I think it is safe to say difficulty determines price and price determines difficulty. I think the argument is whether or when are they leading indicators or lagging indicators. What do I know though?
It is not safe to say that. The only mechanisms that I have seen thus far that attempt to explain how difficulty affects price are these: 1. If the difficulty rises, then miners will continue to mine at a loss, but hold their coins until they can sell at a profit, thus causing the price to rise due to lower supply. I agree that this effect is possible, but even if 100% of the miners follow this rule (which I doubt is the case), newly mined coins are only a small part of the market and this will have only a small effect on the market at most. 2. If the difficulty rises and miners can't mine at a profit, then they will buy instead and and the increased demand will cause the price to rise. I agree that this can also happen, but in this case, the cause is not the rise in difficulty. The increase in demand is due to more people wanting bitcoins, whether they mine them or not. The rising difficulty is due to more demand for bitcoins and not vice-versa. |
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Lull before the storm.
There are two factors that will reduce the rate of difficulty increase in the next year or so:
1. Power costs approach mining revenue.
2. ASIC designs approach state-of-the-art.
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The "secret alternative currency" turns out to be collectible gold coins. Other than that, he has nothing to say. Oh, and this ... Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint against Agora, Inc. ("Agora"), Pirate Investor LLC ("Pirate") and Frank Porter Stansberry ("Stansberry") (collectivley referred to as "defendants"), hereby alleges as follows:
INTRODUCTION
1. Defendants engaged in an ongoing scheme to defraud public investors by disseminating false information in several Internet newsletters published by Agora or its wholly owned subsidiaries such as Pirate. Through various publications, defendants claimed to have inside information about certain public companies. Defendants suggested that its readers could cash in on the inside information and make quick profits. The defendants offered to sell the inside information to newsletter subscribers for a fee of $1,000.
2. Numerous subscribers purchased the defendants "inside tips" and made investment decisions based on that information. The purported inside information was false and, as a result, the subscribers did not realize the profits the defendants promised.
3. The defendants, however, profited handsomely. On information and belief, Agora received in excess of $1 million from the sale of false information to its newsletter subscribers.
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Now tell me, how likely is it that someone would reproduce my sentence (key):
"Ik heb de Mont Ventoux drie keer opgefietst en de Elfstedentocht even vaak geschaatst."
The key doesn't have to be random. It just has to be unlikely to be duplicated whether accidently or on purpose. I guess a phrase like that might never be duplicated, but you might be surprised. Consider the birthday problem: There are 365 days in a year. In a room with 23 people, what are the chances that two people in the room have the same birthday? It's a lot higher than you think. Answer: 50% |
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Are people really still suggesting that price affects difficulty but not vice versa? It's pretty absurd -- difficulty affects our perceptions about how rare or valuable a coin is.
Only miners care about difficulty, so if you are a miner then you might care, but nobody else does. Besides, difficulty does not affect the total number of bitcoins or the number of new bitcoins, so there is no reason why it would affect the perception of rarity or value. Difficulty may have some small effect on the market supply because miners may react as group in response to the difficulty. However, contrast the number of new bitcoins to the volumes on exchanges and you will see that miners must only be a small portion of the market. |
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Google employees are given time to spend on personal projects. I wouldn't be surprised if someone at Google hacked Google Wallet to hold bitcoins.
I recently worked on a side project where I hacked our payment processing system to accept bitcoins, but my company still has no plans to accept it.
Interesting, where do you work? Google. Read between the lines. Not Google, but close. |
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Google employees are given time to spend on personal projects. I wouldn't be surprised if someone at Google hacked Google Wallet to hold bitcoins.
I recently worked on a side project where I hacked our payment processing system to accept bitcoins, but my company still has no plans to accept it.
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His basic thesis is that money must be centrally managed and that only a government is capable of doing that.
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That's great. But, just to be sure, assume that I lost my wallet; completely, no back up. And all I do remember is my private key, can I restore (or recreate) the same wallet including all the coins?
Yes, as long as you have memorized the private keys for all the addresses that have coins -- but why would you not back up a wallet? That seems like an obvious mistake (as well as not encrypting it). Furthermore, why would you back up your wallet in your brain? |
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The very first users, when trying Bitcoin for the first time, were not aware that it was going to become what it is today - they put in time, effort and risk when no one else would.
What was the risk associated with mining the first blocks? A couple of minutes of personal time wasted, a couple of minutes of wear and tear on CPU, a dollar spent on electricity? Man, that is a huge risk. I'm glad it paid off.  You are missing an important point. Even though the cost was small, the risk was huge. Let me ask you this: why don't you start your own alt coin and start mining it? After all, it takes very little effort -- even less now because everything is already done for you. You stand to make billions of dollars! Not interested? Why not? |
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Forty-seven percent of respondents say they would sell Bitcoin, while 11 percent say they’d buy it. Another 7 percent say they’d hold the virtual currency, while 35 percent say they haven’t got an opinion about it. Only 47%? A year ago, it would have been 97%. 47% is great news. |
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But the price for bitcoins are mostly driven by mining cost, which defined the lowest possible cost to acquire coins without buying on exchanges
That's odd because it is currently cheaper to buy BTC than it is to mine it. Not really. It defines the minimum price at which new supply will hit the exchanges. Any miner who sells for less than cost quickly goes bankrupt, leaving only profitable miners in operation. Profitable miners don't sell when prices are below cost. I don't think that a small amount of coins withheld from the market is enough to set a floor on the market price. Furthermore, when the price drops below a miner's cost, the miner will stop mining, essentially giving the coins to the more profitable miners who will sell them. |
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But the price for bitcoins are mostly driven by mining cost, which defined the lowest possible cost to acquire coins without buying on exchanges
That's odd because it is currently cheaper to buy BTC than it is to mine it. |
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No, I'm not talking about the people who accumulated bitcoins by trading or earning them. I'm talking about rewards from solving blocks. And my point was... it didn't take much time or effort or money to mine blocks # 1, 2, 3...
Yes, NOW it takes a lot of time, effort, and money to mine a small amount a of bitcoin.
So looking at historical data up to this point, one could say, in essence, that the system was setup to:
A) give big rewards for putting minimal time, effort, money into mining
B) give small rewards for putting a lot of time, effort, money into mining
as time went on. Why was time chosen to be a variable?
You are correct that it didn't take much time and effort to mine the earlier blocks, but you are missing a very important point. The value of the bitcoins in block 1, 2, and 3 were 0. In fact, the first 70,000 blocks were worth nothing because the value of a bitcoin at that time was 0. You are complaining that it isn't fair that a group of people were able to spend a bunch of time, effort and money mining worthless bitcoins. Consider Laszlo Hanyecz, who paid 10,000 BTC for two pizzas in 2010. At that time, it would have taken weeks to mine those 200 blocks. Are you are saying that it is not fair that he was able to mine $20 worth of bitcoins in a few weeks? |
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Why was Bitcoin designed in such a way that the rewards from mining decrease over time?
The current system is designed to give a lot to very few in the beginning
and then continue to give less and less rewards as the network grows.
After N years, who makes up the backbone of the network? The first few (assuming they didn't cash out)? Or the thousands or millions of new miners? That's a rhetorical question by the way.
A system in which the reward increases over time (relative) could still be designed in such a way to benefit the early adopters and at the same time spread the wealth among more users (I don't have a specific proposal off the top of my head before someone asks). But maybe such concept was beyond the brilliant mind of Satoshi.
Bitcoins aren't "given" to anyone. Ask any bitcoin miner, and they will tell you that it takes a lot of time, effort, and money to earn just a tiny share of the block reward. It has been that way since the beginning. No miners have gotten rich from mining, and they never will. The people that have gotten rich are the people that have accumulated bitcoins regardless of whether they mined them, traded for them, or earned them. What you are really complaining about is the fact that some people risked their time and money on Bitcoin, and that they have been rewarded for that risk. |
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Eventually, the exchange rate won't be rising as quickly as it is now and it will maybe rise 1% - 3% per year. When we talk about bitcoin being deflationary, that is the kind of rate that is expected. Basically, nobody will lend bitcoins until the deflation rate drops below the prevailing interest rates.
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Nice job, Mike. Well done.
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I miss the newbie restrictions already.
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