I've often thought that a good way to reduce the spread would be to reduce or even waive the tx fee for any bid or ask that is inside the current spread. 

Edit: This would also make it such that anyone could act as a market maker without needing any kind of special arrangement with mtgox.  Also, a bid that is above the lowest ask (or a market order) would not be inside the spread and hence not eligible (and same for an ask that is at or below the highest bid).

@justmoon, why did you need to use a forked mongoose with bitcoinjs and why make it a submodule (i.e. why not treat it like as an ordinary module found via NODE_PATH)?

Also, how about setting up a separate forum (maybe a child forum to this one) and IRC channel for bitcoinjs development?  Maybe #bitcoinjs or #bitcoin-devjs?

The very recognition that there is a potential tragedy of the commons problem is what will prevent it from actually happening.  The essential problem is that the current fee system will steer toward the most power efficient solution without regard to the overall security afforded by that solution.  But, the pool operators will have a large voice in setting future transaction fee policies and they'll educate other miners on the need to abide by them.  They'll ponder the level of security sustained by a given level of difficulty and adjust fee policies such that a level of mining activity can be sustained that effectively protects bitcoin.  There are lots of ideas about alternative minimum fee structures and miners will start to experiment with different formulas for determining minimum fees.  I'm pretty confident that a solution will be found and there is plenty of time to find it.

Currently, the miners just issue a getwork request, which includes the merkle hash of the transactions (among other things)...hence it is the pool that determines which transactions are included in a block.

I think the future of this is to develop a miner that is easy for a person to install and that websites could interface with...a user would have a choice between ads, mining or direct payment for access or content.  A given website would stipulate a number of hash computations required for access and the miner would use spare cycles and run overnight to try and satisfy the requirement of all websites the user subscribes to...if the user tries to sign up for more sites than his hardware could possibly handle, it would alert him to that fact.  People with efficient GPUs would have a lot more of this currency to spend on website access.  But people with less efficient hardware might still use this method to access websites as it might be preferable to a separate billing or ads even if the electricity cost exceeds the value of the bitcoins they mine.

This is a really great idea!  I think it's a good step even considering the longer term costs of transaction signature verification and maintaining the full block chain.  In the future, miners could pick and choose how they want to operate...they could have their own TX policies, but they could also be given transactions by the pool or even by another third party.  They could opt to do transaction verification themselves, or purchase that service from someone else (who would get economies of scale by having many customers requesting verification of the same transactions).  They could maintain a full block chain themselves, or use the services of someone else that charges a fee for it.  And the pool itself could also bundle these services.  But what this does right now is make it so that pools can operate without forcing their TX acceptance policies on their members (although, I suppose the pool could still set some rules by rejecting blocks that violate their rules...but at least the miners have a larger say in the matter).

Oops.  So, I worked out some estimates for a website that gets 10,000 hits/day and where people stay on the page an average of 5 min.  If I did the numbers correctly, that would be on the order of 0.001 BTC/day (or $0.0065 at current exchange rates).  This doesn't seem like very much...how would advertising usually compare with this?

It's awful tempting for me to keep adding more mining power to keep my bitcoin production from falling as difficulty rises, but I'm quickly going to exceed what my infrastructure can currently handle.  Mining is addicting, however I have to keep reminding myself that if I'd had just put the money I have spent on rigs into purchasing bitcoins, I would have had 5x the number of bitcoins that I have right now and a much (much!) larger profit.  It's not that mining isn't profitable, it's just that if you believe in the future of bitcoins, you might be better off putting cash into bitcoins directly.  I'm glad I have the mining capacity that I have...it's nice to have been able to keep generating bitcoins rather than chase the market higher...but now that the price seems to be dropping, I'm scaling into bitcoins directly rather than buying more hardware for mining.

I compared this with the native Bitcoin c++ client's mining...I am getting 4 to 5x the performance with your Javascript miner (running on OSX in the Chrome browser).  Can anyone else confirm that (I'm getting about 9Mhash/s in the browser vs less than 2Mhash/s with the bitcoin client)?  If it's really the case, that's quite impressive!

I started mining back in March...I would have been much better off putting that money directly into bitcoin due to the appreciation in that time.  If the price remains stable however, it will be good for a few weeks until difficulty catches up and diminishes the profit margins.  Then you have to hope for further price increases.  But, with mining you own the hardware and could later sell.  For that reason, I view mining as a lower risk way of obtaining bitcoins, but one that may not pay nearly as well compared with buying bitcoins directly.  Also, don't underestimate the amount of time you'll spend on mining.

Ok, "as high as possible" is close enough.  So, what would that mean in practice?  The largest sustainable amount of wealth that the community could throw at mining?  The current block award of 50btc is 0.0008% of the total number of bitcoins currently in circulation.  Of course, with lost bitcoins, this percentage is actually higher.  So everyone holding bitcoins is subsidizing mining by this amount via inflation.  That's a drop in value of 0.000008 btc for each btc in circulation.  This percentage declines as the number of bitcoins in circulation rises.

I could imagine normalizing difficulty increases for Moore's law (to get a truer reflection of difficulty increases attributable to increasing bitcoin prices vs difficulty increases due to more computing power available at a lower price).  You could use something like 2^(blkNum/105120) for this normalization (105120 is approximately the number of blocks created in 2 years).  After normalizing for increasing hardware power, you then need to look at the question of how the average block reward should be levered to increasing bitcoin prices (is the relationship between price and difficulty linear after factoring out Moore's law?  i.e. if the price doubles, is the difficulty expected to double assuming hardware prices and power remain constant?).  Assuming a linear relationship between price and normalized difficulty, for a doubling of the price of bitcoins, how would you affect the average block award (in bitcoin terms)?  Cut it by 12.5%, 25%, something else?  I think you'd want to cut it by less than 50% if price doubles...you still want the increasing price to result in increasing block awards.  One the block award is determined, clients could look at the average number of transactions and the current generation award level to determine the minimum fee.  While there is still a 50btc generation reward, the formula could work out such that the minimum transaction fee would be zero.  But when the generation award drops to 25btc, the minimum fee could be something non-zero and based on this function and designed to replace some, but not all, of the 25btc that is no longer being awarded in the generation transaction.

Yeah, I suppose if the lady had given her the taco first, he might have been able to assert his right to pay with the gold coin under legal tender laws. 

I think the point was that bitcoin is not as useful as gold because it is not as widely recognized to have value.  That's certainly true.  But another equally valid point is that it's not necessary for everyone to accept bitcoin as payment for bitcoin to have value and to be valued.  Gold was cited as an example that it couldn't be used for exchange in a grocery store.  Even if they would take gold, there are plenty of other examples you could cite (try buying bread with BRK-A stock certificates, a barrel of oil, or a pack of cigarettes...I think a clerk would politely refuse and request payment in something they recognize and whose value they understand).

I disagree.  The crux of the matter is whether you believe that a commodity like gold must have some intrinsic value other than its utility as money for it to be useful as money.  I believe that the metallic value of gold is utterly and completely irrelevant to its value as money (aside from the metallic properties that are directly related to its suitability as money...i.e. it doesn't corrode away).  I also believe that gold's utility as money *is* an intrinsic value, just as I believe bitcoin's utility as a money is its intrinsic value.  For these reasons and others, I think gold is perhaps the closest thing to bitcoin that currently exists and is thus useful for comparison purposes.  It certainly isn't like fiat currencies, or bank deposits, or agricultural commodities, or stocks or bonds.

Many Austrian economists would agree with your point of view, but not all.

No, they do not have to accept it.  They do not have to accept pennies or $100 bills either.  They could even require that all payment be made in carrots if they wanted.  Legal tender laws in the US only require that people must accept legal tender for the settlement of debts.  You are free to request or require payment in any form you prefer for goods or services.

Really? http://www.youtube.com/watch?v=Ef0VG1WEP10


Try not to worry so much...miners flipping bitcoins just keeps the price from rising by more than it already is (and I for one would welcome a halving of the price with arms wide open).  They might not get what bitcoin is all about, just be thankful you do.  Besides, lately, compared with just buying bitcoins and later selling, mining rigs have been a poor investment.

I'm kind of interested about the dynamics of the early genesis of the block chain...Satoshi could have been the sole miner for a month before he let anyone else know about it and would have a amassed ~216,000 btc ...what would have been the reaction of the second person?  I think if it were me, I would have said "Satoshi, that's a really nice bit of code you wrote, but how about we start over with a new block chain."    ...Satoshi, realizing there would be two competing block chains and his might lose out would probably have been agreeable.  Then what about the third person that joined two weeks later?  That person might have said, great idea, but I have 5 people ready to start mining on a new chain, so you two might want to consider restarting your mining activities on it.  A fourth person might have advertised among their social network and recruited 25 people to start a new chain.  At some point, you get to a critical mass working on a chain where it is not feasible for new miners to overcome and that chain become *the* chain.  I know it didn't actually play out like this, but it's interesting to think about.

You cover a whole lot of ground (and a lot of ground that people have already discussed a great length in this forum).  I won't try to respond to everything, but instead just offer a few points:

- Bitcoin does have plenty of intrinsic value...not as a thing, but as a system (the software platform, trading sites, merchant services, escrow services, the mining community (which secures transactions), and the various people and merchants that use it on a daily basis)

- I think most people would agree that competition from another system that works substantially like bitcoin is a threat to bitcoin...the best way to counter that is to keep improving bitcoin's intrinsic value...at a certain level of adoption, a bitcoin competitor/successor would want to leverage the bitcoin infrastructure (and they would have strong incentive to bootstrap their own currency into existence using bitcoin)

- Gold's metallic properties were only relevant in bootstrapping it as a currency...today, its value has little or nothing to do with its metallic properties.  It is not valuable as money because it's used as jewelry, it is used as jewelry because it is valuable as money.  What does this have to do with bitcoin?  Well, you implied that gold is somehow better because of its metallic properties and I think its metallic properties are irrelevant.

- Gold and bitcoin are basically accounting units that do not require centralized management

- The only thing that will cause bitcoin's value to go to zero is some fundamental technical flaw that renders it useless as money.  That's not out of the realm of possibility.

Are people plotting how to "monetize" their bitcoins (kind of an odd way of putting it since bitcoin is money)?  I really hope so because I would welcome a drop in the price.

So, gold makes for a pretty good and almost pure physical form of money.  While bitcoin is pure money.  I'm excited to see where bitcoin leads.

Have I drunk the bitcoin kool-aid?  yes I have

I don't think hoarding in and of itself is bad.  People need reliable ways to save for future purchases just as much as they need a way to spend.  Also, if people hoard enough, eventually they will need to eat or buy things and they'll have no choice but to spend.  However, people do need to recognize that each incremental bitcoin they hoard is worth less and less.  For example, if you cornered 90% of all bitcoins, the market price would skyrocket, but the market price would not be an accurate indicator of the true purchasing power of the bitcoins you possess (it would be far less).  If there was some mathematical model that could make a person aware of this in the client, it might help people better gauge when hoarding starts to have increasingly significant diminishing returns.  If you could somehow estimate the portion of the bitcoin price that is attributable to your hoard, you could better understand it's true purchasing power.  That might discourage excessive hoarding.

No, the value is set by the marketplace.  The designer just created a system that is valuable.


For many of the same reasons that gold is worth a certain amount of coffee (and for those that think gold has in any way "fallen out of favor", I suggest you investigate the top holders of gold in the world).  The vast majority of gold exists in above ground stock stored in vaults and protected by armed guards.  Or, as Warren Buffet puts it: “Gold gets dug out of the ground… we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”  Yes, martians would be scratching their heads, unless they actually understood what money is.

I heard Gavin describe bitcoin as "pure money" ...I think that is a great description of bitcoin.  I like to compare it with gold.  Gold has value because:

- there is a limited quantity (due to physics and the composition of elements on earth)
- it's difficult to counterfeit (almost impossible and fairly easy to detect fake gold)
- it is not subject to inflation
- it is relatively easy to handle (due to the limited quantity, a small amount represent a large value)
- it can be secured relatively easily (vaults and weapons)
- it can be divided without losing value
- it doesn't deteriorate
- its value is not controlled by any central authority (though various powerful entities could affect its value)
- there is a worldwide market for gold (if trade is impaired in one region, gold could be sold in other regions of the world)
- there is no counter party risk associated with holding physical gold

(the value gold has as a metal are inconsequential to the value it has as money...aside from the fact that it may have been initially bootstrapped as a money due to such non monetary uses)

Gold is a relatively pure form of physical money.

Bitcoin has value because:
- there is a limited quantity (due to mathematics and the physics that enable rapid computation)
- it's difficult to counterfeit (also due to mathematics...the block chain and miners protect against double spending...double spending is also easy to detect)
- it is not subject to inflation
- it is relatively easy to handle (far easier than gold in fact, it's all digital after all)
- it can be secured (but unlike gold, you don't need vaults or weapons and if you do it right, one would have to torture you to reveal a code in order to steal your bitcoins and theft of your computers would yield nothing of value for the thief)
- it can be divided without losing value (to 8 decimal places, more if necessary...and unlike gold, change is never a problem)
- it doesn't deteriorate (as long as you take steps to make adequate backups)
- its value is not controlled by any central authority (though various powerful entities could affect its value)
- there is a worldwide market for bitcoins (if trade is impaired in one region, bitcoins could be sold in other regions of the world)
- there is no counter party risk associated with holding physical gold
- it is digital, which means people do not have to be physically co-located to transact with it
- it is pseudo-anonymous
- transaction fees are low or non existent

Bitcoin is pure money.