Money originally arose due to a desire to trade more efficiently, just as language originally arose due to a desire to communicate more efficiently.  Money has value just as words have meaning.  Both are emergent properties, driven by natural human desires.

Note: This does not explain why any one particular currency has value, but rather why there exists some form of money.


Don't worry.  I'd bet many people don't understand this but are afraid to confess such ignorance.

There is value in owning certain objects (goods).  A simple example would be a plumber fitting a $3 washer to fix a leak in your kitchen.  We can easily identify the $3 of value in the utility of a dry kitchen.  However, the plumber might charge $60 for this, a markup which occasionally confuses people.

As you rightly observe, there is value in certain kinds of labour, and the skill (knowledge) of the labourer plays a part in determining this value.

But the story does not end here.  There is value in all kind of things: location (shipping), customer knowledge (advertising), risk mitigation, time (investing), et cetera.  Businesses often work to unlock such efficiencies and, the extent to which they are successful is the extent to which they can profit.

To be confused by a factory owner profiting above the costs of materials, maintenance, and wages is just a more subtle version of being confused by the plumber's $57 markup.


Suppose I want to employ you to dig a ditch for me (a full day's work).  Could I pay you with 3kg of 1-day-old date and walnut cake and 20 freshly baked potatoes?


Quantum computers theoretically break certain cryptographic algorithms.  Bitcoin may have to transition to newer algorithms as older ones fall.


A form of consensus.  The 21 million cap is effectively part of the definition of Bitcoin.  The full definition of "Bitcoin" is written as a piece of software called "Bitcoin Core".  The analogy is weak, but you might consider why the English word "water" has the meaning that it has and how you might go about changing this meaning.

There is no consensus on the number of ignored transactions so this factor cannot be used as part of a protocol rule.

From this calculation it is clear that you intend for miners to discard solutions that cannot be used due to a range requirement.  You've effectively replaced the rare event of finding a single 1-in-(210 * 10¹⁵) hash to the rare event of finding ten 1-in-54 hashes in a row.  There is no reduction in variance, even with wider ranges.

Note: your link reports about 350 000 000 gigahashes/second = 350 petahashes/second (350 * 10¹⁵ hashes/second).  This works out to 210 exahashes (210 * 10¹⁸ hashes) in 10 minutes.  The tenth root of 210 * 10¹⁸ is 108 (3.s.f).

You hit the nail on the head with your first edit.  This proposal would give slightly faster miners a huge advantage.  This would quickly lead to almost perfect centralisation.

Your second edit does not rescue the situation as far as I can see.  Depending on what you mean by restricting the nonce to a particular range, I believe you will either fail to remedy the tremendous advantage of the faster miners or reintroduce the original variance.

Well, the original altcoin after:

• Namecoin
• IxCoin
• I0Coin
• Solidcoin
• GeistGeld
• Tenebrix
• Fairbrix
• SolidCoin 2.0

So...  the 9th altcoin.

You could say: "one of the original altcoins".

As I understand it, Bitcoin blocks were always limited by MAX_SIZE (32 MiB).  It was in 2010 when MAX_BLOCK_SIZE (1MB) was introduced as a temporary anti-DOS measure.

Unfortunately, while many had high hopes that a robust mechanism could be devised to defeat the blocksize problem, no such proposals have survived close scrutiny.  Clever-sounding fee policy discussions (transactions becoming more expensive as blocks grow) were replaced with more general musings about votes (e.g. have full nodes report how long it takes them to download and verify blocks and adjust MAX_BLOCK_SIZE to target a sane duration).  Today, the blocksize limit remains in place and we seem to be left with few, very ugly options.

Disclaimer: I was quite new to Bitcoin at the time and am far from an authority on this topic.

Lol.  I expect he thought about it and concluded that 30 days per re-target was overly long.  Rumour has it that these tweaks were at least part inspired following some feedback by Hal Finney.

2016 doesn't seem so random to me.  There are exactly 20160 minutes in 2 weeks.

Wait.  Weren't agent Smith and "Mr. Andersen" enemies in that movie?  Is Neo's defection a planned plot element for The Matrix 4 or something?

As far as I'm aware, there's nothing particularly special about 2016.  I believe it's simply a figure Satoshi felt was not too big and not too small; an educated guess at an optimal value.

Indeed, such parameters were subject to last-minute tweaking.  Not long before Bitcoin 0.1 came out, the intent was for 2880 blocks per difficulty change.

Maybe the first Slashdot story (11th July, 2010).

The price rose tenfold in five days and the following difficulty round was the shortest in Bitcoin's history, the only time the fourfold maximum difficulty increase was achieved.

I'm not so keen on this first generation of hardware wallets myself due to the need to trust the hardware wallet company.  I'd be more comfortable if there was companion software that could be used to verify that the device is not manipulating the RNG as you use it to create private keys.  Perhaps we'll see more robust approaches with a second generation of hardware wallets.

In this light, whitslacks graphical calculator program has an advantage.

Here, it appears you are trying to change your claim to match the source rather than admit error.  I maintain that your original claim is not supported by the citation you provided.

With the remainder of your post (omitted), you shred your reputation for doing research.  You openly admit that your statements are routinely shot down and go on to try and shout away the concept of philosophic burden of proof.

Ignored.

This citation does not support your claim that POW was only ever designed to be short term.

In the video, Mike Hearn claims (and hopes) that one day, someone will come up with a better system.  He explain what he doesn't like about proof-of-work by observing that it is barely a rough approximation to "one person, one vote".

I find nothing objectionable here.  This is purely a statement about technological progress which promotes neither proof-of-stake nor indeed democracy.

Litecoin, just as Tenebrix before it, marketed its scrypt hashing as being GPU resistant.  It was more than half a year before GPU mining arrived for these altcoins.  While it is true that, in late 2011, some GPU miners were worried about the future potential of Bitcoin ASICs, they were certainly not looking to Litecoin for a solution.

Why is the existence of a "sane deflationary BTC" a strong reason for a highly inflationary fiat to exist?  Do you mean: "benefits the latter"?

That's taking things too far I think.  I agreed with you that anonymity was not the main goal.  As far as I'm concerned, the main goal was to do with creating a trustless wealth transfer protocol, where the functions of payment processors are wholly replaced with a system of cryptographic proofs.  Satoshi explains this clearly in the introduction of his whitepaper.

However, if the whitepaper does not highlight the importance of "anonymity", I would not take this to mean that anonymity was not an important goal (absence of evidence is not evidence of absence).  Sure, you might argue that the whitepaper carries more weight than a single post (more thought was put into its wording); however, by the same token, the whitepaper itself is surely trumped by Satoshi's actions:

The clues are everywhere, from Satoshi actually maintaining his own anonymity to the intention that addresses be used only once (a heavy blow to short-term usability; something Satoshi cared a lot about).  I personally like to cite the release notes for Bitcoin 0.2.  One does not properly torify the client at such an early stage unless one is taking anonymity pretty damned seriously.

I do expect that a healthy, truly accepted cryptocurrency would kill off a fiat rival in short order.

I will clarify though to say that by "Bitcoin universally accepted" I really mean "humanity truly accepts Bitcoin for what it is".  Here I intend a much stronger statement than simply "going mainstream".  Going mainstream to me is about most people people technically owning and using bitcoins but continuing to allow their financial activites to be tracked, regulated, and taxed.  I was talking of a hypothetical scenario in which most people actually use Bitcoin, allowing themselves the greater liberty and privacy the technology and supporting tools will allow; reclaiming lost freedoms of decades past.

To illustrate this distinction, please consider an extremely popular, MPAA/RIAA designed and approved, file-sharing service which automatically ensures that all copies made are fully paid for.  Certainly, the MPAA/RIAA could co-exist quite happily with mainstream file-sharing in this world.  However, the file sharing situation we actually have is much sharper and, were Bittorrent to become universally accepted by the people, I doubt the MPAA or RIAA would last very long at all.

This is true.  However, I feel it's worth noting the close parallel between reliable identification as it is typically handled and trusted third parties.  If one wishes to preserve the goal of Bitcoin then one must tread carefully on any topic of identification, especially when combined with the idea of government regulations (please clarify if you had something totally different in mind when you said regulation).


Certainly, intermediary companies can be useful.  The focus of Bitcoin is on removing the need to trust third parties to process payments, not in eliminating third party support entirely.  I agree with you here.

I also agree that an intermediary that manages contact details could be of value, but I claim that this value should be determined by market demand for such intermediaries, not by one's feeling that we should lay the groundwork for regulations.

The proposal undoubtedly comes with certain pros and cons.  The reason I'm not so happy with it is I believe an alternative proposal can give us the pros without the cons.  It is the trust that allows lower fees and reduced waiting times, not the contact information.  Contact information is one way of engendering trust, but so too is reputation.  I believe that a system which allows people to build and prove reputation (a web of trust), in applying the UNIX philosophy, will ultimately do a much better job of increasing the efficiency of commerce.  Next to this, a system which relies on third parties to verify sensitive information which is then sent to trading partners seems like an expedient hack.


Such proof can be valuable, but it doesn't require decentralised storage.  All that is needed is for the traders to specify the deal in agreed upon detail and then for each to digitally sign a copy for the other(s) to keep.

Wealth moving from an inflationary instrument to a deflationary one only serves to exacerbate both states.  The only equilibrium implied by this simple description is in the hyper-inflationary annihilation of the former.

The inflationary instrument would have to have some functional advantage over the deflationary one to not suffer this death.  This works for fiat money relative to gold because fiat money is much cheaper to move and store.  This works today for fiat money relative to Bitcoin because Bitcoin is not widely accepted.  If Bitcoin were universally accepted then I'm doubtful that fiat money's remaining functional advantages in paying taxes and settling debts would be enough to save it.

Dishonest miners may decide they do not like the transactions in the current chain X and focus their efforts on creating a fork Y, building upon the most recent block of which they approve.  If majority hashrate decides to ignore the "always extend the longest chain" rule and work on chain Y then eventually chain Y will be longer than chain X.  At this point, the honest miners will abandon chain X in favour of the longer chain Y.

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Many people seem to be justifying the security of Bitcoin in this context by describing the attack as being uneconomic.  I'm not so comfortable with this in light of OPs description that miners are not choosing to do this but being forced to do this.  If existing industries are anything to go by we may even see the largest miners support (even write) the regulations when they feel Bitcoin is sufficiently well entrenched that the public discontent will be outweighed by the advantage of driving smaller miners out of business and lowering difficulty.

Instead, I propose a greater focus on Bitcoin's fungibility and privacy.  If it is not possible to identify a "bad transaction" then it will not be possible to create a blacklist in the first place.  Were blockchain addresses and transactions to be well divorced from wallets and real-world transactions then miners would have little choice but to function as dumb pipes, using only overt transaction properties such as size and fee to determine block admission.

Should this privacy arms race be won, mining blacklists would be as nonsensical as Tor-relay censorship.