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Author Topic: The Future of the Bitcoin  (Read 5671 times)
Timo Y
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bitcoin - the aerogel of money

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February 24, 2011, 09:45:16 AM

In a Bitcoin future, will Intel be the next federal reserve?

Yes, in future, there will be only a handful of players who will mine the majority of new Bitcoins. We will see the kind of consolidation that happens in most mature industries.

By that time however, most of the Bitcoins will already have been mined.  The small, and decreasing rate of Bitcoin production will make it difficult for these players to manipulate the economy.

A double spending attack by a cartel of miners is another danger, however:

Pulling off a double spending attack is hard enought, pulling it off profitably is nearly impossible.

Double spend too much, and users will get pissed off with Bitcoin and move to Bitcoin v2 en masse. The value of Bitcoin will collapse and soon you may find that your loot is worth less than the Billions you have spent on gaining more than 50% of the network's hash/s.

Double spend too little, and you may find that you may as well use your computational power for honest generation instead of double spending.  Technically, the network may be vulnerable to double spending by this cartel, but there is also a social barrier. The community can choose to reject blocks from nodes who are known to be dishonest.

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February 24, 2011, 08:46:52 PM

Hello folks,

I've been watching this for a long time now, and I've just recently gotten involved...gotten my first .05...the whole nine yards.

It feels great.

But at the same time, I have a question that has been gnawing at me for sometime. I've been reading people's posts about this being a real future currency. I know it's a currency now, but it's not mainstream.  And it's certainly not something that is close to adoption on a large scale.  Here's the issue I see:

Difficulty to mint bitcoins is increasing. This is something that is SUPPOSE to happen, but doesn't this hurt the future of the bitcoin? Using computer power to create more means that those with computer power are the most powerful (not to be redundant).  This works now because it's a new commodity on the uprise..but what happens when the difficulty rises above what an average computer user can manage? In fact, hasn't it already?  To really be competitive in acquiring more of these things, I need to go out and spend a couple hundred dollars on a new video cards. I don't want to argue with anyone about how much the buy in is right now, because that's not really the point.  Difficulty will continue to increase, and what I see when I look ahead is a future where supercomputers mint new bitcoins. That's interesting, isn't it?  Now, I realize that by this point the market will be much more saturated with these things, but I'm trying to parallel this with the dollar.

In a Bitcoin future, will Intel be the next federal reserve?

Stop confusing this poor person, all of you!  Yes telestrial, here on the forums you are likely to find a lot of people who do mining, talk about mining, etc.  But mining is just the competitive process to mint bitcoins and keep them secure.  It's about as relevant to the whole bitcoin economy as the printing of banknotes is to the U.S. dollar economy:  the normal way for regular people to use bitcoin is just like any other currency where you are rewarded for working, selling things, or offering services regardless of what computer you run.  If you want bitcoins I recommend you do what I did and exchange some other currency for them via or some other reputable service, accept them for work, or sell something for them.

As an aside, however, the mining process is actually a beautiful detail in bitcoin because of the competition being based on computing power.  Forgetting the technical side of things for a moment we can see how amazing it is by relating it to the printing of banknotes.  Most banknotes cost a few cents to print and the job of doing that is contracted to specific people.  But what if, once it had been decided how many more new banknotes were needed, anyone could compete to produce them?  As long as we have a way of ensuring that only that number are produced, and that the company printing the most secure banknotes gets to spend them, we can see that competition will drive the amount of security going into each note close to its face value.  We would end up with notes much more secure than anything we've had before, and instead of one entity making money hand over fist the competition would mean the company makes roughly the fair value of what it costs to perform the work of creating the bills.  This is how bitcoin works--competition keeps driving the difficulty of mining closer to the cost of mining, and this all makes bitcoin incredibly secure because attackers of the network need to either overpower the network temporarily (for a small scam, like spending coins they already own twice) or perform as much work as has been done cumulatively so far (to take over the whole network).  Most beautifully, as bitcoin increases in value the difficulty will tend to scale with it, meaning that the more people use bitcoin, the more secure it gets.  Pretty cool, hey?

Getting back on track, the vast majority of people who use bitcoin will not and should not do any mining.  Mining is just a technical detail that makes everything work.  It has to be in place first, but once it is people can just use bitcoin like any other currency and be able to trust that it's secure without necessarily knowing the nitty gritty of why.  For some other parallels beside using cash and printing banknotes, think of the difference between:

Using the Internet and running an Internet Service Provider (ISP)
Wiring money to someone and running a currency transfer company like Western Union
Using a computer and designing one

When I explain bitcoin to people, I don't even tell them about the mining process unless/until they ask who creates the coins, or if they would be interested in the technical design.  It's just plain irrelevant to everyday people, except to know that it's very secure (and getting moreso all the time).  I hope that helps!


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February 25, 2011, 01:13:24 AM

You shouldn't worry about super won't pay...mining will migrate toward the most cost effective hardware, not necessarily the fastest.  Already people claim that a 5870 card is more cost effective than a 5970.  Pooled mining with commodity hardware is probably going to be more cost effective than super computers.

(gasteve on IRC) Does your website accept cash?
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