Bitcoin Forum

Everyone around me (in meatspace that is, not on the forums) tells me I shouldn't be so reckless by putting so much of my savings into BTC.

But really - what are the real risks here? Under what scenario could bitcoin possibly fail?

'Shutting Down' is almost impossible, Bitcoin is like p2p file sharing, as long as 2 people are using it than it cannot be.

However, it can be severely choked.

If you ever see a spend from this address:
1111111111111111111114oLvT2
Sell your bitcoins immediately; it means we are all doomed and the system has been broken from the start.

Evil never fails.

It's always a bad idea to keep all your eggs in one basket, as it were.

extinction of the human race might cause bitcoin to fail, but hey maybe some aliens will come by, find it a cool idea and take it up!

This should do it.

http://www.youtube.com/watch?v=BpKda4Tj4H8

Yep.
www.youtube.com/watch?v=3s22JijLKEw (http://www.youtube.com/watch?v=3s22JijLKEw)

I like how they both used Pink Floyd: Dark Side of the Moon.

Right now a government could run an on going 51% attack without much trouble. I don't think we're completely out of the woods on this until the value of a days blocks is well over a million 2012 bucks.

I don't think interest waning to near nothingness is even a remote possibility at this point, but I guess that is a scenario.

My understanding is that mainstream crypto has never broken suddenly, there is always time to switch. But it isn't completely impossible I guess.

Is there any country that could sustain a 51% attack for long before another equally large superpower countered their attack?

As Bitcoin grows and gains popularity, and hate, and takes business from large and monopolistic foundations, a 51% attack will be a viable option for these people. The only problem is that most people with any sense realize Bitcoin is a great thing, and probably wouldn't want to kill it. But then again, all it takes is the man in control of a SHA256 optimized supercomputer pressing a few keys...


If a 51% attack comes about, I wouldn't doubt that someone with power will be ready or at least willing to counter it.

Ohh and today's my birthday 8)

A global government takeover of all network infrastructure, with forced licensing of all network devices and central auditing of all network processes with the intent of expelling Bitcoin could do the trick.

The key here is global governance of all telecommunications.

Not going to happen.

A resolution to give the UN authority over telecommunications is currently in progress.

A huge bureaucracy trying to keep a step ahead of hackers. Not gonna happen.

An individual hacker is irrelevant in a world where every computing process, every user, every piece of hardware, every watt of electricity, every packet of data has to be approved, logged, tied to verified biometrics and tracked by a bureaucrat backed by force.

If we have a world like that, then how we buy our rice and beans is the least of our worries. That's a little Alex Jonesy for me.

The UN couldn't find its ass in a bright room.

We will likely not have a world like that unless people are convinced they can't secure their own software.  If people get scared enough about a "terrorist" compromising or abusing the systems of the world and killing them, we might have the world described above.

Fortunately, most of our cybersecurity has come from private developments. We believe people like ourselves are capable of taking care of things. Else, people would give government "gods" an excuse to take everything over.

bitcoin is much too small to resist any decent attack yet
Any major country could probably kill it easily with computing power alone

the entire economy is worth $50-100 million
in comparison ,gisele bundchen (yes,the bikini model ) is worth $250 million and thats peanuts  by "rich" standards

http://www.toptenz.net/top-10-shockingly-rich-celebrities.php

when a market is so tiny ,it cannot resist being manipulated by people ,countries ,goverments that are worth so much more

they can buy in ,crash the price down to near zero or incite a panic or many things that would make it too volatile to mainstream  traders to accept

a major bank could buy it and bury it and it would barely register on that days trading sheet

Wut?

Many ISPs think Bitcoin is important enough to set up systems for its defense, but they aren't interested in actually turning them on now? They are going to wait until attack or high difficulty? Besides being made up from no evidence it doesn't even make sense.

Everyone is also conveniently forgetting that the moment someone invests in Bitcoin - even to 'manipulate' the price (which is laughable, given the lag times of moving funds into exchanges) means they are INVESTED IN THE SYSTEM.

Sorry, there are easier methods that don't involve speculation - but I won't entertain them here.

the cheapest way would be for USA to declare the BTC an "instrument of terrorists and drug trafficers and pedofiles" to evade capture and make them illegal

all exchanges accepting USD for bitcoin would be closed and it would cost hardly anything

if USA did it first ,UK would follow and probably EU eventually


they could do all this without buying a single coin or spending a single dollar because the
lawmakers are already on the payroll

That would make the USA and UK miss out on the new economy and countries like China, Russia, Japan, etc would have no worries to flood the USA and UK with counterfeit currencies with no fear of retaliation.

I don't see bitcoin failing either... still it's possible. Never underestimate stupid politicians.

Another reason not to put too much of your savings in bitcoin is because YOU could fail to protect them. To me this is a more realistic problem.

It is also possible that Bitcoin never "fails" (i.e. blockchain halts or value goes to zero) but never really grows.  A large portion of Bitcoin prices is speculation on future utility.  If that utility/demand never materializes the price could fall massively (99.9%) without Bitcoin failing.    I mean look at the scamcoins (LTC, SC, etc).  No real use for them but they still hang on to sub cent prices and small volume.  I don't personally thinking this is Bitcoin future but just pointing out value can go down and by a lot without a "failure".

I suppose it could become mostly irrelevant like UseNet and IRC, but only if it's replaced by something better. Even then, it will probably just be re-purposed for something. OTOH, I expect UseNet and IRC to make glorious comebacks in the coming Age of Decentralization.

All these comments about 51% attacks are very weird to me. The most straightforward way that a government would go after bitcoin is simply ban the exchanges on the pretext of stopping illegal gambling and illegal drug dealing (which, one will notice, are pretty major parts of the bitcoin economy). I've posted on this before:

Consider what happened to the poker rooms. What's really wild about that action is poker is probably not illegal in many states that ban gambling; it's not a banking game, skill has a significant impact, etc. Moreover, poker is not even asserted to illegal in all the states. The reason they dropped the hammer on Poker Rooms is the passage of UIGEA, which made financing poker room illegal, even though the underlying activity was not necessarily illegal.

Can you imagine something similar happening to bitcoin? Yes, easily. Without the ability to get checks, wire transfers, ACH, Dwolla, etc., bitcoin becomes very difficult to use--not just for drug dealers, but for everyone.

Lots of people have said that bitcoin would survive the loss of Silk Road, but I think it depends. If Silk Road is infiltrated by law enforcement and coordinated high-profile arrests made, I think the site might become too scary for customers to use, and that is dries up in the US. In that case, I think Bitcoin survives. But if they go after it with something like and anti-bitcoin UIGEA (call it ABU), I think Bitcoin could honestly die out.

Maybe you think that an ABU would not pass because there are legitimate for it, I say bullocks. Judging by Silk Road and this forum, the top three uses of bitcoin seem to be illegal drugs, gambling, and Ponzi schemes. It's not as if they are commonly accepted on eBay, for example. Bitcoin desperately needs high-profile legitimate uses. Moreover, compared to Poker Rooms, Silk Road (and the Armory) are terrifying to ordinary citizens. Most people didn't see anything wrong with poker, and UIGEA itself probably would not have passed without land-based casinos lobbying for it. It is true a lot of people think pot should be legal, but just the splash screen of Silk Road shows a whole lot more. If a politician demagogues on Silk Road, I bet something even more draconian than UIGEA gets passed, no problem.

But would this destroy bitcoin?  I mean, it would still be tradeable overseas.  I think it does kill bitcoin as a real currency (as opposed to quirky hobby).  We'd see the mother of all bank runs as US bitcoiners cash out. When this happens, not only with the price drop precipitously, but some of the exchanges will not have enough cash on hand and won't be able to cover claims. This will terrify non-US bitcoiners as well, and at the end of the day I think bitcoin is trading in the range of pink sheets, and the exchanges may all be belly-up. It won't make sense to mine, rigs will be sold off, and bitcoin becomes a cute novelty susceptible to attacks--kinda like Litecoin. And unlike bitcoin circa 2010, there isn't much of a chance for it to rise from the ashes--not with an an anti-bitcoin UIGEA in place, stifling the US market.

I'm pro-bitcoin, so I hope (1) flashy legal uses come to fruition quickly, and (2) the Silk Road is seriously compromised by LEO so that it doesn't become an excuse for demagoguery.

Bitcoin desperately needs a big business to adopt it  ,such as an ebay or amazon or maybe even dhgate to go mainstream
even the itunes store or something as crappy as that would pull in millions of users

but big businesses dont change a perfectly working system easily and the sites mentioned above NEED transcations to be reversible in case customers dont get their goods

could you imagine the customer service agent when she tells someone tough shit that your product never arrived ,thats what you get for paying by bitcoin :D

I suspect the hostility to altcoins might have been quite destructive.

For example when I cast asset values in terms of Canadian Digital Notes (CDN), or in GMC, GRF, MBC, NKL, UKB or UNS, they seem quite a lot less volatile than bitcoins:

http://galaxies.mygamesonline.org/incdn.html

-MarkM-

So there is no online poker anywhere in the world?  Oh wait there is.  It is just very difficult to get money in from the US.  Nobody is ignoring the possibility of govt going after exchanges however the scope of such action would be limited to one (or a few) govts.  Would it hurt Bitcoin?  Of course (up thread I indicated Bitcoin may not "fail" but it may become marginalized and thus value drop very significantly).

Unlike poker (which are centralized) the decentralized nature of bitcoin will make any ban less effective (although it will marginalize usage in that banned country).  For example someone in the US could use OTC and WU funds to someone in a country which doesn't ban bitcoin and get coins (much like they do today). 

It is very unlikely a "ban" could kill Bitcoin without some one-world govt and Police state with direct control over the internet backbone.

I don't think we disagree, but to clarify: if bitcoins become very cheap due to straightforward government action, it becomes less practical for use in actual commerce (small changes in price due to volume make it proportionately more volatile) and more susceptible to attack because investment in mining follows price.

I agree that it won't disappear, but the OP seems to be asking if it could drop precipitously in value, or if it could fail to make a significant mark on the world economy. The answer to both of these questions is emphatically yes. Will bitcoin persist as a hobby even after government action? You bet, but I don't think that's what OP is asking.

I think the OP doesn't quite see the point that any individual government, even the USA, is unable to kill or even significantly suppress Bitcoin. Even if they call out Seal Team 6 to kill every known developer and bomb the known servers, they will only show their fear and weakness. There are probably more hackers in China than there are college grads in the USA. Bitcoin will become stronger than ever.

A massive cash out could mean it would take many years to recover ones investment.

I think that has already happened several times, though I don't think they were voluntary cash outs.

Interesting thread today on the 2 million btc that have been generated but never moved. If all sold at once, the last one would sell for a buck.

For future reference, here's the thread:
https://bitcointalk.org/index.php?topic=98641.0

That's what I mean, it would have to be hacked. Nobody would be crazy enough to sell all their Bitcoin that cheap. If that happened and the 2 million were redistributed, Bitcoin price would bounce back before too long. That event would be well publicized and show that it's not the Bitcoin network that fails, but fools and their money. I think I would sell my car and buy more Bitcoin that cheap knowing that I would buy a new 7 series in a couple months.

If the price drops too far too fast, the miners will stop and the network would become less stable...that might allow for an easy 51% attack...not sure if thy would really kill Bitcoin though.

That is part of why we need ASICs. If it happens while peopel are still wondering whether to invest in ASICs it could be nasty, but once everyone and their dog has ASICs maintaining the network will be dirt cheap as far as actual running costs.

-MarkM-

Bitcoin will go the way of the dodo bird once we can teleport gold atoms back and forth.

http://www.redorbit.com/news/science/1112534053/photons-teleported-60-miles-by-chinese-researchers/

Actually it will mean bitcoin won't go anywhere as the internet will add quantum communications to its network, ensuring any kind of censorship will be rendered utterly useless. (Even more so than now with current technology.)

And the difference between a photon and a gold atom is probably something like the difference between throwing a baseball and throwing the Titanic...  :D

Well, if the exchanges want to let Bitcoin die, then they die too.

Also what is commonly misunderstood in those articles is they researchers DIDN'T teleport a photon.  They teleported the quantum information about a photon.  It has theoretical applications in the use of cryptography.   


In theory if this somehow this could be done at great distances and the quantum information could be recorded it would provide for faster than light communication but so far that has been found to be impossible.  However despite the name quantum teleportation has absolutely nothing to do with transporting objects having mass.

Maybe someday you could use it to make an Ansible Ansible (http://en.wikipedia.org/wiki/Ansible) but not to have your friend Scotty "beam you up".

It depends entirely on your own personal definition of "fail"

To most people having $5000 stolen from your computer via a hacker just once would destroy all confidence. Even though its not bitcoin itself failing, you sure wont be using it anymore.

What?!?

Utility never materializes?

I refer you first to this thread:

Why we need Bitcoins for international transactions (https://bitcointalk.org/index.php?topic=98988.0)

tl;dr:


I then refer you here:

Banks to Make Customers Pay Fee for Using Debit Cards (http://www.nytimes.com/2011/09/30/business/banks-to-make-customers-pay-debit-card-fee.html)

Yes, that's right, banks were actually going to make people pay to use their own money. Money on deposit BTW which benefits the bank by fulfilling its reserve requirements. That article is old. Consumer backlash made banks back down from that ludicrous scheme. But the mere fact it was soon to be a reality reflects how broke and anti-user/pro-bank the current banking system is.

This doesn't even get into bitcoins being a guaranteed non-inflationary currency similar to gold - a fact magnified at a time now where central banks are printing cash like crazy:

ECB saves Greece from bankruptcy by securing emergency loans-paper (http://news.yahoo.com/ecb-saves-greece-bankruptcy-securing-emergency-loans-paper-030900282--business.html)
Fed’s Rosengren: Let’s Buy More Bonds (http://finance.yahoo.com/blogs/the-exchange/fed-rosengren-let-buy-more-bonds-152200952.html)
China's Surprise Rate Cut (http://www.businessweek.com/articles/2012-07-05/chinas-surprise-rate-cut)

It also doesn't get into the ability to use bitcoins anonymously, the ability to use them for micropayments (even fractions of pennies), the ability to store any amount of them non-physically (http://bitcoinmagazine.net/brain-wallets-the-what-and-the-how/) (relevance (http://www.zerohedge.com/news/greek-banks-run-out-safe-deposit-boxes-eerie-calm-takes-over-country-24-hours-d-day)), etc.

Utility and demand never materializes? I think not. (I say that with as little sarcasm as possible; you're probably my favorite forum poster d&t  :) )

if the exchanges go down... https://localbitcoins.com/ (https://localbitcoins.com/)

Seems to me that the answer depends a great deal on the definitions of 'success' and 'failure', though it sounds like success to you means that you won't lose your savings.

To me the most likely cause of failure (in my definition of it) would be, paradoxically, 'success'.  I say that because I can see no other way to cope with the load but to significantly change the nature of the solution to one with has some ugly parallels to today's system of banking.  That is to say, the 'peers' are by necessity powerful and well situated entities who have the ability to exploit the users...and thus they probably will.

My fallback hope for Bitcoin is simply that I get unbelievably rich from them.  The most like 'failure' here is that Bitcoin is ignored by 'the powers that be'.  If Bitcoin is molested by said then I suspect it will both limit the solution's availability and drive the solution into hiding and hardening.  That would (I theorize) extend it's lifetime in something like the current form and the increase the value to those who find such a solution useful...and I believe there are many entities who fall into that category.

In another respect I believe that success of Bitcoin will be in demonstrating proof of concept and providing inspiration to a variety of similar solutions and I think that Bitcoin has probably already achieved this goal.  Time will tell.

It's interesting that when the banks fail the government steps in to prop them up.

But when Bitcoin fails it's the users that step in to prop it up.

Which has more merit?

Bitcoin already failed once and is now on it's way to renewed success. They say in life there is no such thing as failure. You just get up and keep going. I think Bitcoin now is stronger and more resilient than it has ever been. The slower it grows the more solid it's foundation.

If you look at this:

https://blockchain.info/nodes-globe?series=topBlockRelay  --> nodes which fund the most blocks in the past 24 Hours

you see (with a very nice graphic :-) ) that there only about 6 servers  that need to be shut down to nearly "kill" bitcoin.

So as long solo mining or services lice p2pool are not getting a significant amount of hashpower, Bitcoin is very vulnerable.

I don't think that would work for longer than a few hours as all those miners would spread out to far more pools or even move to p2p fairly quickly.

Difficulty used to be 1 and there was no 51% attack.

If a drop in price makes miners drop out it will also reduce the incentive to preform the attack.

1) Full disclosure,  I am a site pro at SealsWithClubs.eu - the only bitcoin poker site - and I am heavily invested on Bitcoin working long term.

2)  I tell everyone that I introduce to BTC that IMO there is a 25%+ chance of total technical fail.  A list of possible ways this can go down, and of course I cannot conceive even half the reasons:

-- massive cracking of the "uncrackable" public / private key cryptography - "It's cryptography that can't be hacked!"  scares the shit out of me.  Possible solution:  massive team of dedicated, super-smart programmers on this shit 24/7 and working for good.  Need Linus Torvolds and shit.

-- massive technical fail of the blockchain - real world weed-induced 1-of-a-possible-100000 scenarios:  China starts to hate BTC b/c it frees their citizens and lets them gamble and get drugs and shit.  China likely controls a super-duper headshot botnet - likely more valuable than nukes at this point in human history - and they decide to take out Bitcoin.  They can likely get that shit done by 3pm the next week.  uber-botnet, brute force 3x the current nodes and start to corrupt the blockchain.  without much technical know-how on how the blockchain works i'll just bet theoretically china could fuck up our awesome distributed DB if they tried hard enough.  So could USA, and so could Isreal & a handful of other countries.  N. Korea has even been getting in the game recently, and seem to be good enough to fuck up a S. Korea bank recently.

-- I hope the above ramblings at least illustrate the point that there are such numerous ways this can all go boom instantly. 

I just hope those dedicated neckbeards are working for good, and working 'round the clock.  I just read somewhere this was the largest distributed software something - either largest network or largest software project.  I hope some bill gates types or warren buffets or Soros or someone comes in and tries to help legitimize us before they kill us - we need those nerds and beards and scientists and software engineers on that client and defending against the constant shots ppl are taking at it and developing the solutions for shit like "satoshi dice just made the blockchain 20% bigger" and other scalability issues we must face quickly.   Anyone got metric for how many programmers on the sourceforge project?  is it well taken care of?

Messing up the blockchain would only work for so long. All that would have to be done is the blockchain becomes 'frozen' at some point in time and then ported to a new client that plugs up the vulnerabilities. Everyone gets their coins back (or whatever coins they had at the freeze point). As for the crypto being broken, that's a whole other issue.

Folks, I cannot stress this enough. The blockchain is not going to blow up. Even if the Satoshi client blew up at some point due to scalability issues or some other reason, the blockchain isn't going anywhere. There is now $100 million in that blockchain. Those who have Bitcoins have a significant vested interest in having the blockchain survive. It will survive anything short of the cryptography itself being broken.

I have yet to read this thread, but the following image is in response to the title of this thread.

http://cdn2.listsoplenty.com/listsoplenty-cdn/pix/uploads/2010/05/A-falling-house-of-cards.jpg

The key word was IF.   I believe in the potential of Bitcoin.  I wouldn't be here if I didn't and I certainly wouldn't have started a company to explore ecommerce using bitcoins if I thought it had no potential.

Still potential =/= tangible utility.  Assuming it does and thus price is supported by current utility is a fallacy.  

BRACE YOURSELF:  Bitcoin "may" never live up to that potential.  Regulatory, technical, or social issues may prevent it.  

Once again keyword is "may".  The OP was about Bitcoin failing.  I think Bitcoin failing is very unlikely but Bitcoin stagnating and becoming a niche technology with a much smaller valuation is certainly a "possibility".  Bitcoin doesn't need to fail in order for the future valuation to be much much lower.

It's also possible (since we are talking hypotheticals now) that official currencies will all fail (or become unattractive) due to inflation and over-regulation. Black market trade will then fill the void. Don't overestimate government competence. In a world with no official currency, is there anything better than gold and Bitcoin?

Maybe bullets.

Bitcoin, bullion, and bullets sounds about right.

Yeah in another post I suggested making your gold into bullets for your personal carry. :p