I disagree!

If we define "bull" as "one who expects the BTC price to rise", and "bear" as "one who expects the BTC price to fall", I can imagine plenty of reasons to be interested in the Bitcoin technology that don't imply bullishness - even long-term bullishness.

There are people who think that the blockchain technology is the future of currency, but see the Satoshi implementation as riddled with instabilities or bad design decisions that will require a new blockchain to (and thus, the eventual abandonment of BTC as current money) to resolve.

There are people who simply believe that the practical use of BTC is too niche to justify a half-billion total nominal value - who reject the "rocketship or nothing" dichonomy and expect the price to eventually stabilize at something more like $13/coin.

There are miners who think BTC will fail in the long-term, and are just here to get their block rewards (cashed out for fiat) until it happens.

And that's not even counting all the people who think BTC will go to the moon in a hundred years, but think it'll revisit $2 before it gets there.

They are equally vulnerable.

Quantum attacks on the hashing algorithm are utterly irrelevant. The best quantum algorithms give you a big advantage in making hashes, but doesn't let you make them at will; the difficulty will adjust and life will go on. The only relevant quantum attacks are on the digital signature scheme that protects wallets from thieves, and both Bitcoin and Litecoin use ECDSA (which can be broken by Shor's Algorithm).

A significant downside to the ruling, but one that's easily circumvented; all you need to do is cash in your mining spoils by actually spending them in the Bitcoin economy. Buying 1oz rounds, for instance (which can then easily be exchanged for fiat if that's your thing).

Edit: Of course, you could also just ignore the law, provided you're careful enough about where you cash out (and willing to risk the book getting thrown at you if you're discovered).

Nothing.

The cases that are affected are:
1) Mining coins and then selling them for fiat.
2) Acting as a third party who sends coins from Person A to Person B (neither of whom are you) as part of an exchange of fiat.

So, exchanges and miners are affected - nobody else.

The way I read these rules, the only people affected by it are
1) miners who sell their mined cryptocoins for fiat, and
2) third parties who transfer someone else's cryptocoins as part of an exchange of fiat (i.e. exchanges, BitPay, &c).

They provided a definition, though. A "virtual currency" is any currency that isn't legal tender in any country.

The exchange needs cryptographic objects to buy and sell and trade.

The ones who provide those objects (which, at launch, will probably include me) ought to be aware of the laws that will apply to them - whether in order to comply, or merely so that they know what the risks are if the country in which they live finds them out.

I've been considering how to do it. I'll need to obtain legal advice, though - there's one piece of it that will probably require a lawyer's advice (especially in the light of the guidance memo's mention of "e-precious metals").

The only downside of this ruling, to me, is that it adds overhead to some mining operations.

Balancing that are what I see as a major upside, plus a minor one:
1) FinCEN has acknowledged Bitcoin as a real thing, and done so in a way that implies they aren't going to pee in the end users' soup. One of the big possible uncertainties of Bitcoin's future was that the gummint, once it took notice of Bitcoin, would react punitively. The fact that the ruling places no restrictions on end-users (or, really, anyone who isn't mining for fiat or running an exchange) goes a long way to dispelling that cloud.
2) Miners are now incentivized to spend their mined coins within the Bitcoin economy, because then they don't have to register as money transmitters. This means an increase in demand for BTC-denominated goods, which is excellent long-term for Bitcoin as a whole.

An optimistic view of things. Perhaps, once the financial industry learns that Bitcoin has no printing-press, no fiat safety net, they'll be more prudent with their client investments. But personally, I feel like it'll be hard for financial professionals who have used fiat all their lives to really adjust to that mindset, and until they do, they'll be just as reckless as always.

I suppose we'll just have to see.

I disagree!

I mean, certainly, people with checking accounts wouldn't be affected, because with Bitcoin you don't need a checking account. But savings accounts? Earning interest? That stuff still requires putting your BTC on deposit with an organization making loans and investments, and such an organization can go insolvent as easily in BTC as they can in your favorite flavor of fiat. And unlike with fiat, there's no remitter of last resort like the EU has (which can theoretically print money to cover government-insured deposits if all else fails).

So, it may be emblematic of the ongoing failures of the banking system, but it's not something that Bitcoin really solves.

Bitcoin has some protections against a quantum computer, although not enough.

The thing about addresses is that they aren't cleartext public keys - they're hashes thereof, which for quantum computers are only slightly less infeasible to brute-force.

So the good news is that until you spend from a particular address, your coins at that address are safe; if you avoid reusing addresses, and if you always empty them out when you spend them, and if you submit your transactions directly to the big pools, the risk of someone stealing your coins with a quantum computer is low (because even if they cracked your private key, stealing the coins would effectively require them to double-spend against you).

Really, a quantum-resistant signature scheme would be ideal, but they all have a digest+public key size in the kilobytes (which would require significant, possibly infeasible, block size increases). Hopefully, as the state of the art advances, a more succinct post-quantum signature algorithm will be found that can be easily rolled into Bitcoin.

Everything I've read seems to indicate that trading in bitcoins works just the same as trading for barter, tax-wise. That is, when you get income in BTC, you report it as income worth what the bitcoins were worth when you got them, and then when you spend/sell the BTC, you report the capital gain/loss.

I'm doing my US taxes right now, and I'm trying to report everything in a forthright way. But it's a lot of busywork.

Don't get me wrong. I think it's still possible that this is a bubble, and that the pop will be nasty.

But would you like to know why I consider $5/coin an absolute floor, barring some impossible-to-forsee disaster?

Observe.



This is a chart of the three most stable months in BTC's history. During this time, the BTC price was never more than 10% away from $5/coin. After that, the price began to steadily increase - reaching $15, crashing to $8, floating around $10-$13 for a while, and then finally beginning the rally that is still going on today.

But those three months of stability created an impression. There could be no bubble involved - there could be no bull run. There was confidence, for a time period that's still a significant portion of Bitcoin's whole history, that BTC were worth about $5.

To shatter such confidence would, in my view, require the king of all bear markets.

But if you're not convinced by that, then let me show you why expecting the price to drop below $2, barring some impossible-to-forsee disaster, is total fantasyland:



This is a chart of the end of 2011. After the Big Bubble popped, the BTC market was in a downtrend. Many predicted, on this very forum, that BTC was dying and it was just a matter of time.

The price got to $2 in mid-November. At that time, Mt. Gox experienced the biggest trading volume ever - a record that still has not been broken. For several days, the market threatened to break through $2/BTC. It did not. Even in the face of a bubble that brought the price above $1/BTC and had been slowly sputtering out for six months, even among doomsayers who believed with all their hearts that the Bitcoin experiment had failed and the bubble was a one-time event... even in such a climate, people wanted BTC for $2. People wanted them enough that the price never crossed that line. It was an insurmountable foundation of support, and from there the price began to climb again.

Now, the BTC price has beaten the previous bubble - market participants know that high prices were not a one-time opportunity. There are major online services that accept it, other than Silk Road. There's been media attention. In today's environment, what could possibly hurt confidence in the currency any worse than it was hurt in November 2011? What could possibly make people less confident in BTC than they were a year and a half ago, when they bought in with all their might at $2 a coin?

What's up?

Edit: Fifteen minutes later, problem went away.

Or, borrow.

Of course, that means...If they're the sharks, the true believers lending them BTC to short with (and extracting heavy interest in exchange) are shark-farmers.

Barring a disastrous technological or legal black swan (Gox robbed again, ECDSA broken, Bitcoin outlawed, &c), I can't imagine dipping below $5 and am willing to bet we won't dip below $12 either.

Anything else, well, we'll see. Other than the kodiak in the room, news has generally been bullish; how these forces will play out - and whether the next major correction will take minutes or months to materialize - is anyone's guess at this point.

LukeJR was already doing something like this. Apparently Eligius runs two Bitcoin clients, and in the case of a contradiction between them goes with the more "mature" version.

Unfortunately it's hard to incorporate such logic into the client itself - miners have to do it manually right now.

That's why, ideally, you have an independent QA team - who has no expectations of what was in the developers' heads - doing the integration tests.

Of course, in a crowdfunded project like this (as compared to a start-up or corporate R&D project), an independent QA team may be an unaffordable extravagance, barring a community fundraising effort.