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(Yahoo)   All your bitcoin are belong to somebody else   (finance.yahoo.com) divider line 66
    More: Obvious, hacking attacks, Best & Co.  
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4897 clicks; posted to Geek » on 04 Apr 2013 at 9:10 AM (2 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-04-04 06:12:00 PM  

downstairs: BarkingUnicorn: Just for fun, I downloaded a Bitcoin client and started it up to get a Bitcoin address yesterday.  It immediately started "syncing" and 24 hours later it's only 88% done.  The counter suggests it's going through every transaction since the first Bitcoin was created.

Perhaps this is supposed to dampen demand, as the mining process is supposed to dampen supply.

Can you explain what "mining" means?  Serious question (for you or anyone).  In layman's terms.


"Mining, or generating, is the process of adding transaction records to Bitcoin's public ledger of past transactions." In exchange for doing this work, you get a transaction record along the lines of "Bitcoin created MMDDYY at HHMMSS, assigned to you."

So, it's like SETI, (Search for Extra-Terrestrial Intelligence) a network of independent computers each processing parts of a large data set for a common goal, only you get paid.

It's called "mining" because mining is a tough, slow way to accumulate wealth (in the old West prospector romances, at least).  The Bitcoin mining protocol is deliberately resource-intensive, aimed at keeping the rate of Bitcoin creation at about four per day.  Your desktop PC will never make you rich in Bitcoins.  "Mining appliances" of formidable specs are sold to serious miners.  The ones I've seen cost up to $3000 so that gives me a feeling the ROI may be a handful of thousands per year.
 
2013-04-04 06:29:28 PM  
I just read a thread on reddit about a guy who took out a $30,000 loan, invested it all in bitcoins, and has a couple hundred grand a few months later.
 
2013-04-04 06:45:00 PM  

fluffy2097: Bitcoin isn't recognized as money. It's Tax exempt.


I don't know what the law is where you live, but there's nothing in US tax law to suggest that it only applies when transaction amounts are denominated in US Dollars.

If I sell you  drugs web development services and you give me 10 Bitcoins in exchange for it, then according to the IRS I've received 10 Bitcoins' worth of income and should be taxed on it.

/if they somehow find out about our transaction.
 
2013-04-04 06:46:45 PM  

Smackledorfer: the US dollar off the gold standard with nothing but the full faith and credit of the US has never fluctuated like this stupid bitcoin.


It's almost as if currencies controlled by a strong central authority are more stable.
 
2013-04-04 06:47:44 PM  

iawai: cefm: Until bitcoins are valued at zero (or "imaginary") they will continue to be over-valued.

Put your money where your mouth is. Buy a bunch of shorts on the market and laugh your ass to the bank if you're right.


Well, that's the thing--you can't short Bitcoins yet, or I'd completely agree with you that the haters can either place their bets or STFU. And I'm one of the haters, at least for now.

And why can't you short Bitcoins? Because shorting (or equivalent transactions that mean either one party or another is going to get paid after a specified period of time) require trusted third-party intermediaries. Those don't exist in the Bitcoin world. And why not? Because potential third parties don't trust Bitcoin users, either.

You and I could hammer out a nice, legally binding arrangement that would work out to a short sale, if we wanted to pay some  open-minded lawyers to write the contract and serve as an escrow agent. (And unless we were talking about multiple tens of thousands of dollars, that would probably eat up all the expected profit right there.) But I'd want to be damn sure I knew exactly who you were, whether you were good for it, where I could serve you with a lawsuit if you tried to welch, and so forth. And you'd want to know the same thing about me. But anonymity (such as it is) with Bitcoins is half the point with its current user-base.

And we'd both need to be absolutely, 100% confident that our escrow wouldn't decide to screw us both for shiats and giggles, or out of sheer incompetence, or because they got raided, or what have you. As of a whole 48 hours ago, the closest things there were to a Bitcoin-denominated financial infrastructure were way too shady, opaque, ill-suited, or new to be trustworthy.

It's a vicious circle. Hey, eventually someday Bitcoins or a successor e-currency will get past that tipping point. But it ain't there yet, and when you can ONLY reliably make money betting that something will increase in value, that's a recipe for a bubble.
 
2013-04-04 07:01:20 PM  

poot_rootbeer: fluffy2097: Bitcoin isn't recognized as money. It's Tax exempt.

I don't know what the law is where you live, but there's nothing in US tax law to suggest that it only applies when transaction amounts are denominated in US Dollars.

If I sell you  drugs web development services and you give me 10 Bitcoins in exchange for it, then according to the IRS I've received 10 Bitcoins' worth of income and should be taxed on it.

/if they somehow find out about our transaction.


Yep.  Various barter exchanges have run into this problem for decades.  The IRS will tax the "fair market value" of the roof you received in exchange for your car repair services.  No different with Bitcoins.
 
2013-04-04 07:09:11 PM  

Popcorn Johnny: I just read a thread on reddit about a guy who took out a $30,000 loan, invested it all in bitcoins, and has a couple hundred grand a few months later.


It takes time to establish trust in the Bitcoin community.  Until you have a lot of people trusting you, you can't spend much of your Bitcoins.  You start with zero trust because you're nothing but a PGP-encrypted number that nobody knows anything about.

The more I read the Bitcoin wiki, the less I am inclined to jump through all the hoops and navigate all the hazards.  That's why financial education is bad for the economy and isn't taught in high schools.  The more you know, the less you want any part of it.
 
2013-04-04 07:15:31 PM  

Popcorn Johnny: I just read a thread on reddit about a guy who took out a $30,000 loan, invested it all in bitcoins, and has a couple hundred grand a few months later.


He doesn't have a couple hundred grand until he actually manages to sell them.  And human nature being what it is, people like that usually get greedy and continue to "let it ride."

Now, if he was smart, he would sell off 300 bitcoins today so that he can at least break even and pay off his loans.  Then the rest of the economy could crash to zero, and he would still come out ahead.

Or, he can keep getting greedy and go "double or nothing."
 
2013-04-04 10:18:40 PM  

schrodinger: He doesn't have a couple hundred grand until he actually manages to sell them


That is why people want banks in on the act. There is no easy out to cash to pay your bills with.

Of course, getting a bank involved defeats the purpose of bitcoin which is to avoid banks.
 
2013-04-04 10:31:33 PM  
Buying normal goods with Bitcoins is easy!  (Yes, that is correct, there are at least five separate transaction fees to get through the process)i.imgur.com
 
2013-04-04 11:11:36 PM  

fluffy2097: schrodinger: He doesn't have a couple hundred grand until he actually manages to sell them

That is why people want banks in on the act. There is no easy out to cash to pay your bills with.

Of course, getting a bank involved defeats the purpose of bitcoin which is to avoid banks.


Yep.  Paypal partnered with FirstBank to offer debit cards.  Now PP is collecting SSNs and other ID info it missed earlier to comply with "new banking laws", and reporting transaction volumes of more than $25K/year to the IRS.

Rumor has it that Bitcoin exchange BitInstant has partnered with a French bank and will start offering debit cards, bank transfers, etc., "any day now."  But if you see an offer for a Bitcoin debit card now, it's a scam.
 
2013-04-05 03:46:34 AM  
Dollars have been working great for me.

/old skool, I know.
 
2013-04-06 01:30:22 AM  

schrodinger: Nice change of goal post.

10 years is roughly 730000% of "overnight."

Also, how would we be in decent shape if the rate of inflation was lower?  Do you think that the main reason the economy crashed in 2008 is because there was too much currency and not enough people defaulting on loans or something?


The actual printing happens "overnight". The amount over 10 years is far more than 20%. Each printing adds 10-17% to the money supply, causing the value of existing dollars to drop by that amount immediately. This happens several times per year. Moving the goalpost? Hah. You wish. How would we be in decent shape if inflation were lower? Are you retarded? Loss of purchasing power is bad, you dolt. We would be better off with more purchasing power. Was that a serious question?
 
2013-04-06 10:45:52 AM  

untaken_name: The actual printing happens "overnight". The amount over 10 years is far more than 20%. Each printing adds 10-17% to the money supply, causing the value of existing dollars to drop by that amount immediately. This happens several times per year.


Ah. That explains why, several times a year, you wake up to discover that everything in the grocery store costs 10-17% more than it did the previous night.

No, actually, you usually wake up after you discover that everything in the grocery store has gone up 10-17%. Because overnight 10-17% drops in the value of the US$ still aren't actually happening in the waking world.
 
2013-04-07 08:19:26 PM  

jfarkinB: untaken_name: The actual printing happens "overnight". The amount over 10 years is far more than 20%. Each printing adds 10-17% to the money supply, causing the value of existing dollars to drop by that amount immediately. This happens several times per year.

Ah. That explains why, several times a year, you wake up to discover that everything in the grocery store costs 10-17% more than it did the previous night.

No, actually, you usually wake up after you discover that everything in the grocery store has gone up 10-17%. Because overnight 10-17% drops in the value of the US$ still aren't actually happening in the waking world.


Well, since it takes 18 months to hit, that must mean it never has any effect, nor that the effect was caused in a short period of time. Lucky, that. Oh wait, it has NO EFFECT upon the end result. I guess things don't cost more this year than they did last year, eh? Keep telling yourself that. When you're buying a loaf of bread with a wheelbarrow full of dollars, remind yourself that it doesn't happen in the waking world.
 
2013-04-08 12:27:47 AM  

untaken_name: Well, since it takes 18 months to hit, that must mean it never has any effect, nor that the effect was caused in a short period of time.


Does the rate of inflation happen slowly enough for people to adapt?  Because if it does, then what's the problem?

Lucky, that. Oh wait, it has NO EFFECT upon the end result. I guess things don't cost more this year than they did last year, eh?

Do you read the newspaper?  Have you been reading about the energy crisis?  The oil crisis?  The fact that droughts have been decimating our farm economy?  There's a lot more to price increases to simple inflation.  And funny how the libertarians whining about prices going up are also dead set against efficiency standards and any attempt to curb global warming.

When you're buying a loaf of bread with a wheelbarrow full of dollars, remind yourself that it doesn't happen in the waking world

But when the bitcoin ponzi scheme crashes and people end up losing 99.9% of their initial investment, that's going to be awesome, right?
 
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