How do you know what his plans were? Maybe it went exactly as planned. Maybe he knew that 30,000 BTC wasn't enough to crash the market and he was only trying to lull traders into a false sense of security.

Or maybe those 30,000 were a weather balloon.

Maybe next time he will dump 1 million bitcoins.

It's probably that nenolod guy distributing his coins between his wallets.

Maybe he's scared that we will expropriate him. 

bitcoinexchange.com

I transferred some EUR to their bank account in Finland and my Bitcoins came 3 days later.
Good source if you need some Bitcoins quickly. EUR bank transfers are free and there is less danger of chargeback than using a credit card or paypal.

Bitcoin is not trying to replace anything. This isn't an insurgency. It's trying to be a better currency.

The Fed will only pay attention to Bitcoin once it's gone mainstream and by then the Fed won't have enough money to buy every coin in existence.

Trust is something that can be created and destroyed at will, plus it's subjective, so it doesn't make sense to have a market in trust.

There are two happy days in the life of a red elephant owner.

Depends how it's done.

There's what I would call the static trust model. This is the one most commonly found on the web. It's used by Ebay, Amazon, Web of Trust, and many others.  The trustworthiness measure is simply a constant assigned to each agent.  The number is some sort of average of ratings of all people who have done business with that agent, perhaps weighted according to the size of the transaction or the trustworthiness of the payer.

This static model would not work with Bitcoin because Bitcoin is anonymous. There is no way of proving whether bitcoin address X belongs to person Y. If you allowed static rating of bitcoin addresses people would simply create new adresses and inflate their rating by sending money to themselves.

Then there is what I would call the network trust model. The trustworthiness measure of each agent is not a constant but a function of your location in the network. The idea is that a bitcoin address would only show up as trustworthy to you if it has been rated trustworthy by address owners that you yourself have rated trustworthy.   

This model would work well for bitcoin IMO. It's similar to a social network except that you can have "relationships" with anonymous users, and the relationship strength depends on transaction size and how long you have been doing business with them.

We should give him the benefit of the doubt. We shouldn't assume his intentions are malicious just because he is a banker.

While traditional banks may see their business model threatened by Bitcoin, there are other, innovative forms of banking that could benefit from a decentralised currency.

Sucessful p2p banks do already exist. Here is one example:

http://uk.zopa.com

The "meanigless computation" aspect is something that I too found ugly about Bitcoin when I first came accross it.

True, proof-of-work does create overheads. True, we could be computing protein structures instead of hash functions, IF we could find a protein computation algorithm that has the same properties as a hash function.

But then I realised that security always comes at a cost. More security will usually mean more inefficiency, but that doesn't matter too much because people value security.

Using the physical gold analogy: Sure, we would all be better off if we didn't "waste" our money on safes und just kept our gold coins in the drawer. All we would need to do is to mutually agree not to steal from each other. Then we could spend the money on something more sexy than safes.  But in all but very small and tight-knit communities, this is unworkable because it only takes one rogue...

In any case, the overhead imposed by the proof-of-work function isn't that high. Generating coins is only a small part of the economy; the price of bitcoins is low enough to make generation unprofitable for the vast majority of users.

It is reasonable to assume that the few users who still do generate coins, do it at almost zero marginal cost, utilising resources that would have gone to waste anyhow. So it is not as ineffecient as it seems.  

His marginal cost of generating bitcoins is probably close to zero. Maybe he owns a windmill and just pumps the electricity peaks, which would have gone to waste otherwise, into generating bitcoins. Same for the unused CPU cycles of his server farm.

This doesn't change the fact that selling bitcoins way below the market price would create opportunity costs for him. No rational person would sell a thing for less than people are people are prepared to pay it, even if they found that thing on the street.

Of course he might not be a rational person, but the majority of buyers will be.
 

There is going to be someone somewhere in the world for whom the marginal cost of generating bitcoins is zero.

For example:

1) A server farm that is used for some other profitable purpose during the day and sits idle during the night.

2) A geographical location where electricity made from cheap, always-on sources and surpluses produced during the night are wasted anyhow. Iceland comes to mind.  I'm sure in some parts of the world it's possible to negotiate contracts where you pay nothing for electricity during certain hours. Or some sort of pure flat fee.

That someone will always be motivated to generate coins no matter what the price. The only limit to the generation rate will be the amount of capital at her disposal.

For the vast majority of users, however, generation will become unprofitalbe and they will give up.

Hence difficulty will not depend on bitcoin price, but on the number of new users who find ways of generating coins for free.

This too can be handled by the repuation system. There doesn't need to be a top-down one-account rule. Alice can claim she is Alice all she likes, but if Jose, Sabrina, Anna, Colin, Peter, Jasmin, and Michael all claim that Alice is Bob, then nobody is likely to believe Alice/Bob.

It is easy to open a Facebook account claiming you are somebody that you are not. But it is almost impossible to make that account *well connected* and uphold the lie. The person you are impersonating is more likely to find out the more connections you have, and they will tell those connections.

Poorly connected identities should thus always be viewed with suspicion, and remember, connectedness is not only a function of the number of connections but of the topological distance from the center of mass of the network, and the latter is extremely hard to forge.

If authorities started blocking the websites bitcoin.org and sourceforge.net/projects/bitcoin/ they could actually be doing the bitcoin community a favor!

A dozen alternative sources for the bitcoin client would spring up. Other conventional websites, .onion sites, .i2p sites, torrents, emule, usenet binaries, usb sticks hidden in geocaches, etc. The bitcoin community can be pretty evangelical, especially when provoked. Shutting down one source at a time would then become a game of whac-a-mole for the authorities, with each major shut down generating free publicity for bitcoin.

It would remove the only single point of failure that remains in this project.

At worst, this would cause the whole bitcoin project to fork into several parallel currencies with independent chains and slightly different clients/rules. But I see that as an advantage because it would mean even more resilience and redundance.  Exchanging Bitcoin for Bytecoin is much easier than for USD or EUR; the overhead would almost be as low as for an internal Bitcoin transaction and the exchange rates would reflect the desirability of each Bitcoin fork.

You don't have to associate with the "industry" in order to run an adult site. Set up a studio, place some ads in your local newspaper, sell the movies on a .onion site that only accepts bitcoin. Even if some Pron Gangsta guy, presumably in California, decides to "make you pay", well he is going to have a hell of a hard time to find out who you are in the first place. And even if he does, will he bother coming after you if you don't live in California but Finland? or Brazil? Not likely, as long as you keep a low profile. 

Or maybe I'm being naive here. The thing is just, there seems to be a growing cottage industry of "Erotica by Amateurs for Amateurs" on the web, and I find it hard to believe that these people are all getting death threats from the Pron Mafia.

Wouldn't work.

The cornerer would simply generate thousands of new bitcoin addresses and distribute her wealth eavenly among them. How do you prove whether a bitcoin address belongs to a certain person? How do you prove whether physical  person X has access to private key Y? You can't.

A better idea would be a damping of the trading volume built into the bitcoin algorithm.  For example, you could have a rule of thumb that no more than 10% of bitcoins in existence may be traded each hour.

The algorithm could use floating transaction fees that increase as a function of all bitcoins traded the last 60 minutes. As the trading volume approaches 10%, the transaction fees approach 100%.

This would not prevent someone from cornering the market, but it would prevent panic selling.

Someone who owns more than 10% of bitcoins could of course clog the whole system by sending large volumes of coins to himself, but he couldn't do it for long, and he could only do it once. He would leak massive amounts of coins as transaction fees are paid out to those generating blocks.

Rather than permanently crashing the bitcoin price, such an attack would simply make the market unusable for a few hours.

What's so special about money? Money is just one form of storing value, among many. What if your profit isn't money but, say, a friend who thinks he owes you a favor? Then the originator doesn't deserve a cut? Why not? The profiteer is profiting either way.



Not true that *nobody* will be motivated  to do anything if there's no money in it. Perhaps fewer people, but not nobody. Psychological studies have shown that intrinsic motivators (eg. sense of purpose, belonging, social status) are stronger motivators than extrinsic motivators (eg. money, threat of punishment).

As for compensating creators, I agree that it is the moral thing to do, but that doesn't mean it should be an obligation.  Just like saying "thank you" and helping old ladies across the street shouldn't be.

There is a difference between advocating violation of contracts, and providing a tool that *may* amplify the harm caused by the violation of a contract.  The act of selling a crowbar to a know burglar does not  in itself constitute advocacy for burglary.

Also, believing that people should have the freedom to behave in a certain way does not mean you necessarily approve of that behaviour personally.  It's still a freedom worth advocating, even if it means more of that behaviour will take place.

In any case, there are plenty of ethical uses of Tor that would also benefit from bandwidth trading.

And what if XYZ does violate the contract? How harsh would the penalties be in absence of a government-sponsored MPAA racket?  Yeah, you could draft a contract that said "if you leak the film you owe me $100 million compensation", but good luck finding a theatre chain who would be prepared to take that kind of risk. On the other hand, if the mutually agreed penalty was more market-realistic, say $1 million, that would no longer serve as deterrent onerous enough to prevent a leak. All it takes is 1 out of 10,000 employees being careless, or dishonest, and the damage is  irreversible. XYZ would not bother investing millions in airport-style security scans for every cleaning lady that enters the cinema building. It would simply accept the risk of paying the penalty.

What bitcoin needs to take off, is a killer app.

The only people who are motivated to use bitcoin at the moment are cyphergeeks, who are attracted the beauty of its internal mechanics, and rabid libertarians, who see it as a tool to spread their ideology. The vast majority of internet users are neither of those. Paypal fulfils their needs just as well as bitcoin, so why would they be motivated to switch?

The killer app, IMO, would be a system for trading bandwidth on anonymity networks such as Tor and i2p. The problem with these networks at the moment is that they are slow and inconvenient as they rely on volunteers to provide bandwith and suffer from congestion.

If Tor users had a way of paying for node providers anonymously, the size and speed of the network would explode.  Anonymous bittorrent would become viable, and judging from the amount of bittorrent traffic on the net, there is no shortage of demand. Increasingly draconian copyright laws, and their increasingly heavy handed enforcement, will motivate even the most lazy bittorrent users to switch.

That is one application where bitcoin has a big competitive advantage. There are few, if any, other currencies suitable for anonymous bandwidth trading.

The total money supply of USD, for instance, is somewhere between  $1 Trillion and $10 Trillion:
http://en.wikipedia.org/wiki/Money_supply

Now imagine the extreme scenario where Bitcoin replaces all USD transactions in the world:

That would mean that each Bitcoin would be worth approx. 1e13/2.1e7 = 480,000 USD.

The smallest possible unit would be worth 480,000/1e8 =  0.48 cents

In other words, even in most wildly optimistic future scenario, a divisibility of 8 figures would more than suffice.