What I'm saying is markets prefer choice. Some people are die hard Pepsi drinkers, others Coke. As long as there are enough people that prefer a certain brand, for whatever reason, that brand has value.

I don't know if you've visited BTC-e which has the famous chat box, but there are some pretty die hard Litecoin fans, ones that are just as set about Litecoin as others are about Bitcoin. The fact that there can be irreconcilable opinions is what led me to realize alt-coins had a crucial role to play. This dawned on me because I was involved in the opposition and uproar over the announcement of a power consolidating Bitcoin Foudation, a topic that to this day is a problem issue to some.

What I realized was that as things progressed there would be individuals with differing views on large enough issues as to be problematic. Keeping everyone happily under one tent seemed implausible.

Yes there will be many people that only hold one main cryptocurrency or another, but there will also be those that hold multiple ones. Technology allows for instant and easy exchange and transfer of any cryptocurrency, so the inconvenience of having more than one is practically non-existent. Remember, conversions can happen within seconds and behind the scenes.

What you're missing is any coin can change development participants.


There you go again with your preconceived expectations. Again, it amazes me Bitcoin didn't exist in 2008 but now some people talk as if they've studied textbooks on it. Nothing is set in stone, and nobody can say definitively what does or doesn't constitute "correct" courses of action about any cryptocurrency. There is only what works in practice and what doesn't.


As I said, development participants can change over time. The point is Litecoin, and even Novacoin, now has significant traction and growing monetary user base. Obviously it didn't take more than tweaking a few parameters to establish that (actually Novacoin did a bit more), because the basic building blocks of the original Bitcoin are so good already. People considered Bitcoin a toy when it traded for pennies did they not? Now look at Bitcoin. You have to be able to see how the future can bring about things not always seen present day.

Gavin, I mean "learning" in an abstract not literal sense.

I think Bitcoin faces the hardest challenges for cryptocurrency, because Bitcoin is spearheading real world implementation. I also think the strongest development happening for cryptocurrency is with Bitcoin, for the same reason. Similar to speculating 51% attacks would become less worrisome at some future date I imagine as alt-coins like Litecoin become more established stronger development interest will arise with the benefit of history to learn from (which Bitcoin doesn't have).

One thing you have to understand is neither Bitcoin's or Litecoin's (or any other coin's) future is on any set in stone course. I amazes me some people seem to think there is some known path of progression for Bitcoin. Satoshi didn't leave any. He didn't know either. The block size issue, for example, validates this. It's a bit of a thorn for the community and until it's resolved one way or another will continue to be one. In other words, we're making things up as we go.

Development of Bitcoin and cryptocurrency in general is experimental and fluid. Bitcoin hasn't worked out all technical issues, so how could anything else? Indeed, what if Litecoin died before going above $0.04? Should it have mirrored every development as it happened? I don't think so.

I see cryptocurrency as a huge and fascinating experiment, one with real world implications, but an experiment nonetheless. Things can go one way or another. It's not paramount any alt-coin solve and implement every technical issue in the near term, just as it's not paramount Bitcoin deal with the block size in the nearest term. Rather, people speculate and make plans on what may happen for everyone's best interest, and that seems to work well enough for now. That's one reason I see alt-coins as strengthening cryptocurrency overall; they can sit back and watch what works and what doesn't for Bitcoin and learn from mistakes.

My post in a thread titled The end of Alt-coins pertains to this:


I'm also going to reply to the alt-coin discussion in this Let's Talk Bitcoin thread with Erik Voorhees when I get a chance.

That's similar to Erik's one email protocol example, which as I said isn't the same applicably.

The truth is markets do prefer choice -- coke, pepsi, chevy, toyota. I actually think things will wind up being pegged to gold. That fits with Erik's one dominant currency belief, which I actually do agree with, but people will hold a portfolio of currencies just as more savvy money managers (read as the rich) hold money in different forms.

Money is complex. Gold is the most widely valued thing among the largest number of people. However, it's not transacted as money often, and can't achieve good network effect, because it's not convenient to transact. So things, like fiat currency, compete with gold and are used far more dominantly. That doesn't mean gold has lost all its monetary value, though.

I think we will see prices listed relative to gold, e.g. .0001 oz, for something, but merchants will accept a variety of things to equal that value, cryptocurrencies topping the list. Just as you can go to many sites and buy services with dollars or Liberty Reserve and increasingly bitcoins, all relative to USD, in the future we will see similar payment options but relative to gold. People will store the majority of their wealth in gold, but also hold a portfolio of whichever cryptocurrencies work for their situation. There may even be fund managers offering professional services.

So you do have access to everything, because it's so easy to trade for anything you need at any time. That's what you both seem to miss. As I point out richer people already hold and trade portfolios of different currencies. They don't have it backwards. Technology is simply expanding that access to a larger group of people.

The two money masters go at it.  


True, true. But there is something you're missing.

Money network effects are prompted by market access. It's all about market access, and traditionally that has been limited to the physical and the local. You go to the store you need to have what the shopkeeper will value. You travel to a foreign land you need to have what they value.

As you point out dollars would be used worldwide if countries didn't mandate their own currencies, due to the network effect of more and more people accepting dollars. However... dollars have been advancing their worldwide acceptance. Why? It's because it has become easier for someone, anywhere in the world, to meet with someone that can change dollars into something valuable to them, if dollars are not, and that's thanks to technology. As dollars have become digital it has become easier to transfer them (much harder with physical dollars). The only thing gumming up the works is regulation and an industry not exactly known for leading technical innovation.

Cryptocurrencies are digital by nature, and the Internet is ubiquitous.

That means market access is uniform for users of cryptocurrency. Network effects, normally amplified by geographic practicality, are restructured.
  

I disagree.


It's not the same thing. Email servers are set up to interact and behave a certain way, the email protocol. If you don't follow the protocol you can't access the system. But what is the money protocol? There is no inflexible rule. As long as someone else values something you have the thing can serve as money. The Internet allows for finding others that value what you have to be at a maximum. The digital nature of cryptocurrencies mean moving that value the easiest way possible is also at a maximum. Taken together these factors impact the old paradigm of physical money network effects.



There is a niche that Bitcoin can't fill. It's what led me to start promoting alt-coins in the first place. That niche is that they are not Bitcoin.

That's something the cryptocurrency market needs for many reasons. The first one I realized was potential market domination of Bitcoin Foundation. That fear is embodied in recent forum posts even on this day. Another one is the block size issue. If there were only Bitcoin I think there would be far more pressure to "get it right" whatever that means, because there are varied (irreconcilable) opinions. Another is hard fork risk should Bitcoin become so large the voices pulling in different directions must split. Still another is technical risk, for example, if some problem arises with Bitcoin's hashing algorithms (or ASIC hardware monopolizing it) where others like Litecoin use something different, or where Gavin goofed with the version 0.8.0 fork; imagine the economic carnage if Bitcoin were 10 times the acceptance it has now.

Bitcon's future isn't certain. Having alternates exist economically beside it I believe definitely strengthens cryptocurrency overall, and is why they will have co-existing value.

Exactly. That's why I posted this back in October 2012:

Solution to the Bitcoin Foundation


Shortly thereafter I started promoting Litecoin, which is now doing quite well.

I'm definitely not suggesting anyone sell on Silk Road, but I find the above a bit, well, lacking.

A) first I'd imagine different substances will produce different times. I believe some drugs on SR are of the pill variety. If you deal in a specific substance I imagine it's possible to improve/calculate sealing techniques.
B) the post office processes 528 million mail pieces a day, 727,167 packages picked up through Package Pickup. I doubt every package gets an x-ray and dog screen, especially with postal budget cuts. Even if one does get flagged, it doesn't mean much to the seller, only potentially the buyer, and in such cases I believe buyers have claimed they didn't expect the package.
C) gloves are cheap
D) it is hard, though, for the government to sift through the web browsing habits of millions of people; why would they single a specific person out?

I do agree you can make a living without becoming a SR seller though.

Okay, I just listened to the whole thing. Very nice!

I just have to comment on the very end about alt-coins. Usually it seems I agree with Erik Voorhees at a 99.999% ratio, but both he and the interviewer are far from my thinking here.

The questioning started off immediately on the wrong foot, suggesting an alt-coin needs to replace Bitcoin to be successful, and Erik went along with that premise. What they both don't seem to consider is an alt-coin working alongside Bitcoin.

Why would Litecoin need to replace Bitcoin to be successful? Why would you imagine the market must use either or, with only one reigning supreme? I understand that's how people are used to looking at products in a store, pricing shown in only one currency, but I believe that will change. I almost feel some people view alt-coins as a threat to Bitcoin, but that's not it at all. I completely agree Bitcoin will not likely be displaced by an alt-coin, but that's not the hope of alt-coin supporters.

Alt-coins actually strengthen cryptocurrency overall. I've posted various ways this is so. Last, yes, Litecoin does have network effect, which is growing. There are goods and services being developed targeted just at litecoins, far more so than the newest alt-coins, similar to how Litecoin is positioned relative to Bitcoin now.

When you put it like that it's pretty funny lol  


Yes, there was someone here that posted a great saying that went something like, if you're not sure how to use Bitcoin anonymously then assume it is not anonymous.

That is super accurate advice.

Truthfully, you have to be an expert at Bitcoin to be sure you're using it anonymously. It's not easy, but certainly possible.

The biggest technical hurdle is someone tracking coins to you that you wish they couldn't. With Bitcoin every transaction is public, so if you receive coins associated with an "illegal" drug sale and enforcers are aware of those coins, then you have to take steps to be sure those coins can't be connected to you. The enforcers can watch everywhere those coins go, just as anyone else can, so mixing services for example are used so those coins can mix with people not connected with the sale.

I think that's only how it appears to you. For example, people sometimes look at someone who gained success, like billionaire Mark Cuban, and think they had the right set of circumstances and got lucky, without appreciating the whole story.

I think a lot of people were thinking of things in the direction of Bitcoin (not necessarily cryptography related), but Satoshi had all the right pieces for everything to fit in place.

Try Litecoin.

+1

I agree. This is the most efficient and secure storage method.

Then all you have to do is use a strong password and adequately guard it. Whenever entering the password be sure nobody can access it, e.g. binoculars through window, key loggers etc., and you're good to go. Use a dedicated offline computer to send coins, only connecting to the Internet when sending, and reformat it after each use if super paranoid. Also change passphrase periodically.

Yes, Armory is sufficient if you use an offline computer which you set up properly (clean OS/wallet install). However, there is one (actually two, which I'll explain...) potential vulnerability in the Armory system I see, which is dependence on shuttling data back and forth from offline to online computers with a USB drive. It's possible to infect computers with viruses, even offline ones, simply from plugging in USB drives. This is due to the Autorun and install feature of an OS. So you'd want to be sure to disable that on the offline computer. It's usually a Windows concern, but can apply to Linux too: http://linux.slashdot.org/story/11/02/07/1742246/usb-autorun-attacks-against-linux

If you're careful about not falling victim to USB autorun viruses, then I'd say Armory with an offline (and encrypted) computer and printed paper backups is nearly impenetrable.

However ...

When securing anything, you're only as secure as your weakest link.

If I were securing say 1 million dollars or more then I'd want to reduce my attack surface to the smallest possible.

Storing bitcoins on any computer, even an offline one, is risky. You reduce that risk by installing a clean OS and keeping it offline, but as I point out above even that can be compromised by USB if you're not careful. Even if you do all that properly then you have to remember to keep your physical computer safe from unauthorized use. To do that you can obviously encrypt it with a strong password, but then you have to keep the password safe too. I won't go into the various ways passwords might be learned by attackers, but just keep in mind thieves work full time on finding weak links, and have been doing so for many years. If you're storing millions of dollars I'd consider even an offline computer a risk, albeit small.

I'd do things differently with huge amounts.

First, I'd start with a dedicated offline computer and clean OS install (preferably Linux), then install the Bitcoin-qt wallet (do that securely by USB etc.) and generate some addresses. Then use Armory to print or simply copy by hand the private keys of several addresses. Say I was storing 5 million dollars. I might break that down into paper sheets of 100K each, with one address (and its amount label) per sheet (so say 50 sheets). This would be essentially printing money. I'd make two copies.

People are good with storing/guarding physical things. This moves things to that realm. After I had my two copies of private keys, and sent the correct value to each address (100K each or whatever) then I'd put those sheets into two separate brief cases and delete everything from the offline computer, reformat it. Now, I have 5 million dollars worth of value in two briefcases, and security depends on how well I can secure those briefcases. That's easy to grasp conceptually.

Next I'd transport and place the contents of each briefcase into two separate bank safety deposit boxes. Now the security of the 5 million dollars is how well access to the safety deposit boxes is guarded. This puts security back into a familiar well established model.

Whenever I needed funds I'd go to the safety deposit box, extract desired number of sheets of value and import the private keys back into a newly installed OS and Bitcoin-qt wallet on an offline computer again. Then I could use Armory, or even connect directly to the Internet to send coins. Since I wouldn't be visiting any sites, downloading any files etc., the chance of getting a virus would be essentially zero, and even if there was anything loss is limited to only that transfer session.

Send remaining balance to more sheets of paper, delete files again/reformat computer, and place sheets of new value back in deposit box(es).

Yes.

The system is all messed up because banks and government are in bed together. They scratch each other's back. Government ensures people use bank fiat money through legal tender laws, and banks ensure governments have plenty of money to grow on.

Meanwhile the little guy, ordinary people, just have to bend over and take it. What else can they do?

Bitcoin will change that because people can cut banks and governments out of the picture.

LOL

Peter, that is a fantastic video. I especially like the emphasis on off-chain transactions.

I would however add one thing at the end...

"And by the way, Litecoin (or other alt-coins like Novacoin) can ALSO be cryptocurrencies with smaller fixed limit blocks, allowing Bitcoin to raise the limit and the free market to appreciate which works best."

Well, yes, but it may or may not mean anything.

You have to realize that when you "send" a bitcoin nothing actually moves. It's not like you send a file from your computer to a recipient computer. With Bitcoin there is a public ledger in the cloud that contains info on where all the bitcoins in existence are (which addresses). So when you send a bitcoin all you're doing is telling the cloud to record that you've moved coins from your address to some other address. The cloud ledger is called the block chain.

Bitcoin is a protocol, just like HTTP. That means as long as you do things following the protocol you can experience a result. You can access websites on a computer with a web browser, or with a mobile phone app, or something else invented in the future like a robot. So with Bitcoin if you follow the protocol you can have a miner recognize and confirm your transaction (record it in the ledger) as valid. The only question, then, is which public ledger is the "right one" if different miner groups produce different ones? That's what a fork is, a situation where more than one possibly valid copy of the block chain exists.

Users then have to know which block chain to use, because technically both are "valid" (conform to the protocol). Also groups of miners can support both chains, by continuing to build on them. For users that would result in not knowing if transactions sent and received were actually confirmed (forever into the future) until the chains grew sufficiently apart. Their coins would be spendable on both chains until contradicting transactions happened. So for merchants or anyone accepting a payment they would have to know which version to honor as in step with the rest of their money transacting group. Externally, the price per bitcoin might, for example, be cut in half because everyone owning bitcoins could spend them twice, once with each version of the block chain, and different merchant groups might accept different versions.

So economically a hard fork can be extremely messy and confusing for a market. The bitcoin Bob received from Alice might be spendable at one shop, and not at another one next door, or it might not be accepted by anyone (what happens when one fork strand dies).

However, since nobody wants such a mess it's unlikely we'll ever see the well defined split of enough hash power to cause a fork. It's better for all if everyone remains on the same page. Still, a hard fork is possible, but also survivable. Hard fork risks are another reason it's good for the cryptocurrency economy as a whole to have viable alt-coins as options.

I know it refers to brand new block chains, but Gavin's post was made in 2011 when Litecoin was one (can't remember exactly when LTC started).

My point isn't about age of the block chain, it's about being skeptical of anything removed from the core trust given to Bitcoin development. As the OP notes the address his funds were sent to has something like $50000 in it, so maybe more people are victims; some issues take longer than others to develop. In other words, I'd assume anything NOT Bitcoin software to contain trojans, just to be on the safe side until I could confirm that wasn't the case. That's essentially Gavin's message.