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1  Bitcoin / Bitcoin Discussion / Re: At what pricepoint is bitcoin dead? on: October 21, 2011, 08:40:27 PM
It would be safe to say Bitcoin is officially dead when you can't get a pizza (or two) for 10.000 BTC...
2  Bitcoin / Bitcoin Discussion / Re: Price stability, difficulty changes, fairness. infnite coins is NOT inflation on: July 28, 2011, 07:21:53 AM
- Anyone can create and send as many of these transactions as he/she likes.

Money must be either scarce or based on the credit of the issuer (LETS, ripple) to work.

Money in these transactions is generated by proof-of-work, which costs scarce resources.

No (noteworthy) inflation due to increasing moneysupply is to be expected, as one should be crazy to create more money if it's worth less than the cost of production. No (noteworthy, long-term) deflation is to be expected, as coins will be produced when appearently necessary.

This is like saying that we all should be allowed to counterfeit dollars and there would be no inflation because no one would print them if their price goes below the production costs.

Interesting idea, applying the suggested 'distribution scheme' to the dollar. Less practical, as the exact amount of 'work' needed can not easily be proven when dollars are printed. But suppose it could work and we'd have a dollar being worth it's production costs.

Obviously the number on such a 'dollar note' is no longer relevant, a 1.000.000 dollar note is just as easy to print as a 1 dollar note. So either you need a huge amount of notes to pay for e.g. a car, or some printing process has to be invented that can be proven to cost way more resources than the current printing process.

Also, bitcoin miner's calculations are the source of the bitcoin security. What those generating calculations are for? Just wasted resources?

Such questions are best asked to the current bitcoin developers.

I'm signing out (http://forum.bitcoin.org/index.php?topic=26738.0), this is my last post in this thread.

EDIT: http://www.thesmokinggun.com/documents/crime/got-change-million
3  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 07, 2011, 01:20:21 PM
The 10 year timespan is reasonable because the the coins don't become worthless after 10 years (at 6.25BTC/block), just twice more prone to a theoretical attack that is still very hard to pull off. There's plenty of time to fix the system and change the block rules for example to impose a minimal fee, thus making the "mine for fee model" sustainable.

Maintaining that bitcoins will be worth still 15$ in 6 years time (when the bonus drops to 12.5) is not actually "keeping all other things equal". It implies a major source of liquidity on the market in order to displace those miners that are currently cashing out. So I think a revenue lower bound of 1500$/hour is highly probable for the mining revenue in the next 10 years. On the other hand most of the buyers are currently motivated by hype and speculative mania, and they will be long gone if the price stays rock solid for years. This is why extrapolation for the next decades are useless, the pyramid monetary scheme will long destroy it before double spend becomes a major threat.

Quote
If Bitcoin would be well accepted and a solid economy would depend on it, frauding a few Bitcoins wouldn't stop that

Frauding a few bitcoins, once discovered, is irrefutable evidence that someone has gained ownership of the 50% hashrate underpinning the security of the system. Since that someone can launch a devastating attack at any moment, aimed not at double spending but at disruption, and the same someone can rewrite history to assign ownership of all coins to himself, informationally efficient markets will drive the price very low to counteract that possibility.

Quote
I don't see the need to do so secretly, isn't Bitcoin supposed to be 'not backed by law or goverment'?

That does not mean your trades are not subject to the law of the country where they are performed. Since bitcoins have a fair market value they are taxable and fraud will attract criminal responsibility. People have been indicted for stealing WoW gold. If you barter for a house with bitcoins and fail to deliver them the contract is void, and if you do it with intent you are committing fraud. Intent can easily be proven with your ECDSA signature on two transactions with the same source.

Yup, you're right, I (or someone else) might have to do so secretly. I don't agree the 10 year timespan is reasonable, but I'm sure we'd never come to an agreement on that. I'm signing out (http://forum.bitcoin.org/index.php?topic=26738.0), this is my last post in this thread.
4  Bitcoin / Bitcoin Discussion / Saying goodbye! on: July 07, 2011, 10:56:10 AM
Just a little goodbye to all my fans here!  |-)

In the last month I've been posting some critique here, starting with

http://forum.bitcoin.org/index.php?topic=4278.msg179112#msg179112

through a.o.

http://forum.bitcoin.org/index.php?topic=13969.0

and

http://forum.bitcoin.org/index.php?topic=15657.0

to

http://forum.bitcoin.org/index.php?topic=25760.msg325929#msg325929

I must admit that some of my posts here were a deliberate attempt to drive down Bitcoin's exchange rate. Not because I'm an adversary to bitcoins, envy early-adopters or wanted to 'buy cheap'. It was because I thought the current value hinders proper development of what a decentralized currency could have been. Getting people to think about solutions of problems that lay ahead (trust me, they'll arrive) instead of shouting 'BUY' or 'SELL'.

However, I've now come to the conclusion that Bitcoin's flaws are too fundamental and no longer believe in the current block-chain concept, as designed by 'Satoshi Nakamoto'. Therefore this is my last post and I will use it to refer to if I someone responds to one of my former posts. Thank all of you who gave me some descent retort, good luck to you all, and may Bitcoin value florish (because I will be happy to keep selling you some)!
5  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 07, 2011, 09:16:10 AM
Firstly I don't find any relevance in speculating what will happen in a few decades from now. The block bonus will stay above 12.5 BTC for the next decade, and it's entirely possible that bitcoin will run it's course during this decade and fail for unrelated reasons. This is the internet after all. I've expressed my doubts that the "mine for fee" model is sound from a game-theoretical perspective: it seems the users are incentivized to pay a fee as small as possible (maybe 1 satoshi) since there's no way miners can differentiate on the market.

Then we have a Bitcoin that will work (or not due to other reasons) for the next decade. I wouldn't be satisfied with that and I think as soon as people realize that Bitcoin is not 'for ever', they will not accept it for one decade either.

For the purpose of our discussion, in the foreseeable future and without massive growth of the number of transactions, the main motivation of the miners is the block bonus. At current prices the block bonus is over 500$/block and all other things equal it should maintain that $ value even if it drops to 12.5BTC: the miners that don't hoard are the main source of liquidity and if they inject less BTC the price will rise proportionally. So in order to rent 50% of the network you need to pay at least 1500$/h

If all other things equal, block bonus will be about 12.6 (0.1 fees) * 15$ (current rate) = 189$ per block after the next decade. And if all things equal, it will be 0.1 (fees) * 15$ = 1.5$ per block in normal Bitcoin operation, after the coin generation phase.

Secondly, you assume you will be able to amass this hashing power surreptitiously and use it repeatedly without being detected. That's not realistic. Honest miners are unlikely to rent you the hashpower since it's obvious why you needed it. Furthermore, if the average player is small, you will incur a high price in contacting many of them, and you will need to pay way above market rates to attract them. You will need to advertise and attract further suspicion upon yourself. It seems highly unlikely that your criminal endeavor reach the same economy of scale and efficiency the open network has. You will either build your own hardware, a capital intensive task, or buy it off the black market at very high prices in order to maintain discretion, from a handful of players (Large conspiracies inevitably fail). An hour of 50% hashpower will then cost maybe 150.000$, not 1500$

Assuming you finally get to 50%, using it for a whole day will quickly attract the suspicion of the community. It's not reasonable to expect to use it more than a few times without crashing the bitcoin price and halting most bitcoin trades. You can't double spend a few bitcoins many times, you need to double spend many bitcoins a few times in order to recover your fixed costs, and before your attack tanks the exchange rate due to panic.

If Bitcoin would be well accepted and a solid economy would depend on it, frauding a few Bitcoins wouldn't stop that. Either there's not going to be a solid Bitcoin economy or it will be feasible to double-spend some coins often enough to get one's investment back (and more).

One more question, what do you mean by: "as to not get caught"?

Assuming you manage to do all of the above and successfully double spend 1 million $ in BTC, the fraud becomes apparent quickly. If you buy a large house you will get caught and be indicted, I have no doubt about that. You need to launder the money quickly and maintain anonymity to pull a double spend. I believe it's much more effective to simply short the market and attack the network directly, assuming you have 50% hash rate (borrow BTC and sell out, then buy back in at pennies, no need be anonymous, just make sure the attack can't be traced back to you).

I don't see the need to do so secretly, isn't Bitcoin supposed to be 'not backed by law or goverment'? I'd not be committing fraud, I'd just be playing by the rules of the game!
6  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 06, 2011, 07:31:34 PM
I was referring to the specific attack described in the paper, rewriting history from block one and assigning to yourself all bitcoins, which is clearly a stupid way to steal bitcoins - they instantly become worthless.
I agree, that would be a stupid 'attack', at least not a very profitable one. In the paper it serves the purpose of proving that, even though not profitable, it is possible, and therefore undermining the principle of Bitcoin's block-chain as consensus. At least, as long as not 50% of total existing computer power is used 'in an honest way'.

Regarding merely double spending your bitcoins that's even less of a concern: you still need to amass millions of dollars worth of hardware and millions dollars worth of bitcoins - so that you can double spend them a few times and recover your hardware costs. It also means you need to find a trading partner willing to sell you millions of dollars worth of merchandise for bitcoins, and do so in an anonymous fashion preferably over the internet so as to not get caught. Good luck with that plan.

The temporary mining revenue of 50 BTC/block and later 25 or 12.5 BTC will be worth much more if the bitcoin network is regularly used for multi-million dollar transactions as opposed to buying a few grams of hash or an alpaca sock.

This is all reason why profit-oriented attackers are implausible, or at least their profit will be derived from the failure of bitcoins: speculators, governments, banks etc.

Have a look at the example above, I projected current bitcoin statistics to the moment there's no coin generation anymore. I dare you (or anyone) to alter some input values, like bitcoin value, transaction value, whatever, and I'll try to show such a scheme is still lucrative.

One more question, what do you mean by: "as to not get caught"?
7  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 06, 2011, 04:59:22 PM
It's pretty clear that rewriting the history is not equivalent with stealing everybody's money, rather it means destroying the system and making the coins worthless, so the likely attackers will not be profit-motivated by any definition of profit expressed in bitcoins.

There would be an incentive, by double-spending coins and making a profit that way, see example above.

The hashing power of the network already surpasses what could be accomplished by ~10 million commodity PCs, excluding even the largest botnets as worthy attackers.

About 99.8% of the hashing power of the network is currently paid for by temporal rewards of 50 bitcoins per block.
8  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 05, 2011, 08:57:43 AM

Quote
True, I did not take into account the initial acquisition value (which I would estimate at 10.000$ in the example above). I only took into account the depreciation of that hardware (and then added another $ per hour). I think that's not unreasonable and standard procedure in profit/loss calculations. The same trick could be pulled of multiple times with that very same hardware, or the hardware can be used for different purposes (e.g. video rendering) afterwards.

I don't think the attack could be pulled off multiple times. Either the value of bitcoin would plummet, or the network hashrate would increase significantly prevent future such attacks. The attack can't be a recurring source of income.


Then who would be paying for that significantly increased network hashrate?

I do agree there's a risk that bitcoin value would plummet, therefore my premise 'a truly valuable bitcoin, with a value that can be depended on'. So either the example shows such a scheme would be profitable, or that bitcoin value can never be depended on.
9  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 05, 2011, 08:46:07 AM
So after all that effort in getting 23 GH/s, you only make $2,000?
In the example I overestimated the cost, so there's a break-even when hashing for 20 hours at 5$ / hour and a 100$ scam. My point would be that it can be profitable to gain 51% of hashing power, and the problem of creating consensus as stated in Ben Laurie's paper is far from hypothetical.
10  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 05, 2011, 08:37:47 AM
But the ratio of cost to transaction value stays the same regardless of what the value of bitcoin is, since the cost of pulling it off increases at the same rate as the transaction value does, as the value of bitcoin increases.
Don't know exactly what you mean here, maybe you are agreeing that all values are proportional to bitcoin value?

Also, your claim seems to assume that all the transaction value in a block can be confiscated by the person doing the double spend attack, when in reality, the only thing they can steal is the money they transferred to others, by reversing those transactions, and NOT the entire transaction value.
No, in my example I used only one transaction of 100$, which would not be conspicuous. And it would probably not attract any attention if a few more of those transactions were slipped in.

It would definitely be much easier to attack bitcoin if transaction volume doesn't increase by the time coin generation becomes negligible, but your calculation of cost doesn't take into account the long term investment required to acquire a large amount of hashing power, not just purchasing the hardware, but getting the facility, setting it up, etc all of which have a huge fixed cost, and therefore the need to double spend for many blocks, to make back the cost of the investment.
True, I did not take into account the initial acquisition value (which I would estimate at 10.000$ in the example above). I only took into account the depreciation of that hardware (and then added another $ per hour). I think that's not unreasonable and standard procedure in profit/loss calculations. The same trick could be pulled of multiple times with that very same hardware, or the hardware can be used for different purposes (e.g. video rendering) afterwards.
11  Economy / Economics / Re: Bitcoin's kryptonite: The 51% attack. on: July 05, 2011, 08:08:21 AM
So, you want them to assume that neither the transaction fees nor the exchange rates increase in the future?  Huge coincidence that both of those assumptions favor your side in the debate?

"To assume is to be deceived." (Yiddish proverb)

I wouldn't want anyone to assume anything. Just saying that 99.8% of current total hashing power is payed for by the temporal generation of 50 bitcoins per block. And that it would be reasonable not to take these into account if (normal) bitcoin operation is discussed.
12  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 05, 2011, 06:52:28 AM
Quote
With that premise, that could very well be.

Thanks for conceding that.
You're welcome  |-)

Quote
The whole double-spending scenario is proportional to bitcoin value. If value were to go up orders of magnitude, the number of blocks needed to get your investment back goes down the same order of magnitude.

But difficulty, and therefore cost of a double spend attack, is also proportional to bitcoin value, so the rise in the potential reward of a double spend attack, is canceled out by the rise in cost in pulling it off, as bitcoin value increases.
I don't agree, as the cost of pulling it of is proportional to transaction fee cost, which is much lower than transaction value.

Let's look at the current state of bitcoin:

Rewards are 50 (temporally minted) + 0.10 (fees) bitcoins per block.

Resulting hashrate is 11326 (payed by temporally minted) + 23.6 (payed by fees) Ghash / second.

If nothing were to change in the value of bitcoins or transaction fees, I'd eventually have to produce 23.6 Ghash / second for a succesful attack. Which would cost me roughly 15 kW electricity (ca. 3$ per hour) and (very) roughly 1$ depreciation per hour of my hardware. Let's say it costs 5$ per hour all together.

I can then sustain an attack where I forge (double spend) say 100$ (which will not be conspicuous) for 20 hours (which should be more than enough to collect).
13  Economy / Economics / Re: Bitcoin's kryptonite: The 51% attack. on: July 05, 2011, 06:06:51 AM
Tens of millions of dollars for hardware, and millions more for manpower is expensive for most groups in the world.

You couldn't even start on something like this with less than $2,000,000.

Several orders of magnitude more computing power than the rest of the world combined to manipulate the chain? Hmmm. One thing is clear, you only need 50% or less of the total mining capacity (supposedly currently worth 50 million dollar or less) [...]

You guys forget one thing: Currently bitcoin is rewarding 50 extra coins per block (worth roughly 650$), that's what pays for the quite large current total hashrate of about 11,000 Ghash per second.

These 50 blocks are rewarded only temporarily, bitcoin is designed to run on transaction fees only, currently roughly 0.13$ per block.

Please redo your calculations based upon a hashrate that is about 500 times lower.
14  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 05, 2011, 05:28:10 AM
Quote from: Stevie
With 'truly valuable' I mean value that can be depended on, no matter what that value is. I certainly don't want to speculate about whether that value be higher or lower, but if it were higher, transaction fees would be worth more than now. But if I do a rough guess of the transaction fees (by inspecting a few blocks on the blockexplorer), they're now about 0.05 - 0.20 bitcoins per block.

That means, if exchange rates wouldn't change, a ROI of 0.2% of what it is now and with that an expected difficulty of 0.2% of what it is now. A not so huge investment is necessary for that.

I know, fees could rise, the exchange rates could rise, the number of transactions per block could rise.

If bitcoin is to be a successful currency, exchange rates and number of transactions will rise by orders of magnitude by the time coin generation per block has become negligible.

With that premise, that could very well be.

Quote
However, it's always safe to assume fees will be much less than total transaction value in a block, and therefore it's lucrative to calculate hashes of an forked block-chain with double-spent transactions.

Once again:

The cost of producing hashs is not a short term cost. It requires a long term investment in the hardware that produces them, so unless there's a way to double spend for hundreds of blocks without crashing the value of bitcoins, it would not be worth it. It would be more lucrative to just be honest.

The whole double-spending scenario is proportional to bitcoin value. If value were to go up orders of magnitude, the number of blocks needed to get your investment back goes down the same order of magnitude.
15  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 04, 2011, 08:13:38 PM

That's not actually a response.  Just a statement about your intention not to respond.

It's a response stating the conditions on which I will respond with respect to content.

I see now your motto is 'Usually right, but not polite.', and I'm wondering how far that'll get you. My motto would be: I'm happy to be proven wrong and I thank those who spend their time and effort to do so. But if you want me to return the favour, you'll have to ask nicely.
16  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 04, 2011, 07:02:56 PM
Oh, and Steve's paper has been refuted many times in many of the threads that he has posted it into.  Perhaps ridiculed would be a better word.

I wasted some time on it a couple of weeks ago.

'Ridiculed' is exactly the right word. And the reason I choose to waste my time on such reactions.

You didn't waste any time on mine.  I'm still waiting for you to respond to any of my criticisms.

Actually I did respond:

http://forum.bitcoin.org/index.php?topic=14693.msg215507#msg215507

17  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 04, 2011, 06:19:14 PM
Oh, and Steve's paper has been refuted many times in many of the threads that he has posted it into.  Perhaps ridiculed would be a better word.

I wasted some time on it a couple of weeks ago.

'Ridiculed' is exactly the right word. And the reason I choose to waste my time on such reactions.
18  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 04, 2011, 06:13:28 PM
Quote from: Stevie
Meanwhile I have come to the conclusion that it can be easily proved that as soon as bitcoins would become truly valuable, it would be lucrative to ‘fraud’ the system by gaining more than 50% of that cpu-power.

When they become truly valuable, transaction fees will be worth far more than they are now, which will increase difficulty, meaning the cost of attaining 50%+ of the hashing power will be far higher than it is now.

With 'truly valuable' I mean value that can be depended on, no matter what that value is. I certainly don't want to speculate about whether that value be higher or lower, but if it were higher, transaction fees would be worth more than now. But if I do a rough guess of the transaction fees (by inspecting a few blocks on the blockexplorer), they're now about 0.05 - 0.20 bitcoins per block.

That means, if exchange rates wouldn't change, a ROI of 0.2% of what it is now and with that an expected difficulty of 0.2% of what it is now. A not so huge investment is necessary for that.

I know, fees could rise, the exchange rates could rise, the number of transactions per block could rise. However, it's always safe to assume fees will be much less than total transaction value in a block, and therefore it's lucrative to calculate hashes of an forked block-chain with double-spent transactions.
19  Bitcoin / Bitcoin Discussion / Re: My Response to Ben Laurie’s ‘Last Word’ on Bitcoin on: July 04, 2011, 12:40:51 PM
About one month ago, I wrote a little paper

http://www.newbitcoin.org/documents/newbitcoin.pdf

in which I stated that ‘Bitcoins are not truly decentralized’ and that developers should refrain from hard coding ’correct block hashes’ in a reference implementation.

At that time I didn’t fully realize the implications of what Ben Laurie now stated more formally. So the rest of the paper is an attempt to establish an improved decentralized currency, based on a ‘block-chain’ created by 50% or more cpu-power.

Meanwhile I have come to the conclusion that it can be easily proved that as soon as bitcoins would become truly valuable, it would be lucrative to ‘fraud’ the system by gaining more than 50% of that cpu-power.

1) Gain 50%+ of the computing power.
2) Generate transactions favouring you and have them included into the block chain.
3) In the mean-time, with your 50%+ power, start creating a forked chain, with your coins double-spended in different transactions.
4) Publish the fork when your original transactions are accepted and collect the benefits of your new transactions.

At the moment each block generates 50 new bitcoins, and it would take a huge investment already to gain 50%+ of the cpu-power involved.

In the long run however, blocks will only be rewarded with transaction fees and (a market equilibrium will form where) the cost of producing the hashing power needed to find a block will be equivalent to the total of transaction fees in that block.

Assuming transaction fees are much lower than the value of transactions in a block, the cost of forking a block are then much lower than the rewards of the double-spended coins.
20  Bitcoin / Bitcoin Discussion / Re: Have you held in your hands some actual euros and dollars as a result of mining? on: July 04, 2011, 09:04:04 AM
I already asked a similar question in the newbie zone, and I got a yes answer, but I am still not totally convinced. I want to be sure that some people won something before placing my orders.

Please read http://en.wikipedia.org/wiki/Greater_fool, before making your investments...
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