I am pretty confident we are the new wealthy elite, gentlemen.

[Astrohacker]

Your point about there not being a difference between 5000 and 3000 is simply wrong. It's different a factor of 5/3. How many billionaires would turn down the opportunity to have 5/3 more money? None.

the opportunity to get it isn't costless. most people would be irrational to take a substantial risk of bankruptcy for a chance to have $5 billion instead of $3 billion, given, among other things, the diminishing marginal utility of wealth.

Correct.

And my conclusions have done nothing but sharpen on the incredible outcome: bitcoin is likely to actually be adopted as a currency by a huge fraction of the world.

for one thing, three weeks isn't enough time to make lifelong investment decisions. if you feel rushed, that itself is probably the result of counterproductive speculative pressures. recall that 'get in before it's too late' is an almost certain hallmark of a scam or at least hypothetical speculation. in non-speculative investments, there's a presumption that the price impounds at least some rational calculus by the market, so that waiting a month ought not to make a big difference.

It's not like I'm going to stop learning and just stick with my decisions no matter what for the rest of my life. If I acquire new information that suggests I should sell, then I will sell. Also, feeling "rushed" is what you feel if you only have one second to make a decision. Three weeks of research is obviously not a rushed decision.

as to the particulars, your interesting article runs into a few potential problems that you might want to consider being more cautious about.

first, exponential growth is almost always unsustainable and, in practice, is almost never sustained. relatedly, past performance of any commodity does not predict future performance. to assume that it's as easy (and rapid) to grow from 1000 to 10000 users as it is to grow from 100,000 to 1,000,000 would have been an incorrect assumption for almost any technology, and it's not justified here.

The numbers I plugged in are obviously gross approximations, but it's not unreasonable to think that every person who participates in commerce on the internet will use this. And I'm also not saying the future behavior will be exponential because the past was exponential. I'm saying it was, is, and will be exponential because of the incentives for using it. It will only stop being exponential when it gets close to saturating, which is when basically everyone uses it.

second, you downplay various attack vectors. it's very hard to predict, but many have offered at least credible analyses that suggest (for example) that governments could readily shut down bitcoin. there are also potential internal problems, like scalability and the evolution of the fee structure. at the very least, there are more unknowns than knowns here.

Perhaps I have downplayed the government threat. It may very well be possible for government to shut it down, at least at a technological level. However, governments "could" shut down the entire internet, but that's not going to happen because it's politically impossible. If bitcoin catches on, it would be equally impossible to shut it down. And if they tried, they would just be committing economic suicide.

third, i don't see a justification for your claim that there can be only one decentralised online currency. you tie this claim only to the notion of the security of the block chain based on hashing power, but

(1) alternative currencies could rely on alternative proof of work,

(2) alternative currencies could rely on alternatives to the need for proof of work, and this becomes sharply easier as soon as you relax the design criterion of 'total decentralisation' toward 'decentralised for all practical purposes', and

(3) 'most secure' is never important in the real world; what's important is whether a technology is secure enough for the purposes for which it's being used, in view of its threat models.

(as a rough analogy, the rijndael cypher was adopted as the advanced encryption standard, aes, even though almost everyone believed it to be less secure than serpent and twofish. but it was faster and good enough for all conceivable practical purposes, given the standard's timeframe, threat model, and use cases.)

Suppose you constructed a bitcoin competitor, say bitcoin2, that relied on proof-of-work. Your bitcoin competitor has much less computational power than bitcoin. Any of the bitcoin miners could therefore conquer your tiny network and start reversing transactions whenever they pleased. For this reason, there can only be one. Even if your bitcoin competitor were technologically different than bitcoin, but still relied on proof-of-work, then it could be conquered by any of the bitcoin miners at any time.

I agree that if a decentralized currency didn't rely on proof-of-work then it could compete with bitcoin. But no one has actually invented such a thing, and I suspect that it's not possible.

i'm not sure why i keep engaging these discussions, only to be misinterpreted as a bitcoin detractor. i'm actually trying to help people make better investment decisions, and though you don't have any particular reason to believe me, i have quite a lot of experience in this area. as a matter of full disclosure, at today's rates about 3% of my wealth is currently in a large pile of bitcoins that i mined cheaply early on, though that was not a conscious investment decision and amounts to little more than a lottery win.

Thanks for engaging.

[1714202163]

1714202163

[1714202163]

1714202163

[unk]

Suppose you constructed a bitcoin competitor, say bitcoin2, that relied on proof-of-work. Your bitcoin competitor has much less computational power than bitcoin. Any of the bitcoin miners could therefore conquer your tiny network and start reversing transactions whenever they pleased. For this reason, there can only be one. Even if your bitcoin competitor were technologically different than bitcoin, but still relied on proof-of-work, then it could be conquered by any of the bitcoin miners at any time.

there isn't just one kind of proof of work, however. an alternative could require a greater (or lesser, or just different) capital investment than gpus and thus be roughly as secure with more or fewer users. for example, consider one network that relied on a computation that could not easily be sped up with gpus, other asics, or fpgas; there, only cpus would be relevant, whereas gpus and other devices would be relevant to bitcoin. the two could exist in parallel without one being monotonically 'more secure' than the other.

but the more important point remains that 'most secure' is not what's important. a system needs only to be good enough to do what people want it to do. multiple competing currencies could achieve that, even though only one of them is 'most secure'.

I agree that if a decentralized currency didn't rely on proof-of-work then it could compete with bitcoin. But no one has actually invented such a thing, and I suspect that it's not possible.

there are two responses to that. the simpler is that proof of work isn't necessary; as satoshi recognized, you just need proof of resources, and he picked work as a judgement call. there are any number of other kinds of resources that could be used. for example, satoshi considered and ruled out ip addresses, but they're not obviously better or worse than cpus or gpus in the steady state. (ip addresses were probably more prone to what would have been perceived as 'manipulation', but then often so are cpus by network administrators, and using computation has many downsides.) there are other resources too, like bandwidth, which is of course the foundation of the emule and bittorrent 'economies'. it could be used in a currency, though it would be more complex to do so.

sheesh. that was what i called the 'simpler' response. the more complex one is that the only feature of decentralisation that requires proof of work is the initial distribution of the currency, though that is perhaps a contentious point. i believe i could show, however, that the block chain's consensus mechanism is not needed merely to prevent double spending; other decentralised technologies could achieve that goal without proof of resources, with whatever probability of correctness was appropriate to a system. (it's all about probabilities; no system to prevent double spending is perfect, including bitcoin's.) the double-spending problem is considerably easier than the question of how to allocate initial wealth without trust, but unfortunately bitcoin uses the same solution for both, thus making the double-spending solution susceptible to more attacks than would otherwise strictly be necessary.

[Dude65535]

While I think that road from here to a widely used cryptocurrency will be rougher than some seem to think, I have to admit I have taken out a loan to buy bitcoins. However it was a loan from a relative with good terms I think, 0 interest but a cut of the profit if any. I had no money available to invest and they had no confidence in bitcoin. So far it is working out well for both of us.

[BubbleBoy]

During the singularity phase, you should also take out loans to buy bitcoin, since bitcoin appreciates far more rapidly than interest on any fiat currency loan.

You know who else does this ? Those who fall for a market bubble, a speculative mania, a gold fever, a balloon, or a ponzi scheme. It's either that or a uh... singularity.

@unk: +1 Insightful. As you say, proof of work is not required for byzantine fault tolerance of the coin database. For minting I propose a simple centralized solution: everybody relies on a "central bank" that mints digital coins with it's private key. The bank has a published manifesto that explains what it does with the proceeds of seigniorage (ex. give it them to charity) and the schedule of monetary expansion (ex. fixed rate, dynamic to combat deflation, linear up to a hard limit etc.). The users instruct their clients to trust the bank that better fits their ideology, and better banks would roundup more users. Should a bank fall short of it's manifesto, a large portion of the user base can split the block chain by collectively and democratically choosing another central bank. They would end-up with money in both block chains, and they would presumably sellout in the old chain. The market would decide which block-chain has real value. Even if the old block chain goes to hell, the users who did not switch banks would not loose value since they would end up with spendable coins in the new chain. What do you think ? Any ideas on how to distribute such a thing and forgo any centralization ?

[marcus_of_augustus]

Yeah, like everyone is going to rely on a "central bank" ever again ... well maybe not for the next 300 years. I think that horse has bolted, it's a bust, and it failed as spectacularly as communism, for very similar reasons.

[PIO]

To think that not so long ago I was paid 50 BTC for two hours of work.

LOL! And I didn't want to "go in" when a BTC was worth 0.60 because I thought it was too high... 

[benjamindees]

You know who else does this ? Those who fall for a market bubble, a speculative mania, a gold fever, a balloon, or a ponzi scheme. It's either that or a uh... singularity.

"Markets can remain irrational longer than you can remain solvent."

[shady financier]

What are you going to do with your Bitcoin wealth once your coins hit upwards of $10,000 a pop?

Pay of my debts, all denominated in nearly worthless FRN's, and then retire to the first libertarian seastead if the 'launch loop' isn't yet ready to take me to my ranch on the Moon.

Just buy a cruise ship and park it in international waters.

[Vladimir]

While I share the belief that bitcoin or something very like it will play a major role in the future, I think the road there is going to be a lot rougher.

I imagine we will see a huge boom then a bust, after that those who stick around will build the meaning full economy that will allow bitcoin or its successor to dominate.

I don't care about the busts. I am riding this pig wherever it takes me. If it tanks, I'll have a helluva story to tell. I'm sick of half measures. I'm swinging for the fences and If I strike out, so be it.  I won't be some mediocre drone living a life of quiet desperation. I believe in bitcoin and I'm going for broke, knowing the risks.  

I'm with you. Want to camp together if this shit burns?

Topic:
I am pretty confident we are the new wealthy elite, gentlemen.
Quote:
I'm with you. Want to camp together if this shit burns?
^^^
Camping together is the wealthy elite back-up plan?  

I suppose when by camping they mean buying a cruise ship and parking it in international waters, than yes indeed   

[shady financier]

but creighto, at least you'll have your guns, ammo, and silver to disinfect your milk.

just recall that 'if it sounds too good to be true, it probably is'.

those of us who aren't teenagers have seen this kind of thing dozens of times before, each time with claims that the speculation is based on something fundamentally new. i make no predictions about the price of bitcoins, as today's price results solely from what game theorists call a beauty-contest game, but 'confidence' in the most optimistic of results isn't warranted.

perspective isn't hard to acquire here, but it's always elusive. you can find quotations almost exactly the same as the original post in this discussion littered through history. would it help anyone if i found some?

borrowing in support of speculation is, additionally, almost always irrational because of the diminishing marginal utility of wealth. if bitcoins end up worth $1,000, it won't really matter whether you have 3000 or 5000 of them. (as someone with money, that's all too real a truth. like most people who've made money, i continue to seek it out of what, if i were honest, i'd have to admit was a quirky habit, rather than a need or a belief that i can do something better with it than others.) on the other hand, the interest on the $36000 debt you'd incur to buy an additional 2000 bitcoins today, which debt would grow to $240,000 in 20 years at 10% interest, could make the difference between solvency and bankruptcy for you.

going 'whole hog', to borrow an american phrase, is almost never a good investment strategy. diversification is almost always better, particularly when bankruptcy is a real risk. (incidentally, what does an honest libertarian do when facing legal bankruptcy, which is of course basically a protection against legitimate debt offered by a welfare state? does he or she decline the legal protection because it results from 'force'?)

Say it again bruth'r.

[gene]

Talk about chickens and hatched eggs... bitcoin still has a long way to go politically and technically. Unk is correct on his points, and those with the necessary technical skills should carefully consider and attack the issues he raises.

[Timo Y]

I don't wanna be part of a new elite replacing the old one. Fuck the yachts. If I become a Bitcoin Billionaire I'm going to open entrepreneurial academies and startup incubators in developing countries. 

[Litt]

I don't wanna be part of a new elite replacing the old one. Fuck the yachts. If I become a Bitcoin Billionaire I'm going to open entrepreneurial academies and startup incubators in developing countries. 

If I can turn my bitcoins into billions someday, I will be happy to join you in many such ventures. Its just amazing to even dream of making such difference.

[theboos]

Just think, once the "bankers" and hedge funds find out about this, we are going to the moon.

This gave me an idea: a Bitcoin Space Agency. Maybe we could get some publicity by landing on the moon, buying up Nasa, and colonizing Mars using one or two Bitcoins when they become valuable enough...

[marcus_of_augustus]

Just think, once the "bankers" and hedge funds find out about this, we are going to the moon.

This gave me an idea: a Bitcoin Space Agency. Maybe we could get some publicity by landing on the moon, buying up Nasa, and colonizing Mars using one or two Bitcoins when they become valuable enough...

Actually, before that we may need private satellite Internet relays to keep the network up when they try to block bitcoin traffic at the national borders which would fragment the blockchain.

I have some plans and contacts but too early for that now. Fire up the rockets later.

[unk]

If I can turn my bitcoins into billions someday, I will be happy to join you in many such ventures. Its just amazing to even dream of making such difference.

very true. so go to school, start a business, create something useful or beautiful, develop a special talent, or find many of the dozens of other ways to make such a life more probable for yourself. it's not that hard to make a difference, nor is it hard to become 'rich' when you're productive and clever; for example, come up with a product that costs $250, sell 20,000 copies of it, and you've got $5 million in revenue.

by contrast, in the history of the world, i strongly suspect the number of people who've become billionnaires on the back of a tiny capital investment alone is 0. at most it's 1 or 2, with extreme luck, and i can't think of any examples. there's a simple reason for that, which is that if it happened too often, there wouldn't be any money left for anyone else to be contributing their shares of worldwide wealth to the accidental magnates.

bitcoin does have the potential to create wealth, but not that much wealth. if you add up the surplus from all the transactions you think it enables that are otherwise prevented today, then additionally total the transaction costs that it saves as a payment system (if it does at all, because its long-term competitiveness on fees to other ways of transmitting money is quite contentious), and finally subtract the negative externalities from those newly permitted transactions, you don't get nearly enough wealth created to justify all the personal hopes of the people in this forum. to bank on a mostly-zero-sum transfer to yourself of magnitudes unlike anything the world has ever seen is much more likely the result of a loss of perspective than of neutral, balanced thinking. it's the product of psychological features like confirmation bias, not of reflection.

[Findeton]

Topic:
I am pretty confident we are the new wealthy elite, gentlemen.
Quote:
I'm with you. Want to camp together if this shit burns?
^^^
Camping together is the wealthy elite back-up plan?  

I think the wealthy back-up plan is to increase Thash/s power capacity. In fact, my idea is to start a btc mining company where investors decide how to spend the money created. For example, we can start with this setup and change accordingly in order to grow as a company:
- 50% profits are collected for dividends.
- 50% profits are collected to buy more rigs.

[nazgulnarsil]

unk you drastically underestimate the wealth that is destroyed by parasitic entities.

I'd say the world is producing about half of the wealth it should. 

[unk]

unk you drastically underestimate the wealth that is destroyed by parasitic entities.

I'd say the world is producing about half of the wealth it should. 

even accepting for the sake of argument that regulation is necessarily parasitical (rather than recognising as most people do that it can be both good and bad), if you think that governments will fall in your lifetime as a result of bitcoin and, consequently, that all financial activity will be unregulated, then we have such different frames of reference that it's hard to meet in the middle.

(and, though i don't meant to wade into yet another strange political discussion, even if governments did topple chaotically as a result of bitcoin, you're far more likely to be shot for your bitcoins than to be able to retire with them in peace. one point neglected by almost all utopian thinking is the manner and costs of transition.)

[nazgulnarsil]

you're deriving quite a bit from my post.  All I said is that the world is producing half the wealth it should.  This is a counterfactual and so not really worth arguing over but I regard government as pretty much 100% harmful and governments take around 50% of all income in taxes.