Bitcoins biggest flaw

[skilo]

Bitcoin's biggest flaw is not in the protocol, It's biggest flaw is people judge its value based on fiat currency such as the EURO or USD, This is bitcoins biggest flaw as long as bitcoins value is dictated by fiat currency then it will have little chance of accomplishing indenpendence as a currency.

If the USD collapsed tomorrow what would happen to BTC? who or what would dictate its value? silver? gold? the mining difficulty?

Your thoughts?

[1713889139]

1713889139

[1713889139]

1713889139

[1713889139]

1713889139

[wolftaur]

Bitcoin's biggest flaw is not in the protocol, It's biggest flaw is people judge its value based on fiat currency such as the EURO or USD, This is bitcoins biggest flaw as long as bitcoins value is dictated by fiat currency then it will have little chance of accomplishing indenpendence as a currency.

If the USD collapsed tomorrow what would happen to BTC? who or what would dictate its value? silver? gold? the mining difficulty?

Your thoughts?

Mining difficulty is determined solely by the combined hash speed of the network.

And BTC's value would be determined, as always, by the amount of the source currency or commodity the majority of buyers are willing to offer weighed against the amount the majority of sellers will accept.

If USD drops by, say, 50% against most other currencies that are actively traded, the same will probably happen with USD-BTC exchanges.

[Jeremy West spendbitcoins.com]

Bitcoin's biggest flaw is not in the protocol, It's biggest flaw is people judge its value based on fiat currency such as the EURO or USD, This is bitcoins biggest flaw as long as bitcoins value is dictated by fiat currency then it will have little chance of accomplishing indenpendence as a currency.

If the USD collapsed tomorrow what would happen to BTC? who or what would dictate its value? silver? gold? the mining difficulty?

Your thoughts?

It is only pegged to national currencies because 99.99999% of businesses only accept national currencies so bitcoin accepting businesses have to convert their bitcoins in order to spend them or pay suppliers. The greater the number of businesses accepting bitcoins, the more products will be able to be priced strictly in bitcoins.

If the USD collapsed, as the Zimbabwe dollar did, bitcoins might just be worth millions of USD but still around 5 Euros.  

[skilo]

What if ALL fiat currencies collapsed tomorrow? lol

[Bitcoin Swami]

What if ALL fiat currencies collapsed tomorrow? lol

hard to tell in that situation.  What would gold be valued at?  I'm sure i could get an ounce of gold for a pack of ramen noodles, if someone was hungry enough. Ramen is the investment of the apocolypse <-- i cant even spell it.

[skilo]

What if ALL fiat currencies collapsed tomorrow? lol

hard to tell in that situation.  What would gold be valued at?  I'm sure i could get an ounce of gold for a pack of ramen noodles, if someone was hungry enough. Ramen is the investment of the apocolypse <-- i cant even spell it.

Why not just do like the federal reserve does and have a central issuing computer (we will call it crypto-jesus) that dictates how much it is worth.

XD Crypto-jesus says one BTC is worth 5 bags of ramen noodles!

[BitcoinStars.com]

Personally think it's asking to much for the public to not relate the value of a bitcoin in fiat. Fiat has been ingrained by the owners of our nations to be as valuable as water or air. Bitcoin will be interconnected with fiat as long as fiat holds value.

[skilo]

Personally think it's asking to much for the public to not relate the value of a bitcoin in fiat. Fiat has been ingrained by the owners of our nations to be as valuable as water or air. Bitcoin will be interconnected with fiat as long as fiat holds value.

Maybe you are right, I think what i am trying to say is - why cant we make a crypto currency and figure out a way to give it value without letting other fiat currencies dictate its value?

[NF6X]

Maybe you are right, I think what i am trying to say is - why cant we make a crypto currency and figure out a way to give it value without letting other fiat currencies dictate its value?

The only things that give any artificial currency value, whether it's a fiat currency or not, is the ability to trade it for real goods and services that people need to live, and/or the ability to trade it for other artificial currencies that can be used to buy needed goods and services. Right now, not many people accept Bitcoins. In particular, we still generally need to use something other than Bitcoins to buy our food, pay our taxes, pay for our housing, and so forth. So, Bitcoin is strongly tied to established fiat currencies because those account for the majority of the things that we can exchange Bitcoins for. Its value is also highly volatile because it's not strongly tied to real goods and services; rather, it's presently mostly an instrument for people to engage in speculation with, and its value is thus particularly strongly tied to people's whims and emotional reactions.

Getting more people to accept Bitcoins for real goods and services is both our biggest challenge, and the solution to the the flaw of Bitcoin being tied so strongly to fiat currencies. I think that it's also the solution to Bitcoin's current extreme volatility in exchange with other currencies. Without a government pointing a gun at our heads and demanding that we use Bitcoins (as is the case to some extent with most fiat currencies), it's a bit of a Catch-22. So, if you believe that Bitcoin will succeed, or even if you just believe that Bitcoin should succeed for philosophical reasons, then I think that the only thing to do is to keep trying to incrementally grow the number of people who accept Bitcoin for goods and services, and to expect to be doing that for a long time before Bitcoin becomes strongly established.

[Meatpile]

Yeah if the us market collapses, then you have bigger problems to worry about than bitcoin value, like all the poor people with guns running around...

Anyway I agree with you completely: bitcoins will forever be useless if they are just pegged to their exchangable value. Why the fuck would anyone change the $5 in your hand to digital paying a fee, transfer to someone, then they change it back to $4.75 or less to buy something? Absolutely dumb.

The only way it would ever work is if once you had bitcoins you had to trade them for things or services only, none of this exchanging crap. Which is impossible, because big companies like utilities and rent will never switch to it.

Even though bitcoins are awesome, they aren't compatable with the real world. There is just no transition I can see that makes any sense.

The only attempts people make to get people to "adopt" bitcoin are so far from sensible right now I have no faith anymore. Such as : "getting websites to accept bitcoins in easy automated exchanging, hell you dont even have to know what bitcoins are!" What a stupid fucking idea, just accept real dollars the way you have been for years if you dont want to know what bitcoins are.

I liked the idea of bitcoin so much I even got to the prototype hardware stage of a custom usb drive, that you can transact with bitcoins offline... But i completely lost faith recently because of all the hacking and value plummeting.

[Alex Zee]

Am I the only one who thinks that the biggest BitCoin flaw is scalability?

When you have at least O(n2) algorithm you can be pretty sure it will bite you in the ass.
Sooner, rather than later.

We have 800 Mb transaction database now. This means that people with slow or traffic-limited internet are out. Mobile devices are out. And it's what – 20 000 users?

Yes, I know you can prune the chain, but to what extent?

When each transaction must be distributed to each member and you have, let's say, a million users, it's roughly one million network packets to send per one transaction.
Each user will do at least one transaction, so it will be one trillion packets!

And a million users? It's nothing. There are 300 million people in US alone.

You get to 100 million users and you will shutdown the Internet  
10 quadrillion packets is a pretty big number. And with more users the number of transactions will grow. And I suspect the growth will be non-linear.

So, I don't know. I've heard people saying that BitCoin was a nice proof-of-concept. To me, it wasn't. It doesn't scale beyond a small town population.

These are just some scary thoughts I've been having lately  

You're welcome to refute. I'd be more than happy to know that I am wrong.

[NF6X]

I liked the idea of bitcoin so much I even got to the prototype hardware stage of a custom usb drive, that you can transact with bitcoins offline... But i completely lost faith recently because of all the hacking and value plummeting.

I don't think you should have to lose faith because of those things. The hacking is a natural consequence of people entering new areas that they aren't experts in (securely handling valuable commodities online) and hackers taking advantage of them; it doesn't reflect negatively on Bitcoin itself. The value plummeting doesn't mean much, either. Bitcoin isn't strongly tied to real, vital day-to-day needs like coffee, gasoline and ammo yet, and its apparent monetary value today is mostly just due to the whims of speculators. If and when Bitcoin becomes a well-established currency, its value will have little to do with today's exchange value, or amy of the other wildly-swinging values lately. Its eventual stable value may be higher or lower than prices we've seen recently.

Some of the people dabbling in Bitcoin are brilliant, and some are idiots. Some are honest, and some are predatory crooks. The hacking and value swings result from all of those different people interacting with each other, but none of it reflects on Bitcoin itself in any substantial way. Bitcoin will succeed or fail in the end, and I'll gamble a reasonable amount of my funds and effort on its success simply because I hope it'll succeed and provide a viable alternative to increasingly non-anonymous fiat currencies.

[nmat]

What if ALL fiat currencies collapsed tomorrow? lol

If all fiat currencies collapsed tomorrow you would be worried about bitcoin?  Reminds me of other guy who asked on reddit what would happen to bitcoins if the Internet ends...

[Jack of Diamonds]

We have 800 Mb transaction database now. This means that people with slow or traffic-limited internet are out. Mobile devices are out.

Transactions don't work that way. You don't *need* the whole database as a huge 1gb lump.

The android mobile app is ~30mb and it works just fine for sending & receiving coins. I got it to work in less than a minute.

[NF6X]

Am I the only one who thinks that the biggest BitCoin flaw is scalability?
[...]

You're welcome to refute. I'd be more than happy to know that I am wrong.

I live in a rural area. It's by choice, because I like to live on a big chunk of dirt, and I need to drive about 40 miles from where I work to be able to afford to do that. Since I live where cable TV doesn't go, and I'm too far from a nearest telephone switch to even get DSL or ISDN, my Internet connectivity at home is horrible (a mix of spotty cellular modem plus a Yagi antenna pointed at the crappy free municipal wifi, plus lots of multiple-hour butt-numbing weekend download sessions at the nearest SBUX, about 8 miles from home). I know that most folks have much better connectivity than me, and that I'm in a relative minority, but still, I have first hand experience with how hard it can be to stay on top of the block chain with poor connectivity. In spite of all of that, I'm not too concerned with the scalability of Bitcoin. Right now, all clients expect to stay in sync with the whole block chain in order to do anything useful. I can think of all sorts of technical solutions for lightweight clients to do useful stuff without maintaining full-time sync with the whole block chain. I think that one or more of those solutions will naturally be deployed at some point long before Bitcoin achieves success, and I think that overcoming that hurdle is a small problem compared to simply getting enough people to accept Bitcoins for real daily expenses.

I agree that scalability is a problem that will need to be solved, but I think that it hasn't already been solved mostly because its solution isn't needed so much yet, and not because it's a particularly tough hurdle to get over. I other words, I expect the scalability problem to be solved before it's the long pole in the Bitcoin success tent.

[NF6X]

What if ALL fiat currencies collapsed tomorrow? lol

If all fiat currencies collapsed tomorrow you would be worried about bitcoin?  Reminds me of other guy who asked on reddit what would happen to bitcoins if the Internet ends...

If all fiat currencies collapsed tomorrow, then I'd probably be glad that I've already speculated a lot on .223coins. 

[Alex Zee]

Transactions don't work that way. You don't *need* the whole database as a huge 1gb lump.

The android mobile app is ~30mb and it works just fine for sending & receiving coins. I got it to work in less than a minute.

I am more concerned with the amount of inter-nodes traffic.
A client can decide not to store everything, but the information still needs to be transferred by design.

To put it simply - when the number of users is big the block size itself will be too big to be useful.

A block needs to hold 10 minutes of _all_ transactions or the system starts lagging and transaction times will soar to infinity.

Let's assume each user does at least 1 transaction per day. There are 144 blocks per day.
A million users * let's say 100 bytes per transaction / 144 = almost 1 MB per each block = 6 Mb / hour constant incoming traffic to every client.

That's why I don't think it's something that can be solved easily. People pretend that scalability is just a feature you can easily add "when needed".
It might not be so. Being a programmer I know how hard it is to solve O(n2) algorithms.

I worry that it's the whole design of BitCoin that makes it unscalable and that this cannot be solved without a major redesign.
Essentially, creating a completely new currency. That's why I don't see BitCoin as any proof-of-concept.

I love the cryptocurrency idea, but I don't see any ways of implementing it on the scale of PayPal or VISA.

[coinage]

I am more concerned with the amount of inter-nodes traffic.
A client can decide not to store everything, but the information still needs to be transferred by design.

To put it simply - when the number of users is big the block size itself will be too big to be useful.

A block needs to hold 10 minutes of _all_ transactions or the system starts lagging and transaction times will soar to infinity.

Let's assume each user does at least 1 transaction per day. There are 144 blocks per day.
A million users * let's say 100 bytes per transaction / 144 = almost 1 MB per each block = 6 Mb / hour constant incoming traffic to every client.

That's why I don't think it's something that can be solved easily. People pretend that scalability is just a feature you can easily add "when needed".
It might not be so. Being a programmer I know how hard it is to solve O(n2) algorithms.

I worry that it's the whole design of BitCoin that makes it unscalable and that this cannot be solved without a major redesign.
Essentially, creating a completely new currency. That's why I don't see BitCoin as any proof-of-concept.

Seems you're so far ignoring cached/pooled & queried/polled data options available to programmers (you say you are one).

Let's not incorrectly assume that every client must see every transaction.  Many clients haven't even been invented yet, such as for many mobile devices and for those on slow or expensive connections.  So what you said about problems "by design" need not apply to them.  ("By design" is a Microsoft term used to excuse the company from doing proper software design and actually resolving problems.  "By design, this bug has existed in all versions of Windows since Windows 3.1 and we have no intention of fixing it.")

Any client which can't handle the entire block chain can simply establish a secure, low-speed connection to a trusted client which can.  For example, at your request, your mountaintop phone-based computer with an expensive satellite Internet connection can simply ask (poll) your desktop back in the city for the current balance of your wallet, and for the current number of confirmations there are for the handful of payments it has personally sent or received.  So a mobile or dial-up client only needs to query a well-connected one for a FEW pieces of data on an OCCASIONAL basis.

Let's also not pretend the Internet can't grow if needed to accommodate a critical financial infrastructure -- although a massive bandwidth increase shouldn't be needed, as just discussed.

As far as distributing all or part of the massive block chain history is concerned, a cached (mirrored) copy from the cloud (provided by, say, Akamai) would suffice, provided it remains possible to connect to individual clients at random to acquire copies of the latest blocks.  The latest blocks validate the prior blocks (not just the reverse), so Akamai could not simply invent a false block chain to distribute for fun & profit.

[cbeast]

IOW, the 'scalability problem' is not a bug, it's a feature 

[aq]

Let's assume each user does at least 1 transaction per day. There are 144 blocks per day.
A million users * let's say 100 bytes per transaction / 144 = almost 1 MB per each block = 6 Mb / hour constant incoming traffic to every client.

So you think 6 megabyte (BTW, Mb would be megabit) per hour is too much? I mean, a single SD card in my smartphone could store the total *raw* traffic for more than a year. But as was already pointed out, there is no need to store the complete raw data on a smartphone client.
And on a full node? Well, we are not living a decade ago, we now have terabytes for a two figure price, and believe it or not, we will have petabytes as cheap in the future.
So those while those number may look huge for the uninformed, those are actually tiny. At the moment the bittorrent network alone produces a network traffic of around 10 petabytes per hour, some 7 orders of magnitude above the your imaginary bitcoin network, and probably 10 orders of magnitude above the current bitcoin network.

But seeing that you are trying to spread FUD in some other thread, well, maybe you are just trying to to that here too