The Princeton Bitcoin class and companion text are very thorough. One of the crypto-currencies of note highlighted during the class was zerocoin, which adds a layer of anonymity to the blockchain. The Zcash implementation of zerocoin is currently launching in alpha. It may prove an interesting way to witness the progress of a crypto-currency being bootstrapped in real-time. As well as gaining insight into cutting-edge zero knowledge technology, that some believe may become standard in all future crypto-currencies.
Bitcoin definitely attracts fraud, but it's also teaching many people an important lesson in trust. Trust code and math as these things are ultimately verifiable.
It's a hard lesson for many, and it'll likely need to be learned many times over. Any number of individuals are willing to take advantage of the trustworthy nature the technology to imply that the things they do are also trustworthy.
And too often, it works - because the technology is secure, not enough people question those who are using it and proclaiming "secure" in a loud enough voice (mt gox, cryptsy, mintpal, and countless others).
It's also a first-class lesson to a lot of young technologists as to how financial regulations and the modern banking system came to exist in the first place. Thankfully bitcoin was so well designed that we can ultimately trust the math behind it, but the code is still malleable by people who may not have the network's best intentions in mind.
The Bitcoin network works perfectly fine and always has. The issue you are referring to was during a DOS attack on the network, which still wasn't an issue if you paid slightly higher fees to prioritize your transaction. The developer split on the blocksize increase was pretty heated for a while, but has largely blown over due to Bitcoin still working and the sky refusing to fall as some predicted. However, scaling is still a major issue that some very smart people are working on.
If Bitcoin users were naturally making more and more payments or there were more and more users, and then it ran up against the block size limit, how would you know whether there was a DOS attack or not? Wouldn't it look like a permanent DOS attack?
Did it blow over because the block size limit was increased?
I call it a DOS attack because blocks aren't regularly full anymore and the transaction data showed that the flood of transactions were "peeling chains", meaning they mostly had the same source. There is blockchain data to back this up.
The blocksize hasn't been increased yet. It blew over due to wallets improving their fee support. If you are in a hurry and need quick confirmations you increase your fee by 10 cents, but if the transaction doesn't need priority you may wait for quite a while.
Currently the calculations show that for your transaction to be processed first it should have a $.06 fee. Transactions with fees down to about $.01 are basically guaranteed to be processed but may take longer. Many 0 fee transactions are processed but they have no guarantee.
The modern wallet softwares all calculate and offer different fees based on the expediency of the transaction.
"The fastest and cheapest transaction fee is currently 60 satoshis/byte, shown in green at the top.
For the median transaction size of 226 bytes, this results in a fee of 13,560 satoshis (0.06$)."
I could see this as Steam testing the Bitcoin waters. Steam games created an entirely new market of digital items changing hands for real world money, and this is done globally across all currencies--bitcoin would be an ideal fit. I could also see value in using bitcoin to reward content creators (modders). Obviously this is crazy speculation, but seem to be solid use cases.
I don't think this was done for any political or idealistic reason. I imagine bitcoin makes it a lot easier for purchases in countries with unreliable banking, high levels of fraud, etc. Try transfering a non-trivial amount of money to Eastern Europe, Africa, Russia, Brazil, etc. Steam deals with this millions of times a day with fraud credit attempts, legitimate credit cards being turned down, etc. Legitimate buyers can just use bitcoin and not worry about credit card shenanigans.
The "omg futurist" brownie points are just a side-effect. Steam/Valve isn't terribly progressive. Heck, its only recently that they put in a refund policy and started putting in common sense limitations on trading to stop fraud. Someone did a cost/benefit analysis here and it simply worked out. I guessing this is part of a larger anti-fraud initiative at Valve.
It's not that it's a global currency. It's that there's zero buyer protection. Or phrased positively, zero risk fit the merchant. Anyone offering that in any currency would be useful.
A $100 cellphone isn't a decentralized peer to peer network. You are comparing apples to nose-hairs. Bitcoin will scale in the same way the internet scaled... slowly and then suddenly.
For me the largest put off with Bitcoin is the community. They seem to be very intolerant of criticism, to the appearance of a cult or ideology.[1] The problem lies in that unlike most open source projects, a sizeable portion of the community stands to make huge profits, giving rise to a permanent conflict of interest. Time and time again, the financial interest of the early adopters continue to stifle actual development of the technology.[2]
That's exactly my problem with bitcoin as well. I'm just elaborating Hearn's points here; but as it turns out the incentive for miners (in order to pay their mining) is actually a deflationary good (so the value of their mined coins keeps increasing). Unfortunately miners are also required for the confirmation of transactions.
On the other hand a global payment system would require a currency which is at the very least stable (and not increasing in value). But a stable value might not be enough to cover the expenses of most of the miners. Mining is already dominated by Chinese miners which happen to have access to the cheapest electricity - which incidentally completely undermines the aspect of decentralization.
In summary it seems that at this point a decentralized payment system just appears to be too expensive (computationally) to be any serious competition for currencies in countries with a well established, trusted payment system. It still might be of use in the developing world.
Stability is relative and a matter of perspective - it's not technically possible to engineer something that has a stable value because the value of everything is constantly in flux.
I'm not sure I fully understand your position. Price stability (with respect to some basket of common goods) is the primary function of any central bank...
The value does not need to increase for miners to profit. Mining difficulty scales with the total mining power in order to keep the block rate stable. Increased value only gives an incentive for competition, increasing mining power and THEN increasing difficulty.
It works in the other direction too. Lowered value lowers mining competition which LOWERS difficulty. It stabilizes itself automatically.
Ohhhhh yes. Not only are there those with financial interests that are terrible community members, there appears to be quite a lot of ideological, over enthusiastic fanboys who ruin it.
This is a valid point, but there are far sharper criticisms out there than Mike Hearn's. I find that following the code and not the community is the way to go in Bitcoin-land.
People don't use cars because they have a hard on for internal combustion engines. They use cars to go from one place to another, i.e their utility. The utility of bitcoin is its TPS rate.
But you need the person n the other end to be set up with bitcoin. With the current transaction limit, the likelyhood that the other person is set up to accept bitcoin stays low.
As with the 2nd amendment, arguing for the right to bear arms is not in and of itself an argument for their use. In this case, bitcoin represents by which civil disobedience could be practiced. As long as it is maintained as a real alternative (meaning first and foremost it operates outside the constraints of authority) then a reasonable argument can be made that regulators in democracies will compromise in allowing greater user rights in the official alternatives. Napster and bittorrent did change the music industry, in the end.
But even without game theoretic arguments involving civil disobedience, Bitcoin is still interesting. It offers cryptographic protections that have never existed before in real fintech applications (e.g. programmable signatures), and radical transparency and configurable trust that can patch the sort of vulnerabilities that led to the 2007 financial crisis.
Like getting your money out of Venezuela, Argentina, Cypress or Greece before its gone or you can't get to it? Those are all illegal. Legality and morality are not the same thing and not all of world lives in cozy security.
Look up the ideal properties of money and you might understand the big picture better, but it may mean challenging your deeply held beliefs and not everyone is ready for that.
Like I said, Bitcoin will scale like the internet scaled which is in direct proportion to demand. Blocks aren't often full and if you are in a hurry then you need to pay 10 or 20 cents to prioritize your transaction.
There is already a global currency which works great: USD. I live in Pakistan, and I regularly pay my AWS bill, IDE subscription, Netflix, VPN, and a lot of other things with USD.
That's very true, Bitcoin doesn't solve many problems for people with access to credit banking. However, billions of people don't have access to Visa or a bank account. They only need a phone to send payments internationally.
Not the case. The bitcoin you paid in and the bitcoin refunded to you are tied directly to your real identity, so I'm not sure what value "laundering" would have. There are no dirty bitcoins--see the U.S. Gov sale of the Silk Road coins as proof of this.
Bitcoin does have mixing services that would "launder" or obfuscate the link between bitcoin and your real identity, which does provide value for some users.
As far as I know you can't make a purchase without having valid payment data. There might be a work around, but probably not via Bitcoin payments. Bitpay is definitely subject to KYC / AML compliance.
What is "valid payment data"? How do they validate this data?
You need to have a valid payment method. I'm not sure how better to explain this... a credit card or paypal account etc. It's validated when the payment clears. Both of these have strong identity data linked to them.
KYC (Know your customer) / AML (Anti Money Laundering) compliance means validating the identities of those you do business with. That means, using Steam to launder money isn't possible. This should be pretty obvious.
>You need to have a valid payment method. I'm not sure how better to explain this... a credit card or paypal account etc. It's validated when the payment clears. Both of these have strong identity data linked to them.
No, paypal doesn't do ANY identity verification for customers beyond fraud scoring and AVS.
For cards, you can just get a prepaid. And most cards outside of the US don't even support AVS, so there's no way for valve to validate any of the information you give them besides the PAN and CVV.
>KYC (Know your customer) / AML (Anti Money Laundering) compliance means validating the identities of those you do business with. That means, using Steam to launder money isn't possible. This should be pretty obvious.
I don't think Valve is covered (or considers themselves to be covered) by either of those, and they certainly don't appear to be doing any of the typical KYC stuff.
https://freedom-to-tinker.com/blog/randomwalker/the-princeto...