Bitcoin Forum

http://en.wikipedia.org/wiki/Submarine

Since my digital wallet is the record keeper for my bit coins and it's stored on my hard drive, if my hard drive dies or I forget my password, then my bitcoins are essentially...destroyed. Since the total bitcoins that will ever be made are 21M (to prevent inflation), wouldn't that mean that over time, the bitcoin economy will get smaller and smaller and pretty soon there won't be any more bit coins? Keep in mind I do understand that as bit coins are destroyed, the remaining bit coins will just go up in value and bit coins are divisible by 8 decimal places so you can slice a bitcoin up to be pretty small. But it is an issue.

Thats the only (and I do mean ONLY) upside to paper money because as physical dollars are destroyed over the years due to wear and tare and accidents, the goverment can print more to replace them. If we had a gold backed currently, then we would just mine more gold to replace the gold/dollars that are no longer in circulation. Granted, thats not how the goverments been using the printing press for the last 70 years but it does bring up a good point. If you can't re-create something that can't be re-created, how do you ensure it's survival?

What happens if a Spanish galleon full of gold sinks in transit in a storm? Is it the end of gold??

People have to realize that the number of coins is not the same as the size of the economy. Bitcoins are divisible down to eight decimals (currently, that could be changed in future clients) so as coins are lost, the remaining coins go up in value. The economy still has the same amount of value moving around, it is just with a slightly smaller number of chips.

Yeah, but gold's limit isn't artificial and it has actual substance.

How can the number of decimal places change? I thought no one person or group could control bitcoins? If thats the case then whats stopping greedy person or group from hyperinflating bitcoins now? Some greedy programmer changing the 8 decimal places to 80. Does changing the decimal places require some kind of intervention from the mining community or something?

But you can't destroy gold, you can hide it, melt it, make stuff out of it but gold is delete key proof.

But you can't destroy gold, you can hide it, melt it, make stuff out of it but gold is delete key proof. If some old lady didn't backup her hard drive and looses 5 bitcoins in a crash she's screwed. So lets say bitcoin went super huge and millions of people are accepting it world wide. But every day, some where in the world, an old ladies hard drive crashes, a students hard drive got 1 too many bad sectors, someones computer got hacked and there harddrive was formated and in the process, 100 bitcoins are destroyed every day around the world due to pure stupidity. That would mean every year the bitcoin economy shrinks by 36,600 coins. With no way to "reprint" those coins back into the economy, eventually the remaining bitcoins would get hyper inflated and die due to not enough money to go around.

If there is no way to reprint dead bitcoins then it just can't be done. But is there a smart way around it so stupid people don't hurt the bitcoin economy yet prevent inflation past the 21M? I know there are bitbanks, bitbucks, escrows and insurance (coming soon) but all of those are for smart people, not little old ladies who use the recycle bin to store there important documents.

But you can't destroy gold, you can hide it, melt it, make stuff out of it but gold is delete key proof.

If there is no way to reprint dead bitcoins then it just can't be done. But is there a smart way around it so stupid people don't hurt the bitcoin economy yet prevent inflation past the 21M? I know there are bitbanks, bitbucks, escrows and insurance (coming soon) but all of those are for smart people, not little old ladies who use the recycle bin to store there important documents.

The difference is that lost gold is almost always recoverable.  Lost bitcoins are, generally speaking, not.

Isn't cash the same way? If you accidentally burn your house down with a buck-fitty inside, that's lost to every too, right?

Very little of the gold lost at sea has been recovered, so far.  Except for portions that may have fallen into subduction zones, all of it is at least in theory recoverable with more or less current technology.  And whatever actually did fall into subduction zones is recoverable with technology that is possible.

Lost bitcoins are not recoverable with any potential future technology, according to our current understanding of the universe.

For what it is worth, I don't see lost bitcoins or deflation as a problem.  The losses are tiny relative to the size of the market, and always will be.

Ah, ok. It's starting to make sense now. So do bitcoins have to be recognized as legal tendar in order to sue someone over them?

You do realize that using your own math scenario, it would take 287 YEARS to lose half of the total number of bitcoins right? Even taking into account the fact that USD is not a limited resource, do you know how much difference there is between a USD today and 200 years ago? (which is only 2/3 of the time we're talking about). And that is ignoring the idea that we'd be seeing lots of backup/encryption services for peoples wallets (you can infinitely replicate your wallet if you wish) if the service did take off.

How do you figure?  Finding a private key for a given public key is a known cryptographic function.  As processors become faster and faster, it will become easier to perform.  With today's processor it is a brute-force task requiring an unreasonable (possibly impossible) amount of computing power.  That won't be true 100 years from now.

Would dealing in smaller quantities require a new blockchain or just a new client? My understanding is that a new client could use smaller values and keep building on the current blockchain. I could be wrong?

12:12 < nanotube> plato: not necessarily a new blockchain... but definitely a change in the client that affects blockchain format starting from some block x

Keys are 160 bits, if I recall correctly.  Brute force would require a computer somewhere between the size of the solar system and the galaxy working for a very long time to find a lost key.  By the time we can build a computer capable of finding a key, the issue will be moot. 

Effect of quantum computing attacks on key strength

The two best known quantum computing attacks are based on Shor's algorithm and Grover's algorithm. Of the two Shor's offers the greater risk to current security systems.
Derivatives of Shor's algorithm are widely conjectured to be effective against all mainstream public-key algorithms including RSA, Diffie-Hellman and elliptic curve cryptography. According to Professor Gilles Brassard, an expert in quantum computing: "The time needed to factor an RSA integer is the same order as the time needed to use that same integer as modulus for a single RSA encryption. In other words, it takes no more time to break RSA on a quantum computer (up to a multiplicative constant) than to use it legitimately on a classical computer." The general consensus is that these public key algorithms are insecure at any key size if sufficiently large quantum computers capable of running Shor's algorithm become available. The implication of this attack is that all data encrypted using current standards based security systems such as the ubiquitous SSL used to protect e-commerce and Internet banking and SSH used to protect access to sensitive computing systems is at risk. Encrypted data protected using public-key algorithms can be archived and may be broken at a later time.
Mainstream symmetric ciphers (such as AES or Twofish) and collision resistant hash functions (such as SHA) are widely conjectured to offer greater security against known quantum computing attacks. They are widely conjectured to be most vulnerable to Grover's algorithm. Bennett, Bernstein, Brassard, and Vazirani proved in 1996 that a brute-force key search on a quantum computer cannot be faster than roughly 2n/2 invocations of the underlying cryptographic algorithm, compared with roughly 2n in the classical case.[8] Thus in the presence of large quantum computers an n-bit key can provide at most n/2 bits of security. Quantum brute force is easily defeated by doubling the key length, which has little extra computational cost in ordinary use. This implies that at least a 160-bit symmetric key is required to achieve 80-bit security rating against a quantum computer.

Compared to that, searching the entire volume of the earth for lost gold, say a cubic millimeter at a time would be trivial.  And searching the entire ocean floor at this level of detail, through the top couple meters of crud, is totally possible right now, just not economically feasible.