A simple bitcoin Q/A. Learn new and interesting stuff about bitcoin.

[Ahmat faisol]

Question #6:
In Satoshi's old e-mails they imply that handling as many transactions as Visa should not be a problem.
What does this imply about the development of Bitcoin?
Specifically, what is one parameter that would need to be changed and to what value to accommodate such heavy transaction flow?
Answer:
Scalability is the subject of the first correspondence and recurring themes in emails. Satoshi commented that the higher boundary block size could be offset once "we have actual usage close to the limit and ensure its performance is okay", adding that the choice is to keep it lower to a more reasonable size and believe that Moore's law will ensure current capacity This will ensure the capacity grows with demand.
Educated scales, and mathematics succeed in producing numbers. I want something that is not too low if it is very popular and not too high if not. "He added that the 10-minute block target is also a conjecture.

[1713306834]

1713306834

[EthanB]

That is false. On July 4, 2015, there was a 6 block orphan chain, and those blocks were accepted by almost all wallet software. It was a result of SPV mining (mining based off of just the block header, without verification. Can give a small advantage in letting them find a block a bit faster) ontop of an invalid block that signaled a v2 block (the network had soft forked into v3 blocks). It's entirely possible that a transaction could have been put in the first orphan block, got to 6 confirmations, and then went back to 0. The mempool could have had more higher fee transactions in the process, making the earlier mentioned transaction have a slower confirmation time. This allows an attacker to theoretically double spend with a higher fee. It is an extremely rare scenario, but it is false to assume that it is entirely safe from any attacker. There were fortunately no double spends from July 4th.

More reading:

https://bitcoin.org/en/alert/2015-07-04-spv-mining
https://en.bitcoin.it/w/index.php?title=July_2015_chain_forks&redirect=no

I was completely unaware of this ever occurring. I was reading through Satoshi's old emails as suggested and he was speaking about how 6-blocks should/would be sufficient enough that it would not be an orphan chain. I'm reading through the extra reading you've provided, but I can't find any comparisons, clarification or contextualization of what Satoshi meant by this. Have we moved away from the original development enough to render his statement incorrect, or was this always a significant possibility?

I know you said it was due to SPV, but I am wondering why this chain was not invalidated sooner? What have we done to prevent this in the future, or is this still a capability?

[DarkStar_]

That is false. On July 4, 2015, there was a 6 block orphan chain, and those blocks were accepted by almost all wallet software. It was a result of SPV mining (mining based off of just the block header, without verification. Can give a small advantage in letting them find a block a bit faster) ontop of an invalid block that signaled a v2 block (the network had soft forked into v3 blocks). It's entirely possible that a transaction could have been put in the first orphan block, got to 6 confirmations, and then went back to 0. The mempool could have had more higher fee transactions in the process, making the earlier mentioned transaction have a slower confirmation time. This allows an attacker to theoretically double spend with a higher fee. It is an extremely rare scenario, but it is false to assume that it is entirely safe from any attacker. There were fortunately no double spends from July 4th.

More reading:

https://bitcoin.org/en/alert/2015-07-04-spv-mining
https://en.bitcoin.it/w/index.php?title=July_2015_chain_forks&redirect=no

I was completely unaware of this ever occurring. I was reading through Satoshi's old emails as suggested and he was speaking about how 6-blocks should/would be sufficient enough that it would not be an orphan chain. I'm reading through the extra reading you've provided, but I can't find any comparisons, clarification or contextualization of what Satoshi meant by this. Have we moved away from the original development enough to render his statement incorrect, or was this always a significant possibility?

I know you said it was due to SPV, but I am wondering why this chain was not invalidated sooner? What have we done to prevent this in the future, or is this still a capability?

I don't think Satoshi envisioned SPV mining taking place, as after all, the role of a miner is to validate transactions. SPV mining includes no transactions and does not validate the previous block. A lot of the nodes at the time weren't on the latest version, so they accepted the block as valid, and roughly half of the network was SPV mining, so they would accept invalid blocks, and start to build on those.

This should no longer be an issue. Bitcoin Core 0.9.5 and later versions can detect invalid blocks now related to the BIP 66 rules, and there is zero reason to be running a node with such an old version. Most, or all of the network has stopped SPV mining, as it's more profitable to fill up blocks, and better for the network. This almost certainly won't happen in the future, but it's false to say that 6 confs is safe from any attacker. There could be some other extremely rare case that happens in the future, that leads to a similar result.

[athanz88]

This is a great thread. I made one thread about giving away merit but people told me i should lock my thread and come to this thread. Ill try to support sending sMerits if i find a good answer too if i may, may i Pugman and bill gator?

Question #6:
In Satoshi's old e-mails they imply that handling as many transactions as Visa should not be a problem.
What does this imply about the development of Bitcoin?
Specifically, what is one parameter that would need to be changed and to what value to accommodate such heavy transaction flow?

The purpose of bitcoin development is to serve people as a digital currency that can be used for micro or macrotransaction everywhere and by everyone, without a 3rd party work in it. So those words mean that Satoshi's want bitcoin used for everyday purpose like Visa did today for millions (or even billions) of people, not as a digital assets like people do now. And for one parameter that would need to be changed is block size, it has made a lot of debate over the years as bitcoin only use 1 mb up until now and the reason behind it is to fight transaction spamming on the network because if bitcoin has bigger block size then it would be more vulnerale to transaction spamming, it is a great reason though, but some people who are in "bitcoin world" suggested to increase it to at least 2mb.


Please tell me if my answer is bad or not   , still on learning proccess.

[Oulay]

Question #6:
In Satoshi's old e-mails they imply that handling as many transactions as Visa should not be a problem.
What does this imply about the development of Bitcoin?
Specifically, what is one parameter that would need to be changed and to what value to accommodate such heavy transaction flow?

I didn't really get your first question but you may be referring to the the time Satoshi limited the block size to 1mb or to when he posted this:

It can be phased in, like:

if (blocknumber > 115000)
    maxblocksize = largerlimit

It can start being in versions way ahead, so by the time it reaches that block number and goes into effect, the older versions that don't have it are already obsolete.

When we're near the cutoff block number, I can put an alert to old versions to make sure they know they have to upgrade.

About the second question: The one parameter is the block size, I don't really know how much it would need to be increased but I would guess to a thousand times the current 1mb block size. Because the Bitcoin network is now handling around 210k transactions per day based on blockchain.info while visa is handling around 150 million.

By the way, thanks for trying to help us while making us learn something in the same time.

[pugman]

Page 3 Updates:

Update 1:

This is a great thread. I made one thread about giving away merit but people told me i should lock my thread and come to this thread. Ill try to support sending sMerits if i find a good answer too if i may, may i Pugman and bill gator?

Sure you can. Any one can merit the they feel is merit deserving. New rule:Plagiarizing or copy pasting content from various sources is NOT allowed. Rephrasing such content is also not allowed.

[pugman]

Question : What are bitcoin days destroyed? No copy pasting!

[tranminh]

Question #9
Here is my answer
The classic bitcoin client will show a transaction as "n/unconfirmed" until the transaction is 6 blocks deep. Merchants and exchanges who accept bitcoins as payment can and should set their own threshold as to how many blocks are required until funds are considered confirmed. When potential loss due to double spending as nominal, as with very inexpensive or non-fungible items, people may choose not to wait for a transaction to be confirmed, and complete the exchange as soon as it is seen on the network. Most exchanges and other merchants who bear the risk from double spending require 6 or more blocks.

There is nothing special about the default, often-cited figure of 6 blocks. It was chosen based on the assumption that an attacker is unlikely to amass more than 10% of the hashrate, and that a negligible risk of less than 0.1% is acceptable. Both these figures are arbitrary, however; 6 blocks are overkill for casual attackers, and at the same time powerless against more dedicated attackers with much more than 10% hashrate.

Freshly-mined coins cannot be spent for 100 blocks. It is advisable to wait some additional time for a better chance that the transaction will be propagated by all nodes. Some older bitcoin clients won't show generated coins as confirmed until they are 120 blocks deep.

[bitmover]

Question : What are bitcoin days destroyed? No copy pasting!

Bitcoin days destroyed is another way to measure bitcoin trading volume, in a more significant way.

This idea was created because 1 bitcoin could be sent thousand times a day, to create a false high volume.

The idea behind Bitcoin days destroyed is to consider in the trading volume equation the number of days each bitcoin has not moved from that address.

So if you have 1 bitcoin that has not moved in the last 100 days, when it move to another address it would have the same weight in the volume as 100 bitcoin that were transferred yesterday.

This equation would give a more precise value for bitcoin volume and economic activity as it cannot be manipulated by whales.

[EthanB]

I don't think Satoshi envisioned SPV mining taking place, as after all, the role of a miner is to validate transactions. SPV mining includes no transactions and does not validate the previous block. A lot of the nodes at the time weren't on the latest version, so they accepted the block as valid, and roughly half of the network was SPV mining, so they would accept invalid blocks, and start to build on those.

That's probably because SPV mining seems to have very little utility in the Bitcoin protocol. Unless I am misunderstanding it, SPV mining sacrificed security for speed. This is constantly an argument within the crypto world, but I think Bitcoin's stance on security from the beginning should be respected. We can't be mining blocks without validating what they're doing. This is just encouraging splits, orphan chains and a less stable network.

This should no longer be an issue. Bitcoin Core 0.9.5 and later versions can detect invalid blocks now related to the BIP 66 rules, and there is zero reason to be running a node with such an old version. Most, or all of the network has stopped SPV mining, as it's more profitable to fill up blocks, and better for the network. This almost certainly won't happen in the future, but it's false to say that 6 confs is safe from any attacker. There could be some other extremely rare case that happens in the future, that leads to a similar result.

I fail to see why SPV mining became a thing in the first place, that is to say that I don't believe it should have ever been an issue; I guess hind-sight is 20/20. So then the answer to the question would be "Unknown", is that right? Wouldn't it have been possible for these invalid blocks to have garnered more than the 6 confirmations they did? I guess I'm wondering if there would ever be a "safe" amount of confirmations, because the blockchain is constantly under attack by those searching for anyway to exploit it or manipulate it.

[DarkStar_]

This should no longer be an issue. Bitcoin Core 0.9.5 and later versions can detect invalid blocks now related to the BIP 66 rules, and there is zero reason to be running a node with such an old version. Most, or all of the network has stopped SPV mining, as it's more profitable to fill up blocks, and better for the network. This almost certainly won't happen in the future, but it's false to say that 6 confs is safe from any attacker. There could be some other extremely rare case that happens in the future, that leads to a similar result.

I fail to see why SPV mining became a thing in the first place, that is to say that I don't believe it should have ever been an issue; I guess hind-sight is 20/20. So then the answer to the question would be "Unknown", is that right? Wouldn't it have been possible for these invalid blocks to have garnered more than the 6 confirmations they did? I guess I'm wondering if there would ever be a "safe" amount of confirmations, because the blockchain is constantly under attack by those searching for anyway to exploit it or manipulate it.

Miners want to make a larger profit, so it just took time for someone to come up with something like this. I think the answer to the question would still be six, as the probability has significantly lowered since the last time it happened. The bitcoin network had a empty mempool when this happened, so sacrificing probably 10-100 dollars per block might have been worth the chance of a larger payout. Today, miners would be throwing away 3000+ dollars roughly per block they SPV mine from fees. The network had also undergone a soft fork with new rules, and not everyone would have been on the latest Bitcoin Core that enforced these rules. I don't expect to see another BIP66 in the near future. I think it's fair to assume that they are safe, but it is never a guarantee.

You are correct in that the chain could have been over 6 blocks, but I believe only around 50% of the network was SPV mining, so the more time passes, the higher the chance that the other 50% would have found a valid block.


pugman/bill gator, mind if I asked a question? I'll reward the merits my self, and you don't have to add it to the OP, I just don't want to make a new thread

[bill gator]

pugman/bill gator, mind if I asked a question? I'll reward the merits my self, and you don't have to add it to the OP, I just don't want to make a new thread

You got it, ask away. I give you my blessing to take over the thread in any capacity you deem necessary. You are educating better than I could pull off and I'm ready to let someone else take over the merit situation, because I am at 0 for now.

Pugman is an easy going fellow, doubt they'd have any problem with you doing the same. I don't wanna speak for someone else, though.

[DarkStar_]

pugman/bill gator, mind if I asked a question? I'll reward the merits my self, and you don't have to add it to the OP, I just don't want to make a new thread

You got it, ask away. I give you my blessing to take over the thread in any capacity you deem necessary. You are educating better than I could pull off and I'm ready to let someone else take over the merit situation, because I am at 0 for now.

Pugman is an easy going fellow, doubt they'd have any problem with you doing the same. I don't wanna speak for someone else, though.

Okay. Here's my question:

Question 9.5: Pretend I own a large business that sells physical items, with all orders being sold online. Tell me about the benefits and drawbacks of accepting Bitcoin for my business. I reside in and pay taxes in Canada.

I'll offer up to 20 merits depending on how well your answer is, especially if you make a point that I haven't thought of. I expect more than the obvious benefits and drawbacks, posts with just those will not get merited (by me anyway). Same rules listed by pugman apply.

[DarkStar_]

Question #9:
A bitcoin transaction with 6 confirmations is usually considered to be secure. Why is it so?

one is free to consider a bitcoin transaction as valid as soon as it appears on the ledger. However, the greater number of confirmations grants better surety that the transaction is valid and the buyer is not trying to double spend.

Each subsequent confirmation makes the computational effort required to forge the contents of 51% of the distributed ledger that much higher; 6 confirmations is considered a practical limit after which the feasibility of such forgery becomes infinitesimally small. 6 confirmations is often considered to be as safe as waiting 6 months on a credit card transaction.

You picked the wrong thread to copy and paste in. Here's an archived version of your post.

Copied from a Quora response: https://www.quora.com/Why-do-you-need-to-wait-for-6-confirmations-for-bitcoins

I was just about to give you a few merits too! 对不起.

[izanagi narukami]

Question #9:
A bitcoin transaction with 6 confirmations is usually considered to be secure. Why is it so?

Q : With 6 confirmation, you're safe from double spending ! With 6 confirmation, you're safe to do transaction for more than $ 10.000 although you must wait about 1 hour in process !

...

Okay. Here's my question:

Question 9.5: Pretend I own a large business that sells physical items, with all orders being sold online. Tell me about the benefits and drawbacks of accepting Bitcoin for my business. I reside in and pay taxes in Canada.
...

Benefit :

• With bitcoin, I can purchase anythings without worried being robbed ( example : carrying money )
• Bitcoin also provide cheaper fee and you also have double advantage ( investment & income)
• With bitcoin, we can do transaction without converting into certain currency because every country accept bitcoin ( Absolutely No fee for conversion )

Drawbacks :

• Bitcoin still volatile so when you're accept bitcoin , you're investing into risky investment except you sold it directly as soon as you got paid with bitcoin
• After you run your business , suddenly your government decide to forbid bitcoin usage because security reason. Bitcoin still consider as criminal money.
• Bitcoin still can be hacked although they said bitcoin using SHA 512

[BTCforJoe]

Okay. Here's my question:

Question 9.5: Pretend I own a large business that sells physical items, with all orders being sold online. Tell me about the benefits and drawbacks of accepting Bitcoin for my business. I reside in and pay taxes in Canada.

Considering that you're an online business, cash generally isn't a payment option for your customers. Paying via credit card means that there are fees: for both you and the buyer. While these fees are usually offset for the buyer via bonuses, such as points or airline miles, you, as the seller, are stuck with having to pay merchant fees for allowing credit card payments. Accepting bitcoin means that you, as a seller, do not have to pay fees for the transaction. Chances are that the transaction fees are [currently] lower than the credit card fees for the buyer, as well. Customers can also rest assured knowing that their personal information, such as their billing information that is tied to their credit card, is not divulged to your company. This should allow the customer to buy your products with ease, knowing that their privacy is never at risk.

Additionally, you no longer have to wait to have the cash on-hand. Once a bitcoin transaction successfully receives confirmation, it's yours to spend immediately; no more having to wait for your credit card agency to transfer the money to your bank, especially when there are international fiat currency exchanges involved.

More importantly for you, as a business, you're not susceptible to chargebacks, such as with credit card payments! Once a transaction has occurred, it's final. Customers can no longer fraudulently chargeback a transaction for any reason.

Given that there is a small minority of retailers that accept Bitcoin, yours will be considered one of the "forward thinkers" of this day and age. As a large business, you'll definitely gain positive press for accepting Bitcoin, which will be free press and marketing for simply deciding to accept Bitcoin.

Additionally, given that Bitcoin is considered a commodity by the Canadian government and the Canada Revenue Agency, you don't have to pay taxes on your Bitcoin earnings, unless the value of Bitcoin is higher when you're ready to convert it to fiat currency than it was when you acquired it. If so, then you'll have to pay capital gains taxes on it, which is the perfect segue into the drawbacks of accepting Bitcoin for your business:

Bitcoin is still highly unknown to the Canadian government. Because of its past ties to illegal activities, your Bitcoin could be at risk if the authorities deem any form of investigation into how you acquired the bitcoin. Because you'll be forced to comply, your bitcoin could be in limbo while investigations are conducted. All the government needs is one (false) report that your company is using Bitcoin to launder money or for trafficking, and you'll be forced to give up your bitcoin while they (attempt to) clear any false claims.

This is a farfetched scenario, but the risk is definitely there. Another risk of accepting Bitcoin? The extreme volatility of the currency. Because it's not tied to any fiat currency, and given that all of the products that your store will offer are based on a cash value, you could end up taking a loss for any given transaction if the price of Bitcoin dips after the transaction was conducted. This could be a matter of minutes or a matter of weeks. Because there is no guarantee that the price of bitcoin will increase, every transaction you conduct is at risk of realizing instant losses the moment you sell a product. On the contrary, your profits could be easily multiplied if the price of Bitcoin inflates after a sale has been made.

As a large business, you'll also be susceptible to hacking, and you'd be a target for hackers to try and intercept your customers' payments. Because bitcoin users are also more tech-savvy, it attracts the bad along with the good. Your store's website could be prone to attacks, which could come with hackers' demands for you to pay a ransom (ironically more than likely with Bitcoin) in order to resume your site's normalcy.

There are additionally many perks and drawbacks to the customer for using Bitcoin to purchase products, but since you asked about benefits and drawbacks of your business, I'll leave it at that. Does this answer your question?

[Husires]

Question 9.5: Pretend I own a large business that sells physical items, with all orders being sold online. Tell me about the benefits and drawbacks of accepting Bitcoin for my business. I reside in and pay taxes in Canada.

Since Bitcoin is not a legal tender "not supported by any government or central authority" that mean you must pay Income Tax Act.
This means that if you want to start a big activity like selling physical  items you must be included your income for tax purposes"Because you didn’t use the legal currency".
You must report any gains or losses when assessing taxes.

benefits
Global market:You can sell to all parts of the world and you can win big markets that can’t pay by conventional methods such as the visa and MasterCard "African and Asian markets".
Low fees:Anyone around the world can pay for you less fees than $ 10 "Cheap product"
drawbacks
taxes and more taxes: income tax and bitcoin tax "bitcoin as commodity"
Legal Legislation: It can be changed at any time.
Bitcoin fluctuation:
Rigidity by CRA.

[jpespa]

pugman/bill gator, mind if I asked a question? I'll reward the merits my self, and you don't have to add it to the OP, I just don't want to make a new thread

You got it, ask away. I give you my blessing to take over the thread in any capacity you deem necessary. You are educating better than I could pull off and I'm ready to let someone else take over the merit situation, because I am at 0 for now.

Pugman is an easy going fellow, doubt they'd have any problem with you doing the same. I don't wanna speak for someone else, though.

Okay. Here's my question:

Question 9.5: Pretend I own a large business that sells physical items, with all orders being sold online. Tell me about the benefits and drawbacks of accepting Bitcoin for my business. I reside in and pay taxes in Canada.

I'll offer up to 20 merits depending on how well your answer is, especially if you make a point that I haven't thought of. I expect more than the obvious benefits and drawbacks, posts with just those will not get merited (by me anyway). Same rules listed by pugman apply.

The benefits and drawbacks of accepting bitcoin for the business are:

*
It is convenient because you can buy online without hassle through paying bitcoin and it is a fast process since you only need to send bitcoin from your btc address to another btc address and there you have it. The problem that could possibly occur though is the confirmation speed and its transaction fees. Since bitcoin has become more popular nowadays many people now are getting involved with it meaning the number of transactions being created are increasing also and it can result to a delay of your incoming or outgoing bitcoin and increase in transaction fees because of overloaded unconfirmed transactions.

*
Because of its volatility, if you sold an item in bitcoin then how much you receive will be its equivalent value at the time you receive it and you cannot change the fact that once you received your bitcoin income, you might gain or lose some of its amount depending on its price movement. For example you are able to sold such goods or services for 100$(in bitcoin) but when you receive it you might actually get more or less than 100$ because bitcoin's price has moved again.

*
I just remembered what I read recently if I am correct in Canada when you convert your bitcoin into Canadian dollar then it becomes subjected to tax. Barter transaction rule is applied when bitcoin is used to purchase goods or services and for tax purpose, the fair market value of the goods or services sold are included as income and I understood in this part is that regardless of the price swings the income that you will declare is based on the fair market value of that goods and services sold by your large business.

But the good part of all is that bitcoin is legally accepted in Canada unlike other countries that banned it.

Please feel free to correct if there are some mistakes on my opinion especially on the last part. Thanks!

[BTCforJoe]

Okay. Here's my question:

Question 9.5: Pretend I own a large business that sells physical items, with all orders being sold online. Tell me about the benefits and drawbacks of accepting Bitcoin for my business. I reside in and pay taxes in Canada.

Now that I'm thinking about it, there are so many more drawbacks of running a large store that accepts Bitcoin... You've got my brain working in overtime now, and all these thoughts keep popping into my head lol. Automation, being one of them. You'd have to hire developers to make an automated payment and fulfillment system, such as the ones that are used by existing fiat payment processors. This comes with a high-cost, as you'd have to have a custom build, or use existing companies like BitPay or Blockonomics. Custom builds will cost thousands of dollars to develop, and you have to put a lot of trust in the dev not to backdoor your code. Using bitcoin payment processors, in turn, means that there are, in fact, fees for your bitcoin payment transactions.

All of this talk can't be for no good reason. DarkStar_, do you run an online retailer that accepts Bitcoin, or are you thinking of starting one? I'm quite interested lol

[tranminh]

I think except fee of transactions one of the most drawbacks of accepting Bitcoin are Legality.
Before you want accept BTC for your business
How about Legality of bitcoin in Canada? I am not a Canadian and I just study about Cryptocurrency. I am finding some information at https://en.wikipedia.org/wiki/Legality_of_bitcoin_by_country_or_territory#North_America:

Bitcoin would seem to be classified pursuant to the current provisions of the PPSA simply as an "intangible".[25]
Bitcoin is expected to be regulated under anti-money laundering and counter-terrorist financing laws in Canada, based on a federal budget bill (C-31), passed in 2014.[26] Regulations must be enacted before this provision becomes active,[27][28] however, once they are it is expected that "dealers in digital currency" will be regulated as money services businesses.[29] The Authorite des Marches Financiers, the regulator in the province of Quebec, has declared that some bitcoin related business models including exchanges and ATMs are regulated under its current MSB Act.[30]

Maybe some one tell me exactly the answel for this question