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Is the site down for anyone else? I see some "SiteLock" website at amagimetals.com
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There are two separate questions here, and I'm not sure which you are asking.
Why should the total value of all Bitcoins be $5.1 billion? (Is the Bitcoin economy overvalued or undervalued as a whole?)
Why should the number of arbitrary divisions of Bitcoin be set where it is, giving each a value of $385? (Does such a high value make it more awkward to talk about and use in everyday transactions?)
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Aside from the issue of whether there should be a Bitcoin central bank, OP puts the cart before the horse.
There can't be a Bitcoin central bank unless and until a large portion of Bitcoin transactions are done through Bitcoin banks. I would estimate that portion is currently close to zero percent.
If we don't have widespread use of Bitcoin banks, a central bank can't regulate Bitcoin banks, it can't control Bitcoin bank lending or reserve ratios, it can't act as a lender of last resort to Bitcoin banks that don't exist.
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They could surely try, with varying possible degrees of success.
They could make it illegal for any banks to do any business with Bitcoin exchanges, which might stop large Bitcoin buyers in countries where this was made illegal. This could cause a significant drop in the value of Bitcoin.
However, they could not prevent smaller scale Bitcoin transactions from taking place without implementing a 1984-style police state and completely destroying the concept of free speech. That isn't going to happen, and if it does, Bitcoin is the least of our problems. (After all, Bitcoin is just people sending messages to each other.)
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We should not encourage vandalism as a way of advertising Bitcoin.
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The problem stems from the fact that we can have what Robert Shiller calls ‘naturally occurring Ponzis’, that is, financial bubbles that form without the manipulator’s baton but from finished natural market forces and with one person’s expectations feeding into another’s,” says Basu. The quote defines a "natrually occurring Ponzi" as a thing sold at market that forms a bubble. This could very well apply to Bitcoin, as Bitcoin has been in bubbles and may be in a bubble, but that has absolutely nothing to do with Ponzi schemes. bubble != Ponzi. "Ponzi" has become a catch-all term for "something financial that I don't understand but I'm still suspicious of." And such people are going way out of their way to fit the word "Ponzi" in here somewhere, even if it's completely unrecognizable from anything Charles Ponzi ever did. |
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Great answers, thank you very much.
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Bitcoin address X contains 1.06 bitcoin.
Let's say a miner sees two unconfirmed transactions broadcasted - the first one says to send 1 bitcoin from address X to address Y. The second transaction says to send 1 bitcoin from address X to address Z. Both transactions cannot be completed. This is a double spend.
My understanding is that Bitcoin miners can write their own miner software to choose which transaction to process in any way they wish. They could include in the next block whichever transaction has the higher fee, they could go with whichever transaction they received first, they could go with whichever one has more of the letter 'Q' in the destination address because they like the letter Q.
But in practice, how would this normally be handled by most miners' software?
In practice, most miners will only see one of the two transactions. The nodes of the network will accept and relay the first transaction that they see. They will refuse to relay the second one, so it won't propagate across the network. If, on the other hand, you specifically connect directly to the larger mining pools, and send your transactions directly to them, then most mining pools will accept which ever transaction they receive first. They will ignore the one they receive second. Thank you for your answer. One more question though. How reliable is it in practice that miners will receive transactions in the same order they occur? Let's say one person has a habit of going out and making small Bitcoin purchases ten times a day, and receiving his goods with zero confirmations. And let's say every time he broadcasts his purchase transaction, he immediately broadcasts a second double spend transaction. Roughly how often will the second double spend transaction be confirmed in a block? I wonder if the policy of not relaying duplicate transactions ever backfires, and one node receives the second one first, and that node relays it to numerous other nodes, and now the doublespend transaction blocks out the legitimate one. |
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I think we should have separate subforums for the perennial posts of: 1. Bitcoin needs a central bank! 2. Bitcoin is a Ponzi/pyramid scheme! 3. Bitcoin is destined to fail because of economics especially deflation! 4. Bitcoin is destined to fail because 21 million isn't enough! That said, this is the first post I've ever seen that says Bitcoin is failing because the price is TOO STABLE! 
- - Bitcoin is stagnating
- - This is a failure of the free market.
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Well yeah, it's not exactly a Ponzi scheme per se, but it is a lot like oil and other natural resources, but they're a resource and not a currency. It is quite a lot like a natural occurring Ponzi scheme though. I don't anyone has actually explained this yet, the core point I'm getting at is if the supply is inherently built to continually diminish, then wouldn't the price continually increase, and that in itself is can't sustain a stable currency and the people who invested early will never be at risk because their asset will be guaranteed to continually appreciate in value
Bitcoin has had very large drops in its price and this risk is still present. The number of Bitcoins in existence never inherently decreases (though it will if people lose their Bitcoins), but the rate at which it increases will slow down over time. That Bitcoin is supposedly guaranteed to increase in value over time, as you say, is a self-defeating prophecy. If anything is guaranteed to increase in value over time, people will speculate in it right now, which will drive up the price right now, which means it is already at the point where people expect it to be in the future. The role speculation plays in the value of Bitcoin thus dwarfs the effect of reductions in the rate of Bitcoin creation. |
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But it would take resources to intentionally orphan the last block in order to double spend a transaction with 1 confirmation. It takes no resources to double spend a transaction with zero confirmations. So, there is some security improvement when you compare 0 confirmations and a longer block time, to 1 confirmation with a short block time.
I understand what you are saying. But help me understand the Bitcoin protocol here. Let me know if I have some of this wrong: The Bitcoin network is interconnected nodes that share unconfirmed transactions by broadcasting them among the nodes. A wallet application joins the network by connecting to one or more of these nodes. When BTC is sent from one wallet to another, it is sent through the network and the receiving wallet sees the transaction. A transaction must be verified by a node before it is sent to the next node. Part of this verification is a check to see if it duplicates an input from another transaction, either one in the blockchain or one in the unconfirmed pool. Thus, it is difficult to double-spend because the transaction with a duplicate input would have to be introduced into the network before the 1st has propagated. Not only that, but the double-spend would only work if the recipient of the 2nd transaction was connected to a part of the network to which the 1st transaction hadn't been propagated. Thus, to protect against a double-spend, the recipient only has to wait long enough for the transaction to propagate through most of the network. This is less time than the wait for the transaction to be confirmed in a block. You're close. Bitcoin nodes relay new transactions to each other, but they don't necessarily (and don't usually) mine a new block when relaying new transactions. Until a new block is mined that includes a new transaction, (usually 10 minutes on average, but this varies) it is not certian which transaction will be included in the blockchain (confirmed) and which transaction will be ignored*. Miner software has to decide which one to include. It is up to the miner to decide how to rectify this situation, and I'm not certain how off-the-shelf miner software typically handles it. I've asked in this thread here: https://bitcointalk.org/index.php?topic=758658.0*And even when a new block is mined that includes your transaction, there is a small chance (if other miners quickly mine two blocks in a row without your transaction) that this block may be replaced by another block that doesn't include your transaction. |
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Bitcoin address X contains 1.06 bitcoin.
Let's say a miner sees two unconfirmed transactions broadcasted - the first one says to send 1 bitcoin from address X to address Y. The second transaction says to send 1 bitcoin from address X to address Z. Both transactions cannot be completed. This is a double spend.
My understanding is that Bitcoin miners can write their own miner software to choose which transaction to process in any way they wish. They could include in the next block whichever transaction has the higher fee, they could go with whichever transaction they received first, they could go with whichever one has more of the letter 'Q' in the destination address because they like the letter Q.
But in practice, how would this normally be handled by most miners' software?
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Sound advice here from the CFPB.
I don't want to be the "I told you so" guy, but I never trust any Bitcoin business to hold my money for any extended length of time. I had used MtGox to buy Bitcoins for years and immediately withdrew at every earliest opportunity.
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After figuring out how the mining works, that it becomes increasingly more difficult obtain, wouldn't that just cause the price to keep on increasing, like it will never stabilize and outside of the speculative fluctuations, the price will always continue to rise and the guys who set it up and invested early sit on an asset that will continually appreciate in value. The distribution won't ever be even and prices will never stabilize for it to be an viable currency for trade. So the guys who created bitcoin really made a Ponzi scheme for themselves as the price is always set to rise due to the increasing mining difficulty
See the latter half of my signature. Additionally, 'rising asset values' is also not the definition of a Ponzi or pyramid scheme. Oil becomes increasingly difficult for drilling companies to obtain as the decades go by. Is oil a Ponzi scheme? Also, "The guys who created bitcoin" don't own or create all new Bitcoins - they are created and distributed, essentially, in proportion to the amount of computing power contributed to the network, and anyone can contribute. |
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If the government really wanted to fuck Bitcoin they would only need to folk out a few million and buy out most of the Bitcoin in existence right now and Bitcoin would become worthless.
This is complete nonsense. No one can buy all the Bitcoin in existence at once, at any price. No one. The government dumping millions into buying chunks of Bitcoin would make the remaining Bitcoin far more expensive, not worthless. |
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Banks serve three purposes, the first two of which are unnecessary with Bitcoin:
1. A clearinghouse for transactions
2. Safe storage place for money
3. Connecting lenders with borrowers
The fact that no one needs a Bitcoin bank for purposes 1 and 2 means that any lending entities/banks will have much more difficulty getting people to hold bank credit as payment in lieu of the actual money itself (a Bitcoin transaction on the blockchain)
Fractional reserve lending works for dollars because people tend to keep their money in banks for purposes 1 and 2, and the banks are able to tell people that they have more dollars in their account than actually exist in the bank's posession. It will be far more difficult for fractional reserve lending to take off with Bitcoin because nobody is going to want to have someone else hold their Bitcoin for them, and thus no bank will be able to tell them they have more Bitcoins than actually exist on the blockchain.
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The sole reason people use bitcoins is to more easily transact dollars (or any currency) from one place to another.
But would it make any difference if bitcoin price was $1 or $0.1 for its use?
Let's say you want to send someone $100 dollars and than you buy 100 bitcoins, send it to him, he receives them and sells them to get his dollars. Transaction of dollars complete.
There is no need to hold bitcoins except for hoping price will rise, and there is no reason for price of bitcoin to rise except if people hold them because of speculation.
Therefore, price is almost entirely speculative, because if it was up to usage price would be small since everyone would be selling them the moment after they recieve them.
You could say you hold it because you can buy stuff with it, but really you can't. You're just buying with dollars bitcoin represents (you're transacting dollars again). One bitcoin means nothing, you need to have it expressed in dollars to grasp the meaning of it. People need dollars because they're legal tender and they pay taxes with them, while nobody needs bitcoin. They just need it to transact those dollars, but they don't need to hold them.
Yes, people speculate on Bitcoin. I don't think anyone can deny this. So what? That people speculate on Bitcoin does not prove the price of Bitcoin is in a bubble that will inevitably pop. Bitcoins have utility that dollars do not. Bitcoins can be spent to anyone in the world who has a phone or computer, in minutes, with no international wire fees or chargebacks. |
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Once the transactions are confirmed in the blockchain, they are confirmed and no longer able to be double spent. Right?
No, this is incorrect. The block that contains the transaction could be orphaned. If block times are shorter, then it is more likely for a block to be orphaned, resulting in no difference in security. Unintentional orphaned blocks would become more common, yes. But unintentionally orphaned blocks can't be used to double spend because you don't know when unintentionally orphaned blocks will occur, (and without resources you can't guarantee the new blocks contain your double spend transaction instead of the legitimate transaction). But it would take resources to intentionally orphan the last block in order to double spend a transaction with 1 confirmation. It takes no resources to double spend a transaction with zero confirmations. So, there is some security improvement when you compare 0 confirmations and a longer block time, to 1 confirmation with a short block time. |
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