

Because transactions are broadcast to the entire network, they are inherently public. Unlike regular banking, which preserves customer privacy by keeping transaction records private, transactional anonymity is accomplished in Bitcoin by keeping the ownership of addresses private, while at the same time publishing all transactions. As an example, if Alice sends 123.45 BTC to Bob, a public record is created that allows anyone to see that 123.45 was sent from one address to another. However, unless Alice or Bob make their ownership of these addresses publicly known in some way, it is difficult for anyone else to connect the transaction with them.

As more people buy into bitcoins, wouldn't it follow the laws of inflation? As more bitcoins are generated, the current bitcoins become less valuable? In addition, if you can create a "block" (whatever that is), you are generating currency similar to the Fed just printing more money. That seems like it would cause inflation as well...

It said that it has predictable inflation and that in something like 20 years there will be no more bitcoins created at a limit of 21 million. You cannot just print at will. It is nothing like the Fed.

Lastly, it seems like it is going to be attached to a real dollar value in the end. For example, if you are selling a computer online that would go for $400 real dollars, it seems logical that you would only accept $400 worth of bitcoins.

In the end the idea is to replace the dollar. It will only happen if people start using (and if we are allowed to use) this as currency (which I highly doubt).

At the end of the day, this just seems like a way to quantify online barter, which is already done all over the place. The problems arise when you have to pay your rent or a bill in real money. Most banks, utilities, credit cards, etc don't accept bitcoins, so you would eventually have to cash into real money.

Well acceptability is the last hurdle to be good money. It's divisible, portable, durable, and scarce. The last item needed to be good money is acceptibility. It will never be accepted in the US though because the government would lose ALL monetary control. Fat chance on that.

[Guinness]

So how is this different than credits or something you would get at an online site?

credits are only able to be redeemed at certain sites. They are not universal. They are not tracked the way these bitcoins are. It's kind of opposite of a bank.
From wiki:

Bitcoins contain the current owner's public key (address). When user A transfers some to user B, A relinquishes ownership on them by adding B’s public key (address) to those coins and signing them with his own private key.[18] He then broadcasts these bitcoins in an appropriate message, the transaction, on the peer-to-peer network. The rest of the network nodes validate the cryptographic signatures and the amounts of the transaction before accepting it.

Because transactions are broadcast to the entire network, they are inherently public. Unlike regular banking, which preserves customer privacy by keeping transaction records private, transactional anonymity is accomplished in Bitcoin by keeping the ownership of addresses private, while at the same time publishing all transactions. As an example, if Alice sends 123.45 BTC to Bob, a public record is created that allows anyone to see that 123.45 was sent from one address to another. However, unless Alice or Bob make their ownership of these addresses publicly known in some way, it is difficult for anyone else to connect the transaction with them.

As more people buy into bitcoins, wouldn't it follow the laws of inflation? As more bitcoins are generated, the current bitcoins become less valuable? In addition, if you can create a "block" (whatever that is), you are generating currency similar to the Fed just printing more money. That seems like it would cause inflation as well...

It said that it has predictable inflation and that in something like 20 years there will be no more bitcoins created at a limit of 21 million. You cannot just print at will. It is nothing like the Fed.

Lastly, it seems like it is going to be attached to a real dollar value in the end. For example, if you are selling a computer online that would go for $400 real dollars, it seems logical that you would only accept $400 worth of bitcoins.

In the end the idea is to replace the dollar. It will only happen if people start using (and if we are allowed to use) this as currency (which I highly doubt).

At the end of the day, this just seems like a way to quantify online barter, which is already done all over the place. The problems arise when you have to pay your rent or a bill in real money. Most banks, utilities, credit cards, etc don't accept bitcoins, so you would eventually have to cash into real money.

Well acceptability is the last hurdle to be good money. It's divisible, portable, durable, and scarce. The last item needed to be good money is acceptibility. It will never be accepted in the US though because the government would lose ALL monetary control. Fat chance on that.

Great post, bh - especially your estimation of bitcoin as currency in this last paragraph.

[columbia]

Digital Black Friday: First Bitcoin "Depression" Hits
http://www.dailytech.com/Digital+Black+ ... e21877.htm" onclick="window.open(this.href);return false;

[guiner]

BitCoin is really already illegal in the U.S. I don't see how it wouldn't be considered illegal since it's a form of currency not minted by the Federal Reserve.

Competing currencies are key, though, to help stop inflation. As a Libertarian (and apparently a technotarian) I fully support alternate currencies.

Since when is it illegal to create a currency. It waa just a couple years ago i was visitig friends in another town in california and they had developed and used there own local currency

[Azkar]

If you guys paypal me money I'll put it in your bitcoin account.

[Samsdog]

It's already being used to purchase illegal materials like drugs because it's impossible to trace who purchased the bitcoins. Although as a form of investment they used to be worth around .25 USD and now they're closer to 30 USD. Throwing that out there. And to my knowledge they aren't explicitly illegal in the U.S., though they may run afoul of laws illegalizing money unlicensed money transferring businesses, but it would be the province of a federal appeals court to decide if Bitcoin qualifies. I don't know whether or not it's been addressed before though.

[Sarcastic]

This guy doesn't like it.

http://apenwarr.ca/log/?m=201105#08

[Sarcastic]

Also, I read somewhere that if you use it and want your money back.... no way to do it. You're stuck with your purchase and/or transaction. No chargebacks.

[Admin]

I'll give it a month before someone hacks it.

http://gawker.com/5811868/a-500000-geek-cyberheist" onclick="window.open(this.href);return false;

[Malkamaniac]

I'll give it a month before someone hacks it.

http://gawker.com/5811868/a-500000-geek-cyberheist" onclick="window.open(this.href);return false;

Wow, facepalm to that guy. His name though Allinvain, is pretty humorous now.

[Admin]

It's on the Internet so I don't believe the hack is real but just putting it out there...