In this article http://www.coindesk.com/bitcoin-price-long-term-potential/ the author says that the velocity is 9.

Where does this number come from ?

If it's true, and given that the velocity of fiat currencies is around 1.5, I think everyone who complain about hoarding and the economic effects of a deflationary currency should just stop telling bullshit.

personally, i think the Money Masters in Wall St are what corrupts Washington.  this is the power of the printing press when controlled by private hands (banksters).

that is where the root of the problem lies and this is why we're here.

Yes, getting these straight is important.

I think a main source of confusion is under a proper system of english common law where we live under the rule of established law and not under the rule of men, ownership = control. But when this legal framework breaks down (such as FDR's 1933 order) then ownership no longer equals control and the concepts of possession become important towards maintaining control.

So with Gold ownership equals control until the rule of law breaks down. With bitcoin the concept of possession is stronger than with gold so when the rule of law breaks down you still maintain stronger control. But as others have pointed out the state and still torture you till they get your coins, so the concepts of possession and control are stronger than with gold but not absolute. It is easier for the government to take your gold and/or inflate your money away than it is from them to torture you, but the state can do both...

posession, ownership, control ... I think we need to get these straight.

If there are unspent bitcoins associated with that passphrase, your software should also immediately send those bitcoins to your wallet. That is your way of letting the other person know they chose a bad passphrase, and your reward for letting them know they need to move the coins in their main brainwallet.

I could see maybe if the commission for selling on Silk Road was 50% or something ridiculous.

One downside of this pattern of not knowing if your password is correct at the high-level is that if you misttype your password, you lose 20c each time.  If you are using the process to offload a 32-bit KDF from your cheap/slow offline wallet computer to your own fast online computer its not a huge deal, just try again as there would be no fees.

But if you are offloading a 46-bit key stretch online you could do with either a check character on disk (which makes 57/58 passwords offline grindable, so removes 6-bits from the password strength, or only a 40-bit key stretch for the CPU cost of a 46-bit one). 

Or better augment the users password with a check character so that the user is expected to remember.  Remembering a check char doesnt seem so unreasonable if you are trying to remember a 50+ bit password you can probably remember a single char that was machine generated appended to the end.  Computed in such a way as to catch transposed characters, missed chars as well as typos with probability 57/58.

Then for 60c per transaction in additional fees you can bump the security of a 50-bit password to 96-bits, with the knowledge that grinding is uneconomical even though your password unstretched is within grinding range.  I bet most people's wallets (whether offline or online), once an attacker has their disk so they become brain-wallet like, could be economically ground currently for amounts of $10k and above say. 

Basically I claim, everyone effectively has the brain-wallet "you're either kidding yourself how good your password is, or your password is so good you'll forget it", once you factor in an attacker getting a copy of the (random private key) encrypted deterministic wallet.

Adam

AES is bad (baked by NSA).
Please use another cipher (say, Serpent, Threefish or ...)

Here's a way to repair the security of the process of the miner claiming the fee for doing the KDF work.

Q=xG (x is ECDSA private key, Q is ECDSA public key)
A=H2(Q) address is hash of public key
Extended public key (R,S) as Q' = H2( (y=H(salt)), Q ),  S=salt*G
Extended address E=H2(R,S).
K=Scrypt(password), encrypted private key X=AESEnc(K,x).

User deletes y, Q and A and k-bits of salt.

User publishes extended address E and receives funds on it.   

When user wants to spend funds (or an attacker who has the users hard drive), he types his password and computes K'=Scrypt(password), and computes a candidate private key x'=AES-Dec(K',X).  The candidate (non-extended) public key is Q'=x'*G.  The user cant tell if this is the right password (right private key x' nor right public key Q') the work to brute force k-bits of salt is much more CPU power than he has.

User publishes (R, S, ECDSA(x',tx)); anyone can compute Q' from the signature, and see that the signature is valid, but it takes work to discover if R is derivable from Q'.  Thats the work the miner does as follows: the miner tries to find salt in the defined (advertised) search space such that either H2(H(salt'),Q') == R (because the password is correct) or if the password is wrong the miner finds salt'*Q' == R mod 2^k (ie last k bits match).  If the password is right the miner does not publish salt, only publishes H(salt') and signs with salt as private key to R in order to claim the full reward (40c+20c).  If the password is wrong (miner did not find full match within search space) miner signs with salt' but as H2(H(salt'),Q') != R he can only claim 20c.

Unlike before it is not possible for other miners to take the solution and assign the fee to themselves so the KDF miner does not need to be a bitcoin miner (to include his own fee collection into a block), nor does he have to use committed transactions for security.

Adam

this is what i continue to call Bitcoin's Tension.

ppl are so focused on the problems of today.  especially the illiquidity and difficulties in "capitalizing". and they are right about that; today.  but anyone here, if they have been paying attention to what i've been saying, understands that if Bitcoin makes it thru the gauntlet (window of illiquidity and nonacceptance) all these problems will melt away.  

all of a sudden you will find yourself in control of a pile of BTC worth thousands and all sorts of means to capitalize if you wish (cash out).

it's going to happen.

Actually, I expect that the more successful Bitcoin becomes, the more challenging it will be for me (as someone who lives in a non-free jurisdiction (the U.S.)) to find solutions to the problem of capitalizing.  In no circumstance did I every intend to take a majority of my BTC to my grave, and I think that there is a fair chance that even trading BTC straight across for a tractor if/when some old farmer knows of them and wishes to own them will be fraught with danger.

I'm on record as predicting that all important governments would reject and fight Bitcoin and with escalating forcefulness, and probably cooperate in doing so.  To my shock and delight, it seems like I may be wrong about that given the developments out of China.  Yet I continue to have great suspicion of the likely posture of the U.S. government which is massively as corrupted by corporate lobbying and is looking at a much greater fall being still the beneficiary of having world's reserve currency.  As a citizen who lives under U.S. jurisdiction, this is most salient to me.