Those are features not bugs

Wonderful clickbait headline in The AustralianWhy bitcoin won’t work.

  1. It offers no lender of last resort.
  2. Deflation.
  3. Unreliable exchange of value.
  4. No profits for central banks.

Sigh.

With the distributed ledger technology (Blockchain) we don’t need a central bank (to be clear the government may still need a banker but that can be put out to tender). Similarly because opportunism is suppressed and information asymmetry reduced we don’t need a lender of last resort – in fact insolvent banks can be liquidated in tens of minutes.

Then there is the assumption that deflation is a problem! Really?

It is true that Bitcoin is now too valuable to use for day-to-day shopping. The days of using Bitcoin to buy pizza are long, long gone.  Yachts maybe.   But there are other cryptocurrencies for that sort of thing – not to mention fiat money. Use ordinary digital money (credit/debit cards) for day to day usage and cryptocurrency for more specialised use.

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145 Responses to Those are features not bugs

  1. peter cavanagh

    Can I sell you some Tulip bulbs?

  2. 2dogs

    It offers no lender of last resort.

    Ultimately, the Etherium or a similar platform will make this “lender of last resort” idea obsolete as it will make the ability to issue securities to the public available to the retail borrower/security issuer.

    This one feature will, by itself, greatly reduce risk premiums in all securities markets, and will be a major source of world economic growth this century.

  3. pbw

    Bitcoin is now too valuable to use for day-to-day shopping.

    Why? Because of congestion on the chain? The BTC is infinitely divisible, isn’t it?

  4. Sinclair Davidson

    The BTC is infinitely divisible, isn’t it?

    So what? Why would any intelligent person swap an appreciating asset for groceries?

  5. Sinclair Davidson

    Can I sell you some Tulip bulbs?

    No. I’ve just downsized and have no garden. Bitcoin is a different proposition.

  6. BorisG

    I remember time in 1990s during deflation in Japan. They said it was horrible because no one bought anything but basic goods (as it will be cheaper tomorrow). Many bankruptcies etc

  7. .

    Peter – BTC has gone from 5.4 US cents in 2009 to 8250 USD today.

    Tulipmania lasted one year. It wasn’t because of tulips.

    “Inflation is always a monetary phenomenon” – it was malinvestment caused by widespread debasement of metal coins to fund the thirty years war, French civil war etc.

    BTC will always appreciate as long as the economic orthodoxy is to inflate each year, even by a little bit. QE no doubt helped boost BTC, as did profitable mining and the prevalence of exchanges and apps/cards.

    BTC can be transferred instantly, like MobiMoney. We can’t really do this here yet, and for int’l or large transactions, this isn’t possible or has high transaction costs.

    Microsoft now accepts BTC. So do 300,000 shops in Japan. It is being used as currency regardless of whatever theory says it isn’t. This means it is a currency; money is simply the most sought-after commodity.

    You always pay 2-3% in real terms to hold cash. It’s called inflation.

    As for payments – I am getting a ConJar Swipe soon – I can use BTC and it converts it to AUD to let me pay. I am fairly sure it can be used O/S like this, but are only issued here right now.

    BTC doesn’t need a lender of last resort because it isn’t released on an inflationary basis, nor does it underpin a fractional banking system.

    So what about deflation? It merely incentivises mining and more liquidity. If BTC is lent out, then it will start forming its own M3 supply over the M0 and M1 supply. This will tend to equilibrate out inflation or deflation.

    BTC is not an unreliable exchange of value. It is a direct line to an investment (as it is now). It allows an investor to use their portfolio as a bank account.

    No profits for CB? You have to be kidding me. You could also argue there is no MMT, no seignorage and no fiscal drag or bracket creep. Laughable crap.

  8. Infidel Tiger

    I have no idea what crypto currency or block chain is.

    I have a morbid fear I am going to be this generations version of that old man trying to withdraw cash on my Medicare card.

  9. John Constantine

    All too soon, the wave of refugees fleeing Australia and the shorten looting cartel will be all too pathetically grateful for the chance to use bitcoin to extract some value from the smouldering ruins of the deindustrialised, insect munching, blacked out shantytown gulags of Zimbostralia.

  10. Empire

    Sinc

    Ethereum has had recent issues with frauds and most recently bugs/errors resulting in large sums being trapped in locked wallets.

    How do you view the risk events like this pose to confidence in crypto in general and Bitcoin in particular?

  11. Sinclair Davidson

    Many bankruptcies etc

    Bankruptcy per se is not an economic problem – resources should be allocated to the highest value usage. That means that current asset owners need to relinquish control of those assets. That is what the bankruptcy process does.

  12. Mitch M.

    Too late to get in the game. When cryptocurrency miners are driving up the prices of graphic cards to ridiculous levels over the last few years it means so many more are way ahead of new entrants. I also wonder if it explains the huge price rises in DDR 4 memory this year although one account I read was that Apple bought most of the DDR 4s hence the huge prices. Damn nuisance, I want a new gaming computer. Current expectations are prices will drop next year.

    How much of this is being driven by ill gotten gains?

    If you do go in you had better be quick because sooner rather than later governments are going come a lookin.

  13. mundi

    Bitcoin is currently in a speculation bubble. The number of transactions per day has flat-lined, and has not increased for 12 months. It was growing at a rapid pace, but not any more.

    There is no growth in the number of people using it for a currency in actual economic transactions. Its almost completely a speculation bubble at the moment. The average bitcoin transaction at the moment is pretty much 1 BTC – $8,000. So needless to say, it is not being used as ‘money’ by almost anyone.

  14. Sinclair Davidson

    How do you view the risk events like this pose to confidence in crypto in general and Bitcoin in particular?

    We are at the experimental stage of a new technology. At the same time we can expect bank robberies to occur. So (a) people will lose money in the experimental stage of any innovation and (b) thieves will steal money and assets when they can.

    That tells us nothing about the value of the underlying technology.

  15. JC

    I think the blockchain is an incredible discovery. It could end up being as revolutionary as double entry book-keeping.

  16. mundi

    Also its a joke to say companies like Microsoft accept BTC, or 300,000 shops in Japan accept BTC.

    Go and have a look at how many transcation they actually do. Its basically ZERO. Yesterday Microsofts wallet got ONE transaction across THE ENTIRE PLANET!

    Still think its not a bubble?

  17. Infidel Tiger

    What’s double entry book keeping?

    The real books and the books you show the ATO?

  18. John Constantine

    Is bit even possible to profitably mine for bitcoin using south Australian electricity?.

    Is bitcoin the true measure of which electricity grid is actually capable of sustaining Western style civilisation?.

  19. Sinclair Davidson

    Again – what moron buys a consumption good or depreciating asset with an appreciating asset?

    There is perfectly good fiat currency for that sort of thing.

  20. Howard Hill

    Can I sell you some Tulip bulbs?

    Exacery.
    Anyway, Bitcoin derives its value from power as in electricity. The power required to mine it. It also needs power to be of any use. So where does that leave poor Aussies with a half a dozen broken down windmills and flat batteries?

    The mind boggles?

  21. Empire

    We are at the experimental stage of a new technology. At the same time we can expect bank robberies to occur. So (a) people will lose money in the experimental stage of any innovation and (b) thieves will steal money and assets when they can.

    That tells us nothing about the value of the underlying technology.

    Ta.

  22. .

    I can’t believe people are in red pilled rage about the possible silver bullet to central banks and tax collection.

    Especially on this forum. The facts are against you and the theory is against you.

    BTC isn’t a bubble. The US did three rounds of QE.

    Go and have a look at how many transcation they actually do. Its basically ZERO. Yesterday Microsofts wallet got ONE transaction across THE ENTIRE PLANET!

    How do you know this? XBox live alone as 53 million active users.

    How many transactions do you think happened in Japan in BTC?

  23. John Constantine

    Somebody that knows they aren’t going to live forever reallocates investment capital into consumption spending.

    If I gave up beer and pizza, that would buy me a bitcoin a year.Not becoming a vegan teetotaller to buy more bitcoin is the same as selling bitcoin to buy beer.

    Not gonna do it.

  24. .

    Howard Hill
    #2562764, posted on November 22, 2017 at 10:24 pm
    Can I sell you some Tulip bulbs?

    Exacery.

    In no way does BTC resemble Tulipmania other than being driven by government debasement of central bank provided currencies.

  25. Stimpson J. Cat

    Look, if you can’t pay your dealer in Bitcoin on the spot no fuss, it ain’t going to work.
    It really is that simple.

  26. John Constantine

    Lot of pent up demand for hot money to be laundered through bitcoin.

    Compared to buying into the Sydney property Ponzi to get money out of China, bitcoin has its advantages.

  27. .

    BTC ALLOWS FOR AUTOMATIC PAYMENT IN BTC, REGARDLESS OF ANY BORDER. COINJAR HAS “SWIPE”, AN EFTPOS CARD THAT ALLOWS FOR TRANSACTIONS TO BE PAID IN AUD AND CONVERTED OTHERWISE OVERSEAS. I AM SURE OTHER WALLET SERVICES ARE WORKING ON SIMILAR OR BETTER PRODUCTS.

  28. BorisG

    Bankruptcy per se is not an economic problem

    And if it increases the suicide rate – that is ok too?

  29. Sinclair Davidson

    Boris – suicide imposes very high private costs on individuals and their loved ones. But the social costs of suicide are actually quite low. So we might be shocked and appalled etc by suicide and discourage it the fact remains that it isn’t a social problem and not enough of a problem to warrant justifying inefficient business.

  30. JC

    Lot of pent up demand for hot money to be laundered through bitcoin.

    I don’t think it does that, Johan C. Remember that the blockchain identifies ownership, which is the dead giveaway for identity.

    Bearer bonds were far better 🙂

  31. hzhousewife

    In the old pre-bitcoin days, suicide was the choice of many who found themselves conned out of their life-savings in various ways. Often through ignorance, eg investing all your life savings with a lawyer spruiking a scheme guaranteed to give a return ten times the going interest rate, and sometimes through bad judgement, ie. backing number 6 in the 4th.

    Bitcoin and its several hundred clones just add to the risk profile, IMHO. Blockchain itself is yet to be proven.

  32. The winners with bitcoin as ever will be the controllers of the trade who take a slice at every action. It is so far away from the average punter that if it succeeds it will be forced onto the plebs so take up won’t be an issue. The part l find incomprehensible is that humans will adapt to a notion rather than something physical that will not have the potential of evaporating for any number of reasons in the cloud or wherever it purportedly lives. It is acknowledged that what l understand to be money is a symbol, and it has a tangible quality that even the poorest can relate to. Please explain the mechanics and timeframe of bitcoin et al becoming mainstream.

  33. .

    Blockchain itself is yet to be proven.

    What would pass for proof?

    The winners with bitcoin as ever will be the controllers of the trade who take a slice at every action.

    You don’t say. Kind of like how the government profits from fiat and mining services make money out of gold miners.

    The part l find incomprehensible is that humans will adapt to a notion rather than something physical that will not have the potential of evaporating for any number of reasons in the cloud or wherever it purportedly lives.

    The blockchain isn’t like a draft in gmail.

  34. mundi

    Are you serious about BTC usage in japan? Its nothing.

    There are only 300,000 transactions per day. Each transaction is averaging 1 BTC (thats $8,000).

    No one is using BTC to buy anything in their day to day life. There sure as hell are not paying for software with it at Microsoft.

    People were using Tulips more than they are BTC.

  35. Miners etc that get taxed by Government are producing a saleable material commodity that has a use. As this is an obvious distinction between them and bitcoin, l will take it that you don’t have a clue and are just being a smart arse.

  36. .

    Now a slow process of market adoption is seen as a bubble.

    Miners etc that get taxed by Government are producing a saleable material commodity that has a use. As this is an obvious distinction between them and bitcoin, l will take it that you don’t have a clue and are just being a smart arse.

    Mmyes try to buy products internationally with bullion and low transaction costs.

    NOW I am being a wiseacre.

  37. Please don’t waste space reposting. I’m not interested in stupid, just data.

  38. .

    “Tell me the future or fuck off!”

    You reckon you’re not interested in stupid though.

  39. DaveR

    To .
    you say bitcoin is the silver bullet to banks and tax collection. Thats probably the best reason why governments will shut it down.

    And all currencies have central bank reserves to back them up, especially in times of crisis. Bitcoin has none.

  40. .

    Central banks have nothing other than printing presses and minimal amounts of gold.

    Thats probably the best reason why governments will shut it down.

    Explain how.

  41. .

    I don’t think you understand the anti-banking sentiment and mentality, even conspiracy theories that abound regarding banks to the financially literate but economically ignorant.

    They are coming to BTC because they hate banks in part an want to see them crash.

  42. JC

    There are only 300,000 transactions per day. Each transaction is averaging 1 BTC (thats $8,000).

    There are around 400 million individual transaction in the US each day. That obviously doesn’t take into account the monetary volume. It just accounts for exchanges using the dollar.

  43. JC

    They are coming to BTC because they hate banks in part an want to see them crash.

    Lol I bet it’s a huge part of all the anti-banksters buying this crap.

  44. .

    Most people ARE anti banksters.

  45. JC

    It’s the left fanning all the anti-bankster stuff, Dot.

    You have Pocahontas in the US. The Liars party wanting to run a “Woyal” Commission.

  46. JC

    We need a woyal commission into the banks. Fmd.

  47. Howard Hill

    The BTC is infinitely divisible, isn’t it?

    So what? Why would any intelligent person swap an appreciating asset for groceries?

    Ah ha! I’m onto this economics stuff.

    So if the $AU is on the up, I should not buy my groceries?

  48. BorisG

    Boris – suicide imposes very high private costs on individuals and their loved ones. But the social costs of suicide are actually quite low. So we might be shocked and appalled etc by suicide and discourage it the fact remains that it isn’t a social problem and not enough of a problem to warrant justifying inefficient business.

    I think it is a social problem where it is caused by government policy or lack thereof. And of course increased suicide rate is only one of the manifestations of domino bankruptcies that result from deflation. Huge unemployment rise is definitely a social problem.

    I know nothin about all these future currencies. But I think a know a bit about deflation.

  49. entropy

    Why is not having a lender of last resort a problem? I mean a real problem. The reason I ask is because the Katter Party clearly wants one for farmers, which makes me suspect its purpose is political patronage for non viable businesses.

  50. entropy

    Also, No profits for central banks. A grave crime indeed.

  51. Dr Faustus

    Turnbull government invests in blockchain

    Angus Taylor, the Assistant Minister for Cities and Digital Transformation, on Friday awarded the government’s second largest grant in its Smart Cities and Suburbs program to a project partly run by Power Ledger the first Australian company to list itself on digital currency exchanges.

    Cash out into pizzas and copies of Windows XP while the going is good.

  52. Spring is coming

    Sinclair
    Is there a Dummies Guide to Bitcoin or Blockchain you could recommend?

    I’ve reviewed your slide presentations and feel like the dumbest guy in the room.

    Thx

  53. Ragu

    BTC is not an unreliable exchange of value. It is a direct line to an investment (as it is now). It allows an investor to use their portfolio as a bank account.

    It’s good isn’t it. You can withdraw scrip out of an ATM to buy a bottle of water. For example.

  54. entropy

    The issue I see it is that rather than being developed as a medium for exchange, it is in reality seen more as an investment in and of itself. That looks like a lot of risk to me.

  55. Tel

    So what? Why would any intelligent person swap an appreciating asset for groceries?

    Even intelligent people need to eat from time to time.

  56. flyingduk

    I was lucky enough to come back from a deployment to Afghanistan some years back with an enhanced mistrust of governments, including our own. I bought ‘guns gold and generators’, but also bitcoin (quite a few as the price was only in the 100’s at the time). At the time I was attracted to the idea that I could leave the country with my bitcoin codes in my head, then log on in Singapore, or Hungary or wherever, and my wealth was still there.

    It turned out to be a very fortunate investment for me, and I have learned a lot about the underlying technologies (distributed ledgers, blockchain) since then. This is the real deal and Bitcoin is only the first mainstream use. There will be many others. This is the way of the future. Get on the bus or get under it!

  57. John Bayley

    @Empire:

    Ethereum has had recent issues with frauds and most recently bugs/errors resulting in large sums being trapped in locked wallets.

    Not the ETH protocol as such; the problems you mention relate to the ‘smart contracts’ that are written on top of the Ethereum blockchain.
    In a similar way, there have been a number of ‘exit scams’ and thefts of Bitcoin (see Mt Gox), but that does not mean that the Bitcoin protocol itself is deficient.
    I would compare those to having your wallet stolen. The cash in it will be gone, but that does not yet mean that the currency as such is worthless.

    @BorisG:
    With all respect, the claim that ‘deflation is evil’ is utter nonsense. Mild deflation is an utterly logical outcome of any system of hard money coupled with increasing productivity, and was in fact readily observable in the 19th & early 20th century, when the likes of USA/Australia were on the gold standard (and had no central bank & only very limited government sector). A period which, incidentally, saw huge increases in living standards pretty much across the board.
    It is the asset price inflation that the central bank policies lead into (where for example Australia’s M3 has almost tripled over the last 10 years) which invariably result in crashes, malinvestment on a grand scale and growing inequality.

  58. Hydra

    The beauty of having 7+ decimal places is that of course you can use it to buy a pizza.

  59. Mother Lode

    I just don’t see governments surrendering their control of their currencies.

    What I have heard of crypto-currencies is how they get around a whole lot of government mandated controls, impositions and sheer cupidity. Even if these currencies had 10,000 advantages for ordinary people and only one disadvantage for governments, that government would want it gone.

    And it won’t be just one government – they will all suddenly find themselves in agreement on this point.

    One by one they will whittle down the advantages of bitcoin until it is pointless.

    That is how the bastards roll.

  60. Robber Baron

    Does anyone here at the cat own a bitcoin?

  61. Ragu

    BTC is unique because the crash will come. It’s in the code. It’s finite. The coins are designed to run out.

    The tech is real, Bitcoin is a scam.

  62. Diogenes

    There is a nice little scam rolling at the moment, which if you think about it, and if it were not implemented sneakily, and done with permission could be very game changing across the whole of the interwebs… ie coinhive.js

    Coinhive.js is a script that runs in your browser when you visit a page that uses your computer to generate monero hashes (aka mine for monero) . It has been found on many pages including piratebay (deliberate test) politifact and CBS showtime(hijacked ads).

    Hands up everybody who hates ads on the interwebs !

    Many websites such as youtube now shows so many ads, and inappropriate ‘sponsored’ suggestions that it is rapidly becoming unusable as a teaching resource without breaking the ToS and downloading the content. If youtube were instead to ask me – ‘show an ad, or let us use your computer to mine coins whilst you are here ?’ , I would gladly pay for the content directly by allowing mining, rather than have an advertiser pay for it. The same goes for many tech websites I use in class, as well as general news sites – ask me ‘ads or mine coins’ I will 9/10 pay by allowing mining

  63. Ragu

    The value of Bitcoin come from its scarcity, which is defined by the owner, who just so happens to be the seller.

    It’s a scam.

  64. John Bayley

    Does anyone here at the cat own a bitcoin?

    Yes, have done for several years. A bit of speculation on new technologies does pay off occasionally!
    These days I play with about a dozen cryptos. There are some very interesting new features coming up literally daily now, and while most will no doubt fail, some are bound to do very well.
    Going beyond speculation though, the idea of decentralised, trustless, peer-to-peer commerce is in my humble opinion easily as disruptive as the internet itself was.
    The question now is: Will it run on the NBN? 🙂

  65. John Bayley

    The value of Bitcoin come from its scarcity, which is defined by the owner, who just so happens to be the seller.

    Sorry, you have no idea what you’re talking about.
    I am actually quite disappointed that something that presently offers at least some chance to protect yourself from confiscatory governments (have a look at crypto use in Venezuela!) is yet clearly hated by so many on this supposedly ‘libertarian’ website.
    You can choose to be a luddite, but that does not mean you need to be totally ignorant.

  66. Aristogeiton

    It is true that Bitcoin is now too valuable to use for day-to-day shopping.

    How embarrassing.

  67. John Bayley

    @Diogenes:

    Use uBlock and NoScript as a minimum, and you eliminate 99% of ads and/or malicious scripts.

    There are plenty of other options to help with tracking protection, browser fingerprinting and so on.

    As with everything, it requires some personal initiative, but it definitely is possible to protect yourself from most malware that befalls the ordinary user.

  68. .

    Ragu
    #2563082, posted on November 23, 2017 at 9:45 am
    BTC is unique because the crash will come. It’s in the code. It’s finite. The coins are designed to run out.

    The tech is real, Bitcoin is a scam.

    Scarcity creates oversupply?

    Ragu. Let’s think this one through a bit more.

  69. Aristogeiton

    Is Cryptocurrency new the Carbon Tax? I mean at least so far as Libertarians are concerned?

  70. Ragu

    Sorry, you have no idea what you’re talking about.
    I am actually quite disappointed that something that presently offers at least some chance to protect yourself from confiscatory governments (have a look at crypto use in Venezuela!) is yet clearly hated by so many on this supposedly ‘libertarian’ website.
    You can choose to be a luddite, but that does not mean you need to be totally ignorant.

    Err, dichead. Do you realise that a Bitcoin is underwritten by those willing to pay the price. It has no value apart from those willing to pay the cost of the promissory note.

    The only person that profits is the Nip selling it.

    It’s elaborate, it’s funded by the buyers. It’s a scam

    Time will see me right on this

  71. .

    Robber Baron
    #2563068, posted on November 23, 2017 at 9:33 am
    Does anyone here at the cat own a bitcoin?

    SMH. Terrible opsec.

  72. Kneel

    “What I have heard of crypto-currencies is how they get around a whole lot of government mandated controls, impositions and sheer cupidity. Even if these currencies had 10,000 advantages for ordinary people and only one disadvantage for governments, that government would want it gone.”

    The question is: how will they do this? It is rather like saying you will filter the internet – it is extremely difficult to do, and even if you succeed, it is likely that you will cause more harm than good.
    Did “banning” thepiratebay.se stop me downloading torrents from them? No – even though my ISP prevents me resolving this name, I can change nameservers to google and see the site in all its glory. Does geo-ip blocking stop me streaming from US netflix? No, I have a geo-unblocker that sidesteps the restrictions. For better and worse, this is how the internet and encryption is – the same things that allow terrorists to exchange messages without being detected also allows people to organise protests etc against corrupt officials.

    “I have no idea what crypto currency or block chain is. ”
    Simple concepts, once you know.

    Crypto currency means a currency that relies on digital signatures to verify itself. This is a similar technology to the encryption that is used on “secure” websites used by banks and on-line stores.

    The block chain is a way to ensure that transactions are recorded in a way that doesn’t rely on a “central registry” – it is distributed. This is a similar technology to that use to resolve internet names like “catallaxyfiles.com” into the numbers your computer needs to actually view this site, combined with the “crypto” part above.

    So Bitcoins are “released” – they are “signed” by the issuer. When you obtain one, it is listed in the blockchain as belonging to you – the “owner” signs the transaction. Because it is extremely difficult to fake such a transaction, and because the records (including the signature) can be replicated on many servers, there needs be no central authority to verify you have a “real” bitcoin, or that you “own” it. In fact, if you do the transaction “offline”, you can spread it around at any time later – the “chain” part is the complete list of all transactions of that bitcoin, from the initial issue to when you finally got it.

    The biggest weakness is the encryption strength. I don’t know what this for bitcoin, but I would point out that the more bits in the key, the stronger the encryption. Banking and online sites typically use 128, 256, 512 or 1024 bit keys. Current “military grade” is 8192 bit keys. Note that the difficulty of cracking increases exponentially as you add bits. For 128 bit keys, a cluster of 128 or so standard desktop PCs can “crack” it in under a month. At 8192 bits, today, even US NSA would be spending decades of ALL their compute power (supercomputers, everything) to crack the code. Yet you can verify an 8192 bit key signature on your mobile phone less than a second.

  73. Diogenes

    Use uBlock and NoScript as a minimum, and you eliminate 99% of ads and/or malicious scripts.

    Already do,and ghostery and a double vpn, clear history cookies and cache on exit , etc etc

    I accept that somebody needs to pay for the content and the only reason I block ads is that they intrusive/and or a potential malware vector. If I were given the choice of “meet asian/russian/horny girls today ” ads that make Mrs Diogenes very unhappy on piratebay or donate some cycles to help pay for it – I will donate the cycles -If I want to watch the Great War Channel on youtube asked if I want to see ads from grammerly or Wix, or Ford or … or donate some cycles I will donate the cycles ….. But I need to be asked first !

  74. Mundi

    Kneel, I think you are very confused.

    No one can crack 128bit encryption.

    Even if you had a fleet of the nicest super computers in the world it would take billions of years. The number of combinations to try is 2^128, which is an astronomical number.

  75. Aristogeiton

    Mundi
    #2563228, posted on November 23, 2017 at 11:25 am
    Kneel, I think you are very confused.

    No one can crack 128bit encryption.

    Depends in the encryption. WPA was 256bit and yet has a common and serious vulnerability in implementation. AES 256, widely used, was cracked years ago because of a vulnerability in the protocol.

  76. I am Sparty McSpartyface

    I am sorry in that I have not read all the comments, so please forgive me if I am repeating something already said, but this article has got to be one of the most idiotic things I have ever read. Especially this:

    No profits for central banks

    Central banks don’t create anything so all their profits are in fact taxes of a different sort.

    MORON!

  77. .

    It’s elaborate, it’s funded by the buyers. It’s a scam

    Who else is going to fund it? How can any asset be funded by anyone else (other than their creditors), other than a buyer?

    If you are selling an asset and also funding it – you are simply giving money away. At best you are going to break even. Why would someone buy an asset for more than the intrinsic value?

  78. Fluffy

    My issue isn’t with the blockchain or the technology but the fact that nothing stops an infinite amount of blockchains being created. There is no scarcity when everyone can create their own brand of coins.

  79. I am Sparty McSpartyface

    I just don’t see governments surrendering their control of their currencies.

    Unless there is a united effort across all countries to set up great internet fire walls, Government’s can’t stop this.

    Government collusion to block the internet cannot be ruled out, but that is what is required to stop it.

  80. John Bayley

    Do you realise that a Bitcoin fiat money is underwritten by those willing to pay the price. It has no value apart from those willing to pay the cost of the promissory note.

    Fixed it for you.

  81. Mitch M.

    Government collusion to block the internet cannot be ruled out, but that is what is required to stop it.

    Hackers hack for hacking. Many are not even interested in reward except of the pleasure of knowing they have hacked what everyone thought couldn’t be hacked. The internet is always going to be vulnerable because TCP was not designed in anticipation of hackers. Encryption helps but many systems have inherent vulnerabilities. Just last Tuesday Microsoft released a huge number of security patches and even Adobe Acrobat released an update for 5 security flaws. So if something as basic as Acrobat, after all this time, can be exploited, I’m rather doubtful that Bitcoin is as secure as some would like.

    I wouldn’t be surprised if governments or financial institutions were prepared to upfront fund hackers for the computing and power costs.

  82. Hydra

    When will there be a competitor to the Internet?

  83. Hydra

    Lol people going on about Bitcoin having no worth but are happy to trade pieces of plastic.

  84. Kneel

    “No one can crack 128bit encryption. ”

    I believe it is you who are confused.
    In order to crack a 128 bit RSA key, I only need to find the prime factors of a 128 bit number – I know this number, it is part of both the public and private keys. Finding primes is compute intensive, but not too hard. 128 bit RSA has already been done on a cluster of PCs – at least 5 years ago. Finding prime numbers is the part that increases exponentially with the size of the key.
    This is not to say that 128 bit RSA on an SSL/TLS connection is insecure – it is good enough, considering the SSL/TLS process (IKE), which creates random keys to encrypt the data and exchanges them using the initial key, and re-negotiates new keys on a regular basis. There are also several different encryption schemes of several different sizes, and several authentication hashes to chose from. So unless you catch the entire conversation, including the initial negotiation, it is computationally unrealistic to decrypt. But if you DO catch all of it, it can (and has) been done for 128 bit RSA. The trick is to capture the public keys as they are traded during the negotiation – without that, it is unrealistic to attempt it.

  85. .

    But the government can buy foreign pieces of plastic by debasing the gold that backs the currency after they’ve recklessly destroyed the purchasing power of said pieces of plastic for long enough.

    If this destruction of purchasing power ruins the banking system by economic decline caused by a credit cycle in pieces of plastic, the government will issue secure, electronic credits of pieces of plastic to said banks, out of nowhere for no cost or which are charged out at negative real interest rates.

    Be assured, however, that this is not a scam, unlike BTC.

  86. Kneel

    “Finding prime numbers” should be “Finding prime factors”

  87. Diogenes

    Kneel
    And done much much faster with quantum computers. They say unless bitcoin changes eith what is currently known it should take less than the 10 minutes a transfer takes within 10 yrs

  88. .

    If BTC is fucked, then so is everything else.

  89. duncanm

    Many of the naysayers here ‘don’t get it’ yet.

    BTC itself may (probably) be a bubble. .. but as others have pointed out in this thread, the ability to verify transactions, float shares in a company and other such processes without a central (read government or government-appointed sheriff) is most definitely revolutionary.

    It is something that should be a no-brainer for libertarian-leaners.

  90. Tel

    In order to crack a 128 bit RSA key, I only need to find the prime factors of a 128 bit number – I know this number, it is part of both the public and private keys.

    Bitcoin does not use 128 bit RSA keys… I doubt anyone still does.

    https://bitcoin.stackexchange.com/questions/21907/what-does-the-curve-used-in-bitcoin-secp256k1-look-like

    These are 256 bit ECDSA keys.

    I will also point out that the long-term public record only displays the hash so you cannot even sit there milling away cracking the key, you would need to undo the hash first (i.e. SHA256). Even the public key is only revealed at the time of making a transaction, so you have at most an hour or two to break that key before the transaction executes and after that the key is no use to you anymore.

  91. duncanm

    No one can crack 128bit encryption.

    This is a common confusion regarding security.

    Nothing, and I mean nothing is 100% secure.

    It just needs to be secure enough to make the ROI of breaking it negative.

  92. .

    Tel

    I have a wallet. I am new to the system. It uses two-part security.

    Yes I know those SMS messages can be intercepted.

    Look at the costs of doing it.

    Guess may password within so many iterations and put in the right code after you’ve intercepted the SMS?

    You also have to know my username and what wallet/s I use.

    Jack it up to something ridiculous and have a pin to see the passcodes that confirm the password and it will be simply to costly to hack. Even make it part of the app and link it to devices.

  93. Mother Lode

    Eventually what ever you do with bitcoin will manifest itself in the physical world with national borders.

    And governments are only interested in transactions – so they legislate that you have to report what you have purchased. set up departments (they do so love doing that) and then fall on you like a ton of bricks.

    I wish it weren’t so, but the point is they will not let you enjoy the fruit of your own labour without getting their cut.

  94. Bad Samaritan

    Forget Tulips. I have real experience with Ostriches. There was a time when a few associates and I used to talk in “Ostriches”. We could buy a new car for 4 ostriches. Go on a very nice holiday for 2. Bought a ski lodge for 25. And so on. You couldn’t readily divide them for purchases, but like Bitcoin (very like Bitcoin) there were enough people convinced it was the big new thing that the market was only one way, so the question of splitting an Ostrich rarely came up. Anyhow…

    Eventually the prices got so high that anybody should’ve seen what was coming, but since we were the sellers, so what? Caveat Emptor and all that.

    Like Bitcoin and the others (anyone fondly recall Pawlonia Pine? London Rubber when AIDS was first identified?) we were just taking the dough; handing out hope to the believers. Of course a lot of buyers made money prior to the crash. It wasn’t a Ponzi scheme since the “new money” was not going directly to those already in. Once a breeding pair was sold for $20,000 then all quality pairs were valued at that. You were “wealthy” regardless of whether you had old-fashioned fiat currency or new-fashioned Ostriches.

    Why I’m nostalgically recalling all this is that I still can get some Ostriches for all you Bitcoiners at a good price. Don’t worry; I’ll keep them in a safe place for you and send some lovely embossed certificates with which you can buy stuff off other Certificate Holders.These days too, via the ledger numbers of each certificate we can split the birds. I’m always happy to help fellow Catsters…always. And am hoping to hear from all you Bitcoiners quite soon. Cheers.

  95. duncanm

    I wish it weren’t so, but the point is they will not let you enjoy the fruit of your own labour without getting their cut.

    yup — it is definitely a threat to government monopoly on many things.

    If the government understood they were their to serve the people (rather than extract money from them for vote buying and staying in power), then they would be right on board with disposing of land titles offices, stock exchanges, banks, registries, etc etc.

    But they don’t, so they won’t.

  96. .

    Bad Samaritan
    #2563393, posted on November 23, 2017 at 1:17 pm
    Forget Tulips. I have real experience with Ostriches. There was a time when a few associates and I used to talk in “Ostriches”. We could buy a new car for 4 ostriches. Go on a very nice holiday for 2. Bought a ski lodge for 25. And so on. You couldn’t readily divide them for purchases, but like Bitcoin (very like Bitcoin) there were enough people convinced it was the big new thing that the market was only one way, so the question of splitting an Ostrich rarely came up. Anyhow…

    Eventually the prices got so high that anybody should’ve seen what was coming, but since we were the sellers, so what? Caveat Emptor and all that.

    Like Bitcoin and the others (anyone fondly recall Pawlonia Pine? London Rubber when AIDS was first identified?) we were just taking the dough; handing out hope to the believers. Of course a lot of buyers made money prior to the crash. It wasn’t a Ponzi scheme since the “new money” was not going directly to those already in. Once a breeding pair was sold for $20,000 then all quality pairs were valued at that. You were “wealthy” regardless of whether you had old-fashioned fiat currency or new-fashioned Ostriches.

    Why I’m nostalgically recalling all this is that I still can get some Ostriches for all you Bitcoiners at a good price. Don’t worry; I’ll keep them in a safe place for you and send some lovely embossed certificates with which you can buy stuff off other Certificate Holders.These days too, via the ledger numbers of each certificate we can split the birds. I’m always happy to help fellow Catsters…always. And am hoping to hear from all you Bitcoiners quite soon. Cheers.

    You’re basically getting pleasure by saying you think BTC will collapse.

    It has been around since 2009 and had 10 times increase in transactions over the last year.

    Comparing this to investing in Ostriches or Emu farms is a bit over the top.

  97. Kneel

    “Bitcoin does not use 128 bit RSA keys… I doubt anyone still does.”

    Indeed. I was responding to the idea that 128 bit keys were “impossible” to break. They are demonstrably not, and I am NOT referring to buggy implementations.
    With exponential growth in computing power still happening, it’s important to “keep up” – what was “only CIA could do it” 20 years ago is easy enough to do now, especially considering that I can get several multiples of the performance of a desktop system by spending the money on small “PC on a card” systems. 8 ARMhf cores @ 1.2GHz, 1GB of RAM and 8 GB of flash for storage is well under $US50 as one off, as little as $US9 in bulk. Now. Today. Cluster 50 of those ($US500), you have more compute than “super computers” did circa 1980. Uses less than 2.5kW doing it (ie, can run on a standard 10A wall socket) too. 100 times as much is no harder if you have the resources.

  98. .

    Kneel – how do you really do it though with the two-part security; let alone if it links to devices?

  99. Kneel

    Dot,
    That is the point – it’s not the security of the encryption per se, it’s the entire process. If you have the magical unbreakable encryption, it’s only as good as the authentication you use to gain access to the keys.

    As duncanm noted, return on investment.
    There’s no point in turning lead into gold if it costs more than the gold is worth when you finish.
    Of course, this doesn’t apply to Govt intervention – they don’t care about costs, only outcomes. So it MAY be worth it for them to break something like BTC. But that wouldn’t be enough, IMO – the genie is out of the bottle, and the next iteration will be that much harder to break. And it will be there before BTC gets broken, IMO.

  100. entropy

    Apparently Apple in the US is late beta testing an iMessage payment system to transfer funds. It would be interesting to explore if this strategy has at least some blockchain characteristics, or could easily adopt them. AFAIK it is using some sort of credit card, and is USD only at the moment.

  101. .

    Surprised AAPL and Google haven’t done this before. MobiMoney is huge in Africa.

  102. Tel

    Guess may password within so many iterations and put in the right code after you’ve intercepted the SMS?

    Those SMS messages do get intercepted, and the method works like this:

    * People enjoy smart phones because they are a convenient, “Swiss Army” style all purpose device.
    * Smart phones tend to be far too complex to be trustworthy as a tool, and the systems are all buggy.
    * Smart phone gets hacked and SMS is captured and redirected.

    If you use two-part for anything that matters, then buy a cheap, dumb flip-phone on the lowest prepaid plan and keep it in a locked desk drawer not used for anything else other than SMS.

    Don’t forget, if you are using a third-party wallet then you are trusting them to hold the bitcoins on your behalf (i.e. they own the coins and you have a contract with them). I’m not saying this is a bad way to go, because maybe you trust them to hold the coins more than you would trust yourself to set everything up properly at home and hold your own coins.

  103. Speedbox

    I have been in crypto for some time. That means Bitcoin and 6 other primary coins in addition to a handful of secondary coins for speculation. Those coins are supplemented by investments in publically listed companies that seeking to develop and exploit blockchain technology.

    Although these investments are the “wild west” on the investment scale, I remain convinced that cryptos and the blockchain (both separately and jointly) are with us forever. As another poster mentioned above, you can either get on the bus, or be thrown under it.

    Many have cast aspersions on the low acceptability of cryptos on the market. Well, I am aware of yet another home (an 18th century Spanish property) has just been listed for sale. The price? 1,850 Bitcoins (approx $US15 million). The property owner doesn’t want cash.

    Only today, I was reading about two New York private schools that have announced they will accept Bitcoin for tuition fees.

    There are many other examples but I’m sure you get the picture. Yes, not entirely mainstream yet, but that day is approaching.

    Somebody up thread said “The coins are designed to run out.” Hmmm, well, yes. The current estimates are that all Bitcoin will be in circulation in the year 2140. But, so what?

    If you still think bitcoin and cryptos generally is a fad/bubble, then nothing I say is going to change your mind. But, I will stake my nuts on the proposition that the blockchain WILL eventually affect your business, your bank, your Government and almost every other aspect of your life whether you realise it or not. Similarly, cryptos are with us to stay. They are still in an evolutionary phase but to suggest that all cryptos will dissolve into the sunset is nonsense. So, don’t live in ignorance. Do your research. If you’re still not convinced, don’t worry about it – the world will not alter its direction because you didn’t invest in cryptos and the blockchain – but without knowing for sure, you might just miss out on a once-in-a-generation opportunity.

  104. .

    Tel

    My account/s are linked to my phone and computer.

    Doesn’t that mean they need to know those passwords as well, as physically possess/steal my machines?

  105. Aristogeiton

    Cryptocurrency: an idea so patently ridiculous only libertarians and economists could put any stock in it.

  106. .

    That’s cute but explain why it is ridiculous.

    This is how I describe the fiat system:

    But the government can buy foreign pieces of plastic by debasing the gold that backs the currency after they’ve recklessly destroyed the purchasing power of said pieces of plastic for long enough.

    If this destruction of purchasing power ruins the banking system by economic decline caused by a credit cycle in pieces of plastic, the government will issue secure, electronic credits of pieces of plastic to said banks, out of nowhere for no cost or which are charged out at negative real interest rates.

    Be assured, however, that this is not a scam, unlike BTC.

  107. Tel

    Dot, remote access via some kind of installed back-door is just as good as physical access. The remote controller can run all the same software, use the mouse, keyboard, etc.

    Typical scenario is you get some email attachment or click to download something, and it installs some extra program that goes and hides, then long time later the back-door opens up when your computer is quiet (e.g. you have gone out or something leaving the machine switched on) then it connects to the Internet and provides remote access.

    Security is the new bacon…

  108. Aristogeiton

    BTC is the new gold standard for Libertarians! Speedbox, don’t listen to the haters like me. There’s no such thing as a bagholder. Double down! All your investments are set to moon!

  109. .

    Tel

    I know what phishing is and I have good AV installed.

    How will they know to email me if people generally don’t know my email or coin username?

    Will they just collect as much information as possible?

  110. .

    Aristogeiton
    #2563542, posted on November 23, 2017 at 3:30 pm
    BTC is the new gold standard for Libertarians! Speedbox, don’t listen to the haters like me. There’s no such thing as a bagholder. Double down! All your investments are set to moon!

    There is a bit of fraud in gold.

    http://www.zerohedge.com/news/2017-10-30/could-be-huge-gold-bar-certified-royal-canadian-mint-exposed-fake

  111. Kneel

    “Typical scenario is you get some email attachment or click to download something, …”

    Yep.
    If you want a secure system, it can’t be a “connected” system. If you can afford SOME trade-offs, you can tie it down pretty tight, but that assumes you know what you are doing, or at least know someone who does. Pretty much all computer systems and phones are open from the get-go, because everyone wants it to “just work”.

  112. Speedbox

    All your investments are set to moon!

    I have a moon for you and you can kiss it.

  113. Walter Plinge

    Tulipmania is largely an urban myth. Few people were involved, mainly rich merchants (think Kerry Packer and his gambling losses). It is really a morality tale about how the poor and lower classes came to grief by getting above their station. The lower classes weren’t involved in tulip trading to any extent.

  114. Stimpson J. Cat

    Cryptocurrency: an idea so patently ridiculous only libertarians and economists could put any stock in it.

    Welcome back Ari!

  115. Bad Samaritan

    Any ideas on how a Crypto Credit Card would work (not Debit, OK)…..or Crypto finance. Say a loan for a car?

    The car is currently $50,000 and the Bitcoin rate is currently (say) exactly A$10,000. can Cats explain how a person without 5 Bitcoins to their name could buy that car?

  116. Speedbox

    FYI, it is important to know that every Bitcoin is divisible by 10 million.

    Therefore, using the approximate price of Bitcoin now ($AUD11,000), you can buy a $4 coffee for, say, 0.00035335 of a Bitcoin or your ($50,000) car for 4.41686749 Bitcoin. If you wanted the luxury extras on your new car and those cost an additional $2,000, that would cost an additional 0.17667470 Bitcoin.

    The issue of price volatility is obviously a problem with Bitcoin at present. But, not unlike how a current car loan has a fixed interest rate, in the case of Bitcoin, the lender assumes the risk as to whether Bitcoin value rises or falls. I would expect your obligation would be to return a fixed number of Bitcoin over a fixed period of time. Or, the Borrower may assume some risk in return for a lower interest rate.

    Having said that, there are over 1100 other crypto currencies and I would expect a market force to come into play where a Borrower could select an offer from a crypto lender that offers more stable (when compared to Bitcoin) terms. Interestingly, your Lender could be located anywhere in the world and the blockchain has verified your loan (and your repayments).

    Note that the crypto market is still in its infancy. The specialized cryptos being offered into the market, right now, are as varied as some are a bit bizarre. It is also true that the next few years will see many of the minor cryptos failing – possibly a failure rate of 90%. But IMO, the scenario you query will be a reality in less than a decade.

  117. gbees

    How does one purchase a house with Bitcoin and at the end of the purchase transaction have all the required documents (title transfer, contract of sale) finalised? If Bitcoin is out of the control of banks, governments etc. how is the stamp duty and/or gst avoided given title transfers generate government involvement?

  118. Aristogeiton

    gbees it’s exchanged for real money because only nerds and Libertarian sickos want Dogebux.

  119. Speedbox

    How does one purchase a house with Bitcoin and at the end of the purchase transaction have all the required documents (title transfer, contract of sale) finalised?

    Yes, there are some practical issues at present but my understanding of those houses already sold has been that Government charges (in whatever format they may be) are settled using fiat currency. I don’t think there is any question of avoidance. Similarly, any mortgage must currently be settled using fiat currency.

    A Contract of Sale is just that – a formal record that a property (in this case) is to be sold and detailing the Seller and Purchaser, and the terms (such as price, when, special conditions etc). It is also another area that the blockchain will cover entirely. As far as the transfer of title, that is merely a notation to the title document itself (and which will be a notation held in the blockchain that eliminates the requirement for a “land title”.)

    In the future, the blockchain will record all of these details with irrefutable accuracy.

    I am not aware of any houses being sold using Bitcoin in Australia. The few examples I am aware of are in the UK, USA and Europe.

  120. Tel

    How will they know to email me if people generally don’t know my email or coin username?

    Will they just collect as much information as possible?

    Yeah, in my experience they go for brute force… they send massive numbers of emails and hope one lands in the right place. Maybe your mum’s Facebook gets hacked and she has some email addresses in an old message somewhere.

    If you have a regular long drive and want something to listen to, try these guys.

    https://www.grc.com/SecurityNow.htm

    Not that I would agree with everything he has to say, but you get a good heads up on what’s going wrong out there.

  121. stackja

    Tel
    #2563775, posted on November 23, 2017 at 7:03 pm

    GRC is good.

  122. .

    Bad Samaritan
    #2563639, posted on November 23, 2017 at 4:50 pm
    Any ideas on how a Crypto Credit Card would work (not Debit, OK)…..or Crypto finance. Say a loan for a car?

    The car is currently $50,000 and the Bitcoin rate is currently (say) exactly A$10,000. can Cats explain how a person without 5 Bitcoins to their name could buy that car?

    Get on it because you will be an early innovator.

    My idea would be that it would be microfinance and direct investment in securitisation.

  123. .

    Dogebux

    Doge…bucks…Lawl, someone has been meme-ing hard.

    Heresy, progress, etc?

  124. 2dogs

    Bad Samaritan
    #2563639, posted on November 23, 2017 at 4:50 pm
    Any ideas on how a Crypto Credit Card would work (not Debit, OK)…..or Crypto finance. Say a loan for a car?

    As I stated earlier, the ability to issue securities to the public will be available to the retail borrower/security issuer. You basically just go to your accountant who will set up a bill of sale on the car as security for your own issue of securities on Etherium, similar to P2P lending now, but more direct.

  125. Aristogeiton

    stackja
    #2563777, posted on November 23, 2017 at 7:09 pm

    GRC is good.

    We shilling shitcoin now? BUY ETC IT’S GONNA MOON!

  126. .

    Pretty funny you’re taking the piss out of this when we had QE I, II and III in the US to stop the stock market from tanking.

  127. Tel

    Aristogeiton #2563815,

    GRC = Gibson Research Corporation (i.e. not a publicly traded security, to the best of my knowledge).

  128. Aristogeiton

    Yeah. That “stopped the stock market from tanking”. I have a bridge to sell you: fiat currency only plz.

  129. .

    It doesn’t matter what the other aims are, do you actually know how QE works?

  130. Walter

    Have any of you genius types heard of pyramid schemes? They work on belief in the endless opportunity theory, the system is always extremely complicated, difficult to understand and driven by greed, faith and hope. It relies on an ever expanding pool of suckers! Sound familiar?

  131. Fluffy

    What is to stop there being an infinite number of bitcoin variants?

  132. .

    This is nothing like a pyramid scheme.

    1. People are buying and selling houses in Europe with BTC.
    2. Japan’s financial regulator recognised BTC exchanges this year.
    3. 300,000 shops in Japan accept BTC.
    4. Microsoft accepts BTC as payment.
    5. BTC services are advertised on TV in Japan.
    6. Blockchain is being invested in by the Commonwealth.
    7. There are some MLM businesses in BTC and so on. MLM aren’t pyramid schemes in the proper sense.
    8. You don’t actually understand how BTC works.
    9. Fiat currencies are fundamentally dishonest. BTC is one of thousands of crypto alternatives.
    10. AMZN has registered BTC related domain names.
    11. BTC has been around for nearly a decade and grown from 5.4 US cents to 8250 USD now.
    12. BTC use for purchases has increased by ten times in the last year.
    13. Mining of coins is profitable in itself. BTC wallets and exchanges have lower fees than many banks.

    PS

    Maybe you want to tell Bill Gates and Jeff Bezos that they’re suckers too, champion.

  133. Tel

    5. BTC services are advertised on TV in Japan.
    6. Blockchain is being invested in by the Commonwealth.

    Don’t confuse blockchain (the generic technology) with Bitcoin (one particular implementation that happened to be first out the gate).

    It is entirely predictable that national governments will each sanction their own particular flavour of blockchain (giving themselves a strategic advantage) while simultaneously brutally repressing competing implementations, especially repressing a “wild” implementation such as Bitcoin. Consider that Russia has already jumped onto the crypto-coin bandwagon with their own government sanctioned version of the blockchain technology but (oh dear) only approved parties are allowed to mine this.

    https://www.cryptocoinsnews.com/putins-orders-russia-will-national-cryptocurrency-cryptoruble/

    All the same technology… different governance.

  134. Aristogeiton

    .
    #2563824, posted on November 23, 2017 at 7:59 pm

    I’m on a Libertarian Economics blog, but this is the first time I’m hearing of QE. Please explain it to me Dot. I need to be told what QE is. Because I have never heard of it before. And I don’t know what it is.

  135. .

    You really are trolling, aren’t you? If know you know what QE is, you know what it does to asset prices.

    If you “just know” BTC will fail, short it.

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