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

The folks at LAUNCH put out a provocative edition of their email newsletter today focused on the open source internet currency system Bitcoin.

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.

I haven't spent enough time poking around with Bitcoin yet to agree or disagree with the rather charged assertions above, but I'm definitely intrigued. More, including video, here.

Boing Boing editor/partner and tech culture journalist Xeni Jardin hosts and produces Boing Boing's in-flight TV channel on Virgin America airlines (#10 on the dial), and writes about living with breast cancer. Diagnosed in 2011. @xeni on Twitter. email: xeni@boingboing.net.

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swadeshine

Is there a mathematical troll-to-good-idea ratio?
myke

I can’t really speak to the technological aspects of BC. It sounds like an interesting idea that could be useful. I certainly wouldn’t mind using VISA a lot less for online or even in-person transactions.

But after reading the six statements from LAUNCH in the header above, I feel like someone is trying to sell me beautiful beach front property in Nevada, get me to join a great new cult, or some combination of both. Yeah, going to change the world, unstoppable, most dangerous, blah, blah, blah… brain’s scam alert is ringing-ringing-ringing. LAUNCH’s presentation makes BC sound completely bogus.
OrlandoDFree

I want to take issue with the following points:

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.
6. Bitcoins will change the world unless governments ban them with harsh penalties.

These are very dramatic points, but they’re not supported by Nakamoto’s paper. The paper simply describes a system of electronic transaction that doesn’t require a central authority. I take no position on whether or not it will work, or on the economic impact, but I can’t draw the conclusions stated above.

Nakamoto’s second paragraph ends with this statement:

“The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.”

That’s a pretty big “if.” It sounds like this: If hackers wanted to hack, or some government agency (the NSA?) wanted to destroy the system, they would need to assemble either an extensive bot-net, or a large in-house network (which a government could afford) to add enough CPU power to compromise the system.

In fact, if we ignore the bot-net threat for now, it sounds like this system only works if the government doesn’t consider it a threat.

If the government and bot-net threats doesn’t materialize, bitcoins may well become a useful and important means of electronic transaction one day. But from the four points above, it sounds like some libertarian ideologues are projecting onto bitcoins their fantasies of a new currency that will replace today’s supposedly government-corruptible currency. They’re welcome to this fantasy, and this technotarian political statement, but that’s not what bitcoins were invented for. I seriously doubt that bitcoin currency is the answer to their dreams.
mraverage

pity the man who’s bucks were bitcoined
his wealth was all quickly purloined.

-with apologies to Robert Anton Wilson, and wondering what he would have thought of bitcoins. i know he would have approved of the concept but he probably would have found a problem in execution (and maybe a solution).
Anonymous

Bitcoin is for the remnant. Those who know, know.
Anonymous

There are many people here that misunderstand the technical details of BitCoins.

BitCoins are based on hashing algorithms (for the “work” involved in minting bitcoins). The problem that needs to be solved scales with processing power (usually adding more leading 0′s to the hash that a computer needs to find), so throwing a server farm full of GPU’s won’t cause inflation of BitCoins overall. The BitCoins themselves are encrypted using public-key crypto and your claim to BitCoins depends on your possession of these collections of keys. The production of BitCoins is determined by the entire network at a fixed pace and halving every year, resulting in a finite number of BitCoins that can ever be produced. After which, deflation will most likely take place (assuming BitCoins are used enough) by the BitCoins being divided to a number of decimal places. BitCoins are also anonymous, as they are only collections of keys with no information about who owns them and your own public-private key pair can be regenerated at will.

I agree with the notion that this kind of currency is a potential threat for governments because no one controls the production of this kind of currency, so therefore power is taken away. Even if BitCoins specifically do not take off, the technology and system is sound, and will be a great model for any future electronic currency.

Note: There are drawbacks to this system like if your computer crashes with your BitCoins on it and no backup, you’re SOL. The network will also ignore the fact that BitCoins are lost and will not regenerate lost BitCoins. Also, much like encryption can be used for nefarious purposes, BitCoins scream to be used for money laundering.
Anonymous

Much said and done (but far from “all said and done”), doesn’t it seem likely that bitcoin (and any similar service) eventually falls to the control of those with the greatest computing power? (yes yes, NP-complete, but there will always be ways to bring down a system by fooling the client base with near solutions)

So, with greatest computing power: NSA and maybe the Chinese government. and we’re back to where we started, no?
Kingazaz

Well, I guess I’ll sit on my 250 coins for now, although it’s tempting to try to convert them into almost $2k.

I think that the sum of the comments so far amounts to about 0 knowledge to bank on.
PathogenAntifreeze

Bitcoin IS a possible way to do transactions over the Internet sans middlemen like Paypal and Visa taking a cut. Bitcoin IS a possible way to do micro-transactions like tipping your favorite webcomic artist, etc… due to the lack of debilitating middlemen fees.

Bitcoin IS NOT some “viva la revolucion” magic thing that will overthrow governments… governments do more than govern a currency, and this replaces the network-aided currency transactions, which is a feature of a few private companies and not a feature of governments.

It’s almost like Visa or Paypal wrote this article to get US congresspeople to take note of this.
- mniejiki
  
  “this replaces the network-aided currency transactions, which is a feature of a few private companies and not a feature of governments.”
  
  So what happens to your bitcoin currency when your computer is infected with a trojan/virus designed to steal it?
  - Anonymous
    
    The same thing that happens when your credit card get stolen.
vaccum

well this sounds all well and good, but if its widespread you’re basing the currency on some math that isnt 100%. nobody knows whether the discrete logarithm problem is NP-complete or not, and if it wasn’t, the whole currency would collapse. same thing would happen if quantum computing ever became widespread.
mckinleytabor

It never ceases to amaze me at the number of idiots on both the extreem political right and extreem political left; and nothing shows out their ignorance and zealotry more than talking about financial systems.

..sigh
- BillGlover
  
  I think one thing that most people posting here are missing is that LAUNCH has nothing to do with bitcoin and hasn’t represented it very accurately. In fact they seem to not have heard of it until recently. If you haven’t been using it and think you understand it, you probably don’t.
  
  As usual, the breathless hype is breathless hype, but as with groups like Anonyomous, bitcoin has no central authority and no one who can actually speak for it. There are no central servers, no central steering body. The closest anyone gets are long-time members of the forum people with commit on *one of* the bitcoin source repositories.
  
  The best place to get a feel for it is the bitcoin.org forum, where most most of the observations here are old news.
  
  For my take on it, after playing with bitcoins for several months. Bitcoin is not a Libertarian plot. It’s a cool software and social hack with interesting properties. It’s an experiment. Bitcoin is a toy currency/payment system with very interesting and up until now unique properties. It is very easy to send payments back and forth with no transaction fees. That alone is worth a great deal for game micro-transactions and open source collaboration projects. Confirmation can be slow since most apps require 8 confirming votes before they accept a transaction, but that is a problem folks have worked around in interesting ways. It really can be anonyomous, but doesn’t have to be. It really is designed to withstand some very serious attacks by up to state sized actors.
  
  It may or may not every amount to anything. Right now it’s trading at about $8 per bitcoin up from around $0.60 in Jaunary. The value is either finding it’s level in relation to gold and other stores of value or it’s a speculative bubble and which will collapse. Anyone who says they know which is either delusional or selling something.
  - BillGlover
    
    My apologies for my epic typos and the missing words. I had to hammer that out really quickly during a meeting where I was supposedly paying attention.
Anonymous

If it is just down to the best computing power and the most electricity then that is great news for the american people. If we could set all of our phones and consoles and laptops to mingin bitcoins we could ressurrect the economy…..if bitcoins work, which I can’t say…..
Don

You said there would never be retailers, I showed you retailers, you say those are not true retailers. Not a strong argument, but, moving on.

Secrecy will indeed be the main feature many people are looking for, myself included. (I don’t happen to think I can get it, so I won’t be using Bitcoin, but that’s a separate issue.) The need for secrecy doesn’t mean conversion to other currencies is essential. One thing has nothing to do with the other. Maybe all I want is to do a particular transaction without Mom finding out.

If you can cite a specific law or regulation that Bitcoin is illegal in the U.S., do it. Simply repeating that you think it’s illegal, does not make it so.

My point was that initiatives that position as an alternative to government fiat currency, hide transactions and are based on a commodity, whether gold or digital hashmarks, are inherently of much more interesting to criminals than to regular folks.

Bitcoin doesn’t match that description. It’s a fiat currency, it’s not based on a commodity, and all transactions are public (though the identities of the participants is someone obscured). It may be interesting to criminals, but it’s not obviously useful to them, for reasons I’ve already mentioned above.

They say that the value of bitcoin is derived from scarcity, and it’s _entirely_ from that; hence, it’s a commodity-backed currency.

Nonsense. What they actually say, clearly, is “Bitcoins have value because they are accepted as payment by many.” They are backed by nothing at all. There is no commodity, just like LETS and the dollar. The fact that there are limited bitcoins does not change the fact that there’s no backing commodity.
- nathans
  
  > You said there would never be retailers, I showed you retailers, you say those are not true retailers. Not a strong argument, but, moving on.
  
  I’m only suggesting defining retailers as ongoing business entities, for whom risks and returns are significant. A guy selling a few hats he makes doesn’t have the same concerns. In a way, every eBay vendor is a retailer, but that’s such a broad definition as to be meaningless.
  
  > If you can cite a specific law or regulation that Bitcoin is illegal in the U.S., do it. Simply repeating that you think it’s illegal, does not make it so.
  
  I didn’t say that it was illegal. And I specifically said that alternative currencies aren’t by nature illegal in the US. In my first post I described at length where it would run into difficulties with the IRS, and how it’s the responsibility of the software/community creator to report transactions. You can look up the regulations pretty easily. They need to generate 1099Bs. Simple.
  
  > Nonsense. What they actually say, clearly, is “Bitcoins have value because they are accepted as payment by many.” They are backed by nothing at all. There is no commodity, just like LETS and the dollar. The fact that there are limited bitcoins does not change the fact that there’s no backing commodity.
  
  Are you saying that it’s a fiat currency because it says so on their FAQ? :-) In truth, if I am a user of Bitcoins, I value these coins because there is a fixed quantity of them. You can argue the semantics of it, but in effect Bitcoin _acts_ exactly like a commodity-backed currency. The number of Bitcoins in circulation doesn’t grow with an economy. What is driving my valuation in Bitcoins? What will inevitably cause deflation of Bitcoins? Primarily the quantity in circulation, and speculation within the conversion sites. Compare descriptions of the three models under discussion; which two are more alike?
  
  a. “I value currency based upon the gold standard because there are limited quantities of gold available, and I trust that a currency based upon a valued material in limited quantities cannot be manipulated/corrupted by those running the system. Deflation is likely an ongoing issue.”
  
  b. “I value currency based upon Bitcoin because there are limited quantities of Bitcoins available, and I trust that a currency based upon a valued hashmark in limited quantities cannot be manipulated/corrupted by those running the system. Deflation is likely an ongoing issue.”
  
  c. “I value the US$ because it has the US government behind it, supported by a dynamic economy which ensures that it is accepted by everyone around the world. Few who use it understand how it works beyond this simple fact, or the relationship of quantity to value, and inflation is built in and effectively managed.”
SamSam

Wait, I’m confused by the article:

Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin. A payee can verify the signatures to verify the chain of ownership.

The benefits of a currency like this:

b) Your coins canâ€™t be tracked

Errr…. don’t the first and last statements contradict each other?

And, in general, isn’t being able to track the previous ownership of coins a Bad Thing (esp. I would think for libertarians)? Why is it any business of yours that the BC’s in my possession were last owned by notorious druglord X?
Anonymous

Interesting, but they need to work on their logo. I initially saw it as “obitcoin.” Not exactly the image they’re trying to portray.
shadowfirebird

It’s a brilliant idea and I wish it good luck. But pardon me if I don’t want to risk my money at the bleeding edge just right now…
caipirina

Anyone else is reminded of the ‘good old days’ of sites like freeride.com where one could click through ads (while watching TV on the side), use several email accounts and in the end get amazon gift certificates? now, THAT was mining :D
BillGlover

Wired has a better explanation in their article: http://www.wired.co.uk/news/archive/2011-05/16/bitcoin-p2p-currency
pidg

“Bitcoin poses a real and tangible threat to US interests and we will take legal and/or military measures to stop it in its tracks” – Jason Ramirez of the Federal Reserve, talking to reporters last week
- Anonymous
  
  I haven’t found this quote or mention of a Jason Ramirez at the Federal Reserve anywhere. Links?
- novazembla
  
  would be great if you could post the source of this quote. thanks
pidg

Meanwhile in other fantasy news, Linux just overtook Windows as the world’s #1 desktop OS.
rebdav

Bitcoin is worthless until someone decides it is a useful safe way to transfer value quickly. If people start using it as a receipt for a transaction like we use worthless paper receipts like cash and checks to prove that we have acquired the face value, bitcoin does that job proving itself real better than cash, checks, credit and debit cards; probably even better than old fashioned bank wire transfers.
It can or will be valuable once it is treated as valuable, right now it is a token that sells for a bit over a dollar but can only be spent at a few online shops AFAIK.
Anonymous

Sounds like a massive waist of electricity to me.

Like the computer time spent creating these ‘coins’ would be put to much better use doing something actually useful. Like protein folding.
Anonymous

Bitcoin would be a very useful “tool” to find botnets, to entlighten “anonymous” structures in the online world.

And who is behind this? A group of 16 yo super geeks? Some bored guys working day jobs in american universities? Russian/chinese internet mafia? A gov agency (CIA maybe)?

Imho this whole Bitcoin-story is way too professional to be a “hobby” project developed by some computer nerds…
Anonymous

bitcoin will flourish like linux on the desktop!
Don

I’ve given a lot of thought to alternative currencies. I’m currently doing a marketing survey in preparation to launch an alternative paper currency in my rural community. Some thoughts on bitcoins, and the comments above:

I don’t have a problem with fiat currencies. The dollar is a fiat currency, and everyone accepts it—not because it’s backed by anything, which it isn’t, but because everyone just agrees to accept it, and everyone agrees on its value.

There are some successful local currencies, e.g. BerkShares, where the local currency is backed by national (fiat) currency. They’re not as sexy as a currency that retains its value in a post-apocalyptic world where the dollar has lost all its value, but in that world, I think money would be the least of my problems. A local currency backed by dollars can be practical, not least because everybody knows what it’s worth, including the sales tax collector.

Alternative currencies backed by commodities are difficult. Someone has to do the work of keeping track of the stuff that backs the currency, whether it’s grain or gold or labor, and that either burns out volunteers or creates a cost. A small grain-backed currency folded a few years ago because they had a spoilage or insect problem, I can’t recall which, and they were small enough that it was a big loss of their assets. I considered starting a beef-backed local currency, but I can’t quit my day job and run a meat locker.

For me, the difference between cash and every other form of payment—the reason I want to use cash—is anonymity. If I can’t be anonymous, I may as well use a credit card. As I understand it, the bitcoin transaction database is public. Therefore, only the great difficulty of traffic analysis stands between my bitcoin history and the people who would like to know about it. Doesn’t seem like much protection. It’s a step backward from, say, Digicash, where an adversary had to eavesdrop on the network before traffic analysis could begin, and there was blind signing so you couldn’t link a particular spent coin to a particular minted coin.
- phaedral
  
  Like many folks here, or so I imagine, my introduction to currency theory was Heinlein’s “Tale of the Adopted Daughter”, followed up by Wilson’s “Illuminatus” and “Schrodinger’s Cat” sets. I have no direct, practical experience, and thus truly appreciate your grounded observations. Upthread someone mentioned the bitcoin forums, which seem an obvious place to poke around if one wanted to dig deeper, but I was hoping you might also list some of your preferred net based resources on the topic. Pretty please?
  - Don
    
    An incomplete list, because I’m slacking at work:
    
    Complementary Currency Resource Center
    E. F. Schumacher Society
    BerkShares, an existing currency backed by dollars
    Stamp Scrip, local currency that loses value the longer you hold it (and why that’s good)
    
    Also look in the Boing archives for Douglas Rushkoff, who got me started thinking about all this.
    
    In the 1930s, there were some successful experiments in stamp scrip, and by “successful” I mean it got so big the Austrian central bank shut it down. There was also stamp scrip in Hawarden, Iowa, up the road a piece from where I live. The idea was to encourage spending, and discourage holding cash, by requiring you to buy a stamp to stick on the back of the currency every week. It cost you maybe 2 cents to keep that $1 scrip at full value—unless you spent it before Wednesday.
    
    My own scheme will be a dollar-backed local currency with an expiration date, to try and get the advantages of stamp scrip without the PITA stamps. Early returns to the market survey indicate that I have a lot of explaining to do.
  - Don
    
    My link-filled response seems to have been held for moderation.
enkiv2

It’s fairly surprising that bitcoin hasn’t been covered on boingboing until now (unless it has, and this is a repost). It’s more surprising that so many boingboing readers (and so many people blogging about it) are so unfamiliar with the subject.

I support the use of bitcoin, but I certainly don’t consider it infallable. I am also a supporter of the use of private and alternate currencies. If I had the kind of money I’d need to make it more worthwhile to expend the effort of keeping my money safe than to have it always at hand, I’d probably put some in bitcoin — and some in other currencies (not all of them government-backed).

By the by, to everyone in the comment thread who claimed that bitcoins can’t be used for anything: please to be doing the research (or at least reading previous posts). While not every online store takes bitcoins, not all of them take dollars either (or paypal, or egold, or euros). I suspect that the number of places that take bitcoins will grow (though I don’t think bitcoin will supplant anything in terms of currency dominance, and would consider the dominance of any one currency to be a net fail), and until then you can transfer bitcoins to paypal.

Bitcoin is one of the few systems that does decentralization *right*. It has a fairly straightforward structure, as far as these things go: bitcoin daemons check for counterfeit coins, and with enough bitcoin daemons doing the checking counterfeiting coins would be ridiculously difficult. The math has been done, calculating how many bitcoin daemons would need to be compromised (compared to the number of legitimate bitcoin daemons) to make a single counterfeit coin and keep it from being discovered, and it’s fairly clear: if you want to make counterfeit money, stick with printing government-issue paper currency.
Anonymous

bitcoin isn’t a crazy revolution. It is just free paypal for everyone.
transmothra

I’m just a simple caveman something and don’t understand any of your funny moon-language, but i think the percent of anon commenters who are against bitcoin is somewhat telling, or would be if we had any idea how many anons actually commented here.
emmdeeaych

This looks like another one of those things that will have winners and losers and lengthy court battles ANDS is just not necessary.

What need does this fill? of mine?
Anonymous

What’s great about Bitcoin is that anyone can become an exchange agent and participate in the market. The more agents buying and selling, the more liquid the market, the more “fair” the daily prices for coins. Anyone can accept Bitcoin as payment for goods and services. No credit card? No bank account?….no problem use Bitcoins. How can that be a bad thing?
Mark
Don

I didn’t say that it was illegal.

No, you said Bitcoin would be “will inherently be out of compliance with regulations,” which seemed to be saying the same thing. If all you meant was that they would have to file the same tax returns as any other cash business, it’s not clear how that is a fault with Bitcoin.

Are you saying that it’s a fiat currency because it says so on their FAQ? :-) In truth, if I am a user of Bitcoins, I value these coins because there is a fixed quantity of them. You can argue the semantics of it, but in effect Bitcoin _acts_ exactly like a commodity-backed currency.

I’m saying it’s a fiat currency because it’s not backed by a commodity. Back in the days of the gold standard you could theoretically exchange a paper dollar for a dollar’s worth of gold. There is no corresponding promise to exchange a Bitcoin for anything of value. (And yes, I would expect to see such a promise in the FAQ.) I don’t know what you mean by “valued hashmark,” but they certainly aren’t promising to give one to anybody in exchange for bitcoins. It has value because we agree it has value, period.

Whether Bitcoins have properties that make them act like they are themselves commodities is an entirely separate question, as is the question of whether they act like they are commodity-based currency.
- nathans
  
  > If all you meant was that they would have to file the same tax returns as any other cash business, it’s not clear how that is a fault with Bitcoin.
  
  No, in Europe that is correct, as VAT would simply need to be paid by participants, so it’s an eBay sort of position. However, in the US, Bitcoin would be required to file 1099Bs for transactions. They invoke a set of IRS regulations related to running a virtual economy for commercial transactions.
  
  > Whether Bitcoins have properties that make them act like they are themselves commodities is an entirely separate question, as is the question of whether they act like they are commodity-based currency.
  
  I don’t disagree, but personally think that the important aspect of a commodity-backed currency is where it finds value and how it acts, rather than if it can be traded in; this is definitely an area where reasonable minds may differ, though. I would say it’s a matter of semantics again, as to whether an economy that acts like a commodity-based one rather than a fiat-based one can actually be fiat-based.
  - Don
    
    However, in the US, Bitcoin would be required to file 1099Bs for transactions. They invoke a set of IRS regulations related to running a virtual economy for commercial transactions.
    
    Apparently that’s not true. There are no formal regulations regarding virtual economies (as in games such as World of Warcraft). The relevant quote from the linked article:
    
    Although the IRS has acknowledged virtual transactions,
    no formal steps have been taken to provide
    guidance on the taxation of in-game business transactions
    and the income earned….
    [T]he IRC does not specifically address
    the taxation of income from virtual economies.
    The national taxpayer advocate has indicated that
    transactions in a virtual economy are a significant
    issue, yet the IRS has not taken any action.
    
    Once real cash is extracted from a virtual economy, it of course becomes taxable income, and we know how to deal with the tax man when we receive cash, whether in legal tender or some other currency.
    
    I’m not seeing a regulatory problem that doesn’t already exist (alongside known solutions) for legal tender and for alternative currencies.
    - nathans
      
      That’s pretty funny, no, that’s not the same sort of virtual economy. Those are virtual goods, generated in a game. Seriously, if you sell your car and get Bitcoins for it, Bitcoin needs to generate a 1099B for you, and because there are no rules or effective TOS to Bitcoin, that will contaminate all other transactions and cause them to require the same 1099B documentation. The IRS recognized long ago that an alternate currency system could be created to bypass their tracking of in-bank, credit card and even cash transactions, and formed rules to handle this.
      
      Some alternative currencies act as “stored value” for dollars, and are dollars-in, dollars-out, which won’t trigger this, because they’re trackable in their dollar state. Others handle it differently, with usage rules or tracking, or simply generating 1099Bs.
      - Don
        
        I ask again, cite the specific regulation.
Anonymous

All your bitcoin are belong to us.
Anonymous

BitCoin is incredibly silly for two reasons.

It’s an implementation of a public record accounting system where all transactions are public. That itself is not a silly idea, but it requires maintaining a decentralised public record that anyone can verify the integrity of. BitCoin’s cryptographic solution requires, by necessity, thousands or millions of GHz of processing power to maintain the integrity of the public record. That’s incredibly wasteful, and the CPU power is probably worth a lot more than the total trade enabled.

The other reason it’s silly is because the money supply can’t increase beyond a fixed bound. If the economy grows but more money isn’t created, the value of a bitcoin increases; leaving bitcoins on your hard disk doing nothing becomes a great investment since they’re getting more valuable by the day. The more bitcoins removed from circulation this way, the faster the value increases. Eventually somebody cashes out their savings and causes a chain reaction whereby in the space of a day or two, the number of bitcoins being circulated increases massively and therefore they are massively devalued. Totally unstable.

I’d like to see an efficient approach to maintaining a decentralised public record accounting system, that controls deflation by creating more money when more work is done. BitCoin isn’t it.
benher

Quick, someone wake up Scott McCloud and tell him that we can start making money with web comics now!!
noah

Let me be the first to say Flooz.
- Anonymous
  
  flooz and beanz and even egold were centralised and issued by a company and could be easily shut down. Bitcoin is like email and bittorrent and the internet itself.
  - manicbassman
    
    “flooz and beanz and even egold were centralised and issued by a company and could be easily shut down. Bitcoin is like email and bittorrent and the internet itself.”
    
    bitcoin can be easily rendered useless by a hostile government taxing every transaction within it’s borders in “real” money… ie suck the life out of it…barter, which bitcoins is a form of, is taxable anyway as it can be defined as income…
    
    also bitcoin is vulnerable to a hostile party buying up every coin that appears in the exchanges… there’s only ever going to be 21 million of them ever in circulation… if people can’t buy bitcoins as there’s none available, then it will die a death…
abhiroopb

This seems really interesting, but why couldn’t someone just set-up a large chain of botnets farming Bitcoins?
- Anonymous
  
  It would be more lucrative to mine bitcoins and a botnet actually would make bitcoin stronger!
- rebdav
  
  Bitcoin farming is a reverse trending thing, a friend was able to mine 300 Btc in a month last year(2010) using a hot video card when the first slashdot story hit. Once that happened there were too many people mining and the gold rush was over, he couldn’t get anywhere after that and returned the video card. I think it will take large computing clusters or pooled resources to mine with any reasonable hope of generating more coin. It is based on solving increasingly difficult mathematical problems approaching infinity toward the end of the possible bitcoin pool of I think 30 million coin. Bitcoin is smart because it is mathematically verified hash, it is not owned by anyone and cant be inflated beyond its maximum pool, it is pretty much Cryptonomicon money without any backing yet.
  - mozTom
    
    Would be interesting if you could use that new PS3 CFW that allows you access to all 8 cores and full GPU access to mine bitcoins in this manner.
    - rebdav
      
      So my bitcoin miner says that for the maths involved a moden fast video card is far better than a cluster of cell processors say in the Linux booted Play Station, and massively surpassing a x86 processor.
ftarp

Bitcoin’s hardly new – it’s been around at least two years, IIRC. Even the EFF has been taking donations in BTC for a long time.
One could just set up Bitcoin-farming botnets, but the point of the reward is to compensate you for the use of your processor in validating others’ transactions. So it wouldn’t at all be a harm to the system.
- Xeni Jardin
  
  Hah! What’s new in terms of blog post age is not the same as what’s new in terms of *currency systems.* How long has, say, the US dollar been around? Two years is new.
Anonymous

https://en.bitcoin.it/wiki/Trade for stuff you can buy with bitcoins.

http://weusecoins.com for a better explanation.
Anonymous

Ooh, wow, it’ll be like the Segway of financial transactions! :D
kmoser

Look for emails like this coming soon:

“I am Barrister John Smith, writing to help you collect US$400 million in Bitcoins which have been deposited anonymously in your account. You may claim them immediately by downloading the Bitcoin P2P software which I have helpfully attached to this email message.”
Anonymous

A universal, non-governmental payment system – eh, wasn’t Paypal there first?
witcoin

http://bitcoin-otc.com/ is the bitcoin web of trust so you can know who the trusted bitcoin traders are more easily.
Chesterfield

Steve Gibson did a great podcast about bitcoin and the theory behind it.

The tldr; for this is that it is an anonymous currency that works because it’s based on mathematics.
- Anonymous
  
  “The tldr; for this is that it is an anonymous currency that works because it’s based on mathematics.”
  
  I’m based on mathematics, but I don’t work.
  - tyger11
    
    I’m based on mathematics, but I don’t work.
    
    Assuming you’re a human, you’re working just fine. You’re converting food and water into energy, just as nature intended. That’s not to say you’re doing anything _useful_, of course, but neither does Wall Street, and many people consider that work. *shrug*
Anonymous

Didn’t they say all these same things about Segways?
Anonymous

Why all the excitement all of a sudden? This stuff has been failing to gain traction for well over a decade (e.g. see my own unadopted system from 1999: http://anoncvs.aldigital.co.uk/lucre/).

Also, coins based on proof-of-work is silly – clearly your coins should be as cheap to make as possible or you’re just burning money for no good reason.
Anonymous

Most of the comments on Bitcoin are missing the basic economic idea. The following describes the basic economic theory for why the idea can work, namely unforgeable costliness, as well as being a rousing good (pre-)history of the origins of money:

http://szabo.best.vwh.net/shell.html
Gutierrez

You think we could get the speculators off of oil and onto Bitcoins? Hookers, blow and gambling wound like strong pulls.
cservant

I’ve looked into this before slashdot hit. IMHO, there’s very little talk about the economic system IF such currency is generally used and accepted.

We could you know, simulate such a system in a MMORPG, make it popular and then sit back and see what happens. I’ll bet it will have huge problems of deflation/inflation regardless of what the creators of bitcoin think.
Ry4an

I’ve mined bitcoin in the past, but appenwar’s (google him) recent anti-bitcoin screed was pretty convincing:

http://apenwarr.ca/log/?m=201105#08
- Anonymous
  
  I read the blog post by apenwarr hoping for some key insights into why the concept is flawed. But there was no information in there. Just, as the author admits, a rant.
- thadkrgr
  
  If that post convinces you that bitcoins are bad then I hope you had fun listening to your Evanescence collection. I am dumb and have been drinking for six hours and could see that the article that appenwar wrote has no real points backed up by facts.
  
  Half of what he wrote was a third grade essay on the gold standard and saying that the math they used will be outdated in thirty years is kinda like saying don’t exercise beacause they will have a pill in thirty years that will let you live forever.
  
  Plus he spends the first third of the post qualifying it by saying stuff like “I don’t want it to fail”.
  
  Really good boxers don’t dance they punch!
- Anonymous
  
  One of his amazingly-well-thought out arguments is that paper money is better because it works offline… but guess what, paper money doesn’t work ONLINE.
harrisonlong

The value of Bitcoins has risen 60% against the US Dollar since May 10, when the This Week in Startups show aired. Can you say bubble? Buyer beware to anyone reading about this on boingboing for the first time and thinking they can make a quick buck, it looks like the market is already saturated with speculators. The throngs who jumped on board will lose interest in a matter fo time, and the value will crater. As is usually the case with financial information, if you read about it in the newspaper (popular blog) its too late to take advantage of the information.

*For the record, I do not own Bitcoins, nor have I ever traded in them, I’m just reading the tea leaves.”
- swadeshine
  
  The amount of bitcoin produced has a defined limit for 1year, 2year, etc. “Inflation” is planned ahead.
  - SamSam
    
    “Inflation” is planned ahead.
    
    No it’s not.
    
    The amount of currency in the system is planned ahead, but that is not the same as inflation.
    
    The article linked speculates that there will be massive spikes in the value of bitcoins. That would be (unplanned) deflation. Likewise, if the value of the bitcoin drops, then it would be inflation.
    
    If people stop caring about bitcoins, or if they start trusting their value less and less, then if the value of an hour of work used to be 2 bitcoins it might become 20 bitcoins. Or 200 bitcoins. If no one accepts bitcoins anymore because of fears of counterfeiting, it might be 2 million bitcoins.
    
    It’s the typical libertarian fallacy that the only reason inflation exists is because the government gets to print more money.
- Neural Kernel
  
  I won’t say it’s not a bubble, but this is a form of currency backed by one of the most fundamental measures of worth in the Universe… the ability to process information. The only other thing I can think of with universal value no matter where you are is energy.
  - Moriarty
    
    It’s not based on the ability to process information. It’s based on proof that meaningless “information” has already been processed. There’s a huge difference between the two. One has utility, the other does not.
TheWalbert

What–if any–relation exists between bitcoins and the Zeitgeist movement?
ill lich

“Bitcoin can punch Chuck Norris and actually hurt him.”
nathans

1. Bitcoin is a technologically sound project.

It depends how you take this. There are two ways that this is not true:

a. If Bitcoin is ever hacked, even a little, it has no value whatsoever, as there’s nothing behind it. -No full faith of the government, no productive community. The full value lies in its complete imperviousness to attack and fixed quantities, which seems irrational to expect.
b. Bitcoin is an attempt to create a structure of value without human influence. There are a fixed number of units that can ever be generated. It can only be an inflexible and stagnant economy; if you look at the history of those who followed these sorts of strategies (like Andrew Jackson http://en.wikipedia.org/wiki/Andrew_Jackson ) You’ll see that it leads to something worse than the economic downturn we’re seeing now. Dogmatic belief in the evil of debt or of human intervention leads to very bad things.

2. Bitcoin is unstoppable without end-user prosecution.

Untrue, it’s very easily stoppable. Bitcoin, in scale, is entirely dependent upon the existence of entities that will allow conversion of Bitcoins to dollars. -There will never be retailers participating in Bitcoin transactions. What will happen if Bitcoin ever gets scale is that banks, PayPal, Visa, etc., will shut these down. Why would they shut it down? The problems with Bitcoin will largely derive from tax reporting issues, and the impossibility of an integrated relationship with the United States’ national taxation authority (IRS). A core element of Bitcoin is that there is no central tracking of transactions (or rules for usage); unfortunately for BC, though, for transactions involving sales of commercial services or physical goods with value of a dollar of more executed via a virtual currency, the IRS specifically requires reporting from the transaction-authorizing entity, via form 1099b. Since there are no controls on usage of Bitcoins, all transactions would need to be considered commercial (commercial will contaminate non-commercial if they’re in the same system), and subject to a $15 per transaction fine, in addition to taxes. There are other alternatives for integrating physical currency (like community currencies) into the overall economy, and bypassing this issue, but I don’t see how they could do it online.

So, you start with this piece (that it will inherently be out of compliance with regulations) and then you add to it that, as with egold ( http://en.wikipedia.org/wiki/Egold ), even if you start out with great intentions, these sorts of anti-fiat-currency initiatives aren’t really interesting to citizens outside of a committed core group, you can see that usage will veer toward those for whom the negatives of inconvenience and a lack of liquidity are less important than is secrecy. And while a lot of the best people could fall into this category (Richard Stallman, etc.), there are a lot more of the worst sort of people, with a lot more reasons to participate in the system. And this latter piece is where they will come into most direct conflict with authorities, especially in this era.

3. Bitcoin is the most dangerous open-source project ever created.

It’s entirely toothless. Remember when Assange needed money and there was a cry to raise funds via Bitcoin? The project leader told them not to do it. Why? Because it’s inherently fragile and easily shut down.

4. Bitcoin may be the most dangerous technological project since the internet itself.

Dangerous in the sense that it could blow up and make a hideous mess?

5. Bitcoin is a political statement by technotarians (technological libertarians).*

Well, sort of. It’s the modern version of the gold standard that Ron Paul adores. It’s mined and of fixed limited quantities. Hence it appeals to those who see the fractional reserve system as vile and corrupt.

6. Bitcoins will change the world unless governments ban them with harsh penalties.

Meh.
- Don
  
  Bitcoin, in scale, is entirely dependent upon the existence of entities that will allow conversion of Bitcoins to dollars.
  
  You wouldn’t be willing to trade bitcoins for goods and services, but lots of other people would. There’s no reason a bitcoin-to-dollars conversion is necessary to that trade.
  
  There will never be retailers participating in Bitcoin transactions.
  
  Looks like there are a shedload of them at https://en.bitcoin.it/wiki/Trade.
  
  it will inherently be out of compliance with regulations
  
  Depends on the jurisdiction, depends on the implementation of the currency, depends on the behavior of the people who use it. The fact that Egold was involved in money laundering doesn’t mean every possible system of alternative digital currency is just as illegal. Bonnie and Clyde used a getaway car; doesn’t make cars illegal.
  
  these sorts of anti-fiat-currency initiatives aren’t really interesting to citizens outside of a committed core group
  
  Bitcoin is fiat currency. You apparently didn’t read their FAQ.
  - nathans
    
    > There’s no reason a bitcoin-to-dollars conversion is necessary to that trade.
    
    There’s a lot more in the way of visible activity in exchanges than in transactions for goods and services, and the “retail” entities participating are few, non-professional, and could easily disappear overnight. I don’t mean to diminish the folks that participate in that, but they come from what will end up being the moral “stump” of true believers in Bitcoin. In _scale_, Bitcoin is going to be about secrecy, and used by those to whom that aspect has primacy. That will drive the need for conversion, until conversion is cut off.
    
    > Depends on the jurisdiction, depends on the implementation of the currency, depends on the behavior of the people who use it.
    
    It actually doesn’t in the US, the technology provider is responsible. Canada seems very easy on this stuff, though, and broadly speaking, Europe generally somewhere in between, for now. I can really only speak comprehensively to the US situation, though.
    
    > The fact that Egold was involved in money laundering doesn’t mean every possible system of alternative digital currency is just as illegal. Bonnie and Clyde used a getaway car; doesn’t make cars illegal.
    
    That’s a silly straw man; my point wasn’t at all that digital currency is illegal.-It’s not. My point was that initiatives that position as an alternative to government fiat currency, hide transactions and are based on a commodity, whether gold or digital hashmarks, are inherently of much more interesting to criminals than to regular folks. There’s not a real benefit beyond that it’s not “debt based” and it’s hidden. -The former is actually an economic suffocator, so it’s the latter that eventually drives a significant user base.
    
    > Bitcoin is fiat currency. You apparently didn’t read their FAQ.
    
    It’s not. They just don’t know what a fiat currency is. They say that the value of bitcoin is derived from scarcity, and it’s _entirely_ from that; hence, it’s a commodity-backed currency. -The commodity doesn’t need to be the electricity or CPU/GPU cycles used to create it; the fixed-quantity commodity is the bitcoin itself. The sorts of alternative currency that are actually fiat are those along the lines of LETS, which, like the dollar, reflect instead the faith and participation of a community and which allow currency availability to scale in reflecting activity.
selfish3

The only problem with bitcoin is that the moment you link yourself to any transaction (say, by accepting coins from the bitcoin faucet and providing your google account details), then your entire transaction history is basically public. Nice one!
- matonis
  
  Actually, you can generate multiple receiving addresses and YOU decide which ones are publicly linked to your persona. In addition to bitcoin ‘mixers’ and bitcoin laundering services, Tor and i2p can also be deployed. For bitcoin laundering services, see http://themonetaryfuture.blogspot.com/2011/05/thoughts-on-bitcoin-laundering.html
- swadeshine
  
  True. All transactions are public, but anonymous. Receiving addresses can be regenerated. Never need to supply an email address or link your account to anything. All your bitcoin lives in a local “wallet” file.
emchristiansen

Ever since doing a class project on P2P systems, I’ve been waiting to hear about something like this. Next up, reliable P2P cloud storage (ie Dropbox) and compute services (ie Amazon’s EC2). Why have your money, data, or processing needs controlled by a few companies? Instead, get independence and reliability; have those services provided piecemeal in a fault-tolerant manner across thousands of nodes distributed around the globe.
Anonymous

“irreversible” ??
If I sell you something for cash, and we met on Craigslist, and I didnt give you the slightly used dildo or whatever, your transaction IS reversible? No, and in that regard bitcoin wins over green cash, as its at least more likely to have a record of the transaction, which leads you to actually try to get your money back, or “step B.” calling the thugs (police) to say youve been ripped off.

as for your other point….

“along with allegations of money laundering and the fact that it’s illegal to create your own money in most countries, has already resulted in other “digital currencies” being shut down, or being investigated, by the federal government. ”

That right there actually makes the opposite point you were trying to make, in one sense. The Feds attacking your monopoly money meant that it was real as fuck, and working.
Anonymous

Bitcoins.

Because comp sci geeks are convinced once again their degree applies to every facet of human endeavour and apparently do not understand in any way how a fiat currency actually works.

This is what the death of expertise gets you.
Anonymous

Gotta love the libertarians and their economic ideas that have no foundations in economic theory or reality.

This certainly isn’t the most dangerous open-source or technological projectâ€”it’s the dumbest.

Oh, please, take all of my zero-default risk US dollars and give me a non-convertible, non-government currency instead. Or, wait, got any some magic beans?

Dear libertarians, please read your history and economics before you assume that ‘freedom’ comes from removing government from all market interactions (cf min wage law).
- turn_self_off
  
  I would agree, except economic theory seems largely divorced from reality as well (as long as on take a look at what is considered mainstream, aka neo-classical economics).
- Anonymous
  
  “Oh, please, take all of my zero-default risk US dollars and give me a non-convertible, non-government currency instead.”
  
  Wait some years till the chinese and others stop accepting dollars for international transactions and you’ll see who’s defaulting faster than the speed of light. Then, you’ll wish you had bitcoins instead of dollars :D
  - Anonymous
    
    ” “Oh, please, take all of my zero-default risk US dollars and give me a non-convertible, non-government currency instead.”
    
    Wait some years till the chinese and others stop accepting dollars for international transactions and you’ll see who’s defaulting faster than the speed of light. Then, you’ll wish you had bitcoins instead of dollars :D ”
    
    My suspicions affirmedâ€”the technological ‘libertarians’ don’t know what they’re talking about because they haven’t bothered to study history and economics.
    
    To put it in simple terms even the ‘libertarians’ can understand): Greenbacks (sovereign, non-convertible fiat currency) wont be good anymore because…why?
    Suddenly China will get tired of having trading partners?
    Ron Paul might get elected and try implementing some gold-standard?
    Sudden Zimbabwe-style hyperinflation might seize the nation?
    
    No basis in economic theory or fact.
    Nonetheless they present their counter-argument to history and economics: “But, like, can’t we have, like, a ‘free’ currency, and stuff?”
    
    Please, dearest ‘libertarians’, at least consider the potential differences between ideology and reality when considering things like economics, which you, being ideologues, are not predisposed to intuiting.
    
    Otherwise you’re espousing some mosaic of phantom, zombie, and voodoo economics.
Anonymous

The theory behind bitcoin is great. This implementation reeks of a scam – a poorly implemented scam at that.

For those who talk about just mining these bitcoins, that’s not how it works. You can’t mine them independently giving yourself an unlimited supply of coins. What you create would have to be verified by the central bitcoin authority. That doesn’t really matter though. As soon as it becomes profitable enough, someone will hack the system.

One thing of possible concern is there conflicting statements, “Your coins canâ€™t be tracked”, and “Each owner transfers the coin to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin. A payee can verify the signatures to verify the chain of ownership.” It is unclear, but the phrasing sounds as if the transaction stays with the coin – “chain of ownership”. Even if that’s just the last one or two owners, that still links you to the coin.

Add in the rather ridiculous statements that it would take your laptop “five years” to make one bitcoin because of their ever so complex algorithm. Oh, really?

And then add in the marketing terms, “unstoppable”, “dangerous”, “political statement”, “change in world governments”, followed by “technologically sound” to give you a warm fuzzy feeling that all is well in this particular bitcoin land.

Then add to that the outright advertising for possible illegal activity with this currency.

My prediction: This is either a scam to get your $$ or it was created by the very people they say they are trying to protect you from, namely governments trying to entrap people.

Use this at your own risk and be aware that the risk is high.
Sam

So, uh, mister natural…what does it all mean? Can I buy food with this stuff or pay rent? Is there a way to translate this stuff to greenbacks or gold bullion or something?
- swadeshine
  
  1.)Depends where you shop 2.)Depends who you rent from 3.)Yes 4.)Yes
  - Sam
    
    So I can let this p2p client go to town while I sleep tonight and tomorrow I wake up and I will have made some small amount of money for my trouble? Money that I can translate into american dollars and spend on rent? And if I set up a cluster of computers and get them going generating blocks, I can make more money, faster? I looked at the wiki, but it being my bedtime I can’t seem to piece together how many bitcoins I can make in an hour on my mac mini. Also, I’m confused as to whether 0.01 is one bitcoin or if 1.00 is one bitcoin.
    - swadeshine
      
      Yes. A tiny bit. As stated above, farming bitcoins is proportional to the energy/technology you input. Plus, it gets harder to mine them as more are made. Once they are all “made” on predefined yearly schedules, farming will cease and the main function will be simply… currency.
Anonymous

Just tried to go to Bitcoin.com…and here’s what I got:

“The connection has timed out – The server at bitcoin.com is taking too long to respond.”

Great. Yes, this is exactly where I want my “money” to exist- in a nebulous cloud that can crash at anytime for no apparent reason. Thank goodness bitcoin is impervious to hacking, cracking, spoofing, trickery, cheaters, DDOS attacks, Verizon’s network instability, network outages and modest surges in interweb traffic.

Thanks, but I’ll stick to physical money for now.
Don

Sorry, I meant to say “please cite.”
Zoman

This post in another forum sums it up for me :

” After looking at Bitcoin, I’m not surprised that it doesn’t work. It isn’t a scam in the usual sense. It’s more like a stupid, badly implemented idea by a bunch of people who think that our existing monetary system is evil (for example one of the alleged benfits of Bitcoin is “Be safe from instability caused by fractional reserve banking and central banks.”)

Even though Bitcoin might not be intended as a scam, it is easily used that way due to transactions being “irreversible”, i.e., you give somebody some bitcoins and they decide not to give you whatever you are supposed to be buying, you’re pretty much screwed. That problem, along with allegations of money laundering and the fact that it’s illegal to create your own money in most countries, has already resulted in other “digital currencies” being shut down, or being investigated, by the federal government. ”

Utterly doomed to failure.
- Don
  
  The irreversibility of a transaction is a feature of any cash sale. Since Bitcoin is intended to be a cash-like medium, this isn’t really a fair criticism. It would be fair if Bitcoin were supposed to be like credit cards.
  
  I can’t speak to the law elsewhere, but here in the U.S. it’s not illegal to create your own paper currency, as long as it isn’t represented as legal tender, and any sales and income are accounted for in national currency. (If I sell you a $5 item for 5 foobars, I have to pay income tax on $5, and I have to pay in dollars not foobars.) Within those limits, a state official was quoted as saying “I don’t care if they want to pay in pine cones.”
  
  To the extent that the medium is traceable, UNlike cash, it’s not going to be useful for criminal transactions, and based on my reading so far, it seems darn easy to trace at least the first hop (from my detective-hand to your drug-dealer hand). The low-level payee is going to get busted for sure, and there are non-technical ways to make him talk.
  
  The other reason it’s not useful for criminal enterprises, is that crooks want totally flexible, totally fungible, national currency. The early adopters are going to be punished by having a bunch of bitcoins they can’t necessarily spend where they want, AND they still have the pain-in-the-ass laundering problem to deal with.
  
  It only makes sense to use bitcoins for crime if (a) they need to move cash across an international border, and (b) they don’t physically meet the payee anyway. If I’m buying drugs from Colombians, I have to meet up with the Colombians anyway to pick up the merchandise, so why do I need a separate money pipeline?
ablebody

seems fine to me if any community agrees to trade [insert object/idea]for goods or services.
cutting banks & feds out of the action is the icing on the cake.
Anonymous

I really like the idea behind bitcoin. But where do I buy stuff? Amazon, iTunes, and lots of other businesses not on the list of those that trade in bitcoin. I’ll be much more interested when I can spend bitcoins on Amazon…
- Anonymous
  
  You can spend bitcoins on Amazon, iTunes, buy.com, barnes & noble, fishpond, etc. at http://spendbitcoins.com.
egoVirus

Is it just me, or has history demonstrated that the first batch of investors in any new technology/idea lose everything?

Bitcoin might well be another reason governments will start putting serious curbs on internet freedom. Creating a global currency beyond the control of the people in control is pretty damn ballsy, and it’s gonna end up costing everyone.
noen

technological libertarians

Ah yes, racist morons with PCs. I’m so very afraid.

Bitcoin is the most dangerous open-source project ever created.

Translation, it will utterly fail. Why? Because libertarians are intellectual clowns. However, there will be lulz.