He has already defaulted.  Getting a long duration loan to avoid a default might make sense (usually it doesn't).  In this case he has defaulted.  The creditors are kinda between a rock and a hard place.  At this point simply take the ~10 BTC he "could" pay on the new loan and apply it to the old defaulted loans.  Is it optimal for the new creditors?  No but they can always sell the debt directly to a new creditor or they can accept repayment over 10 months is better than getting zero.

The idea of borrowing to get out of debt is just silly.  More likely the OP borrows, doesn't pay the creditors, and defaults on this note too.  Then what next a third sob story about how he needs a 250 BTC note to cover both sets of bad notes and he will use 50% of his SSI payment to repay it?  

TL/DR If he can pay 10 BTC a month then pay it towards the existing debt.  There is no need for a new loan unless the intent to defraud more creditors.

It is important to break the "51% attack" into two groups.  The economic attack (engaging in an attack with the intent to profit from the double spends or possibly by shorting BTC) and the destructive attack (engaging in a 51% attack with the end goal of destroying or significantly marginalizing bitcoin).

There is little value in an economic 51% attack.  The cost of such an attack far outweighs the amount of commerce which could be double spent.  Add to it the difficulty in having funds/goods delivered without detection and it really is just a monster under the bed ("don't let the 51% man get you, he will make your coins disapear".

The destructive attack however if still viable for a major corporation, a cartel of such corporation, or a governmental entity.  While those entities do have other resources (legislation, internet filtering, FUD campaigns, etc) the 51% attack can be done covertly.  Major governments engage in covert operations all the time.  Billions upon billions spent on programs and projects that the tiniest fraction of the citizenry even know exists.

That being said do I think a govt is going to 51% attack bitcoin?  No.  It likely will be futile.  The destruction on Napster only caused the community to develop even hard to attack resources and protocols.  In hindsight it would have been far better for the media industry to work with napster and develop a way to monetize it. 

It won't happen.   This isn't to say there won't be other private digital currencies in the future but it makes no sense to have a blockchain.

Blockchain (and mining and all the costs & limitations that come with it) = a workaround to achieve decentralized consensus.  Having a centralized decentralized currency makes absolutely no sense.  You get all the trust and implementation limits of centralized control combined with all the costs and attack vectors of decentralized control.

As a hypothetical lets say a one of the banks got hacked and attackers used their mining node to implement a billion dollars in double spends.  Are the banks going to let that stand?  Of course not.  They are going to reverse those transactions (roll them back).  How can they do that?  Simple it is a centralized network.  It would be no different than a PayPal reversal or credit card chargeback.  So mining doesn't secure this "bankcoin", the centralized control of the network does.  If mining has no purpose then there is no reason to waste the resources doing it.

This.

Also you do realize you are creating a spam incentive right.  The profitable thing to do right now is via web searches and screen scrapes find every payb.tc address you can and after 1 JAN simply re-register them all to hijack any funds sent there in the future.

We don't even have Bitcoin 1.0 yet.  The death of Bitcoin 1.0 before the birth of Bitcoin 1.0 seems kinda premature.

There is no enforcement mechanism.  Miners are (intentionally) free to choose which transactions to include in a block.  If a miner wanted to they could mine "empty" (containing only the reward tx) blocks.  There are numerous technical reasons why the network operates this one. 

As for what is the incentive?  Transaction fees. 

10^4 Dwolla deposit pending since 11/19.  

Not that I advocate vigilante violence but there is a reason why Bitcoiners gets robbed more often then say a Mexican Drug Cartel.  Psst it has nothing to do with drugs.

Simple version is Bitcoin is a target rich environment.  You have the scammers fantasy of
a) people with money (or value).
b) people who are amazingly dimwitted (lets hand a guy named "Pirate" $5M in irreversible currency in a "super secret" business plan which exactly resembles but obviously for super secret reasons isn't a ponzi).
c) people who will do absolutely nothing when robbed.

To pull off a scam you have to have mark (see point b above), who has something worth stealing (see point a above), and you have to get away with it (see point c above).   The scammer trifecta.  Bitcoin will continue to attract bolder and bolder scammers, conmen, ponzi operators, and hucksters until a, b, or c are no longer true (or less true).

This +21,000,000.   The whole meme of "print free internet moniez your computer for solving puzzles" is a determent for further expansion.  Anyone that meme would have appealed to should have joined 3 years ago.  Today the margins on mining are small and shrinking.  It is requiring real capital, real planning, and involves real risks.   Today most people hearing "free moniez for solving puzzles" either will be pissed to find out this free moniez is going to require putting out thousands (possibly tens of thousands) of dollars into a complex, high risk venture or will just dismiss it as a scam.  Face it the initial reaction to "free moniez" is SCAM. SCAM. SCAM. SCAM. SCAM. 


Bitcoin is a currency and a payment system.  Lets start there.  What is the purpose of mining? Not HOW does Mining work but WHY do we have mining?  PayPal doesn't have mining, VISA doesn't have mining.  Why does Bitcoin have mining?  More importantly what is the only aspect of mining that "Joe Consumer" gives a flying crap about?  It sure as hell isn't "free internet moniez".  Mining keeps his transactions (and thus the value of the coins he holds) SECURE.

Mining = Transaction Validating = Security = Value.  Far more people buy gold then try to excavate their own gold.  The "mining" sales pitch immediately tunes out 99% of potential users.  Personally I wish the word mining would go out of the vocabulary but please please for the love of Satoshi drop this "free moniez for solving puzzles" nonsense.

There is a very simple logical progression.

1) START WITH COMMERCE.  That is what your audience cares about.  Bitcoin is commerce.  Bitcoin enables the end user to send value anywhere in the world, nearly instantly, and at very low (sometimes zero) cost.  Bitcoin enables the user to receive irreversible payments which can't be reversed due to fraud.  If you aren't starting here at commerce and the benefits you are doing it wrong.

2) After you explain the benefits of Bitcoin it becomes immediately obvious that the network must be secured.  The network must ensure coins are only spent once.  To do that requires the work of "transaction validators" = miners.  Miners put transactions in a block and secure them by proving that a certain amount of work was spent to find a solution which solves the block.  This ensures an attacker would need to "spend" just as much work to make a forgery.  Blocks are combined into a blockchain which grows by consensus and .... FORMS A PERMANENT TRANSACTION RECORD which secures transactions against misdirecting funds, forgery or duplication.  The bold part is the only part consumers and merchants care about.  If you don't discuss the why then you are 100% wrong.

3) Now (and only after #1 & #2 are explained and if you have 10 minutes to talk then 9:30 should be spent on #1 & #2) miners are compensated for this WORK they perform to SECURE the network.   Miners receive small transaction fees (far lower than VISA or ACH, or Western Union).   However when the network is young the amount of transactions may be insufficient to justify the expenses of miners to secure the network.  So the network provides a SUBSIDY to miners.  This subsidy is rewarded per block solved and decreases over time until the subsidy is gone.

My guess is most people who talk about Bitcoin are "mining nerds" and thus talk first about mining but honestly if gives a distorted view of Bitcoin and comes off as kinda ponzi/weird/scamish.   It would be like explaining to someone what a personal computer is and starting with a very detailed explanation of how to play Counterstrike.

Issue is resolved.  It likely was me jumping the gun, combined with lack of communication due to travel.   

Locking.

Resolved.

Are you having a reading comprehension problem?

YOU not ME said "stand your ground and make them go to court and try and prove that bitcoins are money".  My opening OP had "So what happens if tomorrow FinCEN states that Bitcoin exchanges are money transmitters?"  i.e. the premise is AFTER FinCEN has already begun to regulate Bitcoin related commerce (at least where they can = interaction with fiat money systems).

I AM NOT ATTEMPTING TO OPEN A BITCOIN CREDIT UNION.

As long as the protocol supports a method for node to identify their capabilities and allows a node to find a "full set" node to relay to it really isn't a problem.   

Currently they can't which likely would mean a lot of confusion.  i.e. I create a valid tx, submit it, and it is rejected by all my peers.  The tx never goes anywhere.  My nodes keeps trying to send it forever and the recipient never even knows it exists.

The approval isn't for you.  The approval is so the FCC doesn't shut down production and subject the manufacturer to penalties and fees.

Computer nerds building a financnial service business?  Buys cool uber computers?

This risk in doing that is that honest nodes lacking the unimportant tree won't be able to unimportant txs.  This can allow an attacker to flood the network with bogus transactions which honest but uninformed nodes will still forward.  One countermeasure could be to require a proof of work on unimportant transactions.  Nodes lacking both trees couldn't validate the tx but could validate the proof of work.  Thus there is now a cost for attackers in attempting to flood the network.

A side note:  even if all nodes kept all tx (as they do now) pruning out the spam along with spent tx into a separate table, db, index may improve performance.  Essentially the ultraprune method but include "low probability" outputs in the spent set.

So a node receives a tx.  It does a high speed lookup in its active but unspent tx set (which may be cachable in memory).  If there is a match it validates, adds to the memory pool, and forwards.   If there is no match it looks in the spent & improbable set.  Most transactions are performed quickly.  The occasion bulk spent of low value outputs may require a second slower lookup but it is offset by the gains in performance on the majority of transactions.

Ok Bitcoin is money and now any exchanger is subject to all the state regulations regarding money transmission.  That was kinda the whole point. Eventually FinCEN will make a definititive declaration that Bitcoins is money (unlikely) or that Bitcoin is a currency substitute and thus Bitcoin related enterprises to both federal and state regulation.

"Standing ones ground and taking them to court" would simply make that day arrive sooner.

First, no Tangible Cryptography is not looking to start a Bitcoin Credit Union (well at least not in 2012 ).

In the US a large portion of the regulatory costs comes from state regulation.  So what happens if tomorrow FinCEN states that Bitcoin exchanges are money transmitters?  Simply register with FinCEN as a money transmitter, a type of MSB (Money Service Business).  Easy right?  Well no.  Registration as a MT under FinCEN MSB program would be a defacto admission to the states the entity is engaging in money transmission.   This is an activity that most (32 IIRC) states regulate.  Even worse there are at least nine state which regulate this activity even if the business is not in the state. As an example if your service is available to NJ residents you must register as a MT in NJ even if your business is not located in NJ.  So for example if you wanted to comply with MT requirements it would mean filing, approval, reporting and compliance to 11 different entities (FinCEN + your home state + 9 states which require outside entities to register).    Wow your regulatory burden just exploded.   Now it gets even more fun.  Each of those 32+ states is continually changing requirements all the time.  In any particular year the odds are at least one state makes a material change.  So throw on top the need to continual legal counsel and some quarterly research costs just to remain you don't accidentally become non-compliant due to a rule change in any of the individual states.  Most MT simply register with all states (even ones they don't need to) in order to ensure they aren't caught in some future legal entanglement.  A hypothetical example would be NV considers your company affiliate program to be a nexus in Nevada and thus your non-registration as a MT is a violation of NV law despite your business not being in Nevada and Nevada not regulating outside Money Transmitters.

So why a Bitcoin credit union?  Credit Union's are federal charters.  There is significant case law which puts they outside the reach of state regulators.  For the record so are national banks but it is much "easier" (but still difficult) to get a CU charter then it is to get a bank charter. Deposit entities (like CU) aren't required to have more than one branch and with online banking it is possible to establish a national footprint.  Bitcoin supporters could even have their paychecks deposited into a Bitcoin credit union (and thus gain the ability to instantly convert some or all of that into Bitcoins).  Funds would be FDIC insured just like any other CU/Bank.  

Granted this isn't something which could be done easily or cheaply but it isn't beyond the realm of possibility. Startup costs are in the tens of thousands.   Charter application requires 3,000 signatures (technically as low as 500 but that requires additional evidence of support).  The entity would need to maintain a couple million in deposits (say 2,000 depositors depositing an average of $1,500 each with a couple of major contributors putting in the FDIC NCUSIF max of $250K ea).   An option to ensure minimum deposit requirements would be to have initial deposits held as an interest bearing 5 year CDs giving the new entity some time to build up a membership and deposit base.  The minimal ongoing costs would be maybe half a million to a million (total back of napkin estimate,  say $400K in salaries, $100K in outside auditing, $50K building/rent/etc, $120K in interest,  $10K in FDIC NCUSIF insurance premiums, etc).  Obviously a full featured financial institution would have much higher costs but it also would likely have much larger deposit base and revenue.

The entity wouldn't need to engage in fractional reserve or even offer loans.  If it did the profit from those loans (assuming loans are profitable) would lower the costs of members.   CU are allowed to charge a membership fee (most don't in order to attract depositors).  If the CU became a very large exchange then exchange fees could cover a large portion of the operating costs ($100M @ 1% = $1M revenue).  

Anyways just wondering if anyone has looked into this.

I don't think you will get a change like that into Bitcoin at this point.  I would stay away from the "D" word.  It is only going to draw emotional responses.  I don't see a problem with ultra tiny transactions being scrubbed over time but it will be a hard fork and the odds of that happening on anything other than critical fixes is roughly 0%.  It may be useful to use in a new coins.  I would make it a lot less complicated than your mult-tiered system though.  Anything below X becomes can be expired and included in the next block after it is Y blocks old.

Maybe a better system would to have limited the number of digits.  Requiring increasing digits to require a super majority of miners approval.   Start with something like 3 digits and let it expand up to 10 digits based on need*.  Everything internally would be stored as 10 digit "satoshi" integer values.  


*21 million BTC @ 10 digit precision stored as an integer would be max value of  210,000,000,000,000,000 which is less than the max value of 64bit unsigned int  (18,446,744,073,709,600,000). .  If the total number of coins was made to be 18 million instead of 21M one could get 12 bits of precision in the same 64bit unsigned int  18,000,000,000,000,000,000

It is a private payment system only used by the US military and only accepted by approved military contractors.   If it is anything like any other military programs the application process is probably 50 to 100 pages, must demonstrate it fulfills the needs of the military, require operators to have security clearance, etc.  The process alone probably costs in the tens of thousands of dollars and you might (assuming all key personnel already have security clearances) get a final decision in 6-18 months.

I think it is more likely VISA issues a Bitcoin backed credit card than you see bitcoin exchanges even having the ability to accept Eagle Cash payments.

BTW it works pretty well the last 3 months I was in Iraq they were rolling it out.  Works pretty much like cash protected by a PIN.  You lose it, it is lost.  If the chip gets damaged you can get a refund.  All your funds aren't at risk because you can reload the card from your bank account (or advance on next paycheck IIRC) using a terminal (so nobody had $80,000 sitting on an Eagle Cash card).  You can only spend it at approved merchants.  There is no p2p capability (i.e. no sending $5 from your card to a buddy because you owe him).  "real cash" was still popular because you could use it with locals and for playing poker.