Deep Thoughts - Collapse of the Bitcoin Network

[hessenpepper]

In response to this article:
http://www.quora.com/Bitcoin/Is-the-cryptocurrency-Bitcoin-a-good-idea
Severe Problem Number 4: When Something Goes Wrong, It Will Die

Let's suppose there was a catastrophic failure of the Bitcoin network.  This could be someone figuring out how to add a large number of coins or bogus transactions.  What would happen?

Let me first say that from what I know of the system this is just not possible.  Suspend your disbelief for a moment, though, and consider the consequences if this were to happen.

I'm going to go out on a limb and say that everyone using Bitcoins is watching very closely how the Bitcoin saga unfolds.  Exchanges would immediately stop trading and merchants would no longer accept Bitcoins.  Technically, they could not stop transactions, but they just wouldn't ship product.  Pool operators would stop mining.  Message boards would light up and the whole system grinds to a halt.  Again, technically, transactions and mining would continue, but non-virtual products would stop shipping.

Coders all over the internet go through the code and figure out what happened and how to fix it.  The fix would include a way to roll back transactions to the point of failure.  Miners would need to be updated to a new version and then mining would continue with updated code.  Under the covers the bogus chain continues to grow, but big players would update to a new version that would only work with the new branch.  Technically, the Bitcoin network would survive the failure.

You might think that it would be impossible to change the Bitcoin software, but consider the alternative.

The economic impact would depend on many factors, but that's a discussion for another time.

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[relative]

I think what the author refers to here is a a desaster like that when bitcoins are already widely accepted - like USD today.
in this scenario, you don't have to worry about whether the network can eventually be fixed by a software update. you have to worry about a downtime of a single day, which causes banks to fail and other fun stuff.

[SgtSpike]

Bitcoin is dead if a major flaw like that is exploited.  I mean, really dead.  People not already using it will never have enough faith to put their wealth in the system, people already using it will abandon it and try to sell their coins as quickly as possible, and a few loyalists will try to salvage it with some recoding, but it will never return to the value it had before (whatever that value point was).

[DrElektron]

If your jumpy about it perhaps thats your own voice telling you that your over exposed. know your limits, play within it. Really you have to treat it as cash. its fiat currency, not backed by anything but trust in a trust web that is only a year old? (correct me if im wrong i have no idea)
Bitcoin and physical coins suffer the same vulnerability, save perhaps forging. you can send bitcoins to a buyer, it can get lost. you send cash in the mail, it can get lost. same poison, different bottles.

people have to get their brain around the face its a COIN. its not a t-bill, its not a CD, its not a stock, its a coin! and worse, one that can be stolen from a number of vectors.