Bitcoin - The Libertarian Introduction (a primer on Bitcoin)

[Boussac]

Just now getting around to reading it. This is one great article, albeit I did find an error.

Bitcoin is thus the only currency and money system in the world which has no counter-party risk to hold and to transfer. This is absolutely revolutionary and you should read the preceding sentence again.

Actually this particular paragraph might contain a slight overstatement: it's more accurate to write that bitcoin allows us for the first time in history to spread the counter-party risk on the entire community (of miners) instead of relying on a single counter-party (single point-of-failure).
As such, bitcoin can be said the first ever "community based" monetary system, one that cannot be easily hijacked by a small group of people.

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[evoorhees]

Just now getting around to reading it. This is one great article, albeit I did find an error.

Bitcoin is thus the only currency and money system in the world which has no counter-party risk to hold and to transfer. This is absolutely revolutionary and you should read the preceding sentence again.

Actually this particular paragraph might contain a slight overstatement: it's more accurate to write that bitcoin allows us for the first time in history to spread the counter-party risk on the entire community (of miners) instead of relying on a single counter-party (single point-of-failure).
As such, bitcoin can be said the first ever "community based" monetary system, one that cannot be easily hijacked by a small group of people.

I don't think the miners qualify as counter-party risk. In fact, if they all stopped, I could mine myself

Of course, we could also say Bitcoin has counter-party risk in the internet infrastructure itself... I rely on the cables and electricity and servers. But I think that starts becoming a meaningless definition of "counter party risk".

It is the fact that no single entity or organization is vulnerable or can halt the payment or holding of Bitcoin. THAT is the breakthrough and I thus I think the statement "no counter party risk" is valid.

[ptshamrock]

The best article about Bitcoin I've read to date (and I've read them all).

+1

[hazek]

I think it's only fitting to post this piece on the 5th most visited libertarian website, right?  

http://www.dailypaul.com/226936/if-the-government-hates-it-dont-you-think-you-should-at-least-consider-learning-about-it

Man there's still so many close minded die hard precious metals almost religious fanatic like advocates among libertarians completely opposed to what the free market came up with and even to just the idea that such a thing as an artificial and yet sound currency could exist.

But I do notice a lot more people open and supportive to the idea. I just don't understand how libertarians of all people can be so damn close minded that they aren't even willing to spend some time and learn about it in detail before they dismiss it. Human nature sucks. 

[herzmeister]

maybe also a generational problem. most of these libertarians are probably not really digital natives. they need something that's shiny and they can touch.

[wachtwoord]

I went ahead and read through the comments and really like David Robertson's comment. Seems like some people do get it

I wrote the above comment before I read the article and the bitcoin.org website. I did this deliberately since I wanted to lay down the foundation of how money comes into existence and what money is.

There is no question in my mind that the bitcoin is indeed money and harnesses all the features of gold and silver while wedding them to the Internet in a peer to peer payment system. The creators of bitcoin have used an analogy of gold and gold mining to create their system and this is justifiable I believe.

The Land in this case is the pool of talent within the bitcoin community and the Labour is the application of the efforts of the original source code creators and the "miners" who bring the blocks of bitcoins into existence. It is then easy to see that bitcoins are genuine money.

Now, there are other features that I find interesting and intriguing. There is another analogy that can be used to understand this phenomenon. This is the formation of a corporation with a block of "authorised share capital" and a block of "issued and outstanding share capital" . The authorised capital would be the c.21 million bitcoins that can be created over time. The issued and outstanding capital consists of the bitcoins that have been issued to date. The business of the corporation itself is the payment system that bitcoin facilitates and represents.

When one sees it in this way then it is obvious that by becoming an early adopter (shareholder) of bitcoin there is a very real possiblity that one couild profit as the payment system is used more widely and the value of the "corporation" and therefore the price of the "shares" increase. The fact that the number of "shares" that can be issued is finite leads to an even greater likelihood of appreciation in the price of bitcoins.

The same caveats as investing in a "venture" company apply but since the system is already up and running and there are more and more joining every day (61,500 bitcoins traded on just one exchange today) the risks are less than one might imagine. Of course one must be circumspect but it might be worth a flutter.

The other feature I liked was the potential link with gold and silver. I use a Goldmoney account and since last year they have stopped offering inter-account transfers under pressure from the government. Eric Voorhees advertises a website offering gold and silver coins for bitcoins and it may well be that Goldmoney will do the same at some point. Then one could use gold and silver as stores of value and "earn" bitcoins on various websites offering payment in bitcoins for filling out surveys, reading adverts etc. The bitcoins could be used to trade for goods and services and to purchase gold and silver to spread the risk and create a store of value.

All in all I agree that when Dr. Paul is President and the market is opened up to competing currencies, removing the threat of government interference, the bitcoin system will come into its own. There is no doubt it has been created for such a time as this. I am not too surprised that it is opposed by the von Mises Institute. They can be quite doctrinaire. They also oppose Professor Fekete's ideas on Adam Smith's Real Bills Doctrine. However they are free market advocates also so that will put everything to the test.

BTW Bitcoin also mentions fractional reserve banking being used to increase the money supply. This is not something I would agree with since I believe it to be fraudulent but it may not last long since in the first place a bitcoin/gold/silver system would tend to be deflationary and this makes all borrowing less attractive. Secondly the existence of fractional reserves would have to be declared and people would be unlikely to provide savings to such an enterprise since other safer options would be available. It would take only a couple of bank collapses to put an end to that way of doing business.

[dooglus]

The article still says "You only need to back up the wallet file once at the beginning".

That's untrue, and dangerous advice.

[dooglus]

I was trying to make the article somewhat future-proof (and had to keep it simple), so I didn't delve into nuances like this.

It's better to say nothing about wallet safety than to say things you know are factually incorrect and dangerous.

[evoorhees]

I was trying to make the article somewhat future-proof (and had to keep it simple), so I didn't delve into nuances like this.

It's better to say nothing about wallet safety than to say things you know are factually incorrect and dangerous.

I've been involved with Bitcoin for a year now. Never once have I used a wallet with more than 100 addresses. The average casual user will find out about the 100 addresses thing long before he puts himself at risk like that.

The statement is not factually incorrect. You DO only need one backup of the wallet. .. there's just a caveat. The caveat is when you go over 100 addresses - and to try to explain every caveat and nuance of Bitcoin in an introductory article (that was already 14 pages single spaced) is going to be counter productive, don't you think?

[terrytibbs]

You DO only need 1 ounce of gas for your airplane... There's just a caveat. The caveat is when you try to actually fucking take off.

"Sorry, my goal was to write a concise article on Bitcoin."

Edit: Factually correct statements - killing people since the birth of evorhees!

[Technomage]

Well there are people who are using Bitcoin wallets that have required new backups. I happen to have one that is pushing it, 90 or so addresses used. The main problem with this is that it's actually not easy to keep track of the amount of addresses used because you have to check the list of your receiving addresses + the amount of sent transactions. It's reaaaalllyyy far from being user friendly.

That happens to be one of the many reasons that I don't actually recommend the official client to anyone anymore. There are much better clients out there that make more sense. The official client goes to the same category as Armory, meant for power users. Regular users should be using other clients.

[terrytibbs]

Here's another one: "Nobody can prevent you from spending it."

The bitcoin wiki saves the day:

An attacker that controls more than 50% of the network's computing power can, for the time that he is in control, exclude and modify the ordering of transactions. This allows him to:
Reverse transactions that he sends while he's in control
Prevent some or all transactions from gaining any confirmations
Prevent some or all other miners from mining any valid blocks

[rjk]

You DO only need 1 ounce of gas for your airplane... There's just a caveat. The caveat is when you try to actually fucking take off.

"Sorry, my goal was to write a concise article on Bitcoin."

Edit: Factually correct statements - killing people since the birth of evorhees!

Don't be a fool. You know damn well that the keypool had 100 addresses, so the analogy would be more like "here is enough gas to get you there, but it might not be enough to get back". Or even "here is enough for a few round trips, but you will have to learn how to refuel eventually".

If you are so good at writing concise, understandable articles that are suitable for a reader to digest in one sitting - well then be my guest. Everyone will thank you for it.

[terrytibbs]

Don't be a fool. You know damn well that the keypool had 100 addresses, so the analogy would be more like "here is enough gas to get you there, but it might not be enough to get back". Or even "here is enough for a few round trips, but you will have to learn how to refuel eventually".

Sorry! 100 ounces*.

* May or may not be enough to safely reach your destination. (Disclaimer will be stripped for conciseness.)

If you are so good at writing concise, understandable articles that are suitable for a reader to digest in one sitting - well then be my guest. Everyone will thank you for it.

I'm afraid that last sentence isn't factually correct.

[rjk]

If you are so good at writing concise, understandable articles that are suitable for a reader to digest in one sitting - well then be my guest. Everyone will thank you for it.

I'm afraid that last sentence isn't factually correct.

So you agree that you can't do much better and therefore need to STFU?

[terrytibbs]

If you are so good at writing concise, understandable articles that are suitable for a reader to digest in one sitting - well then be my guest. Everyone will thank you for it.

I'm afraid that last sentence isn't factually correct.

So you agree that you can't do much better and therefore need to STFU?

Your reasoning is flawless. A+, would read again.

[Explodicle]

Here's another one: "Nobody can prevent you from spending it."

The bitcoin wiki saves the day:

An attacker that controls more than 50% of the network's computing power can, for the time that he is in control, exclude and modify the ordering of transactions. This allows him to:
Reverse transactions that he sends while he's in control
Prevent some or all transactions from gaining any confirmations
Prevent some or all other miners from mining any valid blocks

I'm pretty sure an attack that is
* Incredibly expensive...
* Temporary...
* Yet to be accomplished by anyone...
* Indiscriminate against particular users...

Counts as a "caveat". You might as well include the threat of someone destroying your keys, that would prevent you from spending it much easier.

[Foxpup]

Here's another one: "Nobody can prevent you from spending it."

The bitcoin wiki saves the day:

An attacker that controls more than 50% of the network's computing power can, for the time that he is in control, exclude and modify the ordering of transactions. This allows him to:
Reverse transactions that he sends while he's in control
Prevent some or all transactions from gaining any confirmations
Prevent some or all other miners from mining any valid blocks

Actually, although a 51% attack can prevent transactions from being confirmed, the unconfirmed transactions are still in the network and thus will start gaining confirmations as soon as the attacker loses his 51%. So at worst, an attacker could delay you from spending your coins for some period of time, which probably wouldn't be very long: Since a 51% attack is ludicrously expensive, I think it is safe to say it will only last long enough for the attacker to do a single double-spend, since there's no other way it profit from such an attack and thus no point in maintaining the 51% any longer than that.

[terrytibbs]

there's no other way it profit from such an attack

This statement isn't factually correct. There may be many additional incentives.
For example, a bank could profit financially from destroying Bitcoin's image because people would return to the traditional financial system. At $84,349.58 for a one-day 51% attack*, I'd say it's chump change for financial institutions; add in a couple of double-spends, and you'll not only fuck Bitcoin permanently, but even profit!

* Cost amortized over a year of operation. (Caveat will be removed for conciseness.)

To be perfectly fair, I can see how Erik feels the need to make Bitcoin seem like the ultimate thing with absolutely no flaws, seeing how he has a vested interest in seeing it prosper so that he can profit from the increased exchange rate.

[Gabi]

Currently making a 51% attack is not so expensive for rich people/banks/governments/whatelse