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Author Topic: Protect BITCOIN before it is too late  (Read 2578 times)
datathe1st
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March 13, 2011, 11:14:44 AM
 #1

Research what happened to American presidents who tried to end the fed.

Read about Andrew Jackson, Kennedy, etc.

Look into the Liberty Dollar fiasco.


Eventually, when bitcoin gets large enough the government is going to try to shut it down.  So it's transnational.  So what?

1) They have the media.  Disinformation to the average mom and pop will sway them.  Heck my parents don't get it now with me explaining it to them.
2) If that doesn't work they can pass laws to tax it or even make markets illegal or even running the client illegal.  If they could seize liberty dollars (http://www.youtube.com/watch?v=qmNIdbl8cyk) they will try to seize bitcoins.
3) They can launch a network attack on the system
4) Because the fed has an unlimited supply of US Dollars they can play havoc with the bitcoin exchanges.  What about always owning at least half of the bitcoin supply so that they could easily manipulate the market 10 years from now if they need to.  They plan long term. Wink


What can we do to protect ourselves?  We need to upgrade the bitcoin client immediately.  I don't know which user on the forums is responsible for http://www.bitcoin.org/ and the official client but we need to do the following and more.  

I am very new to bitcoins so these are just my observations and possibly naive suggestions after 4 days on the system.  Please contribute your ideas and tell me where I might be wrong or missing something altogether.



To protect against 1
Well for starters how about a nice video with pretty graphics showing how the entire bitcoin system works and why it's so wonderful.  We really need a beautiful and simple video that explains the process for users who don't care about encryption and who are tired of fiat currencies and fractional reserve lending.  Look at WingCash (https://wingcash.com/).  That's beautiful.  I get it.  We need that on the bitcoin site and the sooner the better.

To protect against 2
We need to integrate tor functionality into the main bitcoin client ASAP.  Why should opening port 8333 make any difference to the client.  It's so easy as an ISP to block that.  We can't rely on unencrypted traffic either.  That is to say, bitcoin traffic should look like any other traffic on the network so that even deep packet sniffer hardware and software at the ISPs cannot tell the difference between it and average internet traffic.  Can we camouflage bitcoin client traffic somehow?  We need a way to do this so that ISPs can't easily shut us down. We need anonymity so that if it is made retroactively illegal or even illegal overnight, users are protected from prosecution.

To protect against 3
Well  I'm no expert but here I think we are SoL.  Our network is small.  Any estimate on the total number of bitcoin users?  We will never have half of the nodes on the internet unless even webservers are running the bitcoin client. Cheesy  That would be nice.  Could we get bitcoin into Apache?  If every linux server in the world dedicated up to 1% of network bandwidth and cpu cycles to running a bitcoin service it would help our cause tremendously.  I have sites hosted and server time/space.  I'd love to run it on my web servers if it wasn't a resource hog.  Right now there aren't enough transaction fees to collect so there isn't much motivation for servers, however another urgent update that is needed is making use of those 8 decimal places.  The bitcoin client should allow fees of 0.00000001 out of the box.  It should also show balances that way.  Secondly it would be great if the client started displaying balances and transactions in mBTC or milli BTC.  Considering there will only ever be 28 MBTC, we should start thinking and transacting in milli BTC ASAP.  It makes a lot more sense and will remove the psychological parity barrier because it will pave the way for 1 USD to 1 mBTC parity when we use mBTC as our mental currency unit.  It will still give us 5 decimal places of accuracy which is more than enough for this decade.  Eventually I'd like to see us move to micro BTC or uBTC so that we will have only two decimal places just like every other currency in the world.

To protect against 4
First we need so many people mining that difficulty be damned, our network should be doing on the order of 10 Th/s.  That way if we get another mystery miner with 600 Gh/s of processing power come online overnight they won't be able to tilt the balance of power. Basically our network should have 10 times the processing power of the world's fastest declassified supercomputer.  Then it will take national security resources to really tilt the balance of power by generating coins.

How can we grow our network by 10x quickly but without media attention?  Word of mouth and news on geek sites.  We really don't need mainstream press right now and we also don't want single users at supercomputing facilities to be able to generate half the coins at any given time.  

As for the ability for the Fed to just buy everyone out... well I have no immediate solution to that problem.  Thought experiement.  You are the Fed.  You have a bank account with unlimited USD.  Your task: Destroy bitcoin with your unlimited supply of dollars and no other tool.  

I'd do it this way.  Create hundreds of accounts on MtGox and other markets.  Buy up all the asks driving the price up to 1.65 as of right now if I bought out the entire order book. Then sell those coins at a loss to all of the bids wiping that part of the order book out the next day. Then trade with myself at around 0.65 to establish a new "normal".  Accumulate more coins from sheep and then heavy sell the market when I have 10x the number of bitcoins as the market depth for bids selling into the entire order book of bids again creating a new low.  Again trade with myself to establish a new normal low.  Anytime there is severe bidding activity pushing the market up, I would use my huge store of bitcoins to push it down.  If I run out of bitcoins, since I can't short, I'd just buy out the entire market again and then sell sell sell.  Oh what fun it would be Cheesy

How could we protect against this?  



P.s. Please tip if you feel I'm contributing to bitcoin's development if only in ideas.  Even 0.01 BTC to me is precious.




All donations (even 0.01 BTC) are much appreciated! Thank you!
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da2ce7
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March 13, 2011, 12:27:41 PM
 #2

Try posting essays to your friends blogs like this:

http://www.graemeklass.com/economics/a-competitor-to-the-reserve-bank-bitcoin/

 Grin

One off NP-Hard.
datathe1st
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March 13, 2011, 01:22:23 PM
 #3

Well it started out as a short rant and I guess kinda turned into an essay.  I just did a lot of forum reading, thought about it, read some more, thought about it and thought it was time to puke my hash out to the forum for their thoughts.

I don't have a blog and I respect a lot of the people on this forum so I wanted their feedback.


Also I want the developers of the official client to make these updates when they have the time or tell me why they are stupid.  I'm here to learn and help the community grow just like everyone else.


I just hope I can bring some original analysis and insight to the macro issues facing bitcoin.

All donations (even 0.01 BTC) are much appreciated! Thank you!
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March 13, 2011, 01:41:38 PM
 #4

I think you are overestimate them a bit.

1)  Bitcoin's mainstream acceptance is not that important.  An idea would be quite useless if it has to convince every single person in the world in order to be efficient.  I don't want to rely on other people's smartness and awareness, because it would be hopeless.  So I say I don't care if government is using propanganda to discredite bitcoins, just as it chose to promote Keynes's idea about gold being the "barbarous relic".
2)  If government is capable of taxing bitcoin, then bitcoin is not that great anyway, and we'll have to think about something else.
3)  This is a serious threat but there's notrhing we can do apart from trying to improve the software.
4)  They can try, just as they tried with gold, by holding huge quantities of it.  But to do so they'll have to buy some in the first place, which would increase the price of bitcoin and thus draw attentionto the public.  I'm not sure it would be a good strategy for them.
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March 13, 2011, 02:24:26 PM
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1)  Bitcoin's mainstream acceptance is not that important.  An idea would be quite useless if it has to convince every single person in the world in order to be efficient.  I don't want to rely on other people's smartness and awareness, because it would be hopeless.

E-o
grondilu
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March 13, 2011, 03:02:26 PM
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1)  Bitcoin's mainstream acceptance is not that important.  An idea would be quite useless if it has to convince every single person in the world in order to be efficient.  I don't want to rely on other people's smartness and awareness, because it would be hopeless.

E-o

Pri tio ni jam priparolis, genjix:

http://bitcointalk.org/index.php?topic=2099.0
datathe1st
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March 13, 2011, 10:40:53 PM
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My fears about TOR:

http://news.cnet.com/8301-13739_3-9779225-46.html


Re: Yay free money


Yes for you in the short term but it kills the whole bitcoin project.


All donations (even 0.01 BTC) are much appreciated! Thank you!
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March 13, 2011, 11:32:40 PM
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Re: Yay free money


Yes for you in the short term but it kills the whole bitcoin project.



I think bitcoin is the seed and if it ever fails another will quickly assume it's place. The genie is out of the bottle...
grondilu
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March 13, 2011, 11:36:41 PM
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I think bitcoin is the seed and if it ever fails another will quickly assume it's place. The genie is out of the bottle...

True.  Bitcoin has shown that a currency can be decentralised.  This is big news.
Anonymous
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March 13, 2011, 11:49:26 PM
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Quote
The largest numbers of users are in the United States, the European Union and China.

nothing to see here...move along.
we6jbo
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March 13, 2011, 11:58:10 PM
 #11

I get the feeling that when we're told that we gotta protect something like bitcoin that we're essentially putting our bodies in front of the government. This to me seems like the famous build a human chain around a forest to prevent the tractors from coming in and destroying everything. Eventually the forest is destroyed and everyone goes to jail or the hospital. I think a more proactive approach would be to teach people about bitcoin and how it works. Going to universities and giving a speech to junior programmers about the insides of P2P networks like Bitcoin, TOR, I2P etc which will then give the tools to build their own P2P networks. This to me is the proactive approach that is similar to planting the seeds where a patch of trees was harvested.

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March 14, 2011, 12:44:10 AM
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Quote
The largest numbers of users are in the United States, the European Union and China.

nothing to see here...move along.

That was a quote but the source wasn't referenced.  Also, what users are you referring to, ..., users of the Internet?

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March 14, 2011, 01:12:46 AM
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4) Because the fed has an unlimited supply of US Dollars they can play havoc with the bitcoin exchanges.  What about always owning at least half of the bitcoin supply so that they could easily manipulate the market 10 years from now if they need to.  They plan long term. Wink

To protect against 4
As for the ability for the Fed to just buy everyone out... well I have no immediate solution to that problem.  Thought experiement.  You are the Fed.  You have a bank account with unlimited USD.  Your task: Destroy bitcoin with your unlimited supply of dollars and no other tool.  

I'd do it this way.  Create hundreds of accounts on MtGox and other markets.  Buy up all the asks driving the price up to 1.65 as of right now if I bought out the entire order book. Then sell those coins at a loss to all of the bids wiping that part of the order book out the next day. Then trade with myself at around 0.65 to establish a new "normal".  Accumulate more coins from sheep and then heavy sell the market when I have 10x the number of bitcoins as the market depth for bids selling into the entire order book of bids again creating a new low.  Again trade with myself to establish a new normal low.  Anytime there is severe bidding activity pushing the market up, I would use my huge store of bitcoins to push it down.  If I run out of bitcoins, since I can't short, I'd just buy out the entire market again and then sell sell sell.  Oh what fun it would be Cheesy

I totally agree, bitcoin is likely as vulnernable or more vulnerable to a financial attack than it is to a technical attack.  At least until it is adopted more widely, globally.

What you described is discussed similarly here:
  http://bitcointalk.org/index.php?topic=2436.msg32962#msg32962

How could we protect against this?  

Having more exchanges with significant trading  will make short-term manipulation slightly more difficult.  Currently because most conversions to and from bitcoins are pegged to the BTC/USD rate from Mt. Gox, that is a single point of failure.   The arrival of Bitcoin USA gives the ability to buy Bitcoins by having the funds drawn directly from your checking or savings account, and the ability to sell Bitcoins with the funds redeemed to you by direct deposit (ACH).

Absent the short term vulnerability, the ability for a party to mess with the market over the longer term becomes more and more expensive.  Shorting bitcoins is a risky endeavor and anyone lending their Bitcoins for speculation might never see those bitcoins ever again.  Unlike other commodities, production of new bitcoins is price inelastic. So bitcoin is likely a different animal compared to other commodities and other financial instruments.

If bitcoin's only purpose were to be a store of value, this vulnerability would be a bigger deal.  In the medium to longer term, the price will be made fair by the market.

Anonymous
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March 14, 2011, 02:10:19 AM
 #14

Quote
The largest numbers of users are in the United States, the European Union and China.

nothing to see here...move along.

That was a quote but the source wasn't referenced.  Also, what users are you referring to, ..., users of the Internet?

Nah, users of Tor. I was trying to equate the lack of freedom in china with Europe and the US. Its really quite sad when you think about it.
Anonymous
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March 14, 2011, 02:14:06 AM
 #15

I see a lot of trading moving to the bitcoin-otc model away from the other exchanges. So the government would needs to get a gpg key and trade the same as everyone else. It would be noticeable if someone started buying massive amounts of coins and dumping them.




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