Can you explain more?  I realise that an attack is very unlikely, but I'm curious.  Do you keep a record of which work has been assigned to which worker?  Everything else is the same - the data, the target etc.  Only the work (nonce? is that what it's called?) changes, so it would be enough for an evil tor exit node to connect to the pool with it's own worker credentials and submit my successful nonce.

Unfortunately, there is a firewall here, so I have to use tor to connect, unless you can open a port<1024 and forward to 8332 on your machine.  So far latencies don't seem to be causing any problem.  I reduced the ask rate to every 10sec, so it pauses less often.  I'd experiment to find the best values, but I only ever expect to earn about 80BTC through generation, so I'm not very motivated.

How about we call them "millibits", "microbits" etc.  Or, if you imagine how "BTC" might be pronounced, we could call them millibitch etc.  So if you buy a car, it'll cost you 100 bitches :-)

Sorry, I must have missed exactly the questions.  I thought I was answering, but maybe I didn't fully understand.  Could you repeat the specific questions I didn't answer please?

I disagree.  When my phone breaks I will get a new one, but not before then (I have a crappy phone, I hate it, but refuse to buy another because this one still works).  A phone and computer, for me, are necessities, like bread and water (not *exactly* like them, just similar).  If I didn't have them, I'd lose my job.  People will *always* buy bread (assuming they can) irrespective of the price, just like me and my phone.  However, I will not buy any unnecessary phone or bread.  In an economy undergoing monetary deflation, people will minimize unnecessary purchases.  Price deflation (e.g. tech products) due to reduced production costs does not have this effect.

There are levels of collectivism, I'm referring to a community of nations.  The world, at present, is respecting Brazil's right to do what it wants with its own land.  Is that a good thing?  Do you think that the Forces-Of-The-West should invade Brazil in order to install a better western style democracy with greater respect for individual rights?  And, how can you be so sure that individual farmers, in the Amazon basin, wouldn't do even worse?  Lovely fertile land, all you need is to chop down some irritating trees first.  I'm not being sarcastic - I'm really asking how you can be so sure.  It's not clear to me.

Part of govt. spending comes from tax, the rest from debt .  Right?  And if you watch money-as-debt, then I guess debt spending /is/ a bit like magic, yeah?  Money-from-nothing?  Like I said, I'm trying to discuss the present situation in which there is a Big Govt, NOT whether there should be a Big Govt or not.  If Big Govt significantly reduced spending now, there would be an economic disaster even ignoring all the extra unemployed.  There will probably be an economic disaster anyway, and the longer it's put off, the worse it will be.  But, right now, politicians don't want any economic disasters so they keep spending up.  The best path might be to slowly change from Big Govt to Small Govt (slowly, like over 20 years), and then private spending could make up, perhaps more efficiently, the loss of all that govt spending.  Personally I'd be worried about corporate irresponsibility in an unregulated world, but that's just me.

@kiba: self-employed people that can reduce their own price are a minority. And I'm guessing even you won't reduce your prices below how much it costs you to produce.  If it gets that bad you'll stop producing, and the economy will shrink just that little bit more.

firewall :-(

Hi, I'm connecting to the pool through Tor.  What's to stop a tor exit node sniffing my data, and claiming my shares for itself?  Can the bitcoin getwork() interface be encrypted?  Just to let you know, it hasn't happened yet I think.  I did lose one share yesterday, but it might be network latency.

Imagine a modern anonymous digital substitute for cash.  Imagine BitCoin.

I think wikileaks has clearly shown us that governments have no problems with taking secret and indirect action when it suits them.  I suppose my question is, *if* MiB should attack bitcoin as I described, *would* it give them unprecedented power over the economy?  What defences against this attack exist, short of *everybody* in the BTC network buying a quad 5970 setup (or whatever gives most !/$ at that time).  Would that even be enough against MiB dedicated special-purpose custom-built superhashers?  There's an idea, how cheap would it be to build dedicated purpose hardware just for hashing.  GPU's are great, but they're not specifically designed to perform integer hash ops.  Surely we could do better?  Anyone?

resistance is futile :-)

I know the attacker with >50% power.  But I'm talking about an attack that does not destroy confidence in bitcoin, just surreptitiously gaining power until it's too late to stop without everyone involved abandoning all their bitcoins and the bitcoin economy while STILL maintaining the BTC economy, just with MiB imposed taxes.  Of course, if there is a multitude of parallel cryptographic currencies, then no problem.  But if bitcoin is the only one...  Tell me, what defense could the BTC community take against someone with >50% of the power, how would you regain control?  IP blacklists hardcoded in the client?  "Legitimate user" signing keys?

There was one other attack against bitcoin, I've tried to write about it already, and somebody else explained the problem much better.  But I can't remember where, I've looked and I can't find the forum post.

Is essence it is this (MiB=Men-in-Black):

1. MiB surreptitiously and slowly buy up lots of GPU's (reasonably cheaply - the entire BTC mining community is equivalent to about 200Ghps, one 5870 ~ 0.5Ghps, => only 400 5870s required, cost ~ $200k).
2. everybody rejoices - the BTC network is getting stronger!
3. MiB approach and exceed 50% of entire BTC net.
4. When MiB have, say, 80% of mining, they start to reject blocks generated by anyone else.  First slowly, but increasing.
5. Eventually, most, or all, blocks generated only by MiB.
6. Community realises what's happened!  Panic!  Releases new client to blacklist MiB's cluster.
7. MiB have already thought of this and have their cluster instantly distributed to new IP addresses, apparently from many different countries etc, behind Tor if you like.
8. MiB use other methods to eliminate anyone else with any significant mining power.

Result:
1. MiB now verify *all* transactions.  MiB introduce a fee (=tax) on all transactions.  MiB introduce some bureaucracy which must be followed before obtaining a BTC address, certainly requiring some form of ID.
2. MiB now know exactly how much you earn, and when, and who you got it from.
3. BTC's originating from a transaction pre-MiB are rejected until transferred to a new MiB-approved address in the presence of an MiB official.
4. In short, BTC gives *unprecedented* economic power to MiB, exactly the opposite of what it sought to achieve.

Sorry if this attack has already been discounted, I'm an irregular visitor to the forum, and I can't find the previous threads discussing it.  Please link there if you can.

This is great!  For about the first time, I find myself agreeing with the forum. I can't figure out if it's because the forum convinced me, or I convinced the forum.  I think, mostly, I just learned the correct terminology for what I was thinking.  Thanks to all!

More goods are chaising the same money, hence the same amount of money buys more goods, therefore one unit of money becomes more valuable, hence we have deflation.
[/quote]
So, let's imagine a deflationary scenario sets in, causing (my hypothesis) people to reduce spending.  The lack of spending causes companies to lay off employees to reduce costs.  This further reduces the spending *BUT* increases the value of the remaining currency because you now have less currency chasing an equal amount of goods.  HOWEVER, what if companies ALSO decrease production to save costs?  Well, now you have a deflating currency chasing less goods - which wins?  Will the price of goods go up or down?  Depends, I guess on whether the economy shrinks faster than the money supply, or vice-versa.  So, therefore, this forum's assumption (see earlier) that hoarders cause others' currency to become more valuable, is not necessarily a valid assumption.  Then is just depends on whether the reduced-spending -> cost-cutting-and-reduced-production -> reduced-spending spiral becomes epidemic or not.  The monetary powers have to walk a tightrope between deflation and inflation, trying to match the money supply to economic growth or decline.

That's what the study of complexity is all about.

You did - it's the difference btw monetary and price deflation.  I didn't realise there existed the term "price deflation".  That's what I was trying to express by "reduced value" - the reduction in price due to "progress", even though monetary inflation is zero (i.e. the "value" of money is appx. constant).

You didn't, my mistake.  Your example of the guy building his house explains it, but only for work-in-progress.  All the roads, hospitals, bridges etc, already built and completed, will not be destroyed (except after N years of degradation).

No, but since debt-$ are equivalent to savings-$, then you can use debt to /stimulate/ increased production. i.e. you can buy stuff with debt just as easily as with savings.  And they don't have to have been previously produced.  They just need to be produced in the near future.   Have you seen "money as debt" (see other thread)?  It's a great video explaining (amongst other things) how the colonial powers needed debt to fuel their continued expansion.

But this just begs the question.  What if two protection services have a dispute?  Is there a voluntarily provided protection-services-dispute centre?  And if two of /those/ disagree?  Etc.  Eventually, you need a Supreme Court whose decision is final and binding.  But for that to be final and binding, you need a "special" police force that can legitimately enforce the supreme court's rulings.  Hey, I don't want to get into a discussion of libertarianism, these are old debates that have never been adequately resolved (at least, not for me).  And, I'm also playing devil's advocate.  While a Non-State would be great, I just have a feeling that it would never work.  It would either dissolve from within, or be taken over by a foreign power.

Dude, you just became my hero!

Ok, sorry, you're right.  I had made the assumption of a constant economy, neither growing nor shrinking.

What vladimir says indicates that either he or I have a gross misunderstanding of deflation.  Gold does NOT deflate OR inflate, and by design, bitcoins can't either.  There is a fixed quantity of gold in the world, inflation and deflation are caused by changes in quantities of money. Ok, let me qualify that, they're caused by changes in /availability/ of money.  So, yeah, if everyone suddenly started trading in gold, it would become much more available, and the price of bread, measured in gold, would decrease.  But there's no long-term change.  Damn, I remember I saw a graph of the price of oil in terms of gold, from the 1900's to today.  It went up & down like a yo-yo, but the long-term trend was flat.  That's also what I meant by "the only real currency is energy". http://www.incrediblecharts.com/economy/gold_oil_ratio.php  (that's the best I could find now - 1973 to today).

Right now, dollars (and €) are inflating, and everybody should be spending, but they're not.  I don't understand why.  I can only assume it's because the money supply is shrinking, even though there have been huge injections of liquidity.  Some have said that we're in a "liquidity trap" right now http://en.wikipedia.org/wiki/Liquidity_trap .  "Liquidity traps typically occur when expectations of adverse events (e.g., deflation, insufficient aggregate demand, or civil or international war) make persons with liquid assets unwilling to invest."  If this leads to widespread unemployment as it seems to be doing, then deflation will eventually set in.  The only way out of deflation is to inject more liquidity, and the result of that would eventually be hyperinflation.  Isn't this one of the main bones of contention between modern schools of economic thought?  What are they called, Austrian Vs neo-Keynesian?  Can anyone clarify please?  (e.g.
http://www.humanaction.co.za/2010/09/hyper-inflation-and-deflation-are-two-sides-of-the-same-coin/ )

@grondilu: Paper money is not yet worthless.  You can buy stuff to eat with it.
accounting tool: yes, money is just that.  But when an economy fails, it takes time to generate a new currency, and to get the new currency into circulation.  The transition is tough, because it takes time for people to understand the value of the new currency, and they will be reluctant to buy or sell at any price.

@hugolp: cellphone and computer are necessities for my job. I could not compete in the economy without them.
re. brazil: I mean, Brazil benefits by chopping down the Amazon.  Brazil (one member) benefits, world (society) suffers.  In the long run, I daresay Brazil will suffer too.
govt. spending: it helps the economy because all those civil servants buy stuff with their salaries - bread, mobile phones, everything. Giving jobs to loads of other people, who spend in turn etc etc.  Right now it would be a disaster for the govt to significantly cut spending.  It would be like putting a choke on the economy.  Now, that's a discussion of the status quo.  I'm not intending a discussion on whether Big Govt versus Small Govt, just how things are now.

@caveden:
bread: ask a hungry man if bread has inherent value. Then ask him if a half-a-kilo steak has a relatively greater inherent value.  Maybe you could think of inherent value, as the amount of time a person is willing to work in order to obtain that object.  Tell you what though, forget about "inherent value".  Your statement "Your bread just got "less valuable"" seems to me to indicate we're saying the same thing with different terminology.  "less valuable" is fine by me.  Now, is price reduction by deflation equivalent to price reduction due to a lesser value?  I'm sure you think not.
savings: the credit-fueled boom of the past 40 or more years has done some wonders for western society (and now eastern too). But I agree with you, the politicians are selling us the present at the expense of the future, though I don't understand why all the capital created should now be destroyed as you suggest.  Be sure your kids know how to train an ox to till a field :-)  But, in any case, fractional reserve banking FRB allows investment *without* savings.  Or, more precisely, it allows $10 investments for every $1 saved (or whatever the fraction in FRB is) (ok, it's not quite like that, but there are already threads about FRB).
despots: agreed. Politicians don't take a long term view anymore, if they ever did.
property rights: property rights will never stop people abusing the rules at the expense of others, *except* in small communities.  And rights are worthless unless there is a police force to enforce them, and libertarians don't like things like police forces.

#bittertea: that's a good post by your friend, it say things much better than I could, and goes back to a post I wrote a long while ago: in the long term, you can't have inflation without interest and vice-versa.  Since bitcoins can't inflate, then the bitcoin economy can't support, in the long term, anyone who charges interest for a loan. (see "pros and cons of anonymous digital cash" http://bitcointalk.org/index.php?topic=67.0;all).

keep it up folks!

Sorrry for the long reply folks.

Touché!  Like I said though, I'd weigh things up - how bad is the deflation, how necessary is the object.  I hate mobile phones (didn't get one until 2002), but they have become, there you go, a necessity of modern western life.  I guess I'm just not a good consumer - I don't have a tv, I prefer small cars, I eat at home, I sew my clothes up instead of buying new, and I only buy a new mobile phone when the old one dies... etc.  But here's what I think would happen in a deflationary scenario - there's less money so many people can afford only necessities, those that can afford luxuries see their money appreciating and hoard.  Nobody buys new mobile phones, so the mobile phone manufacturers stop investing in R&D.  Existing mobile phones, therefore, don't get any easier to manufacture (though their monetary price might still decrease due to deflation), AND your lovely holographic phone won't ever get invented. (But I really need to read up at mises.org). All the phone employees are laid off and then have no money, so even though prices are decreasing they can't buy necessities, let alone luxuries.  That's fine is when only a few hoard, and most people still have jobs.  But when this cascades throughout all sectors of the economy, it's a disaster.  Correct me if I'm wrong, but wasn't that the Great Depression?  Plenty of money there, but it wasn't circulating and there weren't any jobs.

I'm saving them.  When I need to, or want something enough, then I will spend them.  Do you ever save?  The modern economy is based on debt not credit, and the libertarians of this very forum deplore that fact.

I'd say best care for the garden.  Do I understand you'd say the opposite?  All you need are a few snails, or mold, or greenfly, or whatever, undetected in one corner and in the space of a season, they'll destroy all your plants.  Instead of plants and a garden, I'd ask the same question about the economy and the environment.  What d'ya think?

@ribuck: The masses confuse deflation with reductions in cost.  Deflation is when your money buys more because the money has become more valuable, NOT because you buying things that have a fundamentally lower value.  Let's try to use the correct terminology instead of making the same mistake as Joe Public.  (p.s. cheaper holidays, I gather, are largely due to government subsidies for the airlines - can anyone verify?).  Imagine if someone discovered a process of making bread from thin air.  Bread becomes virtually free.  Is that deflation?  Assuredly not.

@hugolp:
traffic: if everyone drove more reasonably, there would be less traffic jams and, on average, all trips would be quicker. However, such a situation is open to abuse by people who drive agressively who can, at everyone else's expense, shorten their own trip. Individual benefit, system wide harm.
environment: clear example: farmers in Bangladesh can choose to remove trees and increase their crop.  This reduces soil quality and increases the probability of flood for everyone.  Or Brazil chops trees for its own benefit, amazon dies, world suffers.
queues: you can join the end of the queue, or skip to the front. The confusion at the front causes, on average, longer delays for everyone, except you.
taxes: you can pay taxes with money you don't "need" - no loss to you, benefit to society (let's ignore govt corruption and inefficiencies).
Government spending might end the recession, but at the moment the spending is not finding it's way into the economy.  It's staying in the banks' and their bankers' coffers.  But you're right, the govt spending distorts the market.
Central banks printing more money when people hoard is risky.  If the bank prints too much, inflation occurs, all those hoarders stop hoarding, and suddenly the market is awash with liquidity and you've the opposite problem.

Oh crap, there are loads more replies (I started this yesterday).

@grondilu:
brave new world: just as a mobile phone is a modern necessity, in that book, many other luxuries had become (let's say frivolous) necessities, and the point of existence was simply to spend. there were no police, because they weren't necessary - social engineering had obtained the desired result.
cooperation: depends on how big you make the state - a village chief, a town council, city state, nation state, international union, intergalactic federation...
My point is that people suffer *exactly* because some seek personal gain at the expense of others, like the twat who uses the turn-right lane to turn left, and so causes a delay for everyone who wanted to turn left.  We all do that in one way or another, and we all suffer because of all the others that do it.  We're all selfish, 'cos that's how we're 'programmed'.  Really, check out the prisoner's dilemma - when there are only two they can easily cooperate, but when there are 7 billion, cooperation becomes extraordinarily unlikely.  If I hoard (under deflation), then people who *need* money to buy bread will suffer - the fact that the price is decreasing means nothing because they have no money.  I gain, they lose.
cut off arm: some people have done this and more. They're called martyrs.  I'm not a martyr.  Look at the riots in Egypt and Tunisia - people confronting police and suffering brutality, because they want a better society for everyone.
police: me too (being ironic).

@caveden:
savings/investment: debt can create investment. no savings necessary. But you're right, investments through savings would be much better; of course it involves risk for the investor, and this has been centralised in the present system of fractional reserve banking.
inherent value: someone said "energy is the only real currency". You could use that as an estimate of intrinsic value, and then modify it according to individuals' requirements and expectations.  I'll bet if you look at the energy required to produce a 80386 in 1990 and a CoreII x4 today, the coreII requires MUCH less energy per FLOPS/MIPS.  That's technological progress in a nutshell - doing the same or better with less energy.  But maybe you're right too - even energy is too abstract an estimate, so let's talk of *relative* inherent value - bread made with flour and water becomes inherently less valuable after the discovery of air-made bread.
price decreases: see ptd's post.
economy an entity: I didn't explain myself properly.  I mean that some members can profit at the expense of others in such a way that *the average* is a loss, i.e. the "economy" suffers.  But there is nothing can can produce an *average loss* and yet be good for the economy, or vice-versa.
electronics: are certainly NOT superfluous. How could any business or individual survive in the modern economy without electronics?  Unless you're willing to abandon all and live as a peasant scratching a living from the earth without even so much as a clock on the wall.

folks, I have to stop now, this post is *way* too big.

You have all raised good points.  But the fact is, if there were deflation, I would *NOT* buy a new cellular phone, I would *NOT* buy anything I considered unnecessary (taking into account how high the deflation actually is).  As a matter of fact, I'm doing exactly that with the bitcoins I have - they're still going up, and I'm keeping them until I need them.  I wouldn't invest unless I was guaranteed a return greater than the appreciation of my currency (measured in purchasing power).

There are many examples of where something that harms an individual can be good for society in general.  e.g. traffic, environment, queues, paying taxes, damn I've a mind-blank and can't think of others.  But the Prisoner's Dilemma is a great place to start studying these phenomena.  (this goes way back to a long debate about morality, see "should you kill the fat man" on philosophyexperiments.com; let's not get so deep here.).

The economy may be a statistic, but it's important.  Do you deny when the economy suffers (i.e. recession, depression) that people suffer more?  Or that people are better off when the economy improves?  It is a statistic - a very important one, something like the average of people's earnings or wealth.

#grondilu: someone who hoards is restricting others' ability to make their necessary purchases, *especially* if there's no new money coming into the market.  Your suggestion about the police is curious - how long before that actually happens do you suppose?  Ever read "Brave New World" by Aldous Huxley?  As for us not being cows and sheep... are you sure?  Cows behave uniquely for their own benefit, not the herd's; exactly unlike that feature of human society that you would remove. So maybe we're not cows, but you would make us so.  And freedom - "freedom's just another word for nothin' left to lose" (Kris Kristofferson) - you want to have all your wealth, and keep your freedom.  But we can't all have both.

@caveden: how can savings feed investment?  You need fractional reserve banking for that - otherwise the bank has to keep all your savings in its coffers, and can't give it out as investments.  I'll try to check out mises.org when I have time.  But saying hi-tech prices are deflationary is, I think, wrong.  Their prices decrease, not because of deflation, but because the *inherent value* of the object decreases.  If you compare dollars to bread (or whatever basket you choose), you can calculate inflation or deflation.  Compare hi-tech prices to bread, though, and you get an estimate of value, and I'll bet that the price of mobile phones in loaves of bread (i.e. their value) has been coming down too - and I'm sure you wouldn't say the bread is inflating there.  With deflation, if people like me don't buy phones, then the lack of income will cause R&D to falter, and the hi-tech stuff won't get cheaper quite so much.

#ribuck: the economy *is* an entity of its own.  That's the central message of the science of complexity - the whole is more than the sum of the parts.  Look at an ant colony for example.  Look at your own brain, or your DNA.  The economy does *not* follow the same rules as its members and, therefore, something good for its members is not necessarily good for itself, and vice-versa.

Thanks for the discussion folks.

Just a humorous (but correct) page to answer the question "why gold?".  Well, because it's the only thing that could act as a form of money.

http://www.npr.org/blogs/money/2010/11/18/131430755/a-chemist-explains-why-gold-beat-out-lithium-osmium-einsteinium?ft=1&f=93559255

You know, I mostly agree - inflation is a hidden tax.  Only it's worse, it's like a cumulative tax.  If you earn €100k and pay income tax of 40%, then you get €60k in your pocket.  But with inflation, that €60k is taxed again, and then next year, again, and then again and again and it never stops until a year's work is worth the price of a loaf of bread.

But, just in the spirit of discussion, I'd like to say something.  In order to have a functioning economy, people must spend their hard-earned money (and by "money", I mean anything that is generally accepted as payment for goods or services).  However, in deflationary or zero-inflation situations, there is no incentive to spend extra money.  I, for example, hate to have money in the bank or even in my pocket, now, because real inflation is huge (what, it must be at least 5 or 6% - not official inflation figures, but real inflation).

So, this incentive to spend (related to "the velocity of money" or how many times a single note is spent in the year) is high right now on account of inflation, even though there is a huge lack of liquidity.  If people had money now, inflation would cause them to spend and the economy might just recover.  It's just that there's no money in the general economy - all the bailouts etc went either into bankers' bonuses, or to shore up bank reserves in the wake of the real estate crash.

Now, what about bitcoin?  If all goes according to plan, there'll never be any long-term inflation.  Therefore we can assume that people will only spend what they consider necessary, and save the remainder for a rainy day.  The velocity of money will be much lower, and the relatively fewer bitcoins that do circulate will have to represent much more wealth than otherwise.

So maybe inflation isn't *all* bad, as long as it's kept to some reasonable value - the ECB's target, I think, is to keep it below 2%.

Comments?

Ah, how does one easily go about connecting to that?  If you'll accept it here, I bid 205.

Umm, what risk?  No bank, in principle, will give a loan without full collateral.  Admittedly, things went haywire with the credit and housing crises, but even then, the banks didn't bear the losses.


On average, yes.  I'm assuming by "real" you mean "correct".

Please correct me.  I'm not an economist, but the first line of wikipedia's page on capitalism is: "Capitalism is an economic system in which the means of production are privately owned and operated for a private profit."  The keyword being "private profit", not "social profit" or "health profit" or "environmental profit".  Just private profit.


Please correct me - because he clearly says that in a FRB system, a bank that issues too much credit (creates too much money) would find it's notes devalued.  However, the current system means that I can take a loan from BigBankA, and deposit it in BigBankB, at a 1:1 ratio, dollar for dollar.  There is no devaluation of BigBankA's dollars even if BigBankA is an irresponsible or reckless lender.  The dollar as a whole *does* devalue a little bit if BigBankA is reckless, but that's *all* dollars, not just those issued by BigBankA.

If you're tired of repeatedly explaining yourself, then by all means link to some (not overly complex, please) websites or pages where my erroneous understanding can be rectified.  Otherwise leave me to wallow in my blissful ignorance!