The three main concerns I have about bitcoin

[foggyb]

I know people want to get rich. I must say, i never thought I would hear is so commonly and with no shame, "were not trying to fix the world, money and profits are all I/we care about." That is a disease that nature will eventually deal with.

He wasn't speaking for everyone, stop twisting his words.

Besides, we all know its in our nature to want to control our own destiny. Wealth gives us the hope that its possible.

And that's what bitcoin is about, to take control away from irresponsible people who have too much wealth and power.

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[Jaseph]

Thanks for all the responses. As I said, I posted these concerns in order to learn, not because I was convinced of their validity. I'm off to read the wiki now. Thanks again.

[Coinseeker]

Do yourself a favor and check out Ripple.  Ripple + Bitcoin = Brilliant!   

[Kazimir]

2) The supply is fixed at 21 million, but bitcoins themselves are not permanent. People die all the time without wills. People die with btc on a computer/flashdrive that no one knows about, they're gone. People don't make backups, their computer crashes, they're gone. You might think this is great, because now your btc are more valuable. But for a currency, it's not such a good thing, to have the supply eroding over time. Theoreticly, the amount of btc could eventually go to zero.

This issue keeps showing up every now and then... Well here's the thing: it doesn't matter how many (or how little) bitcoins there are in existence!

The limit of 21 million bitcoins (or 2.1 quadrillion satoshis actually, with the current 8 decimal precision) is just an arbitrary number. Bitcoin is digital and therefore infinitely divisible. The 8 decimals are just a limitation in the current software, which can be increased if the need arises at some point in the future.

It doesn't matter if there are 11.6 million bitcoins in existence, or 400, or just 0.03, it's enough. Even if it goes to zero, literally, i.e. all current bitcoins would be magically destroyed, it's still not a problem as new (fractions of) bitcoins are always being mined.

By definition there is NO shortage of supply, period.

[raze]

2) The supply is fixed at 21 million, but bitcoins themselves are not permanent. People die all the time without wills. People die with btc on a computer/flashdrive that no one knows about, they're gone. People don't make backups, their computer crashes, they're gone. You might think this is great, because now your btc are more valuable. But for a currency, it's not such a good thing, to have the supply eroding over time. Theoreticly, the amount of btc could eventually go to zero.

This issue keeps showing up every now and then... Well here's the thing: it doesn't matter how many (or how little) bitcoins there are in existence!

The limit of 21 million bitcoins (or 2.1 quadrillion satoshis actually, with the current 8 decimal precision) is just an arbitrary number. Bitcoin is digital and therefore infinitely divisible. The 8 decimals are just a limitation in the current software, which can be increased if the need arises at some point in the future.

It doesn't matter if there are 11.6 million bitcoins in existence, or 400, or just 0.03, it's enough. Even if it goes to zero, literally, i.e. all current bitcoins would be magically destroyed, it's still not a problem as new (fractions of) bitcoins are always being mined.

By definition there is NO shortage of supply, period.

I never knew that Bitcoins could be divided further, thanks

I knew that the algorithm to find coins was implemented in software, but I guess I keep falling into the trap thinking that everything's hardcoded into the protocol. I still need to read the whitepaper >.>

[Rampion]

Guys, use the search field. These very basic matters have been discussed and debunked soooooo many times.... Since 2010.

Please, please, please. Search is good. Read and learn.

[lucasjkr]

Maybe these have already been addressed, but here they are.

1) Early adopters may have stashes of millions of bitcoin. If widely adopted a few super rich could have a huge influence over the whole bitcoin economy. Imagine owning 5% of all USD in circulation(with no fed to inflate).
and once they sell their 5% of BTC the buyers of that 5% then have the control.. look at gold.. initially the US owned most of it in fort knox. now you can buy it at vending machines in dubai...

2) The supply is fixed at 21 million, but bitcoins themselves are not permanent. People die all the time without wills. People die with btc on a computer/flashdrive that no one knows about, they're gone. People don't make backups, their computer crashes, they're gone. You might think this is great, because now your btc are more valuable. But for a currency, it's not such a good thing, to have the supply eroding over time. Theoreticly, the amount of btc could eventually go to zero.
think about all the gold in peoples teeth fillings and in motherboards, and jewellry which are now in coffins/landfill underground, lost forever. eventually one day in many decades someone may have a fast enough computer to unhash a private key from its public key, and redeem the lost coins.. anythings possible.. calm down getting to zero is something your grand kids wont even have to worry about

3) Speed of transactions. If btc becomes very widely adopted, can it handle billions of transactions a day without speed becoming an issue?
this is probably the first valid worry that would appear in your lifetime. but there are multiple solutions to it. such as using paperwallets as bearer bond certificates. handing them across to trusted parties away from the network. also off the chain exchanges such as mtgox use to do, swapping mtgox codes between users instead of transactions on the blockchain. plus many other solutions to grow in the future

Don't get me wrong. I love bitcoin and the whole concept behind it. These are just questions of someone looking to learn more.

Two points:

"lost" coins are indeed an issue, because it's impossible to have decent price discovery without knowing how many coins are actually in circulation, or available to be circulated.

We know how many coins have been mined and we know the total value of those coins, but we don't know the status of them. Therefore, we can only guess what the market cap of issued Bitcoins are. Quick: what is the total value of all Bitcoins available to be spent? We simply have no way of knowing.

If someone bought up 90% of the outstanding Bitcoins and destroyed their private key, the theory would be that the remaining BTC's would then be worth 10 times as much. But there is no way to demonstrably prove that those coins were actually destroyed, and really, no way to even suspect that they were unless someone announced it.

Second - off blockchain transactions. Seems like a complete non-starter. If someone's going to try to exchange their paper wallet for my goods or services, the FIRST thing I'm going to do is import that wallet into my own wallet. It'd be silly to simply accept the paper "bill", verify that the public key its displaying has the balance that was described and have that signal the end of the transaction - afterall, the person who traded the paper wallet could redeem its value long after we parted ways, and I might be none the wiser until i try to exchange the wallet with someone else who then alerts me that there are no coins remaining in it.

[charleshoskinson]

1) Early adopters may have stashes of millions of bitcoin. If widely adopted a few super rich could have a huge influence over the whole bitcoin economy. Imagine owning 5% of all USD in circulation(with no fed to inflate).

Bill Gates has owned over 10 percent of Microsoft throughout its entire history. Would you like some 1985 Microsoft stock?

2) The supply is fixed at 21 million, but bitcoins themselves are not permanent. People die all the time without wills. People die with btc on a computer/flashdrive that no one knows about, they're gone. People don't make backups, their computer crashes, they're gone. You might think this is great, because now your btc are more valuable. But for a currency, it's not such a good thing, to have the supply eroding over time. Theoreticly, the amount of btc could eventually go to zero.

We will resolve this problem with both innovation and better community understanding of storing money.

3) Speed of transactions. If btc becomes very widely adopted, can it handle billions of transactions a day without speed becoming an issue?

This is a legitimate issue; however, there is a technical solution that eventually will be implemented.

Don't get me wrong. I love bitcoin and the whole concept behind it. These are just questions of someone looking to learn more.

They are great questions. I hope to give you better answers over the Summer. Cheers

[CtrlAltBernanke420]

Maybe these have already been addressed, but here they are.

1) Early adopters may have stashes of millions of bitcoin. If widely adopted a few super rich could have a huge influence over the whole bitcoin economy. Imagine owning 5% of all USD in circulation(with no fed to inflate).
and once they sell their 5% of BTC the buyers of that 5% then have the control.. look at gold.. initially the US owned most of it in fort knox. now you can buy it at vending machines in dubai...

2) The supply is fixed at 21 million, but bitcoins themselves are not permanent. People die all the time without wills. People die with btc on a computer/flashdrive that no one knows about, they're gone. People don't make backups, their computer crashes, they're gone. You might think this is great, because now your btc are more valuable. But for a currency, it's not such a good thing, to have the supply eroding over time. Theoreticly, the amount of btc could eventually go to zero.
think about all the gold in peoples teeth fillings and in motherboards, and jewellry which are now in coffins/landfill underground, lost forever. eventually one day in many decades someone may have a fast enough computer to unhash a private key from its public key, and redeem the lost coins.. anythings possible.. calm down getting to zero is something your grand kids wont even have to worry about

3) Speed of transactions. If btc becomes very widely adopted, can it handle billions of transactions a day without speed becoming an issue?
this is probably the first valid worry that would appear in your lifetime. but there are multiple solutions to it. such as using paperwallets as bearer bond certificates. handing them across to trusted parties away from the network. also off the chain exchanges such as mtgox use to do, swapping mtgox codes between users instead of transactions on the blockchain. plus many other solutions to grow in the future

Don't get me wrong. I love bitcoin and the whole concept behind it. These are just questions of someone looking to learn more.

Two points:

"lost" coins are indeed an issue, because it's impossible to have decent price discovery without knowing how many coins are actually in circulation, or available to be circulated.

We know how many coins have been mined and we know the total value of those coins, but we don't know the status of them. Therefore, we can only guess what the market cap of issued Bitcoins are. Quick: what is the total value of all Bitcoins available to be spent? We simply have no way of knowing.

If someone bought up 90% of the outstanding Bitcoins and destroyed their private key, the theory would be that the remaining BTC's would then be worth 10 times as much. But there is no way to demonstrably prove that those coins were actually destroyed, and really, no way to even suspect that they were unless someone announced it.

Second - off blockchain transactions. Seems like a complete non-starter. If someone's going to try to exchange their paper wallet for my goods or services, the FIRST thing I'm going to do is import that wallet into my own wallet. It'd be silly to simply accept the paper "bill", verify that the public key its displaying has the balance that was described and have that signal the end of the transaction - afterall, the person who traded the paper wallet could redeem its value long after we parted ways, and I might be none the wiser until i try to exchange the wallet with someone else who then alerts me that there are no coins remaining in it.

So bitcoins price structure is trading beavertails. Its price is purley speculative. And buyer will likely get scammed out of their money somehow.

Unless 1 satoshi has a stable value, this whole thing is crazy, based on your response above. There is absolutely no rational for making it money. Similar to how gold.... I am not sure i even understand money at all anymore. Does anyone? Its all guesswork based on crackhead math.

[BTConomist]

2) The supply is fixed at 21 million, but bitcoins themselves are not permanent. People die all the time without wills. People die with btc on a computer/flashdrive that no one knows about, they're gone. People don't make backups, their computer crashes, they're gone. You might think this is great, because now your btc are more valuable. But for a currency, it's not such a good thing, to have the supply eroding over time. Theoreticly, the amount of btc could eventually go to zero.

This discussion should help explain why you shouldn't be concerned about bitcoins getting lost forever.

[timeofmind]

If someone bought up 90% of the outstanding Bitcoins and destroyed their private key, the theory would be that the remaining BTC's would then be worth 10 times as much.

Supply is determined by the amount being actively traded. The market forces that dictate the price of bitcoin depend on the amount of supply and demand. If bitcoins are not being offered up for sale, then they play no part in determining the price. Whether the bitcoins were destroyed, or are just being saved for later, it makes no difference. But if someone bought up 90% of the bitcoins, the act of purchasing them would cause the price to go up incredibly high. After this large purchase, there would likely be a much higher demand than supply, which would maintain this high price; regardless of whether these 90% of bitcoins were destroyed or just saved away. The act of destroying them of course does not change supply, so it would not affect the price at all.

[lucasjkr]

If someone bought up 90% of the outstanding Bitcoins and destroyed their private key, the theory would be that the remaining BTC's would then be worth 10 times as much.

Supply is determined by the amount being actively traded. The market forces that dictate the price of bitcoin depend on the amount of supply and demand. If bitcoins are not being offered up for sale, then they play no part in determining the price. Whether the bitcoins were destroyed, or are just being saved for later, it makes no difference. But if someone bought up 90% of the bitcoins, the act of purchasing them would cause the price to go up incredibly high. After this large purchase, there would likely be a much higher demand than supply, which would maintain this high price; regardless of whether these 90% of bitcoins were destroyed or just saved away. The act of destroying them of course does not change supply, so it would not affect the price at all.

Supply absolutely has bearing on the overall value.

Take a publicly traded company - even if 75% of the shares are held by founders, those shares are still accounted for when figuring out the metrics of the company. Why? Those shares could be released to the market at any time.

Ex - Company A has 1,000 shares outstanding, 900 of which are owned by the founder who so far hasn't shown any desire to sell. The company earns $1,000 profit. Is the earnings per share $1 or $10? If you say that you can safely ignore the shares that aren't actively being traded, then you'd go for the later amount.

The total market cap of the Bitcoin economy might be $1.5 billion. Or, it could be $.75 billion, if half the coins have been lost. If people start setting the exchange rate as if half those coins have been lost and then they discover that those coins were not, in fact, lost, then the value of all existing Bitcoins at that point would fall by 50%. At least that will be the end result once rational actors have joined the market.

[WinVery.com]

1) Early adopters may have stashes of millions of bitcoin. If widely adopted a few super rich could have a huge influence over the whole bitcoin economy. Imagine owning 5% of all USD in circulation(with no fed to inflate).

"Only the man who does not need it, is fit to inherit wealth–the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money? Do not envy a worthless heir; his wealth is not yours and you would have done no better with it. Do not think that it should have been distributed among you; loading the world with fifty parasites instead of one, would not bring back the dead virtue which was the fortune. Money is a living power that dies without its root. Money will not serve the mind that cannot match it."

http://capitalismmagazine.com/2002/08/franciscos-money-speech/

 

[bennett616]

Maybe these have already been addressed, but here they are.

1) Early adopters may have stashes of millions of bitcoin. If widely adopted a few super rich could have a huge influence over the whole bitcoin economy. Imagine owning 5% of all USD in circulation(with no fed to inflate).

There's only 11.2 million BTC that have been mined to date so it stands to reason that it's not possible for adopters (plural) to have "stashes of millions of bitcoin."  Millions of dollars in Bitcoin, but not millions of Bitcoin.  Also, the blockchain is public ledger so you can see which addresses hold the most amount of coins.  Granted, an early adopter may own numerous "whale" addresses, but I think if you look them over, you'll still see it's not possible that a small handful of people are holding millions of coin.

2) The supply is fixed at 21 million, but bitcoins themselves are not permanent. People die all the time without wills. People die with btc on a computer/flashdrive that no one knows about, they're gone. People don't make backups, their computer crashes, they're gone. You might think this is great, because now your btc are more valuable. But for a currency, it's not such a good thing, to have the supply eroding over time. Theoreticly, the amount of btc could eventually go to zero.

Theoretically supply can go to zero but not practically.  Remember that Bitcoin is currently divisible to the 8th decimal (and this can be increased) so you shouldn't look at it as 21 million and no more.  The supply is fixed, this is true, but since you can divide each "coin" into fractional amounts, there's enough to service the world's needs if needed.

3) Speed of transactions. If btc becomes very widely adopted, can it handle billions of transactions a day without speed becoming an issue?

Don't get me wrong. I love bitcoin and the whole concept behind it. These are just questions of someone looking to learn more.

I think this is and will continue to be an evolving process as we are currently seeing with "dust" transactions.  Wider adoption means more miners and a stronger network so I think you need to account for the increase in network and infrastructure that would arise only in a mass adoption scenario.

+1

Andy B

[BTConomist]

Supply of bitcoins, supply of bitcoins... Think "supply of satoshies" as a solution to your bewilderment. The satoshies are there for other reasons than mere divisibility.

[Birdy]

Greed is good.
http://www.youtube.com/watch?v=ONXpaBQnBvE

Nope.
Motivation to create/learn/live is good. Greed can contribute this motivation.
But Greed can also be a very destructive force.

[LostDutchman]

[/quote]I know people want to get rich. I must say, i never thought I would hear is so commonly and with no shame, "were not trying to fix the world, money and profits are all I/we care about."

 That is a disease that nature will eventually deal with.[/quote]

You are kidding, right?

[keelba]

How are lost bitcoins ever going to be a problem and how is this different than any other currency out there? Isn't it possible in a gold based society to be hoarding gold and have it buried in your secret stash only to die and it never be found again? Couldn't this happen with cash? I see no difference.

[CasinoBit]

Maybe these have already been addressed, but here they are.

1) Early adopters may have stashes of millions of bitcoin. If widely adopted a few super rich could have a huge influence over the whole bitcoin economy. Imagine owning 5% of all USD in circulation(with no fed to inflate).

2) The supply is fixed at 21 million, but bitcoins themselves are not permanent. People die all the time without wills. People die with btc on a computer/flashdrive that no one knows about, they're gone. People don't make backups, their computer crashes, they're gone. You might think this is great, because now your btc are more valuable. But for a currency, it's not such a good thing, to have the supply eroding over time. Theoreticly, the amount of btc could eventually go to zero.

3) Speed of transactions. If btc becomes very widely adopted, can it handle billions of transactions a day without speed becoming an issue?

Don't get me wrong. I love bitcoin and the whole concept behind it. These are just questions of someone looking to learn more.

I don't understand people constantly bitching about potentially super rich early adopters, it's simple risk vs gain, they have put their time effort and money into this technology at the very beginning and they deserve every cent they got. There are dozens of alt-coins currently, how about YOU adopt them NOW at their early stage and take on the risk, so when they grow in value you will become "super rich".

So what? As private keys are lost all the other bitcoin are worth more, it is unlikely to ever be a problem decimal place wise and if one day all the owners of bitcoins are murdered the client can be modified to support even more decimal places without significant gain in transaction sizes.

Yes.


I swear it's like this board is filled with 14 year olds.

[chichibano]

The three main concerns i have about bitcoin are the following:

1. Extreme volatility
Investing in cryptocurrencies involves very high risk, as prices have been extremely volatile. Many experts are sceptical about bitcoin as an investment primarily because there is nothing for them to analyse.

2. Neither commodity, nor currency
The lack of clarity about its origin is another big issue related to bitcoin. In olden days, highly priced metals like gold, silver, etc. were used as currencies.

3. Don’t invest if you don’t understand
Some global bankers and experts have warned investors against investing in cryptocurrencies, because they are of the opinion that it is nothing but a bubble that is just about ready to burst.

 Therefore, Investors haven’t seen such high returns from other investments within such a short span of time. So many of them are tempted to try it out, hoping to make quick investment returns