The concept of bitcoin is completely revolutionary. When someone has an idea that runs so contrary to the status quo, with regard to central banks, credit card companies, and everything in between, most people will find ways to poke holes in it. Most revolutionary ideas fall flat on their face, like the DeLorean.

I think that prominent public figures will not typically promote such a revolutionary idea unless
a) It aligns with or would further their world view, or
b) It profits them.

Why stick your neck out and risk tarnishing your reputation promoting a concept that will fail?

With eCommerce, most interest is with companies that are working within the status quo. A normal startup would pose the question, "how do I make money working within existing government regulations and partnering with major credit card vendors." I believe bitcoin was built and started by someone for philosophical reasons as an experiment, not as a way to make a quick buck.

So what prominent public figures are aligned with the philosophy of bitcoin? In the realm of modern economics, most of the "great minds" seem focused on central planning: central banks, IMF, World Bank, insolvent banks, etc. It's fun to play God by moving billions or trillions of dollars from one part of the world to another via taxes and public policy. This is the fastest way to change the world, if they can convince enough people to give them the keys.

The only people I would expect to support bitcoin while it is still in its infancy are those who believe that inflation and centralized control of monetary policy is more dangerous than deflation; that freedom of international trade is more valuable than intense regulation. The others will ignore it until it gains serious traction, or spend all their time trying to criticize or change bitcoin to fit their economic leanings, as some members of this forum do.

Honestly, I was not interested in bitcoin until I saw it achieve some level of stability and success. I think that the success encountered thus far is *evidence* that a deflationary currency may work; the next four years will indicate whether a decentralized bitcoin can achieve enough stability to become more mainstream. Bitcoin will live or die by its own merits, not celebrity endorsements.

Yes, I think lending 100BTC to some Internet user with no identity details beyond a web of trust is far riskier than depositing money with a bank.
1. US bank deposits are FDIC insured up to $250,000. So if the bank goes under or is robbed by someone from the inside, the government will cover my loss.
2. Even investing in the stock of a public company through a broker is pretty safe, putting aside the performance of the stock itself. My understanding is that most securities fraud occurs in hedge funds that manage your portfolio for you. There will always be people like Bernie Madoff promising unrealistic returns and printing out fake "statements" with a fictitious value while they invest in mysterious instruments that you're unaware of.

Why would a professional lender not do fractional reserve lending? Once ripple btc or usd become almost equivalent to btc/usd due to level of trust, it's easy. You will never have all customers demand their cash at the same time unless they think the lender is going under; FDIC solves that problem. I would never say that a lender is unhealthy just because they have a fractional reserve, and ripple would facilitate it.

You guys do know it's illegal to melt these coins, right?

It's pretty simple. The government has printed so much money that the penny is worthless.

I for one would love to see the US eliminate the penny and one dollar bill in favor of dollar coins.

I think the hashrate will be below 20 Thash within a week. Where will we be within 3 weeks?

The problem of a large lender going insolvent or disappearing is no different than with traditional banks and lending. It happens all the time.

You could look at Ripple as a new way to do lending with large organizations. This could be much more convenient with better-than-banking hours; as long as the organization is large enough and trustworthy enough, it could work.

*Or* you could look at Ripple as a way to facilitate lots of small loans between individuals. For smaller person to person loans, it would seem to be much better than using an Internet forum to track debt. Still, I have a hard time believing that a web of trust can make these loans worth the risk.. just look at the Lending forum!

Philosophically, I wonder if lending will ever really make sense without very large entities who are being audited by the government. Banks are all about trust, after all. I know that banks won't steal my money because they have decades of history, boards overseeing activities, etc. And the idea of lending to friends might seem appealing, but I think it's bad for friendships.

Very interesting concept.

My answer is that Ripple is completely complementary to bitcoin. Ripple is *not* a currency; it is really just a sort of decentralized ledger that tracks debts between pairs of individuals. Ripple does not create fungible tokens that can be shifted trivially from one person to another. It could be complementary if a lot of people used Ripple to track bitcoin debts.

This is purely an accounting mechanism which makes it easier to track debt obligations than a Lending forum post; no need for everyone to post their lists of delinquent loans. Instead, if someone asks you for a loan, you could look at their ripple loan history. If they already have 500BTC in debt owed to 100 different individuals, then you would know they are either in over their head or are dishonest.

While you could argue that ripple works like bank notes, the difference is that there is no bank or central bank to make all debts equivalent. Example:

1. Bob asks John for a 10BTC loan.
2. Bob could send a 10btc "note" to John through Ripple while John sends Bob 10btc through the block chain.
3. John wants to buy a flashlight from ABC for 5btc. ABC accepts ripple notes *or* btc. He could either:
  a) Send 5btc to ABC. Now he is out 15btc, assuming he has the cash.
  b) Send 5btc ripple note to ABC, since he already has 10btc in notes from Bob. This puts more risk on ABC, who has to figure out if John's IOU is nearly as valuable as btc cash itself.
4. Bob pays back 10btc to John, then John sends the 10btc "note" back to Bob, thus zeroing their account with each other.
5. Now Bob has the cash to pay ABC when needed. However, if ABC really trusts Bob, they might treat his debt as good-as-cash. Thus, they might leverage this debt for their own transactions, and so the debt could get passed around to yet other individuals.

In theory, if you had a large number of lenders and borrowers with a high degree of trust, then you could have have people lending to dozens of counterparties and rarely demanding actual cash (btc). Then ripple notes for btc would be equivalent to USD loans, or even dollars themselves, which is debt owed by the government. It could be cheaper or more convenient to just trade debts rather than swapping raw bitcoins, and ripple would presumably allow you to easily sum up all your notes to know if you are a net borrower or lender.

While ripple might eventually be a great alternative to bank loans, it is still a debt system. Any debt system could collapse when there is a "run on the bank." With ripple, a run on the bank would happen when everyone decided they wanted to call in all their debts from a large borrower. Only then would you know if there was actually enough BTC currency to back the debt. Chances are the answer would be no; debt systems lend themselves to fractional reserves.

I believe Shakespeare said, "Neither a lender nor a borrower be." It seems that the spirit of bitcoin is to create an inflation-resistant currency and to shun debt-backed money systems which could fail. Decentralized debt systems could fail just like centralized ones, though the risk is more distributed. Ripple could be useful for digital distributed debt tracking, but it would not hurt bitcoin anymore than a collapsed bank would hurt the value of gold.

So you believe that they can deliver *all* products within one month, when they are still tweaking the chip design in the wafer after their initial shipment date? I am no chip maker, but doesn't it take weeks or months to make changes to wafer designs?

So the bitcoin block reward just dropped from 50btc to 25btc. I thought the hash rate would drop pretty quickly as many mining rigs became instantly unprofitable. But it looks like the hash rate is actually *increasing* and is sitting at around 28 thash / sec.

Is there a lag because a lot of people don't realize we've hit halving day? Or maybe a lot of miners don't pay for their electricity and it's all about sunk costs?

Wow. And I just stumbled upon a post from BFL_Nasser on the butterfly labs forum from yesterday:


I don't know who "Nasser" is, but this indicates that the chip design is still being tweaked and tested *after* the expected release date. How can you have a projected shipment date before you have gotten test chip samples and finalized the design? This sounds like R&D to me. How long will it take to iterate through their testing? Another 2 weeks to get the next batch of chips; if there's another problem, how much longer will it be delayed?

Even if the next batch is perfect, they must be ordering in very small quantities until they are sure it is correct; this could be millions of dollars as stake. How many products is BFL promising to ship in their first wave?

It's hard for me to see how they could work through this and have products in customers' hands in less than 2 months. If I were BFL, I would not want to accept any pre-orders until I had a finalized chip design; why risk having people question your credibility when your product can speak for itself? Sitting on a pile of pre-order money is a dangerous thing.

How many people here would sit on thousands (millions?) of dollars in pre-orders and not misappropriate even a fraction of those funds? Look at what happens to pension funds, social security, etc. In my book, you don't want to expose yourself to temptation; there are many people who have started out legitimately and been trapped by the Sirens' call.

So here's a question looking from the outside in. Given that it appears the BFL CEO is a convicted felon, and given that no one has seen a working BFL ASIC product, is it really worth the risk of giving BFL pre-order dollars? Are those with pre-orders banking on getting such a large leg-up on the mining competition that they figure it's worth the risk of losing your money?

Let me put it another way. If BFL does have the technology to create ASIC chips dedicated to bitcoin mining, then they should be in a great spot financially. As soon as the first product is shipped and tested by a member of the public, then the products should easily pay for themselves, and tons of people will order the chips.

On the other hand, if BFL is depending on pre-orders to a) finance the development and manufacturing, or b) take the money and run, then I would consider a pre-order to be very risky. Almost any electronics product that people would normally pre-order is from a hugely reputable multi-national company and is for a product that has already been reviewed by dozens or hundreds of different people.

Maybe getting a 3-month lead time over the mining competition is work the risk, but I think this is an interesting thing to watch. Over the last month I have been amazed to read about the number of scams that the bitcoin community attracts, due to the amount of money floating around and the gullibility of people looking to turn a quick buck.

Being a pretty risk averse person myself, I think people should cancel their pre-orders until the ASICs have been bought and tested by other members of the public, unless your investment in mining represents an amount of money you don't mind losing as with a penny stock.

Good luck to everyone in the meantime, but remember that *every* form of investment has its risks, and bitcoin is not immune to that.

I think you're exactly right. If the government found the *theory* of bitcoin to be better than paper fiat, it would be simplest to bootstrap govcoin with centralized components rather than try to hijack an existing crypto currency by brute force. Digital currency is a lot simpler if you replace the hashing power with centralized servers.

At that point, people wanting to avoid government inflation could trade govcoin for bitcoin after getting their paycheck.

Ultimately, if one or more governments decided to outlaw bitcoin, they could make things a lot harder for the community, but it would be very difficult to eradicate. Bitcoin won't be able to topple visa without government ambivalence or support.

My point is that while some groups could hijack bitcoin, if the price collapsed to $1 or less, the investment would become pointless from a financial and influence point of view.

I have no idea how evenly distributed asics would be. They don't yet exist. It all depends on the price of bitcoins. If the price continues to rise, more and more people will be able to afford high end mining gear, ASIC or otherwise. If the price crashes, then ASIC manufacturers may go bankrupt and people won't care as much about hash rate anyway.

While I generally agree that a stricter, more predictable money supply would reduce the boom and bust cycles, I don't think we will ever eliminate business cycles completely. It seems to me that "easy money" exacerbates bubbles like the dot com and real estate bubbles, but you can still get over-investment without the government's "help."

I think this hypothetical scenario is unrealistic. The cost of obtaining 51% control is so high that such an investment would be highly risky, given price volatility, especially if the plan is to implement a controversial monopoly which could cause the price to collapse.

As long as the government continues to control its own fiat currency, there's no need for it to hijack bitcoin in the near future. If some misguided policy folks thought it would be a good idea after bitcoin became hugely popular, then there would be a public outcry which would be a costly risk to any politician.

What is more realistic is that a government could hijack bitcoin in order to introduce massive volatility and cause panic selling, in an effort to undermine crypto currencies. However, we have already seen bitcoin survive a massive crash, so I don't know if that would work anyway.

If someone or some organization decided tomorrow to impose demurrage via a 51% attack, the response would be:
1. What is demurrage?
2. How could I calculate it even if I cared?
3. Just wait until a miner from the remaining pools mined a block with your .001 btc fee.

The US government will always be able to print money as it desires; even if bitcoin becomes 50% of the economy, they will still be able to encourage lending via a low interest rate, as long as dollars continue to be treated as legal tender.

People can always move from dollars to btc, gold, stocks, or anything else with a more stable value than the dollar.

It's interesting to see that there are always people on the Internet who love to try to disparage a topic among enthusiasts. Some call them trolls.

I think mr. krugman brings up a very valid theoretical weakness in bitcoin. However, I do wonder about his intentions. Why would someone invest hundreds of hours and thousands of posts only to try to prove to others that their work will fail?

I enjoy the story of innovators being told that their ideas are flawed and will not succeed; yet it is those who invest their blood, sweat and tears, like Satoshi and the numerous bitcoin developers and merchants, who can achieve, not the naysayers.

The amazing thing about bitcoin is that is has already succeeded. It has survived four years and plenty of Ponzi schemes, hacked exchanges, and bad press. Maybe bitcoin will now replace the Twinkie as one of the two things to survive a nuclear war?

But all hyperbole aside, I don't think bitcoin is bankrupting visa anytime soon. As mr Anderson has pointed out before, it is more efficient to worry about the short term problems before worrying about how bitcoin will survive when it has uprooted the pillars of the global economy and obsoleted the central bank.

I have to say that, watching from the outside, these ASIC devices are starting to sound like the white unicorn. Once they have been delivered to customers, I will believe they exist. Bitcoin lends itself to vaporware.

When I downloaded bitcoin onto my laptop, I think it took well over 24 hours to sync. However, I did eventually determine that the btrfs I use was heavily fragmenting the block chain index file and causing performance to crawl. By periodically defragmenting the bitcoin files, things finally finished loading.

My problem is that I always want to do things "the right way." If a lightweight client is less secure, then I don't want to use it. Electrum depends on a central server, Armory looks good but is still alpha code.. no way I trust any amount of money to that! Multibit looks good but doesn't encrypt the wallets. Again, there is no way I would trust an unencrypted wallet, and I'm not about to install TrueCrypt onto my PC just for this insecure client. I also don't want to leave much money in an online account given the number of thefts.

It seems like another year could do a lot to mature the lightweight clients as bitcoin gains popularity. In the meantime I will do things the hard way with the original bitcoin client.