I'm setting up a very basic short with a friend of mine.  I'm loaning him 5.75 BTC (actually, the dollar equivalent...he doesn't trust BTC at all).  He's agreed to give me 5.75 BTC in 1 year.  We've made a written contract stating this.  Maybe I'm missing something, but seems easy.  Shorting is not hard.  The hard thing seems to be willing buyers and sellers to find each other, which is where the intermediate exchange comes in.

Awwww snap.  The bitcoin wikipedia article has been deleted due to insufficient independent sources. 

What's my incentive for checking for doublespending?  I know if everyone stopped the system fails, but, I'm best off if I can participate in the system while cheating by not performing this check since it consumes my resources.  If I understand this correctly, the only thing currently preventing me form cheating (besides lack of technical skill) is my own internal since of fairness & social good.  Is this correct?

Insti

You know, I'm just some dumb schmuck with a keyboard and I seriously don't know what I'm talking about so let me just refer to some other sources who may actually have credibility. 

Wikipedia states "This mechanism is claimed[1]  to be virtually tamper-proof. For an attacker to manipulate the record, he must outpace all of the other nodes on the network to produce the longest proof-of-work. This becomes exponentially more difficult as time passes (I assume because the system gets larger)."  Satoshi's white paper article considers what happens when an economically rational attacker (the greedy merchant) does this (section 6). However, he does not seem to address the threat from those with much larger economic incentives such as a nation-state, whose goal might be to destroy trust in the entire system.

I don't know how tampering occurs, my point is that if the system is using it's resources rationally (including vested interests you mentioned), a nation-state (or a group of them) have sufficient incentive to amass the CPU power to outpace all the other nodes in providing the proof-of-work calculation.  Once they have pole position, my impression is they can somehow use that position to harm the system. 

There's another thread that started about the energy wastage that occurs in Bitcoin.  This is what I'm getting at.  I'm not sure a secure system is economically rational for it's participants, and this could be an achilles heal. 

Insti #2

I agree with you.  My account isn't rational cause I have philosophical reasons for wanting this to work.  BUT, if you really want this thing to spread, it's got to be rational for people to participate. 

RHorning #3

I reread your post several times, but I'm not seeing an answer.  Let me try and repost the problem I see.  As I understand, Bitcoin works because it relies on the combined CPU power of the entire network.  But it is not rational for everyone to give all their excess CPU power, and trying to force people to do this via programming changes (mentioned in other posts) will encourage the development of cheats.  But if everyone only gives a rational amount of CPU power (even adding a few thousands fanatics), then the system can be defeated by a gov't which has more to loose then the total system fees.   A system likes this strikes at the very foundations of statist power...there is a lot to loose.  I don't think they even require crazy quantum computers or secret code hacks.  Just more power.  Even if a billion people adopt this, states may pool their resources to outmuscle it.  It just hurts them too badly to ignore it.

But you know, I'm really not smart enough to really understand this thing.  I'm probably just blowing blabbering about something trivial.  But I do know, if this thing works.....hold on to your hats.  It'll be HUGE.  A geo-political meat grinder like the world has never seen.   

I just started following the Bitcoin world about a week ago.  I've entered into a lively debate with a coworker about its viability and was hoping someone might shed some light.  Here's my concern.

If the nodes are all rational, then they'll only perform work verifying transactions if the verification fee is sufficient to cover costs.  But a nation-state might be willing to perform a tremendous amount of work beyond the threshold where it ceases to become economically viable (and do it with economies of scale too).  And the nation-state doesn't have to compete with the total POTENTIAL CPU power of the network.  Because in reality, the potential size will never exist, but only what is economically viable or, to say another way, what the fee structure can justify sustaining. 

So lets say the total monthly fee's total up to equivalent 1 billion dollars.  A rational network performing at marginal cost will consume 1 billion dollars in resources to earn the fees.  No more.  If bitcoin becomes a threat to "national security" the U.S. might spend 2 billion dollars a month (pocket change) to destabilize the system, and they may get back 1 billion dollars of that.

If this problem is real, I can think of 3 different solutions, none of which I like.  I think the best way to solve this problem is to raise the transaction fee, thereby garnering more resources.  At the same time, you've got to make it impossible for someone who's attempting to game the system to get paid...a difficult task by definition.  Other solutions are 1) relying on good will or 2)figuring out a way to force participants to perform lots of verification work.

So am I in left-field with this?  I hope so.  Please help me resolve my debate.