I'd say the disparity is much higher. Probably the correct distribution is that less than 10 people own more than 50% of the money supply, and less than 100 own more than 90%. You can infer this from the popularity graph of bitcoin.org, that nicely matches the hash rate:
http://www.alexa.com/siteinfo/bitcoin.org
http://bitcoin.sipa.be

During 2009 and the first part of 2010 half of existing bitcoins were mined at hash rates bellow 0.01 Ghash/s - a few desktop computers.
There is absolutely no point in arguing about the largest wallet size - an owner can have  many wallets.

I think you are ignoring the highly advantageous position the killer has in such a game. Think about the budget of L.H Oswald versus the money spent for Kennedy's protection during his term, it could easily be 1:1000 or 1:10000 yet it still wasn't enough. Basically, the attacker can focus on the weakest link, while the defender must protect all avenues of attack.

It would also make life 100% crappy for the target with a modest budget. Those who pledge the money are assured that Assange can't have any public life or vacation and is pretty much confined to a well guarded secret fortress, Osama stile. The mere threat of such a life can quickly silence unpopular individuals - self-reinforcing mob rule. The pledgers don't even pay the bounty price, just the interest on it; if the bounty is dropped they recover the pledge.


I would argue that both the demand and supply clearly exist. Therefore the absence of such systems is itself evidence they are cumbersome to the point of being impractical when using regular cash. The apparent ease with which the task can be achieved using cryptocash points that we are dealing with a different beast altogether.

I'm pretty sure on any given date there are quite a number of people who would like to see Julian Assange dead, I don't think there's any surprise about that. Maybe even thousands of people willing to pledge a 100$ bill for the job, as I'm sure there are many killers out there who could arrange the assassination of Assange for a few hundred thousand $. Yet Assange lives on, because in the physical world it would be impossible to connect that demand with the supply. You would either be jailed when soliciting the murder, or when picking up the pay.
The proposed Tor + Bitcoin combo connects supply and demand, and if the technologies work as advertised the parties are safe and the payout is certain. What exactly would preclude people with full brains to use it ?


The algorithm I propose does not work with cash for obvious reasons. Can you propose an algorithm that achieves a similar level of privacy based on cash ? Alternatively, can you point to a flaw that would prevent the algorithm to work as proposed ? For it seems without answer to either, cryptocash can indeed enable transactions regular cash can't.


Bringing pie ninjas is a bit of a derailment since pie ninjas are already plausible in our society. It's like arguing that you can make forks and spoons out of HEU that are only slightly more radioactive than depleted uranium ones, so HEU can't be that bad. The real question is if the preponderant use of the technology is the immoral one, not if benign uses are also possible.

That's untrue. A commodity that's rallying without a plausible change in fundamentals is a bubble, and it can be identified as such by anyone qualified to analyse the fundamentals; most of the time this means disproving the cause claimed by the bulls ("paradigm shift", "technological marvel", "unique opportunity", "limited supply" etc.)

So the question is: who you trust qualified to inspect the fundamentals ? In the case of Bitcoin that's a complex task that touches on contentious and long standing problems in the field of economics, sociology and psychology: What gives money value ? Is inflation good for the society ? How about deflation ? Should monetary policy be used as a tool to regulate the business cycle ? Is such a thing even possible ?

The answers to those questions are for most people a matter closer to faith than reason, as such it's hard to put your finger on the Bitcoin bubble with mathematical precision. Yet, that does not preclude the insightful one to identify the bubble before it pops, and steer clear of it, or ride it.

I've named my description an "assassination bounty" because I think it's the best approximation of what's likely to be implemented using existing technology.
I'm not proposing assassination as a state policy, rather a democratic version that could be used to punish corrupt leaders and noisy neighbours.

In light of the recent Silk Road controversy, I'd like to up the ante and go a bit further via a thought experiment.

A Tor onion site could be created that would trade assassination bounties instead of home made meth. The idea is clearly enabled by cryptocurency and was anticipated and even embraced by early cryptoanarchists such as Tim May.

This it how it could work:

• Killing bids are accepted for well defined people, for example POTUS or your neighbour
• Bids are cumulated by the market software in a public wallet that can be audited via the blockchain; if many people pledge money, the pot could grow considerably
• Would-be-assassins would write a .txt description of the intended assassination plan that should be as detailed as possible, including date, method etc.
• They would hash this .txt and, before the assassination, publish the hash signed with their wallet private key; the onion site would list all hashes published
• After a successful whack the killer publishes the original .txt description which can be hashed by anyone thus proving that the owner of the wallet is the killer (no other party could have known the details of the murder in advance)
• The bidders would vote if the killer's description is considered adequate, and if the funds are to be released to his wallet; this can be automated via Bitcoin's transaction scripting support
• Alternatively, the onion site could perform the arbitration, while retaining a fee; after a few successful kills it would become a steady revenue stream, thus incentivizing the onion site to do good job during arbitration and protect it's business from competitors

I'm not passing any moral judgements yet and I've tried to describe the topic in an objective manner. What's is your opinion ?

andes, i think your points about economy of scale are correct. The total mining revenue at current valuations is in the millions of dollars per month. If sustainable, that budget is enough to motivate a player to invest in optimized ASICs, and once that happens it's game-over for the GPU crowd. The ASIC miner has a 10:1 better capital and energy efficiency and would quickly overpower and bankrupt the competition, gaining a constant revenue stream for himself while denying it for the competition. Without sizeable upfront investments it's almost impossible to catch-up.

You should however consider the failure mode of the network: double spend is made possible at the discretion of the kingpin. It cannot print money, nor it can use other people's money. Moreover, the double spend would be self-evident and a clear proof the kingpin is corrupted (accepts double spend), leading people to flee from the currency. Why would the kingpin destroy his investment and revenue stream ?

Are you implying the BTC price would follow a logistic curve to long-term value ? With no overshot ? What would give that shape ?

> How people trade before central banks existed then?

Using barter, gift economics, precious metals and stones.

> Who used to print gold and buy assets with it?

Gold has a relatively uniform geographic distribution, and throughout the human history the available supply matched the economic growth pretty nicely, if only slightly deflationary. It has the same problems as Bitcoin in that the value of one monetary unit is bounded by the work required to produce it, which in turn leads society to resource expenditures to extract gold out of the ground, only to store it in some other underground vault. Since easy available resources are depleted, the current method of gold extraction consists of chopping a mountain known to contain trace amounts of gold (grams/ton) and transforming in it a lake of toxic cyanide mud. This is the basis of calling gold a "barbaric relic" and the same is true for modern proof-of-work proposals which if widely adopted would lead to similar ecological disasters.
There is a better way.

> Is either central banks or a currency that merchants won't touch?

You should brush up on those reading comprehension skills, I've never said that. The current blockchain is technically and economically flawed, but as you agree nothing precludes a better implementation. This is the basis of my interest in Bitcoin, not the desire to enrage an endless barrage of libertarians, closet economists, conspiracy theorists and other assorted crackpots.

> Not useless problems, it's security.

That's how the mantra goes, but it's false. The amount of work used for bitcoin mining has no relation to the security needs of the system (it could be to small leading to vulnerability, much or too large, effectively wasting the excess). Miners only care about is bitcoins and the resulting security of the network is well correlated with the block bonus and the price of BTC. See the recent thread about how mining for a fee is unsustainable in the absence of unionisation of the miners.
It's also conceptually possible to create a bitcoin-like system that achieves the same level of security wasting much less energy. No, I don't have the source.

That sounds like a sensible conclusion. I think it all depends on what's being done with the printed money. I would be perfectly fine to hold a decent amount of internet money if I knew they are the result of charitable giving, that is most or all printed money were exchanged for dollars that were spent to make the world a better place. If they are abandoned by the market and end up valueless, it's as if every holder of the currency was forced to foot the bill of the initial charity giving - not so bad overall.
OTOH I believe most people will reject money backed partly by a huge electricity and resource waste, partly the result of early speculators getting rich.


Taxing those who trade to the benefit of the hoarders seems like a bad way to regulate the business cycle. It either leads to an economic downturn (people stop economic activity of fear of being taxed), or a rush to get out of the bad, taxy currency and into a better medium of exchange, the hiperinflationary spiral I was warning about.


Sure, but both the price index and the amount of 'economic activity' (MtGox swaps) are imposed externally, by the speculative interest spurred by Bitcoin. So these are the causes of the effects on the other variables, and since they are unpredictable, as all speculative bubbles are, it can't lead to any meaningful conclusion over the Bitcoin economy.



My macro intuition would call any increase in the apparent velocity to be a sign of coming inflation, so the macro model would move to reduce the liquidity, increase the value, create deflation and reward those who hold assets, who are thus incentivized to collude and manipulate the apparent velocity and game the system.
If I'm wrong and you are looking to do the opposite, then the system can be gamed by those who don't own the money they are moving, for example debtors or traders. I could borrow 2 million BTC, buy 1 million BTC worth of gold, then use the spare 1 million to game the system, devalue BTC by 10% in relation to gold, sell back the gold for 1.1  BTC, repay the 2 million and pocket the 100K BTC.
So any reliance on the blockchain for macro adjustments can be gamed by debtors or savers, and can't be countered by the the opposite party.
I wouldn't discount such an influence: if the average BTC changes hands every week - month or so (GDP/M1), the manipulator could spend it in every block, 1680 time a week. So the manipulator can increase the apparent velocity by 10% if he holds only 0.006% of the money supply.

In conclusion, the correct way to achieve price stability is the good old method: aim for constant price for the Bitcoin Standard Commodity Basket which is hereby defined to consist of one alpaca sock, four large carrots and two pizzas.
I doubt inflation estimation can be automated and made 100% reliable and mechanical.

In Bitcoin's case, nothing. The proceeds of seigniorage were destroyed by solving incredibly hard, yet useless problems. A central bank could sell the forex, gold or corporate bonds it acquired during monetary expansion, and seize up any excess liquidity on the market. I can't quite imagine the distributed counterpart.

You can't have stable prices without "messing with the money supply". When the currency's economy grows or money velocity decreases someone needs to print currency, earn seigniorage and buy assets. When the currency loses value the same person needs to sell the acquired assets and defend the currency.

It' either that, or this horrible volatile currency 'backed' by a speculative bubble, that no sane merchant would touch.

That's correct, and it shows why collusion is not likely: the cartel has no way to keep ALL high fee txns for themselves, and no way to keep ANY low fee txns from eventually getting into the blockchain. It seems there's no incentive to form a cartel. The miners are incentivised to pickup any transaction with non zero fee, and the users would tend to pay a fee as low as possible.

Thus, the tragedy of the commons as suggested by the original poster seems possible, and the net effect is lowering the security. A form of cartelisation could take hold however, which we could call unionisation: the members of the union would demand a minimal fee, and threaten to otherwise disrupt the network; they could DDoS or refuse connection from defector nodes that accept low fees, and ultimately split the block-chain by refusing blocks that contain low transaction fees. Additionally, the altruistic impulse of the users could kick-in, they could recognize that paying a small fee is beneficial to the network, or they might not want to be seen using the "el cheapo" bitcoin client. It would be the equivalent of ratio increase programs on private trackers.

For as long as mining generates decent revenue that's unlikely to happen though. But since mining for a fee seems unlikely to reach a Nash equilibrium point, it follows that the security of the network will not scale up with the total number of transactions, rather it will be bounded by the mining for block bonus revenue. If the current monthly revenue is 216000 BTC and miners are looking for a 5 year amortisation at 5%, then only an attacker willing to invest more than about 5.000.000BTC can overpower the network, assuming he has costs/Ghash similar to miners. In 2021 that monthly revenue would drop to 54000BTC allowing attacks for as "low" as 1.000.000 BTC

You are clearly correct on your underlying assumption: Bitcoin is similar to gold in that, at equilibrium, it tends to have the same value as the work needed to create it. If by a thought experiment we equate the value of all goods and services with the market capitalisation of Bitcoin we have a full blown eco-catastrophe one our hands: I computed that if Bitcoin were to replace the USD monetary base somewhere in the next 10 years, minting bitcoins would suck up 70% of US's electricity production at current prices.

So Bitcoin is a quite inefficient format of money but I wouldn't go so far as to say "all the society can buy is the value of bitcoins". Once mintend bitcoins have an unlimited shelf life and can participate in an indefinite number of transactions. For the first transaction the global "fee" imposed by bitcoin is 50%, for the second 33% and so on. This is the same way a limited supply of USD monetary base (~2trillion) can participate in a 14 trillion GDP every year.

We could and in fact some people do. But as I've said, they are pushing the boundary of the definition. Going 'full ponzi' requires malicious intent and a clear setup where early depositors are sure to win and later ones are sure to loose.
When an asset bubble bursts the exists are random: it's perfectly possible for someone to go in at 15$/BTC, exit at 20$/BTC, and make a handsome profit, while someone who bought at 0.0005 will see all his imaginary wealth vanish because of bad timing. However there would be some amount of 'ponziing' going on (profiting on the expense of another), bubbles are zero sum by definition.
An example that comes to mind is Madoff's fund: you could sell at any time you wanted in profit, just like with Bitcoin, yet when it crashed people widely called it a ponzi scheme because of it's intent. In Bitcoin's case, I leave that to the reader.

While it's easy to find a party willing to receive the proceeds of seigniorage, how do you propose to diminish the monetary base in inflationary times ? A tax perhaps, so that besides loosing value, the money you hold are automatically taxed by the system ? Basically, rewarding those responsible for inflation (debtors) and punishing savers ? I think this would quickly lead to an inflationary spiral where everybody wants to get out of that pesky currency that looses value by the minute.

The only way to achieve what you are proposing would be if the receivers of seigniorage are committed to defend the currency during inflation, by selling for bitcoins the assets bough during expansion. I think it's fair to say that will never happen, so the best we can hope is for a non-deflationary currency, that could lose value at any moment if the market decides to abandon it.

PS: I'd very weary of using the equation of exchange without fully understanding what's being exchanged: the "goods" are MtGox dollars, for which there's no intrinsic demand inside the Bitcoin economy, and the price index is purely artificial, driven by the speculation that someday the economy will exchange other things besides dollars.

PPS: what you are seeing in the block-chain is not the velocity of money, but rather an artifact of how the system operates. There's no basis to use that for macroeconomic purposes since it would be easy to manipulate the apparent velocity for example by moving my BTC 1.000.000 from one wallet to another, all day long. If you don't trust the goverment published CPI, the only valid estimator of inflation is the price in bitcoins of one alpaca sock.

PPPS: let's agree not to call the current Bitcoin block chain a ponzi scheme, because it enrages the locals and is not exactly true. It's a speculative mania, where everybody is holding the inflated asset and nobody is yet getting rich (because if they were, the price would crash). When it does finally pop we can call it a ponzi scheme where there will be widespread evidence of early 'investors' cashing out early at the expense of later ones.

<smeagolvoice>Miners are sneaky indeed, veeery sneaky.</smeagolvoice>

Photoshop guys, can we get one where he's holding a bitcoin ? It would sure apply to the speculators in the current block chain.

Why do you think that would help ? Addresses are not people, you are plenty secure behind your existing key. The way a criminal would be caught by the secret service would be when he spends some of crime money for buying something, i.e spend it to a well known wallet, say an online shop or the grocery down the block, thereby steadily giving clues about his real identity.
The investigators would follow the money trail, i.e where the bulk of the value goes. Spending 1 million BTC known to come from child trafficking to another Bitcoin wallet would achieve nothing. What you need is to spend to very many addresses, which in turn give you coins coming from other sources, that is unlink your identity from the history of the coins in your stash.

You know who else does this ? Those who fall for a market bubble, a speculative mania, a gold fever, a balloon, or a ponzi scheme. It's either that or a uh... singularity.

@unk: +1 Insightful. As you say, proof of work is not required for byzantine fault tolerance of the coin database. For minting I propose a simple centralized solution: everybody relies on a "central bank" that mints digital coins with it's private key. The bank has a published manifesto that explains what it does with the proceeds of seigniorage (ex. give it them to charity) and the schedule of monetary expansion (ex. fixed rate, dynamic to combat deflation, linear up to a hard limit etc.). The users instruct their clients to trust the bank that better fits their ideology, and better banks would roundup more users. Should a bank fall short of it's manifesto, a large portion of the user base can split the block chain by collectively and democratically choosing another central bank. They would end-up with money in both block chains, and they would presumably sellout in the old chain. The market would decide which block-chain has real value. Even if the old block chain goes to hell, the users who did not switch banks would not loose value since they would end up with spendable coins in the new chain. What do you think ? Any ideas on how to distribute such a thing and forgo any centralization ?

It's just a roundabout way to launder (mix) Bitcoin. Chaum's blinded cash can protect your identity from a central bank. In the context of Bitcoin it would help you launder coins without trusting the laundering service, i.e provably secure in a mathematical/cryptographic perspective. In their current incarnation laundry services are opaque: they can do a bad job or keep logs that would effectively make them useless. The secret service could setup it's own laundromat with full loging, and there's no way to find if a laundromat is trustworthy, or if a previously trustworthy one has been compromised.
However the effectives of blinded digital cash relies on you finding partners with which to trade good and services. I can't imagine how that would go. "Have 2Kg of pure Colombian, accepting payment in blinded bitcoins" on craigslist ?