Oh yeah? What are big banks doing then? Go spread your filth elsewhere

I will introduce the concept of Sweft's Law and Sweft Attack below.

Sweft's Law:  The network hashrate of a cryptocurrency must rise at a rate at least equal to that of the rate of Moore's Law to ensure minimum network security.

Sweft Attack:  A prolonged deflationary attack on a cryptocurrency network describing a situation in which a rogue miner processes transactions solely for the purpose of removing the fee of said transaction from circulation.  A necessary precondition for said attack is that the average transaction fee must exceeds the average rate of cryptocurrency inflation.

Edit:  originally titled the 2040 problem, a more apt title is the deflationary problem.  I use 2040 as a point where mining reward via block reward would be negligible.  I'm starting to believe this point where miners no longer profit enough to increase hash will come much sooner, perhaps by 2020.

 
In 2040 new block generation will be negligible, bitcoins will be fixed.  Miners will only be rewarded for transaction fees.  This may not seem like a problem, it IS.

The health of the network depends on constant hash growth.  Without constant hash growth, the network is prone to attack.  Why?

What protects the network right now is a high hashing rate.  This secures it from attack.  Without this, there is no security.  The price of bitcoins would fall.  The more hash, the more security, the higher the price will be.  Because it's impenetrable from exterior forces or supercomputers.  If a government were to be able to attack the network, 99% of the network, the system would fail.  If the system has the ability to fail, the price of bitcoins is worthless.

Thus, the whole network depends on hash.  The security and price, which is also reflective of hardware and electricity, and again, security.  The more hash the network has the more secure.

Thus, miners need incentive to increase hash.  They do this by generating new coins.  Thus you increase hash and create a more secure network.

The problem is that in 2040 new block generation will stop, and coins will be fixed.  Now, people want to make you believe this is fine.  It's not.  It's stupid and beyond stupid.

The stupid part about is is that it removes an incentive for miners to increase hash.  It removes a revenue stream for miners.  New coin production is not BAD, it's GOOD.  Only a moron would think otherwise.

This is extremely important.

When you remove the reward for generation of new blocks, you remove a revenue stream for miners, hash will fall.  You say, who cares, hash falls.  

Hash secures the network.  It ensures that miners will profit and the miners ensure there is no double spending of coins.  If miners stop mining because intensives become smaller (loss of profit), hash goes down, the network is prone to attack.

Then the coin holders will be mining to protect their own money.  This will be an incentive of the richest members.  The problem is that every year hardware advances and you're no longer making as much money mining, maybe not even to cover the hardware costs to protect the network.  So now, the network is prone to attack.

This is irrespective of assuming whether or not transaction fees will support the network.  It's irrelevant.  The network will be weaker because you removed profit from miners.  Now, miners stop mining.  Thus, you decrease hash.

Bitcoins are only worth the hash(security) of the network.





Edit:  I haven't posted in two years but i will provide an updated analysis below.

For BTC to to have value, miners must secure the network. If miners do not constantly increase hash, Moore's law will catch up to the network and it will become prone to attack. This should be easily accepted as fact. If you don't accept this premise i can't possibly help you understand the deflationary flaw in bitcoin.

If you don't understand, let me try to explain it again. If hash remains constant and doesn't increase for a number of years, technological advancements (Moore's Law) will make an 51% attack more likely.

Now what some people seem to argue is that tx fees will support mining growth.

This is true in two scenarios.

1) bitcoins are sent/received more frequently (velocity) 2) tx fees increase

I will addresses the problems with both scenarios.

The problem with #2 is that there is a cap on maximum fee the miners can charge, at 100%. So velocity remains constant, miners cannot increase profit beyond 100% tx fee. So this cannot create increasing profit.

The problem with #1 is that bicoins can be permanently lost, and there is a hard cap on the amount of bitcoins. That means that there will eventually be more bitcoin lost than is generated by block reward. This should be known as the 'Sweft point' where bitcoin turns into a deflationary currency from an inflationary one. Thus, to believe that transactions will increase as coins are lost, aka deflation, is not a sound proposition.

Another issue is that rogue miners can mine the network, charging tx fees and sending the coins to the trash. This would further exaggerate the deflationary tendency of the bitcoin design.

Thus it should be obvious to anyone that understands the issues to also understand that there exists a simple solution which will make the person who implements it rich.

Make an alt currency with a cap minimum 3% inflation. This will satisfy the profits of the miners and hash of the network.

R

What is happening here? They're closed... Is this just fulfilling the last orders?

Don't mind the ponzi troll. The price drop is deliberate market manipulation, whether its an attack or just a speculator manipulating the market for his own gain is debatable but whats certain is anyone selling at these prices is playing into his hands.

Seriously, what the hell is going on? I feel VERY lucky. On one hand I was able to sell my main coin supply on the 9th I think it was for like $247 / each. I refresh clean once in a while and that was the time. I told myself, once I see it go over $250, sell it all. I sold them all that day and a couple days later money was deposited into my bank account. The next day coin started to drop big time. Most places ceased operations, stopped business or just suspended trading until further notice. Then I had another whole wallet which I kind of forget about and tried really hard to sell those but no such luck. I pretty much have to hang on to them for a while and see what happens. My stupid fault for not remembering. That's a bad thing to do in this business.

Sorry, just wanted to post something positive in my world for once. I rarely EVER get to do that.

So what the hell is making coin go from $250 to $55 in 2 days or less? Yes, you can respond with sarcastic, anal retentive childish remarks if it makes you feel better.

I don't understand, maybe I'm just too young with whole cold-war mentality born just around collapse. Sure communism didn't work out very well.

But, I do prefer some socialism to pure capitalism. So I don't realy get this whole fear of it in USA, it can't be all bad or is it? Can someone explain it to me?

I met Jones in Denver when he was hanging out at Joby Weeks' house (an admitted mason descended from William Sinclair of Rosslyn chapel fame).

Jones is a mason and CIA asset. Hate to break the news to his fanboys.

PROUDHON's thesis was BTC would drop by itslef

this was an exchange failure not a BTC failure....

We're not going back to exponential growth.  We're completely changing directions now.

Ugh, yeah I had 20 times proft at 265 and that was actually my target price to sell but I didn't sell in time that fateful morning. Now it looks like I'm down to...nothing. I anticipate a huge crash when mtgox comes back. I think a lot of people are getting out of bitcoin for good. I'm not selling now though, whats the point. I might actually buy more. And hold on to them for the long haul.

We are now exactly where we would have been if we had just continued the steadily rising exponential growth of January and February, before the March Madness.

If you got in two weeks ago, you are still up right now.

Nothing fundamental has gone wrong with bitcoin itself. This fallback was a combination of the price getting ahead of itself and gross negligence & unpreparedness on the part of certain exchanges.

People are preparing to set up more exchanges as we speak.

Even if there are more flash crashes this week shaking out weak hands, once the exchanges problem is dealt with there is nowhere to go but up.

[Edit - that last sentence went too far. There'll be lot more flash crashes for a long time, and there is always a chance that bitcoin could fall to zero. But the fundamentals have not changed, and they point to bitcoin continuing to go up exponentially in the long term, however bumpy the roller-coaster gets].

okay, the price is $181 so, people should feel comfortable at $150 by tomorrow, and $200 by the weekend, with $20 swings as people think they are smart and cash out into the hands of the investment bankers that just tested the currency to see if it holds water.

they pumped, dumped, and are now standing aside and watching, eagerly waiting to buy all your coins for anything below $174 each. they just want to see the bottom and determine if the confidence remains before they rebuy.    if you can wait until next week, i believe this will become obvious.

So jealous, wish i had funds on that bloody site I cant believe people are selling so low just because mtgox is down for maintenance.

Read this...

http://maxkeiser.com/2013/04/11/max-keiser-to-cnbc-im-consulting-on-a-project-now-in-london-with-some-excellent-people/

Whatever happens, it looks like this event will separate the believers and the non-believers. There is really no way to make a good rational decision about price movement right now. This will be an opportunity for any newcomers who believe in bitcoin to get in, and everyone else to get out. Gonna be quite a shakeup. Popcorn time.

any chance for some real opinions? I know it get's a little into circle jerk territory for permabulls in here. but you had done well holding so far.

anyway... mtgox deciding when we can sell is not ok with me, since higher price benefits mtgox with high value in fee's. would he freeze market for cooldown mid rally? he is making bitcoin look very bad, just like the first crash from 32 when they halted trading at 17(claiming hackers), it didn't stop anything, it made things far worse.

and he is misleading people also, he is trying to convince people that lag caused people to panic sell. and that by sorting it out, all is well. like a jedi mind trick or something, selling was way overdue, and there system can't handle decent selling, if anything it curbed selling enough over the weeks for it to build to this point,

trust is long gone.

I expect race to get out once again.

unless you think the largest exchange stopping trading due to excessive selling for its own self interest is perfect the time to buy. I worry this may have triggered a long bear market.

goxxed....

Thoughts?

Better picture



I think we'd all tap that ass.