I explained it three times, and gave you an concrete example of that thing having happened already (the OP_MUL fork).  Sorry, it is you who owe me proof that you can read.

"Intrinsic value" is difficult to define and measure; but, anyway, for the purpose of evaluating the contribution of a currency to society one should not count the purchase power of the currency itself as real wealth.

It is true that bitcoin, if it works as planned, should have a positive contribution to society: namely, it should reduce the fees of certain payments and money transfers.  (Those fees transfer some real wealth from society in general to the banks and other financial intermediaries.  While this process does not destroy real wealth, it may be argued that it is morally wrong, because the amount of wealth transfered is too high considering the service rendered by the bank.) 

However, this hypothetical positive effect of bitcoin will be very small compared to its "pyramid effect", the unwarranted transfer of wealth from late adopters to early adopters; and will probably be much smaller than the wealth destroyed by mining. 

Currently, mining costs about a million dollars per day.  Most of that amount corresponds to destruction (consumption) of real wealth (mainly electricity and equipment), the rest being real wealth transfered from new investors to the miners (as minig profits and salaries).  Allowing for changes in price and profitability, I would guess that, since it started in 2009, bitcoin mining has destroyed (consumed) at least 500 million dollars of real wealth.   The total amount of bank fees saved in that interval cannot be more than 50 million dollars.  As for the "pyramid effect", I have no idea of how it could be determined, but it too must be in the hundreds of millions.  And I cannot see these proportions changing much over the next 20 years.

The bitcoin prootocol was a promising solution to an old distributed computing problem, yes; and the blockchain started by Satoshi on 2009-01-03 was a technical experiment to test it, yes.  But the experiment revealed some serious problems, which were not clearly seen at the time, and still have no solution in sight.

Economically, as a "deflationary decentralized pseudonymous irreversible currency", bitcoin still makes no sense to me.

As an investment, I believe that it is fairly well illustrated by that money-making circle on my website.  The bitcoin system does not create any real wealth (food, homes, cars, boat rides, haircuts...)  Unlike the dividends and valuation of typical company stocks, any proft that one can make from bitcoin, wether by short-term trading or long-term "hodling", will be someone else's loss.

If bitcoin crashes, or never rises above the current levels, the losers will be obvious -- namely, all those who bought high and had to sell low, or will die holding the bag.  When an investor uses his sweat-earned 260 $ to increase his holdings by 1 BTC today, he is either giving that money to a Chinese miner, or is paying for a bottle of fine French wine on Risto's table, or a new pair of designer ties for the Winklevoss twins.

But even if bitcoin "goes to the moon",  the mansions and lamborghinis that the bitcoin holders will acquire, when they finally start spending their bitcoins, will not have been created by bitcoin.  By spending those tokens, the bitcoin holders will take real wealth from society, without giving any other real wealth in return.  In that case, the losers will be harder to pin down, because (as in my money-spinning circle) the loss will be diffuse and moving from hand to hand.  Still, the total loss of the "others" will be equal to the gain of the holders.

So, in either case, the economic effect of bitcoin will be the same as that of any pyramid or ponzi scheme: it will only transfer real wealth from the late adopters to the early adopters, without creating any real wealth by itself.

Ponzi schemes are usually planned and managed by one person, which is not the case of bitcoin; but that not an essential difference.  As some Indian economist aptly put it, "bitcoin is not a deliberate ponzi".

I believe that Satoshi did not intend bitcoin to be a pyramid scheme, and that it only became one a couple of years later, when other people started viewing (and pushing) it as a serious investment, rather than a computer experiment.   To the extent that people like Risto, Sielbert and the Winkles are still selling it as a way to get filthy rich without working, even with due risk warnings, it is still a pyramid scheme.


Of course not.

EDIT: Actually, whether bitcoin flops or goes to the moon, the losses of the losers will be much greater than the profits of the winners, because a huge amount of real wealth will be consumed by mining.   Thus, in that aspect, bitcoin is not just a ponzi, but an egregiously stupid kind of ponzi.

What is the point of that question, if the answer may change every minute?

Can't you recognize Economish when you read it?

While outsiders cannot trace the coins through the mixer, the mixer operators know which inputs were eventually sent to which outputs. They only need to record that information and pass it to law enforcement.  The detectives can then skip over the mixing mess and continue tracing from the output. 

But, how can the thieves be sure that the mixer is not operated by, hacked by, or cooperating with the police?

While the cops may not care for the victims' losses, they must be verey interested in identifying any dark market operators.

Yes, for some 100 pages of this thread... 

Just in case it has not been posted before, and someone is curious:

The ~50'000 BTC destined to the recent USMS auction had been stored since 2014-12-08 at this address:

  12pCPrWvudnefJCtXQUBcm9z2NogtC3Rix

Starting on 2015-03-09, those coins were split by a sequence of transactions into three chunks that seem to be transfers to the winning bidders:

  ~3'000 BTC to 1BdmMnKQ417EpUngAnJCYmjYmD9Cud9iZB (on 2015-03-09)

  ~20'000 BTC to 1EAPKSvouAkFJWr5HuNF6wrz4fCN2FBvaY (on 2015-03-09)

  ~27'000 BTC to 1DPx2UJtwCQ3N8eGiuDoZSCB7x3rAPWcXw (on 2015-03-10)

The payouts to winners can be identified with some confidence because each amount is "biddable" (i.e. m*3'000 + n*2'000, for some integers m and n), minus a small amount compatible with the transaction fee.  (The USMS announcement explicitly said that trasaction fees would be paid by the winner, hence deducted from the amount sold.)

Thus it seems quite likely that there were three winning bids, as above.  The last one, paid out on 03-10, may have been a second call after a first-round winner failed to pay in time.

Beware that those three bids may have been made by the same person or company.  In the 2014-12 auction, the USMS released the coins to 10 distinct addresses, the first 9 receiving about ~5000 BTC each, and one address receiving ~3000 BTC; even though all those 48'000 BTC were bought by the same entity -- the SecondMarket syndicate of small bidders.  The syndicate most likely offered different prices for each lot; according to the auction rules, they would have had to submit 10 separate bid forms, each form bidding for one 2000 BTC lot and one 3000 BTC lot.  So it seems that the USMS issues one separate transaction for each bid form, even if two bid forms were submitted by the same entity.

I am, and you say that you are, but is he?

You never answered straight, are you a Brazilian?

It seems unlikely that the thieves will try to sell the stolen coins directly on an exchange.  (Wasn't there a case of an exchange freezing and returning cryptocoins that had been stolen and deposited there by the thief?)

The thieves could swap those coins off-exchange with some large criminal mafia; say 5 stolen coins for 1 "clean" coin.  The mafia could keep the coins until they "cooled off", or use them for other criminal trades.  Meanwhile the thieves could sell the clean coins on the exchanges, and withdraw the cash to legit bank accounts --- and no one would be able to connect that money to the theft.

What do you mean, that cash was invented to overcome bitcoin's failings?

Are you saying that people used screws for millennia, until some genius figured out that a straightened screw could be inserted much faster by banging on it with a hammer?

Perhaps because "yes" (or "no") would be an appropriate answer to both questions?

Why is "screwing it up" the opposite of "nailing it"?

Yes, you got it now.


The protocols are just different; neither is "better" or "more legitimate" than any other.  There is no technical reason compelling a miner to choose one branch or the other.  Without considering the political contextt, there is no way of telling which branch will get the majority of the mining power.


Because it has already happened.  Isn't that a good reason to?

When the OP_MUL bug was fixed, all the miners agreed to switch to the new branch.  There was a very good motivation for that: the orthodox branch was found to be unsafe and included a bogus UTXO with gazillion coins.

As I already said, if and when Gavin proposes another hard fork to increase the block size, I wuld bet that the same woudl happen: all miners will switch to the new protcol, an the old branch will die fro lack of interest.  But the motivation will not be so clear, see the heated disputes.  

The point is that the outcome of a hard fork is not determined by the protocol.  Like any altcoin, a hard-forked branch may or may not gather enough mining power to remain viable, and may or may not become "the" bitcoin.


I don't recall using the word "fair", and I do not see where it comes into discussion.


The protocol assumes, for example, that enough miners will choose to include transactions that have a significant fee, because they would get more money that way.  It assumes that a majority of miners will choose to work on extending the longest chain rather than an orphaned branch, because they would want to maximize their chances of colelcting block rewards.  And so on.  Those assumptions follow from the basic assumption that most miners will want to maximize their immediate gain.  Take away this assumption, and the other assumptions are no longer reasonable.

For example, suppose that some hacker manages to steal the remaining 44 k BTC from the USMS, and the US government threatens to criminalize bitcoin.  American bitcoiners, and investors in bitcoin enterprises in the US, may decide "spontaneously", "for the good of bitcoin", to rewind the blockchain, with a hard fork if needed, to a point before that transaction.  IF such a situation were to develop, would bitcoiners in the rest of the world agree to the fork?


That is simply not true. Anyone can create a hard fork at any moment, without consulting (or even telling) anyone else.  Those miners who like the change (that may be just a cosmetic one, just enough to distinguish the two versions) can switch, those who do not like it can stick to the old version.  Exchanges and processors can opt for either version, or handle both as two separate cryptocoins.  Users can use either, or both, or switch back and forth between them at any time, without losing the coins that they have in the other.  

A cartel of miners holding the majority of the hashpower could, if they wanted to, pick one branch and make the other branch unusable by "jamming" it.  But that is a separate "FUD".  Other than that, nothing requires or creates a consensus, before or after the fork, and a majority that chooses one branch cannot prevent a minority from going the other way.  Self-interest may cause most miners to converge to one branch and abandon the other, but that convergence (unlike the majority-based consensus mechanism that operates within each chain) is not built into the protocol.  The two clones may well survive, like any two independent cryptocoins.


Yes, BECAUSE IT HAS ALREADY HAPPENED and IS EXPECTED TO HAPPEN AGAIN (except that I don't think that there are "millions" of bitcoiners who would have to be aware of a hard fork).

In the OP_MUL fork, hundreds of tousands of bitcoiners forgot their immediate self-interest, and agreed to grossly violate the protocol by rewinding the blockchain -- because of longer-term interest.  (AFAIK, the miners who had mined the discarded blocks lost their rewards, but presumably agreed to the rewinding nonetheless.)

EDIT: I see that I did use "fair" when I said that the difficulty had to be adjusted to maintain a "fair rate".  "Fair" in the sense of "acceptably high", e.g. 1 block every 30 minutes rather than 1 block every year.  Not "fair" in the sense of "just", "equitable", etc.

Thanks for the lesson, but I do understand the consensus mechanism, and I know about orphan blocks.  Perhaps I am using the wrong name, but those that you describe are not "hard forks", not even "soft forks", it is just the normal operation of the protocol.  Both the orphans and the winning branch use exactly the same version of the software, and the UTXOs in the orphaned blocks become invalid by definition. 

What I am discussing is a fork of the blockchain where each branch uses a different protocol, and every message is identifiable as belonging to one branch only, and is accepted (or seen) only by clients and miners who are running that version of the protocol.  Blocks before the split are valid under both protocols, but blocks after the split are valid only according to their specific version.  Each transaction request is directed to one branch only; if a client wants to move both clones of his coins to the same address in each chain, he must issue two requests, and they may or may not be accepted independently. 


No, that is not at all what I am discussing, see above.

It may be possible to have some "merged mining" scheme where a miner can attempt to mine both chains at the same time.  But I am not considering that possibility. I am assuming that each miner chooses only one of the two branches to work on, by upgrading or not to the appropriate software and/or talking only to the appropriate set of relay nodes.

After a hard fork, there is no automatic "synchronizing" of the two branches (and re-joining them would soon be impossible, even with substantial hackery).


Yes, as I said, a hard fork that cannot count on attracting most of the hashpower right away (like that kid's) would also have to lower the difficulty temporarily to ensure a fair block rate, until the automatic adjustment can take over. 

But a hard fork that can muster 25% (say) of the hashpower perhaps could afford having 1 block every 40 minutes for a couple of weeks.  So the difficulty adjustment may not even be necessary.


At the OP_MUL fork, everyone choose to switch to the new protocol, recommended by Gavin, even though it meant "rewinding" the blockchain and invalidating some deeply-confirmed transactions.  If tried to do a hard fork of my own, surely no one else woud switch.  The difference between the two cases is not in the protocol or mathematics, it is politics.

The good working of the protocol depends heavily on the behavior of its human players, about which nothing can be proved mathematically.  It assumes that a majority of the players will be driven by immediate greed, and therefore would choose alternative X over Y when considering many specific choices that have been considered when designing the protocol.  However, that assumption is not certain, and the possible situations and choices that the players may face is not bounded.

We are already seeing some situations and choices that may not have been foreseen.  For example, the transaction fees being insignificant compared to the block reward, and some powerful miners apparently choosing to mine empty of half-full blocks rather than full ones. 

However, gold and silver divide the precious metal market.  If siver did not exist, many people who invest in it would invest in gold instead, raising its price. 

Ditto for altcoins.  I don't think anyone would argue that Litecoin, Dogecoin, and other altcoins are stealing investors from Bitcoin.  (Most US entrepreneurs, themselves presumably heavily invested in bitcoin, seem to do their best to ignore the existence of those altcoins, or badmouth them whenever they are mentioned, for that reason.)


The existing bitcoin miners could quickly switch to any bitcoin clone that retains the basic PoW algorithm, just by upgrading their software to the appropriate version.  They did that after the OP_MUL fork, for example.  Again, whether that would happen or not in a future hard fork depends on political factors only. 


Hm, you may be right.  Yet, while the price is rising (which it may do again, I have no felling about that) people seem to care even less...  When the price is stable and everyone is bored, perhaps...?

Do you really not understand that either series can claim to be the real bitcoin, and that either or both could survive, depending only on political factors?

At the last hard fork, everybody agreed that "Series B" was "the real bitcoin" and "Series A" should be excommunicated and left to die, even though "Series A" was "the real bitcoin" for a while after the fork point.

If a kid creates a hard fork on his laptop, almost certainly every other bitcoiner will consider "Series B" an insignificant altcoin, and continue viewing "Series A" as "the real bitcoin". 

If Gavin does a hard fork to increase the block size, my bet would be that "Series B" will again be accepted as "the real bitcoin"  and "Series A" will quickly die out.  But I do not think that this outcome is totally certain; if Gavin bungles the politics, conceivably "Series B" could be rejected by the community, or there might even be a schism, with Sunnis and Shiites both claiming to have "the real bitcoin".