Why has no one suggested Bill Cosby?



At the very least, use a shot of something who's smiling or otherwise happy. No matter how noble or respectable the subject, every piece of currency always has someone who looks like a log was stuck either going in or coming out. Bitcoin is a system that mostly manages itself, freeing people up to live their lives, so a symbol of joy and a live-and-let-live sentiment would be a genuine and welcome change.

Very - it's a moral issue that really has nothing to do with the underlying structure, but could still be viewed negatively from a certain perspective. Like anything else, I'd expect the time duration from an incident to gradually reduce any apprehension, just as people don't seem to be quite as sensitive anymore about the bubble and exchange security concerns.

It's just symbolic, but it's still nice to see 2012 arriving just as Bitcoin hits 8,000,000 units.

The rollover should occur between 1700-1800 UTC.

End of the year and gold is doing what I was expecting it to do in January. With MF Global, all bets are off. I underestimated the impact and rapidity that incident would have, as well as the magnitude of printing. Nothing fundamental has change - the problems have actually gotten even worse. The existing system is so rotted out that there is virtually no way to win - it'll be an uphill battle to make enough paper gains to keep pace with base currency inflation, not to mention the changing whims of politicians and their laws.

According to Jim Willie, large entities on the buy side (opposition to JPM, et al) are now dumping paper on the markets in order to acquire metal at a discount and in quantity. In addition to professionals exiting these fraudulent paper-dominated exchanges, this is forcing the separation of value between the paper and physical gold markets.

Paper could easily stagnate or plummet while real assets become scarce, leading to shortages and higher prices despite officially-stated ones being relatively stable. The divergence in gold is enormous and accelerating. It really is physical or nothing now.

On the Bitcoin side, I'm noticing quite an increase in awareness and sustained capital inflow into the market on a weekly basis (minimum to maintain current price level is about $200,000 per week). Until the bubble, Bitcoin growth was over 9% and has so far slowed to around 8.4% - weekly. Reversion to the mean may bring that growth rate up further toward 9% again. The chart scale is logarithmic and shows a 5% post-bubble rate, as well as a 5% continuous growth rate for comparison.



For a cursory comparison, we can look at the progress of gold and bitcoin over about 80 years and 70 weeks, respectively. Aside from the artificially (and semi-arbitrarily) fixed rate gold was set at for nearly 40 years, the USD-denominated growth patterns are obviously similar. While correlation does not imply causation, existence of isometric patterns begs a deeper investigation of the underlying mechanisms. Again, the chart is logarithmic, with a relative basis of 1.00.

Right now, yes. Remember though, these are still the early stages. Inflation is very high compared to what it will be as a mature, stable system. The incentive to spend will invert as stability and adoption increases.

Look at the structure, not just the momentary behavior. If there were no limit on the number of units to be created, what you've described would hold true for the lifetime of the system. That's the key element that makes Bitcoin a store of value rather than primarily a means of exchange.

For a quick example, take the California gold rush. A good number of people were able to accrue large amounts of wealth and many spent a lot. The discovery didn't last long, though. Meanwhile, the gold had been mined and still existed, but with reduced mining production it became more worthwhile to hold gold than spend it.

As evident in the table earlier, a static unit base becomes more valuable over time. Thus, prices decline overall. However, as the size of an economy expands, the prices will drop at an accelerating rate. Imagine paying $10 for lunch one year, $1 the next and $0.01 another after that. It might be great for consumers, but businesses strongly prefer stable metrics - it's very difficult to project for future expenditures when prices aren't consistent. That's why having a currency that keeps pace with the economy is much more desirable for stability, but doesn't work well for savings.

Good to see you're still around. I can sympathize.

Whatever the end decision/result, it's been a good run. Thanks for putting ArsB together.

Best to you.

Bitcoin is not a ponzi scheme. It is not a pyramid. It is not even primarily a transactional currency.

Bitcoin is a reservoir; a store of value.

The reason Bitcoin has experienced the volatility and recent bubble is because capital was flowing into the fledgling economy with an expectation of something different than what it was, not to mention the lack of maturity in the system. The mere fact that the Bitcoin system has survived is incredible and a testament to the elegance and resilience of the underlying structure.

Understanding stock and flow and demand elasticity is critical. The former determines the depth of the reservoir while the latter determines the breadth. Bitcoin is still relatively shallow and small in width, so the volume of capital it can support remains limited.



The above compares the inflation rates and stock-to-flow ratios of Bitcoin and gold (all values starting from 2009 at a base of 1 and showing relational change thereafter; data sources available at bottom of linked page). With gold, both variables have been steady for a very long time (gold production shows the cumulative amount mined, from which the inflation rate can be inferred - that's historically been a little over 1.5% per annum).

A stable medium such as gold (and eventually Bitcoin) can store an unlimited amount of wealth so long as sufficient divisible units are available to maintain liquidity matching the level of demand. Bitcoin is in an early growth phase, so current behavior and performance are not fully indicative of what there will be as a mature system. The system will approximate historical gold performance by the 2016-2020 period at the earliest. That should also be about the time frame in which division of full Bitcoins into Satoshis starts to become a necessity.

Paper fiat money (EUR, USD, etc) is a natural counterpart for Bitcoin & gold in that it functions to maintain stable price levels by allowing unrestricted amounts to be created in order to match economic growth. Bitcoin & gold act as safe, long-term repositories for stored wealth that are affected by, but not dependent upon economic activity the way fiat currency is. This table shows how the two types of money interact:


Bitcoin, like gold, is for saving and major transactions. Fiat is for day-to-day spending/trading. A Bitcoin-like variant that behaves like fiat would provide the spending functionality that most people are trying to force Bitcoin to do. Trying to force one system to act as both is impossible, as even with a perfectly-balanced approach (such as demurrage, which acts to address a management issue that the Bitcoin system inherently solves), divergences eventually lead to catastrophic failure. Two functionally independent systems can interact effectively for an indefinite period of time, all else being equal.

So does the suggestion that the dollar has the price of the dollar - it only makes sense in an abstract discussion. A form of money such as the dollar is not valued by its "intrinsic" value, but by its purchasing power; how much of X can I get with Y dollars? The same concept applies to gold or any other item used as money. Without that perspective, it can be difficult to value gold.

Elasticity of demand is an important factor in the stability of value. Low elasticity means that an item is consumed quickly and must have a ready source available at all times to supply the demand. Oil is very inelastic, so prices may fluctuate rapidly depending on available supply (it generally has a shelf-life of about a year, is destructively consumed and demand typically exceeds supply). Gold is among the most elastic of materials and exists in sufficiently large amounts of refined quantities that it just sits around without any other significant purpose than as money, in specific - a store of value. The same function could be filled by rocks or other metals, but they have numerous productive uses and are too common to be feasible. Artwork might have a high ratio, but the supply is too narrow to provide widespread utility and different pieces offer subjective value.

A stock-to-flow ratio is indicative of how much elasticity exists for a given item. At present, gold has a ratio of ~65:1 while silver's is about 15:1 - the amount of gold stock that can absorb demand being significantly greater than that of silver is a strong factor relating to the latter metal's higher volatility. Fiat currencies generally have a very low ratio in order to maintain price stability, as well as low elasticity, so their values vary by a great deal over long periods of time. The larger a resource pool, the more relative price volatility it can handle without exhibiting disruptive purchasing power variance.

Bitcoin is certainly a small wealth pool currently. With steady growth to about 10x its current size, it will start attracting a greater percentage of capital. That leads to a compounding effect or tipping point whereby capital flows are 'trained' to flow in a direction associated with preceding flows. Because Bitcoin has survived a relative bubble of extreme magnitude (it'd be like gold going to >USD$50k and coming back down to <$2,000) without collapsing to zero, I see a rapidly decreasing chance of that occurring - especially with global financial uncertainty that will drive capital into hiding wherever it can find shelter (artwork, Bitcoin, corporate bonds, gold, silver, rare gemstones, etc).

Gold is also a Giffen good. When it is in high demand, it not only becomes more valuable, but the available supply declines. This is due to its function as a safe haven resulting from its ideal combination of properties presenting the best physical form of wealth storage (density, durability, etc). Bitcoin has the potential to become a Giffen good as well, the only immediate comparative drawback being required existence of the network whereas gold requires existence of reality to be present (both only have value in the presence of at least two trading parties).

Perhaps it's a stretch with Bitcoin currently and until it matures further, but gold? So treasuries and other politically-controlled government bonds are "safe"? Food which decays is "safe"? Honey last a very long time, so maybe we should stock up on that. What other asset class has held consistent value for over a hundred years, let alone a thousand?

It doesn't take a gold bug to recognize the appropriate purpose for an item. The message doesn't need to change because gold is stable compared to all other asset classes. It is in US dollar and other fiat denominations that gold's "value" varies. Calling the earth (USD) the center of the solar system does not make it so. It's a perspective.

Would you save in lumber if the lumber yard were on fire? All fiat currencies are burning. Gold is as financially sound as granite bedrock. Bitcoin has the same potential within a decade if it can survive any further exogenous shocks until it's about 5-10x its current capacity (~USD$25mm); a probable tipping point.

Understanding stock-to-flow ratios is important - the higher the ratio, the more stable the instrument. Bitcoin offers the same function as gold, but in a nearly pure abstract version. When comparing gold to Bitcoin, the market size is tremendously different, but the reasoning behind the stock-to-flow ratios of the two holds. However, sufficient wealth has been flowing into Bitcoin to make it clear the the system offers less of an investment opportunity and more a method of savings or protection for stored wealth: a safe haven.


This is a very western perspective. Gold jewelry in many regions is bought in order to store wealth. Also, what is visible in the paper and retail markets is disconnected from the high-capacity exchanges done privately at institutional levels. These trades are opaque to those at smaller scales.


Trading mining stocks is not trading physical metal - equities are a claim on future production, a form of speculative investment. As discussed, BTC & gold are primarily stores of wealth (representing past production) rather than investments. The COMEX actually represents a relatively small amount of physical metal trading, despite being one of the largest exchanges. The LBMA handles far more physical volume and others (e.g. Shanghai and soon the PAGE) are rapidly gaining.


Incorrect. There are an estimated ~170,000 metric tons of gold above ground as of 2010. Of that, about 2,500 tons are produced annually and accumulated - it doesn't go away, it sits in someone's vault (like a Bitcoin wallet). Gold is not consumed and the amount actually traded fits within that 2,500 tons, as it includes stored gold being reintroduced to market. This is why the gold stock-to-flow ratio is very high and stable relative to other forms of wealth storage.

The logistics involved with large-scale shipments preclude major movements, which gave rise to the paper markets. The paper markets simply extend credit to multiply the effective usefulness of the physical metal's property as a store of value. If 250 tons of paper gold trade in one day, that does not mean that the same amount of physical has been traded, especially if not delivered. Instead, the paper instruments simply create a second derivative used for day-to-day trade: fiat currencies.

Bitcoin and gold are both escapes from less reliable forms of wealth storage (especially from paper gold). With the looming danger of a global, systemic financial collapse, those type of assets will experience inflows no matter how nascent the platform. If even 1/10th of 1% (0.001) of the USD capital that exists in gold today were to flow into Bitcoin (the current ~8mm units), it's USD exchange rate would exceed $100/BTC. Do the same math with gold at $12k/oz and BTC easily reaches the low thousands in USD. Further QE efforts will boost the dollar-relative values for both gold and Bitcoin.

Awareness is the trigger. Whether the Bitcoin economy can handle such heavy inflows is another issue, but I suspect it will be able to. Until the mathematical foundation Bitcoin has been built upon is proven to have failed, it will continue making progress as a safe haven comparable to gold.

This is why the Bitcoin market may be the most rational one on the planet at the moment. Yes, it is affected by capital flows from contemporary markets, but it reacts the way a free and open market would - overall, market participants learn and adopt mostly reasonable practices (nothing is perfectly efficient or rational).

The size of the market and the stock to flow ratio are the major factors to consider for the long-term. As the stock to flow ratio increases, fluctuations should stabilize without external flow as there will be reduced incentive for miners to dump newly-found coins. Any external flow (USD->BTC, etc) will cause exchange rate price movements, but larger pools of wealth tend to leave increasing traces of themselves in the smaller ones, just like fiat->gold - it's a gradual transition.

I would say general adoption of Bitcoin could easily bring the BTC/USD rate to the mid $60s along a gradual rise within four years (assuming no further QE... ha!). However, I doubt things will be very gradual. It's more likely than not there will be more exogenous shocks that cause volatile foreign exchange prices.

Read the question. The pool being connected to isn't the issue - when disabling a pool in cgminer, it seems that shares are still being submitted to the disabled pool.

I don't have an explanation at the moment. I'd say wait longer or restart cgminer without Ars as a configured pool.

On that note, it is sad to see the Ars pool running down.

Yes, that's what I thought. I've been looking for methods of collapsing the complexity after acquisition, but so far the only solutions result in a decrease of data quality/resolution.

Thinking out loud here: it would probably be more appropriate currently to offer facial recognition at the device or application level for unlocking access to a pre-generated seed.

Thanks to both for your input!

Would it be possible to generate the seed from camera input, perhaps using facial recognition data?

I'll be sure to add this for clarification next time:


For a somewhat less whimsical thought-experiment, we could use gold. Assume approximately 4.2 billion troy ounces total available for ownership and you have 10 t ozs ($17,000 @ $1,700/oz):

10 / 4,200,000,000 = 0.000000002

700,000,000,000,000 * 0.000000002 = $1,400,000

Or silver, assuming about 1 billion troy ounces available for investor possession and holding about the same current value as the gold example, so 500 t ozs ($17,000 @ $34/oz):

500 / 1,000,000,000 = 0.0000005

700,000,000,000,000 * 0.0000005 = $350,000,000

So you say there's twice as much wealth floating around in derivatives? Fair enough, divide the results by half. That's still more than most people earn in their entire lifetimes.

What was that? The people with humor-deficiencies are screaming that there won't be 100% backing? Alright, let's go with a mere 5% instead. Don't get all uppity about the dollar-denominated values: that squiggly line means 'approximately', as in 'not exact'. Also, certain assets will gain in dollar-denominated value faster than the monetary base is increased, so the extra zeros in derivatives will start to get knocked off (e.g. gold up 10x while derivatives expand by 2x, all in USD).

Gold (10oz @ ~$1,700) @ 5%: $70,000

Silver (500oz @ ~$33) @ 5%: $17,500,000

Bitcoin (50 @ ~$3) @ 5%: ~$83,000,000

I wonder which stores of wealth will constitute the other 85%? Probably government bonds, since everyone knows those are rock solid...

Let this be a reminder that math is fun.


Yes, especially from planets that are about to be blown up.


I'll visit!

It's ok, this is helping me clarify the concept for myself as well.

I'm focused on recovery of wallet information rather than explicit storage of the wallet.dat file. I agree that having the private keys in the cloud is redundant, but there's a subtle difference in restoring wallet information - the deterministic method relies primarily on an algorithm while distributing keys relies mainly on the network. The former uses a passcode to reconstruct the wallet while the latter uses a tag/passcode combination to reconstitute it; rebuilding vs. unlocking. The end result is the same - the wallet can be recovered.

I really like the deterministic approach - IMO it's an essential feature for integration into the main Bitcoin client, though I don't see how it can cope with rapidly-changing contents. If that's true, it may be best suited for stable wallets with a low frequency of disparate transactions (savings account). Searching for tags/keys would still require downloading the blockchain, but all of the relevant information can be obtained. That might be more appropriate for protecting against loss of a high-frequency wallet (checking account).

Part of my reasoning is that I trust the Bitcoin network because of its structure. Even doing everything carefully, hosting a wallet introduces at least one new potential point of failure (the entire Bitcoin network could fail, but that's far less likely) with numerous other trust factors to consider.

Minimum requirements to recover wallet information (to my knowledge):

Method	|Wallet.dat	|Determ. Server	|BTC Network
Encrypted Wallet	| X	|	|
Deterministic Algo	|	| X	|
Distributed Keys	|	|	| X

What would happen if the ECB enacted QE next month? Would it take long before the US would need to answer in kind? How many bankers hold official positions and have protected financial institutions over all others? The banks will make some concessions over the next few months, but they'll get it all back and more shortly after - or else they'll lose all control.

There have been numerous large rallies in gold lasting less than one month (gold shot up >$100 at the beginning of this month). Unless another blatantly criminal act is committed, time's up for the CME and bullion banks. I think fresh fraud will be saved for early next year. QE fills the banks' coffers first, no matter where it comes from - that allows them to flood more money into the short side of the PMs (and/or pull their huge numbers of bids). That whipsaw action will knock out new longs in gold/silver through January, just in time to have brought down the open interest on the February and March gold & silver contracts as it has for years. If that doesn't work, they'll declare a bank holiday or find some other excuse to 'legally' avoid delivery.

Patterns arise for reasons, and this is a big one. I wasn't too concerned about exchanges defaulting this year, but I guarantee this is the last time contracts will be honored with any remnant of legitimacy. The final breaking of functional price discovery will occur in 2012 due to lack of participation in markets by anyone sane - the western markets will become the banks. At that point, gold will officially be quoted at insanely low values while everything else remains artificially elevated.

Another round of stimulus would allow the US to boost the illusion of prosperity just long enough to round out the year with either a re-election or another lackey set in place; if it's to be a final term for the current president, the gloves come off and the nation enters dictatorship under the guise of an emergency (war?).

Yes, I'm still expecting a significant spike to the $2,000 range before year-end.

It's also becoming harder to lend any credibility whatsoever to official announcements; contradictory 'leaks' and rumors, reporting of large volume transactions in obscure locations, probably not disclosing even more. This is the same brinkmanship displayed by politicians earlier in the year, and it will run right up to the last moment.

The exchanges won't officially default, and there may be some truly sleazy tricks pulled to ensure that fact. MF Global was very likely an intentional effort to cull futures positions.

Only one day remains before clients notify the exchange of delivery requests. Gold OI is still 3x the stated warehouse stocks and silver OI remains at more than 2x available stocks, although preliminary numbers show the gold OI at 1.5x and silver OI almost even. Almost all of the contracts that bailed from December have rolled to February (gold) or March (silver).

Even with the PM Dec OI squeezing by, it is not in the bullion banks' best interests to simply deliver everything and leave nothing for the extreme demand during 1st quarter of 2012.


The more testing services, the better. Plenty of scammers will flood the markets over the next several years. Another tool: ultrasonic testing.

For peace of mind, it's best to skip the deals that could easily turn out to not be such great deals by going with reputable dealers. Some beginning gold investing information.

For amusement in a hypothetical situation, let's say the global outstanding derivatives balance has been supplanted by the Bitcoin system. Now, instead of ~USD$700 TRILLION in global derivatives, the global financial system consists of 21mm Bitcoins, assuming every Satoshi has been mined out to the 8th digit. Using some simple math, we can figure out how much we'd each be worth under this new one-world currency.

If we take 1 current block at 50 BTC and calculate the total share of the entire Bitcoin system, we get:

50 / 21,000,000 = 0.000002381

Now, we simply figure out how much that is in today's dollars:

700,000,000,000,000 * 0.000002381 = 1,666,666,666.67

That's not bad at all, a cool USD$1.66 BILLION. See? There's nothing wrong with being an early adopter. Anyone who wants to cry about it can go share their Bitcoins with everyone else.

Me? I'm going to go build a party spaceship.

Very nice work on Electrum. It would be great to see something similar to Bitcoin Spinner using it eventually. The fully-open nature is appealing as well.

Slush mentioned implementation of a 'wallet in the cloud' - I haven't looked at the code yet, but I assume the server must be present for wallet reconstruction?


With Electrum, ThomasV noted the private keys are not stored in the blockchain. With the proposal, the private keys are encrypted and stored in the blockchain.

To retrieve the keys, the blockchain would need to be searched through to find associated tags, then decrypted for use. It's far more computationally intensive for the node, but doesn't rely on a dedicated Electrum server - only the Bitcoin network. A trade-off is the potential for lessened security. The two approaches mostly overlap in the functionality provided.




It would probably make more sense when thinking of a contract as a URL, so information about a trust might be located at https://durangofamilytrust.bit/. Then looking for the transactions associated with that trust could be done by searching for a hash formed from the URL. If the transactions have been appropriately tagged by the trust administration and you've used the correct hashing method on the URL, the relevant transactions will be found in the blockchain. This might be useful for third-party audit.

In this manner, as long as the Bitcoin network is functioning, the assets can be located and/or retrieved. No need for access to the Namecoin wallet - anything could be designated as the tag (the example could've been a .com instead). I just like figuring out ways of using decentralized systems in conjunction.


Yes, I wasn't too clear about that. It's generally an alternative to the server-based wallet-management technique used by BCCAPI and Electrum.

Using the blockchain to store encrypted private keys with their associated addresses would allow for a 'wallet in the cloud' using the Bitcoin network instead of self-hosted or managed solutions. It is also possible that thin clients could engage in limited activities without needing a dedicated server. If the tag/key pair is used and the owner is unable to update security methods (individual died?), it could be possible to recover lost coins.

Initially, I had thought using the comment field might work, but that doesn't seem feasible at present. If it were, this functionality could be implemented exclusively in a client rather than at the protocol level. Again, use of the feature would be entirely optional, though I've been interested in such a capability and keep seeing the issue brought up by others. Since the debacle of MyBitcoin, it's been difficult to garner much faith in hosted solutions.