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What Is Cryptocurrency: Everything You Need to Know

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Re: What Is Cryptocurrency: Everything You Need to Know

#21

Post by ska »

aethertron wrote: post #15
lumberjack wrote: post #7

Earlier quoted context omitted.

I was also having this problem. But I think one must just do away with the self imposed condition that the use of Bitcoin must abide by the law. Bitcoin is useful against capital controls. One then wonders if that was the real motivation behind Bitcoin. It's maybe not a coincidence that it has widespread use in China. I don't want to speculate any further. Just having this thought right now.

>Bitcoin is useful against capital controls. True if any only if, and the degree to which, possession of BTC is considered desirable. If it's a sought-after 'commodity'. Otherwise it's just a decentralised simulation of money, no matter how many desirable qualities it simulates. MMO games have simulated internet money, and various transfer features too. People who got into BTC early, did so because they wanted it to…

I think your "role playing at the beginning" is interesting, but "belief" is in a whole different category.

As far as I can see all useful monetary systems are essentially backed by consensus and belief.

Re: What Is Cryptocurrency: Everything You Need to Know

#22

Post by CyberDildonics »

aethertron wrote: post #4

Seems like a decent overview of the technical aspects. But doesn't it miss something important: whence cometh the value? Why would I, or anyone, actually want to own Bitcoins?

The value comes from how strong its properties of ideal money are.

Lots of people don't see the value of bitcoin when they pay for their coffee with their credit card and go about their day.

There are many uses but just to begin, bitcoin has already outlasted several countries' currencies (Venezuela, Zimbabwe) and it has no boundaries. It can't be controlled by a government (India, Cypress) and it's inflation will slow and stop (unlike Russia, Argentina, Japan).

Some ideas are big picture ideas. They don't help people take selfies, find a restaurant or communicate with celebrities, but their impact will be massive over a longer timeline.

Re: What Is Cryptocurrency: Everything You Need to Know

#23

Post by cobbzilla »

mirimir wrote: post #9
Xophmeister wrote: post #3

I wish it went into more details about a number of things I'm still not really clear on: 1. Why is it becoming harder to mine new Bitcoins? Is this an artificial constraint imposed by the eventual finite supply (i.e., it's controlled by the Bitcoin client software), or is it just a natural consequence of that? 2. If it's simply to do with the client, why couldn't one fork it with different parameters, but while still…

#1 and #7: The difficulty of finding blocks is adjusted periodically (at two-week intervals) so that each block takes ten minutes. As more miners with more efficient hardware have competed to find blocks, difficulty has increased accordingly. If there were less competition among miners, difficulty would be reduced. #2: It's not just a client parameter. #3: The supply cap and underlying deflationary bias were consciou…

I understand the smallest denomination, 0.00000001 (did I get the right number of zeros?) is called a satoshi, after the creator of Bitcoin. Correct me if I'm wrong here, with 21 millions coins and 8 decimal places, you have about 2 quadrillion [1] satoshis, which does seems to be quite a bit to last for a while. I'm guessing we hit the 2038 problem [2] first.

Of note, the US money supply, even including 2 decimal places, creates a space of 331 trillion units [3], as of 2016 [4].

[1] http://www.wolframalpha.com/input/?i=(21+million)+*+(10%5E8) [2] https://en.wikipedia.org/wiki/Year_2038_problem [3] http://www.wolframalpha.com/input/?i=3317+billion+*+10%5E2 [4] http://www.tradingeconomics.com/united-states/money-supply-m...

Re: What Is Cryptocurrency: Everything You Need to Know

#24

Post by __Joker »

But how can you achieve consensus without a central authority?

Nobody did know until Satoshi emerged out of nowhere. In fact, nobody believed it was even possible.

Satoshi proved it was.

I assume there are other algorithms like paxos exists for distributed consensus. Also not sure if Satoshi proved consensus by proof of work.

Re: What Is Cryptocurrency: Everything You Need to Know

#25

Post by RandomInteger4 »

aethertron wrote: post #16
mirimir wrote: post #14

Earlier quoted context omitted.

As far as I know, there are no hard limits for Bitcoin value, in either direction. But with a large enough user base, regression to the mean guarantees some stability. Also, many traders have hard-coded buy/sell targets, and I gather that damps out large fluctuations. I don't speculate in Bitcoin. I just use it.

I don't see why the value couldn't just drop and keep dropping to zero, as users lose confidence. (I will investigate 'regression to the mean')

Bitcoin is has a supply limit, so that taken together with it's technical features such as a proof of transaction and digital-ness makes it highly valuable in an economy where more and more transactions take place in the digital rather than the physical space.

I'm sure there's a better answer, but that's the best I can muster with my current knowledge on the matter.

I think a better question is "given the rarity of bitcoin, why wouldn't people value it?"

Also, as for the confidence thing, bitcoin is no different than anything else in our economy. Our economy is built on confidence.

Re: What Is Cryptocurrency: Everything You Need to Know

#26

Post by mirimir »

ianai wrote: post #20
mirimir wrote: post #9

Earlier quoted context omitted.

#1 and #7: The difficulty of finding blocks is adjusted periodically (at two-week intervals) so that each block takes ten minutes. As more miners with more efficient hardware have competed to find blocks, difficulty has increased accordingly. If there were less competition among miners, difficulty would be reduced. #2: It's not just a client parameter. #3: The supply cap and underlying deflationary bias were consciou…

...and you would never want to have a precious metal be a currency.

Some disagree. There are advantages and disadvantages. And, as I vaguely understand it, Bitcoin was designed to have advantages of both precious metals and fiat currencies.

Re: What Is Cryptocurrency: Everything You Need to Know

#27

Post by mirimir »

aethertron wrote: post #16
mirimir wrote: post #14

Earlier quoted context omitted.

As far as I know, there are no hard limits for Bitcoin value, in either direction. But with a large enough user base, regression to the mean guarantees some stability. Also, many traders have hard-coded buy/sell targets, and I gather that damps out large fluctuations. I don't speculate in Bitcoin. I just use it.

I don't see why the value couldn't just drop and keep dropping to zero, as users lose confidence. (I will investigate 'regression to the mean')

Yes, that could happen.

By 'regression to the mean', I just meant that Bitcoin prices come to reflect average desirability. So even huge events like the pump/dump bubble that Mt Gox (or its infiltrator) created eventually damp out.

Right now, I gather that it's largely Chinese investors who are pushing Bitcoin prices up.

Re: What Is Cryptocurrency: Everything You Need to Know

#28

Post by mirimir »

aethertron wrote: post #17
mirimir wrote: post #5

> In the nineties, there have been many attempts to create digital cash, but they all failed. Centralization enabled government take-down :(

I wonder, why wouldn't a law-abiding centralised digital money system work? Obviously it wouldn't be anonymous. It might not be able to be international. But liberal Western governments want their citizens to be able to interact economically with each other easily (but taxed), don't they? I recall some messaging from the EU about their interest in establishing ways for ecommerce to work over the continent, without re…

Much of the interest in digital money systems has been driven by desire for privacy and anonymity. It's a libertarian thing. Maybe also an organized-crime thing. And in any case, governments tend to see libertarian anonymous money as an organized-crime thing. That's a trope in dystopian cyberpunk. No taxes => no governments.

So anyway, it's arguable that no anonymous digital money system can remain law-abiding. And if it's centralized, it will be taken down.

Bitcoin isn't anonymous. But for small amounts, it can be effectively anonymized. However, it's very hard to anonymize large transactions. It's the "snake eating a pig" issue. So maybe that's why governments cut it some slack. Punters have decent anonymity, but hardcore money laundering is unworkable.

And to actually address your question, I gather that many digital money systems are in development, which are designed to be strongly non-anonymous and law-abiding. But it's a hard problem, without ungameable online identity authentication.

Re: What Is Cryptocurrency: Everything You Need to Know

#29

Post by ianai »

mirimir wrote: post #26
ianai wrote: post #20

Earlier quoted context omitted.

...and you would never want to have a precious metal be a currency.

Some disagree. There are advantages and disadvantages. And, as I vaguely understand it, Bitcoin was designed to have advantages of both precious metals and fiat currencies.

It's built to have a near constant stock of currency. There's literally no room for stimulus. I can appreciate that people may not agree with stimulus, but it was the only thing that ended the first Great Depression.

Re: What Is Cryptocurrency: Everything You Need to Know

#30

Post by mirimir »

cobbzilla wrote: post #23
mirimir wrote: post #9

Earlier quoted context omitted.

#1 and #7: The difficulty of finding blocks is adjusted periodically (at two-week intervals) so that each block takes ten minutes. As more miners with more efficient hardware have competed to find blocks, difficulty has increased accordingly. If there were less competition among miners, difficulty would be reduced. #2: It's not just a client parameter. #3: The supply cap and underlying deflationary bias were consciou…

I understand the smallest denomination, 0.00000001 (did I get the right number of zeros?) is called a satoshi, after the creator of Bitcoin. Correct me if I'm wrong here, with 21 millions coins and 8 decimal places, you have about 2 quadrillion [1] satoshis, which does seems to be quite a bit to last for a while. I'm guessing we hit the 2038 problem [2] first. Of note, the US money supply, even including 2 decimal pl…

Yes, that generally comports with my understanding.

The hard part will be handling enough transactions without becoming centralized. Currently, the blockchain is ~90GB. With most users on mobile devices, very few will be running full clients, because syncing the blockchain will move too much data.

So increasing block size is very contentious. One camp is OK with centralization. The other basically wants to make Bitcoin like gold, and create currencies based on it.

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