Check out IOTA. In theory (and so far in practice) it solves the problems you describe. It does not yet have as solid a theoretical foundation as blockchain currencies, though, so there's higher risk that it turns out to have some flaw that nobody's seen yet.
The mining on that chain is largely pointless, as it's directly controlled by Vitalik. If I held assets on either, it'd be on the chain that didn't hard-fork to reverse a single user's transaction.
Unless you have some ETH or BTC laying around, it's a bit of a hassle, but if you go to https://daohub.org/ and click "Get DAO Tokens" and then "Start Wizard" it will walk you through the process.
One solution for this already exists: P2Pool. From the wiki page, "P2Pool is a decentralized Bitcoin mining pool that works by creating a peer-to-peer network of miner nodes." The key thing is that since it's p2p, there's no owner of the network who can use it to perform a 51% attack.
P2Pool is not perfect, but it works and it shows that decentralized pools mining are possible. With some improvement, it (or something like it) could be a replacement for all centralized mining pools.
You obviously haven't clicked on the link. P2Pool requires too many resources (a full-node). Whereas most of current mining, ran by trusted third-party pools, can even be done off of a raspberry pi, which requires much less resources.
Why does this guy think that Bitcoin can't be taxed? It's not like the government has magical dollar taxing beams. My employer would be in a terrible legal situation if they did not withhold taxes from my income, and I would be in a similarly bad situation if I knowingly did not pay my taxes. Really, nothing should have to change if my income is in Bitcoins -- my employer will withold, and I will file taxes every year.
Yet another failure to understand the purpose of mining. The energy is NOT being wasted. In fact, the energy spent mining is the exact thing that makes the Bitcoin network function. The energy is being converted into trust. The more energy that is spent on mining, the more difficult it will be for a well-capitalized entity to perform an attack on the network.
Aaron Greenspan, repeat after me: Mining energy is not wasted. Mining energy is not wasted. Mining energy is not wasted.
Now, it is an open question as to whether the cost of running the Bitcoin network is worthwhile. However, for the moment, it clearly is. The fact that some miners can turn even a small profit on the Bitcoins they're rewarded with demonstrates that the utility they provide has positive market value.
Of course at some point it may be that it costs substantially more to mine new Bitcoins than they are worth on the market. If this happens soon, Bitcoin will likely fail. If it happens later, it's possible that transaction fees could prop up the network, but that's purely speculative.
Another thing to consider when assessing the energy efficiency of the Bitcoin network is how it compares to the efficiency of existing currencies. Cash has a physical component and must be manufactured. Electronic fiat is backed by huge, complex, and expensive networks. Visa's datacenters are not free. Keep in mind that credit card transactions typically have a transaction cost of 3%, which in some way represents the cost of operating the Visa network. 3% is kind of a staggeringly huge number, and off the cuff I expect that's actually quite a bit higher than the total Bitcoin network cost to volume ratio...
> Yet another failure to understand the purpose of mining. The energy is NOT being wasted. In fact, the energy spent mining is the exact thing that makes the Bitcoin network function. The energy is being converted into trust. The more energy that is spent on mining, the more difficult it will be for a well-capitalized entity to perform an attack on the network.
> Aaron Greenspan, repeat after me: Mining energy is not wasted. Mining energy is not wasted. Mining energy is not wasted.
I think you're missing the point here: Aaron is not denying that markets run on trust, and trust takes work (in both the physical sciences sense and the layman sense) to maintain.
What he is saying, as should be clear through his use of the water analogy, is that we should choose currencies for which it is easiest to convert work into trust and usage. Water is off the table, in his analogy, because of the large amount of work required to use it.
In other words: he views BTC as another currency which, compared to systems like the USD/ACH/Credit system, is overly laborious to maintain.
What's nice is that this is a reasonably scientific claim-- it is not out of the question that someone could compare measurements of the energy usages of the two currencies per unit of value and per transaction. To me, it seems clear that the USD, riding on the trust externalities from the already present authority of the US Gov't, is going to be cheaper. But again, it's a totally measurable assertion.
This isn't a judgment on bitcoin, but on your logic:
The fact that some farmers can turn even a small profit on the tulips they're rewarded with demonstrates that the utility they provide has positive market value.
I don't want to discourage rational discourse about BTC and whether it has any inherent value, but I think tulips are the Godwin's law of bitcoin. As a debate about bitcoin increases in length, the chance of someone mentioning tulip bulbs approaches 1.
Well, what other measure would you use? The markets did, rather quickly, correct themselves with regards to tulips. There was a brief window of mania, but for the last several hundred years the tulip market seems to have been pretty reasonable.
It's just not possible at this time to know whether Bitcoin provides enough value to succeed in the long term. But to survive in the long term, it has to survive in the short term, and our best measure of short term utility is the market.
Again, if the market crashed far below the mining costs, then I would view that as a demonstration of the lack of Bitcoin's utility. And that very well could happen! But it hasn't yet.
There is no other way to calculate whether something is done at an economic loss or profit than by the loss/profit mechanism of the economy.
Again, if the market crashed far below the mining costs, then I would view that as a demonstration of the lack of Bitcoin's utility.
Keywords being "far below". In cases where gold was the unit of money, there would be times where mining gold was economically unprofitable. As a result, more goods started chasing a fixed supply of money, bringing up the price of money making it more profitable to mine gold.
>>The markets did, rather quickly, correct themselves with regards to tulips.
Quickly is subjective... I don't believe several years, according to some historians, is "quickly" considering if you were affected by it.
Also "seems to be pretty reasonable" means it's just your opinion.
You're also very high strung and on the offensive for bitcoin. This is not how you would sell an idea and a huge warning sign of your view being very skewed and not objective when it comes to the matter of bitcoin.
Quickly and pretty reasonable are both subjective, yes. In the context of several hundred years of tulip history, though, I'm happily confident that a 1 year bubble is "quick." You're free to disagree.
Calling me high strung/on the offensive/skewed though is a bit of an argumentum ad hominem and thus irrelevant. My argument would not be affected at all even if I were foaming at the mouth and wearing a sweater woven out of paper wallets.
There are energy efficient ways of securing a block chain. Proof of Stake does not rely on vast energy consumption and in fact is better at securing the network, something one of the newer currencies Peercoin takes advantage of.
Thanks for the Proof of Stake reference, I was not familiar with that system but am reading about it now and it's very interesting. This site [1] seems to indicate a rather unfavorable transaction cost for Bitcoins, around 7%. However, I'm not sure whether their estimation of 650 watts per gigahash* is accurate (that warrants some more research), so I don't know whether to trust that figure or not. If it is accurate, it is not favorable when compared to Visa.
[EDIT] It seems like the recent ASIC miners on the market are vastly more efficient (>100x) than blockchain.info's estimates [2] (which probably include CPU/GPU miners since ASICs are relatively new). Without knowing the makeup of the Bitcoin network (i.e. what portion is CPU/GPU/ASIC etc), though, it seems like any efficiency estimate will be pretty inaccurate.
btc is much like gold, but most ppl here fail to realize that gold as a storage of value makes no logical sense except that a lot of ppl 'believe' in the value of gold. in that sense, gold is a bigger ponzi scheme than btc
personally i believe eventually btc wil crash to smithereens and so will gold prices. but im talking long term, when currencies will be backed by actual work that provides social and economical value
1) it's relatively rare
2) it's easily minted into objects of consistent mass.
3) because of quantum mechanics, gold has a yellow color. This makes it easy to verify gold content without advanced technology. You take a set of "gold standards", say, 99%, 90%, 80%, 75%, and then make a series of streaks against a black rock (http://en.wikipedia.org/wiki/Touchstone_%28assaying_tool%29). Then you take your sample and make a cross-streak. Then you and your trading partner can agree upon an approximate purity level at which you are willing to make the trade for goods.
currencies will be backed by actual work that provides social and economical value
Who decides what this value is? By hours consumed? Is one hour of sitting on your butt playing a video game worth the same as one hour helping to build a rocket that is destined to try to destroy a (hypothetical) asteroid on a collision course with the planet? How about by "type of work"? Well then, is one hour sitting on your butt playing a video game worth the same as one hour sitting on your butt playing a video game in a playtesting environment?
> but im talking long term, when currencies will be backed by actual work that provides social and economical value
If it were possible, the absolute currency would be 'life time' as in the movie http://en.wikipedia.org/wiki/In_Time. In the absence of that, something equally dear for staying alive in a increasingly moving towards apocalypse world, like may be bottles of oxygen or water ? But even then, the things that are of value may not be easier/handy to barter/trade with. That is when an alternative 'scarce' 'hard to create and requires resource intensive mining' but 'easy to handle' , 'easy to determine purity' type of resource takes the place as a currency. Gold has that property inherently. Not saying that it is the only absolute resource that has it. But it is a time tested resource with those qualities.
Nonsense. Gold has non-currency uses so it is, innately, NOT a "fiat" currency. It can be used to make objects of art, and it's essential in many manufacturing processes.
This argument gets repeated again and again, but it doesn't have roots in reality. The market value of gold is far, far in excess of what the demand from industrial, scientific, fashion and jewelry use cases dictate. In fact, these uses exist despite the fact the gold is very expensive. (Perhaps with the exception of the latter two, which are popular because of gold's high market value. But they do not themselves cause it).
If gold and other precious metals did not have their historical use as a currency and the trust of markets (and its suitability as a currency, I suppose), they would be worth at least an order of magnitude less than they are today. And it would be mined a lot less of them.
> The market value of gold is far, far in excess of what the demand from industrial, scientific, fashion and jewelry use cases dictate.
You forgot speculation. The reason it's so much more expensive than 10 years ago is because people expect that at a certain point inflation will finally be realized, and prices will be so high that it will be used for scientific, jewelry, and ornamental uses again, at prices even higher than today.
And even forgetting that, we have the fact that people buying gold to save removes it from the market, reducing supply at lower prices, leaving only higher bidders in the market. And you can still get gold tipped RCA cords, despite what you say. So as long as there are any consumption buyers just below the current price, the price is justified.
If we're going to play the "memes for intellectuals" game, I could just as easily make a similar claim on your comment. This is a content-free comment.
The easiest support for my argument would be looking at the list metals with a similar rarity to gold, and noting that gold is more expensive than all but platinum, despite having an annual production which is >15 times higher.
Now, please provide a citation for your claim "gold's market value is mostly caused by demand from art and manufacturing processes". I claim that this wrong because 34% of all the world's gold is kept in vaults, and an additional 52% is stored in jewelry (of which a significant amount should be considered an investment by its owners due to the high market value).
The fact that you are putting words in my mouth ("gold's market value is mostly caused by demand from art and manufacturing processes") is an indication that you are not debating in good faith. Good day. I shall waste no further time or effort on you.
so is mud. we dont use it as currency. why? gold has value for us not cuz of its uses, but cuz it is scarce and it is shiny and its an easy metal to work with
Gold has unique properties like every element has. But gold jewellery costs a months salary cuz we believe it is valuable, it is purely psychological. Its cost has Nothing to do with its chemistry or value to society.
Same goes for btc.
Actually it does. One of those unique properties of gold is that it is incredibly non-reactive, which means it doesn't visible age, discolor, or tarnish. The value of that for jewelry should be self-evident. It's excellent ductility and malleability are valuable properties as well.
all the things you are saying are just arguments for making gold a good medium of exchange, which it is no longer used for. not one of your arguments suggests that it is a good storage of value, which it used to be because of its scarcity.
if indians stop paying doweries in gold and arabs stop finding its shininess alluring, the value will plummet. there is nothing intrinsic in gold that makes it valuable
Warren Buffett put it well. "Gold gets dug out of the ground in Africa, or someplace," he said. "Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head. Source:http://online.wsj.com/news/articles/SB1000142405274870403270...
My understanding is It's built in what happens when it's too expensive to mine by adding transaction fees. Or once there are no more coins to mine. The network still needs to verify, so the person in the transfer offers up coins to get it verified which go to the miners.
It is correct that after 21 million Bitcoins have been mined, other incentives will be required for mining to continue. Transaction fees are the likely choice.
If Bitcoin became a major currency, I think there might be other incentives, too. To speculate: a large government might want to run mining operations to make it more difficult for other governments to collude against them in a 51% attack. Of course if they did this, they'd probably want to pick up transaction fees as well.
Whoever runs bitcoinfog might want to revise this statement on their gateway page:
> And once again, running through Tor makes it not likely for us to be shut down under pressure from the authorities. When in doubt about this, consider Silk Road.
When I consider Silk Road, it makes me less confident that this service won't be shut down.
By the calculations above, you would be far, far better off just buying Bitcoins on an exchange than you would be mining them with non-free electricity.
If you hold your own gold, and it gets stolen, nobody is going to pay you back (unless you have some kind of insurance, which presumably could cover Bitcoins as well). Similarly, if you hold a gold certificate and a trusted party actually stores your gold, and it is stolen from them, you're in the same boat. Maybe they have a refund policy and enough capital to cover the loss. Maybe they don't. The point is, equal protections could be offered for Bitcoin.
Personally, I think that hardware wallets have the potential to solve this problem. Picture a device that contains your private key, and is capable of signing transactions (after you press a physical button). This thing could be designed such that it is physically incapable of leaking your private key via its USB port (or whatever). And maybe it has a little LCD screen that shows the transaction it's about to sign before you confirm. With something like that, there's really not a whole lot a bad guy could do to steal your Bitcoins.
Of course, if a bad guys does coax you into sending them Bitcoins via some more social-engineery-type means, that could be a problem. E.g. if they briefly took over a popular website and made it show their Bitcoin address rather than the real one, there wouldn't be a whole lot of recourse.
> Everybody would generally be better off to throttle the rate [...]
You're wrong about this. The Bitcoin network would be _much_ worse off (verging on useless) if the global hashrate was throttled. The purpose of mining is not, as you said, to distribute Bitcoins. The purpose is to make it extremely difficult to append a forged block to the blockchain. The higher the hashrate, the more difficult forgery is. The reason that so-called miners receive Bitcoins is because the hashing takes resources (e.g. machines and electricity), so there needs to be some incentive to perform this service. The fact that it happens to distribute Bitcoins is convenient, but ancillary. (There are other ways distribution could have been done.)
Read this link for further information on why you want the global hashrate to be as high as possible. Basically, if a single attacker could match the hashrate of the network, they could do very bad things:
You're wrong about this. The Bitcoin network would be _much_ worse off (verging on useless) if the global hashrate was throttled.
No, it doesn't make a difference because what matters is that the target difficulty is relative to the current number-crunching capacity. A lower hashrate is just fine if nobody is able to do better than that.
Suppose that Bitcoin happened in the mid-90's when Pentium would be the fastest processor, running at 100MHz. The network would run 1000 or 1000000 times slower than today, the difficulty would basically adjust to that, nobody could overtake the network no more than today, and everybody would be as happy as today.
What keeps that from happening is the fact that the hashrate can't be throttled because of the incentives that make it profitable to maximize your hashrate and your number-crunching capacity. THus, the resulting hashrate and, consequently, the required hashing difficulty follow the bleeding edge of the technology.
The difficulty is an arbitrary factor: it's just a community decision that in order to find a good hash for a block, the hash must be lower than X, and that decision is based on the current capacity of the network to prevent some single party from "taking over the blockchain" and to keep the rate of new blocks steady.
But from blocks-per-Joule perspective there's no point requiring such a huge computational capacity.
Bitcoin itself would work just as fine if the difficulty was so easy that a Pentium I could find suitable hashes in a reasonable time: the problem is that we have better hardware than Pentium I so we're forced to raise the difficulty to match the most computationally capable parties.
Good point. It's a known misconception that the act of mining serves only to create new BTCs. Since Bitcoin clients only accept history branches that have the longest proof-of-work, the mining is essential to prevent a forge of the history branch, not just a single forged block since most users have established good practice to wait at least 5 confirmations before approving a payment.
