Bitcoin is going to shine like a diamond in the midst of the smoldering wreckage of this god-forsaken SNAFU germany should know better At least Japan and Germany are not as bad as the US over the past couple of years. With QE3 the US printed $85b/m for $1.02T/year, that's trillion. The US's deficit was less than a trillion recently (although not by much), so the FED was not just monetizing 100% of the deficit but also buying down additional outstanding debt as well. I'd like to believe it can't get any uglier than that, but I'm sure they'll find a way to surprise me. Edit: This is also why the FED has over a trillion in mortgage debt on it's balance sheet, and not only government debt as it should only have. Because the FED was printing more than 100% of the deficit, there wan't enough US gov debt to buy, so the FED had to resort to buying non-US gov assets as well. This is outright printing no matter how they try to spin it. |
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However, I remember reading something about similiar or related R values from which the private key can be calculated, too (by using a system of linear equations). Probably that is the thing, that confused me.
Hi flipperfish, if you find a link describing a related R value attack please post it, am also curious to understand that better. That said it sounds to be somewhat analogous to related key attacks against AES, related key or related R values are a worthwhile area of study in order to understand the algorithms better, but they are not real attacks. True cryptographically random R values are not related by definition. |
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listening to johoe is inspiring. but it appears to me that even if you're using a BIP32 wallet, you'll still be exposed to a hack from address reuse if you choose to accept multiple payments to a single address. for instance, if you accept 5 payments of 1BTC each to a single address, you will create 5 UTXO's of 1BTC each. if you then only spend 1BTC from that address, you will leave the other 4 UTXO's behind on that address which will force you to reuse that address later on when you decide to make another payment. so in that sense, HD wallets (BIP32) are still exposed if you're not careful and don't always force all tx's to empty an address. i understand that this is not directly related to the reuse of the r value that johoe talks about in this episode, but it's concerning to me nonetheless unless i have something wrong: http://letstalkbitcoin.com/blog/post/the-bitcoin-game-7-bitcoin-hero-jochen-aka-johoeDid johoe talk about BIP32 wallets in the stream? I just scanned through, but couldn't find any reference to BIP32 wallets. However, AFAIK you're right. As soon as the hacker gets the R value of 2 signatures from the same address (e.g. from transactions, but could also be from signed messages (!) or a mixture of both), he can calculate the private key of the address and then spend all the funds still left on that address. So from 0 to 1 outgoing transactions (or publicly accessible signed messages) an address should be safe (from this specific problem). I think so far this is not related to HD/BIP32 wallets other than it's easier to not reuse a single address.Address reuse is fine, not advised but fine regardless. The issue is if you use the exact same R value for 2 different signatures with the same private key. This an attribute of the DSA algorthim itself, and is not specific to ECDSA or any other DSA variant. As long as you use a truly random R value, then the odds of repeating an R value is less than someone randomly creating a private key that signs a specific address. The problem above is blockchain.info and other wallet software has at times not created random R values or used k values that are guessable, which is contrary to the DSA specification. Software that creates a truly random R value should never repeat an R value given the large numbers involved. This is a great description of DSA and ECDSA if you are interested. It provides all the math required to understand Elliptical Curves and DSA , but in a descriptive manner for non-mathmatitions. http://kakaroto.homelinux.net/2012/01/how-the-ecdsa-algorithm-works/Towards the end it describes the R-reuse issue in the context of a hack on Sony where Sony used the same R value for everything, in gross violation of DSA's spec. Now I’ll discuss on how and why the ECDSA signatures that Sony used in the PS3 were faulty and how it allowed us to gain access to their private key.
So you remember the equations needed to generate a signature.. R = k*G and S= k^-1(z + dA*R) mod p.. well this equation’s strength is in the fact that you have one equation with two unknowns (k and dA) so there is no way to determine either one of those. However, the security of the algorithm is based on its implementation and it’s important to make sure that ‘k‘ is randomly generated and that there is no way that someone can guess, calculate, or use a timing attack or any other type of attack in order to find the random value ‘k‘. But Sony made a huge mistake in their implementation, they used the same value for ‘k‘ everywhere, which means that if you have two signatures, both with the same k, then they will both have the same R value, and it means that you can calculate k using two S signatures of two files with hashes z and z’ and signatures S and S’ respectively :
S – S’ = k^-1 (z + dA*R) – k^-1 (z’ + da*R) = k^-1 (z + da*R – z’ -dA*R) = k^-1 (z – z’)
So : k = (z – z’) / (S – S’)
Once you know k, then the equation for S because one equation with one unknown and is then easily resolved for dA :
dA = (S*k – z) / R
Once you know the private key dA, you can now sign your files and the PS3 will recognize it as an authentic file signed by Sony. This is why it’s important to make sure that the random number used for generating the signature is actually “cryptographically random”. This is also the reason why it is impossible to have a custom firmware above 3.56, simply because since the 3.56 version, Sony have fixed their ECDSA algorithm implementation and used new keys for which it is impossible to find the private key.. if there was a way to find that key, then the security of every computer, website, system may be compromised since a lot of systems are relying on ECDSA for their security, and it is impossible to crack.
There is another recent attack on ECDSA specifically where an attacker with something on the order of 2^33 signatures for a private key might be able to back out the private key itself. But that is a gross usage of reuse, to put in context you would require more signatures than the total number of bitcoin transactions so far, all on a single address. That said it demonstrates that ECDSA is still relatively new and not completely understood, it is possible (likely?) that more attacks or even fundamental flaws on ECDSA will be uncovered. This is why bitcoin has 2 forms of encryption protecting an address (a hash and a signature) and why every address I use that I care about are zero spend addresses, and thus still protected by both forms of encryption. |
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i believe it's only for accts over $10M.
That is how it starts. It is essentially a wealth tax, which is unconstitutional in the US but I'm sure SCOTUS will somehow find a way around that by saying this mechanism is not a wealth "tax" per-say but a bank fee (after all individuals don't HAVE to keep $10M in a bank, you could keep that as cash under your mattress. Ignore that fact that every police department in the country would use asset seizure to confiscate that amount of money held outside of the banking system) but yeah, nowhere good to flee. except...
Reminds me of this meme. Walking away is the power of withdrawing consent.  |
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The Swiss National Bank (SNB) is imposing an interest rate of –0.25% on sight deposit account balances at the SNB, with the aim of taking the three-month Libor into negative territory. It is thus expanding the target range for the three-month Libor to –0.75% to 0.25% and extending it to its usual width of 1 percentage point. Negative interest will be levied on balances exceeding a given exemption threshold.http://www.snb.ch/en/mmr/reference/pre_20141218/source/pre_20141218.en.pdfThis is in response to capital flight from Russia with the collapsing currency. Now imagine if that capital flight one day starts to direct itself into bitcoin (or gold) instead of to another fiat currency as is the norm today.
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The problem that a free society is so effective that it grows government and in steps the saviors who now promise to solve all your problems.
5% turns into 10%. More problems arise and so it needs to grow even more to help you solve your new problems. 5% is soon 50% and the choke hold is now so strong it grows itself into death.
My guess is that the only sustainable amount of government is 0%
The government gaining access to a free guaranteed funding mechanism 100 years ago is what enabled 2-3% to become 50%. Take away that free guaranteed funding mechanism and it's quite likely that 50% will approach near zero again. It is no coincidence that the modern massive government & social services model of western governments came into being after they broke gold and established fiat money. It is important to remember that the modern era is a historic anomaly, most of history has existed under much smaller governments than we have today. |
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I'm anxious to hear about the revised Lawsky regulations tomorrow.
Would I prefer they don't exist? Of course, but I expect they will be significantly "softer" than the original submission and this is certainly something that should bring some much needed confidence to this market.
Obviously they will not matter in the long run but I expect they will have a positive effect in the short to medium term. Lawsky was quoted in an interview recently as saying he expects Wall Street "will rush into this" when the field is properly regulated and as much as everyone dislike the idea of "regulating" Bitcoin I am very much in favor of getting cozy with Wall Street.
Only once they swallow the pill will they realise it is a poison that will kill them from the inside.
It will definitely be interesting to see if/how the proposed regulations were modified. Bitcoin's fundamental strength is that it is censorship resilient. NYDFS can go heavy handed, but they risk the market bypassing and ignoring them. In my opinion that would be the most damaging outcome (for them) because the world would see how powerless regulation can be against bitcoin. The smartest option for NYDFS is to make the regulation light and easy enough to comply with that most of the market sees compliance as the path of least resistance. Then after most firms have bitlicenses established, NYDFS could slowly increase the regulations having already trapped many market participants who now would find non-compliance more difficult. If NYDFS is not smart, they will start off heavy handed forcing most of the market choose ignore as the optimal path, and in the process expose how little power they actually have and setting a precedent for the market to ignore further attempts in the future. Bitcoin can take a cozy with Wall Street path, but it's censorship resiliency makes a black market path a valid option as well. |
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There is a growing body of evidence that bigger government means slower growth of real GDP. Once the level of total government spending as a percentage of GDP reaches a tipping point, estimated to be from 15 percent to 25 percent of GDP, additional expansion crowds out private productive investment and slows economic growth. When government overreaches, economic freedom is diminished and private exchange opportunities are lost — that is, the range of choices open to individuals is restricted. This is hardly a revelation, most of the communist economic experiements of the last century have demonstrated this is abundance (well total lack of abundance). The question I suppose is how much communism is too much? 15%, 30%, clearly 100% is fatal, and anything more than 50% is probably also terminally toxic. Optimally operating economies seem to have around 5-10% govt. share of GDP but it also depends on strong justice and legal systems for protection of individual freedoms. An open question is what is considered to be government spending or government control of an economy. What we consider government spending is usually limited to what the government directly does (DOD, roads, courts, prisons, K-12 ED, NASA, etc). But the government also indirectly controls (and removes from free market dynamics) large swaths of the economy, such as healthcare, universities, regulated FED supported banks, etc. If you consider government to consist of both what it directly and indirectly controls, then the US government past 50% of the economy a while ago. |
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- US bonds flows (or the lack of)
It will be very interesting to you.
Is there anything specific related to current bond flows to look at? I'm curious. If you are responding and saying that during the next crisis the US gov will have difficulty funding operations, I'd suggest that the paradox of debt-based money will ensure the government remains funded at least for the next cycle and probably for some time. |
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I've been warning about this shit for months now right here. The charts have been forecasting this. Get yourselves to safety.
For close 100 years getting to safety has meant running to the US dollar. It is how the federal government has been able to thrive and grow the way it has. Every time there is a crisis the US government has never lacked for funding because the world runs into its debt, because of this it has been able to fund itself freely during every crisis, without care or worry. Most sane organizations would never consider creating the massive number of obligations the US government has, obligations the must continue to be paid no matter the current environment. This includes a massive global military presence that requires funding every day, a massive welfare state that requires funding every day, a massive number of unfunded social liabilities that require funding every day. Without continuous funding our military overseas would stave for oil in a matter of weeks and over a hundred million in the US would suffer dramatically. If at some point the market does not run to dollars in a crisis, the US government would find itself is a horrific situation from which there is no escape. A situation that was of it's own making but one it is completely unprepared to handle. Luckily (or unluckily) I believe this end point is still a ways away. The Keynesian central banking model still has more tricks to utilize and I suspect the next upcoming crisis will play out the same as in 2008/09, the central banks will first allow the markets to crash, then create money out of thin air at public demand, then give that money to their own first to buy up assets cheap, then create more money and let that trickle into the economy so the public can re-buy at higher "recovered" prices. So the question is which "safety" have you run to? Bitcoin, dollars, hard assets, Pb? |
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Even under the gold standard, bank notes were significantly more useful than physical coins in terms of the ability to transfer and move money around (that is provided the bank did not fail). Under the gold standard banks could provide useful value-add functionality and services, and this is what drove some demand into holding bank notes over physical gold. Yes lots of people still held physical metal directly as "cold hard cash" for security, but there was demand for both mechanisms. With bitcoin none of this applies. Bitcoin has built into its protocol all the functionality anyone could need for transacting directly with the base asset. With bitcoin you can transfer funds anywhere instantaneously. If you need services beyond the base protocol, you can run software on your own computer/phone. I think this is what Satoshi meant when he said bitcoin enables "individuals to be there own bank". Bitcoin enables an individual to have the security of holding physical metal, with the functionality of bank notes and services. It is a killer combination and one that not all VCs into bitcoin understand yet I think. |
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Good or bad there's been a fair share of Bitcoin talk in the media lately. If you're one to keep track of the "bitcoin" word on Twitter there seems to be an unusual amount of Bitcoin related tweets today.
Even more encouraging is we've reached this stage where people are calling the death of Bitcoin all while the world's fiat economy is in the shitter.
This rally is gonna be glorious.
Google trends looks like it may be turning the corner. We shall see: http://www.google.com/trends/explore#q=bitcoin&cmpt=qPersonally I think looking at bitcoin interest during the quiet non-speculative bubble periods is a good representation on how the bitcoin ecosystem is growing. Looking at the Google trend link above you can see the bubbles from June 2011, April 2013 and December 2013. Between these peaks you can see bitcoin interest during the "steady state" when the price was relatively stable and bitcoin is used more as a currency than as a speculative asset. Here is Google's bitcoin interest during these 3 steady state periods (relative to the peak during Dec 2013 as 100) - August 2012 -> 4 - August 2013 -> 16 - August 2014 -> 23 We had huge growth from 2012 to 2013 in bitcoin interest (4x), but over the past year bitcoin interest less than doubled. Still up, but not the exponential growth you'd expect. Of course there could be other factors at work such as more bitcoin news aggregation sites that people go to by default instead of searching google (i.e. going to redit /r/bitcoin instead Google search) Not sure what to make of this, but thought it was interesting regardless. Google is only one data point, # of transactions and # of companies offering products are others. It's quite likely growth will not be steady, but come in spurts. |
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Dow diving now. feels like deflation.
There will also be "up" days again. As if the thing cannot stay down any more. To rocks point earlier I'm in total agreement, QE is just locking in past inflation. Deflation should refer to the money supply but is largely measured in consumer prices. When I here deflation I have a hard time relating it to falling stock prices and other investment assets, although consumer prices and investment assets may be correlated. Where I see the deflation happening I see it in consumer value judgments. Here is a distressing story my wife told me. The dentist visits schools in Canada part of oral hygiene education, while my wife was talking the dentist expected concern, that many children aren't getting the calcium they need in there diet. Many kids don't eat cheese anymore, why, the feedback to the dentist is my mom says it's too expensive. That's feedback I'd expect from people living in poverty not middle class kids. The thing debt purchase like a car a house (even a cellphone believe it or not) are being serviced (creating monetary inflation) while at the same time many of the same people are foregoing basis like nutrition causing consumer deflation. That is a sad anecdote Adrian, but one that I think points to just how horrific the current debt-money system is. Hyper-financialization of basic goods required to live has resulted in massive debt payments that must be paid before anything else, including food. When central banks enable free debt and leverage, it raises the price of everything people need to live, right up to the level where the public can just barely afford interest payments. Take housing for example, without mortgages housing would be much cheaper and affordable. However with all the free leverage (30-45 year mortgages, ARMs, interest-only terms, 3% down, etc), the price of housing rises due to people bidding with leverage until no one can afford any higher interest payments. Same is true with education, health care, etc., these are all examples of necessary goods bid up due to hyper-financialization of the economy. What is evil about this is it creates a form of debt-based serfdom for everyone. Where before your average person could save and buy a house outright in mid-life, today people can "buy" a house earlier in life, but then are locked into large debt payments that extract a significant portion of ones lifetime income potential. And there is no way to opt-out of this system, even if you choose to rent and not buy, rent prices go up with housing. Debt serfdom is exactly what it is. We are all required to pay a significant portion of our life's labor to banks to support debt payments for basic goods that would never be priced so high without the free leverage offered. So here we are today, where families skip basic food for children because they have to make the mortgage payment, school payment, healthcare payment, etc. It is scarily similar to the feudal system where people had to pay a portion of their labor to work the land to the people who inherited that land, now we have a system where people have to pay a portion of their labor to financial institutions to people who inherited financial wealth. The mechanism has changed, but the result has not. Sorry if this is too negative or OT, comes from reading ZH for many years. |
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yours is certainly the predominant view and logical at a certain level.
i only pt out however that 2008 never allowed markets to "clear". the debt buildup since has only multiplied thru unsustainable policies. we could be entering the blow off phase of a multi-decade inflation with QE being the culmination of those policies. i do find myself conflicted on what's happening as, in general, i'm an optimist as to what tech and Bitcoin will bring to society but i am also a believer in cycles. it's time for another down cycle to clear mkts. gold's multi year drop may be leading the next deflationary phase.
just be cautious.
I'm with you there. The macro view is pretty borked in ways that make unborking unlikely without an entirely new paradigm. The deflation is only a piece of that mess, and is being managed to make the massive QE inflation game take longer to play out on the hopes that something weird happens and it doesn't turn calamitous like usual. Optimism? Maybe this time is different. Maybe alien time travelers will visit us and show us the new plan. Maybe we find an efficient, portable, and safe energy storage device. Maybe we will all live forever. Lots of good things can happen, and I don't really want to talk about the bad things because they are just what usually happens historically when the string plays out on this game and we reach the end of the spool. Maybe this time someone motivated who sees what is going on will create an exit from the current financial regime that anyone in the world can join. |
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that's a great graph, rocks. note how it correlates with the black hole shit graph here:  1980 marked the peak of inflation in the US, and ever since, yields have been falling corresponding with the increase of big gvt bond funding needed to sustain the great game. Those inflation graphs are scary. The future for the US is what happened to Japan here.  Japan's rates hit near-zero, at which point they were zero bound. At that point Japan's only option was even more massive debts and significant money printing. Their prices haven't gone up though because they are still in the black hole of over indebtedness. This seems to be the path the FED is taking. |
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i've been saying all along we're in a deflation. this is a big indicator:  Low energy price in this case may be less an indication of a decreasing economy and more a supply/demand issue, and stronger dollar. The low oil price will be accretive to growth everywhere except oil exporters (as of this year, the USA is also an oil exporter, but not at all significant by percentage of economy). Some costs will be reduced, some additional capacity will be turned on. It will be a savings to some industries which will increase profits and growth. In the sense that all "productivity" increases also create deflation, then yes, it is an indicator of deflation, but only by that weird measurement. We may be in a deflation anyway, but oil prices are not indicating that so much they are indicating a supply glut. Oil may be priced what it was in 2009, but just not for the same reasons. Oil Demand and usage has increased, not contracted. AND... lower prices are going to bend this projection chart upward further toward more demand, because lower prices means more consumption is coming, not less.  "Uncertainty" is going to mess with equity markets for a while, but earnings season is going to be pretty nice for a lot of companies that are petrol dependent. yours is certainly the predominant view and logical at a certain level. i only pt out however that 2008 never allowed markets to "clear". the debt buildup since has only multiplied thru unsustainable policies. we could be entering the blow off phase of a multi-decade inflation with QE being the culmination of those policies. i do find myself conflicted on what's happening as, in general, i'm an optimist as to what tech and Bitcoin will bring to society but i am also a believer in cycles. it's time for another down cycle to clear mkts. gold's multi year drop may be leading the next deflationary phase. just be cautious. This graph by the FED showing "Gross Domestic Product/St. Louis Adjusted Monetary Base" shows well what is happening. http://research.stlouisfed.org/fred2/graph/?g=9wKWhat central banking enabled, was for debts and promises to be made in gross excess of underlying money. This is possible under fiat because the FED can act as a backstop and provide "liquidity on demand" to too big to fail institutions, which allows these institutions to leverage as much as they want. Think of it as a rubber band that gets stretched more and more, under sound money stretching passed 2:1 was not advisable, but under fiat stretching 50:1 is possible. This stretching of debts in excess of money causes inflation, home prices and all prices go up. What we are seeing now is the economy can not support these debts, and if you take away the debts prices will crash down. (for example housing which is a financial asset). so there are 2 options: a) massive debt write-offs, with resulting price crashes or b) massive expansion of money, to "hold" prices where they are today. What is interesting about b) is although people think it will cause hyperinflation, it won't necessarily. What b) does is cement the inflation of the past 100 years, i.e. we already had the hyperinflation, the question is whether to keep it or get rid of it. This is also why central banks get away with their crimes, they stretch their hyperinflation over a long time period, so the public accepts it. |
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The reason rates can not go up (and bonds go down) is simply because given the about of debt owed the government could not possibly support interest payments if rates went up, even if they only rose to historical averages. Japanification has come to the US. Japan has such a massive debt load that if rates went to 3% interest payments would be higher than tax revenues, i.e. if Japan cut ALL government services they'd still be running a deficit. So rates have been keep at near zero for a long time. Same thing in the US now. Here is a chart showing the evolution of "forward guidance" on the fed funds rate.  Notice the pattern? They keep saying "trust us rates will go up soon", but then never increase rates. Again and again and again. The reason is simple and easily understood by anyone who can read a balance sheet and cash flow statement, the government simply can not afford higher rates, so the government will never allow rates to increase. |
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His criticisms in this piece are essentially:
1) We haven't seen it during an economic downturn.
2) Government's are causing problems for it.
Both are irrefutably true.
We don't see these as insurmountable barriers, however most people do.
The market has bitcoin currently priced at about a 1% chance of success or less at its current valuations.
We are betting on the long-shot to win, and while I think we are in the right, it is rational to bet against us.
More importantly, if we do not recognize the valid criticisms against our position, we are both (a) insane and (b) unable to adequately overcome them.
This is important because it often feels that bitcoiners believe full adoption of Bitcoin is inevitable and it's eventual success is guaranteed, and as a result do not want to acknowledge real world barriers to wide spread adoption that are outside concepts of what is money. The taxation issue he raises is a massive problem (which I tried to discuss last week). Having to report every coffee purchase to the IRS is simply unworkable at many levels. Maybe people excited for Bitcoin will do so, but most see it as too much of a hassle to bother. Incidentally taxation is one factor that broke gold's role as money. Under the gold standard using gold as money in transactions was not a taxable event, today it is. And taxation is just an example of the government applying existing laws to bitcoins. The government has a multitude of addition tools in it's tool belt to maintain dollar superiority, from regulations (Bitlicense) to new laws to co-opting functionality the public demonstrates preferences for (the USDollarCoin example last week). These current and future barriers could very much force Bitcoin to take a black market economy route towards larger adoption, which is a much slower path. I am much more bullish than Richards on bitcoin's possibilities, but his concerns are all valid and it essentially comes down to opinions on how things will play out. My personal belief is what gives bitcoin a possible chance is the fact that the existing financial system is on it's last legs (NIRP is a perfect example), and as it slowly breaks down an alternative will have to be found. Bitcoin offers the global public an apolitical and non-government option, which would be ideal in a dollar breakdown scenario. |
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I feel we're coming to a crossroads. We go down one path and there's freedom and prosperity for most, we go down the other one and there's oppression and suffering for almost everyone (well, maybe not, maybe it'll be kind of enjoyable because we're going to be so damn brainwashed that we don't even realize what's being done to us and how our lives could be different)
I feel the same way. My worry though is what if the crossroads already happened for the US as a society 100 years ago, and we are merely witnessing the eventual fallout of a path already chosen? When the original progressive era (both progressive Democrats and progressive republicans) started to choose security over freedom and privacy on many levels. Not to get too OT, but the US today bombs multiple counties regularly in order to maintain the petrodollar, and most do not care because it is out of sight and maintains everyone's standard of living. (seriously have you been tracking the target vs "collateral damage" numbers of these strikes?) I don't believe a society that was truly interested in freedom would turn such a blind eye to the number of innocent people Obama has droned around the world. |
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This I can agree with but that's not exactly what your previous statement said That said bitcoin's payment or remittance functions are what make the store of value function valuable. Does the payment system make BTC potentially more valuable than other comparable store of value (gold)? Sure, but gold itself is a great example of a SOV with a very limited payment function that is still relatively successful because of its sound money functions. If you argue that the payment system is what will make BTC mainstream, beyond the sound money property, then yes I would tend to agree. Yes that is what I was trying to say. BTW although gold has a very limited payment function, that payment function was the best function available at the time it was used, and it did work pretty well. With gold and silver coins someone could simultaneously carry enough to live for a year and also have small enough denominations to pay for dinner. That is pretty functional and was good enough for a time, but not as functional as dollars, and definitely not as functional as Bitcoin. |
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