BitCoin: a rube-goldberg machine for buying electricity

[kiba]

http://xifin.wordpress.com/2010/11/18/bitcoin-a-rube-goldberg-machine-for-buying-electricity/

Damning criticism with faint praise.

I am not sure how to answer it myself as I don't completely understand how bitcoins work.(lack of cryptographic knowledge)

[BitLex]

hmm, to me it looks like if he totally missed (like lots of newcomers do)
that block-generation isn't about creating bitcoins at all,
it's about transactions.

[Bimmerhead]

Well the first thing I learned from that article is that electricity is much cheaper in Ontario than the US.  I just checked my bill and I paid $0.065/kWh last month.  At least there is something that is cheaper in this country.

Other than that, I was left with some questions.

He says "we have a currency that will devalue itself almost as easily as the Zimbabwean dollar", right after noting that the ultimate quantity of BTC is fixed.  Not sure how he arrived at that conclusion.

The author also says the 'artificial' creation of bitcoins is 'madness'.  As if boring a hole 3 miles underground at the risk of losing your life to haul out some yellow metal is not madness.  He seems to simply want bitcoins created and then disbursed arbitrarily by the creator somehow.

Sounds a lot like the fiat money system we have now.

[Bitquux]

Well, for starters a lot of new coins are currently being generated on GPU hardware at a better power consumption rate than his measly 2000 khash/s machine, which wasn't all that far off the going rate for bitcoins to begin with. I saw a figure once that it costs something like 4.5 cents to create a US penny.

[wumpus]

I agree with him that bitcoin still has several problems, but not the ones he highlights. I've commented on his post

[ribuck]

He says "we have a currency that will devalue itself almost as easily as the Zimbabwean dollar" ... Not sure how he arrived at that conclusion.

That's because he has got the "bitcoins are subdivisible to 8 decimal places" thing the wrong way around in his head.

See how he says that if we are using Bitcoin 10 years from now, due to the "progressively smaller and smaller subdivisions of a BTC ... we’ll still reminisce how it used to be that 10 BTC would have bought you a nice meal".

It's actually the other way around. We may marvel that the price of a Pizza was once 10000 bitcoins, but we don't "reminisce" for those days, because we can now buy so much more with 10000 bitcoins (if we had them, that is).

[kiba]

Now he said that people don't like to use 0.0003 or something.


Nobody will be using a long form of 0.0003 but an exponential notation. Plus, why would anybody cry foul about everything GETTING cheaper.

[FreeMoney]

Now he said that people don't like to use 0.0003 or something.


Nobody will be using a long form of 0.0003 but an exponential notation. Plus, why would anybody cry foul about everything GETTING cheaper.

I doubt people will use ex notaion. Maybe cent, mill, micro.

[davout]

Now he said that people don't like to use 0.0003 or something.


Nobody will be using a long form of 0.0003 but an exponential notation. Plus, why would anybody cry foul about everything GETTING cheaper.

I doubt people will use ex notaion. Maybe cent, mill, micro.

Or maybe in some distant future people will refer at 0.0001 BTC as being "one" bitcoin

[FreeMoney]

Now he said that people don't like to use 0.0003 or something.


Nobody will be using a long form of 0.0003 but an exponential notation. Plus, why would anybody cry foul about everything GETTING cheaper.

I doubt people will use ex notaion. Maybe cent, mill, micro.

Or maybe in some distant future people will refer at 0.00000001 BTC as being "one" bitcoin

Or maybe like that

[ribuck]

Or maybe in some distant future people will refer at 0.0001 BTC as being "one" bitcoin

There's plenty of precedence for that. At first, the new unit is called e.g. a "new bitcoin" and then over time people drop the word "new".

Historically, of course, a "new" release of the currency comes into use when prices go up, not down. I think bitcoin would be the first exception to that rule.

[wumpus]

Now he said that people don't like to use 0.0003 or something.


Nobody will be using a long form of 0.0003 but an exponential notation. Plus, why would anybody cry foul about everything GETTING cheaper.

Indeed, that's a non-issue. It doesn't really matter how you write it at all, how you shift the point, or how you call the unit. 0.000030 something is 3.0 something else.

One dollar nowadays is also worth $0.001 written in dollars of 100 years ago (if you take inflation into account). But we still call it one dollar. Woo hoo...

For a non-virtual commodity such as gold, on the other hand, it'd be a problem. Matter is only finitely divisable, and at a certain moment the coins would become really really small But virtual commodities don't have that problem...

[RHorning]

Now he said that people don't like to use 0.0003 or something.


Nobody will be using a long form of 0.0003 but an exponential notation. Plus, why would anybody cry foul about everything GETTING cheaper.

I doubt people will use ex notaion. Maybe cent, mill, micro.

Or maybe in some distant future people will refer at 0.0001 BTC as being "one" bitcoin

I faced sort of the same situation when I lived in Brazil during the mid-1980's... the currency was going through massive inflation where over the course of a year you could put two zeros onto all prices compared to what it was at the beginning of the year.

As a practical matter, the currency unit that most people used while I was there was the "mil", or a thousand in portuguese.  If you asked how much a bunch of bananas cost, they would tell you 3 mil or 4 mil (whatever it was at the time) and you would hand over some money.

Based on this experience, I think the idea of a millibitcoin as a unit of currency sounds interesting, as in 40 mBC == 0.04 BTC.  With the current rate of deflation, I would expect this to be a common unit of exchange.