Bitcoin: Censorship-Resistant Digital P2P Currency

Anonymous Bosch · Post by **Anonymous Bosch** » Tue May 24, 2011 10:46 pm

Has anyone else here been following the development of Bitcoin? It certainly is an intriguing concept:

Bitcoin is an open-source virtual currency generated by a computer algorithm that is completely beyond the reach of financial intermediaries, central banks and national tax collectors. Bitcoins could be used to purchase anything, at any time, from anyone in the world, in a transaction process that is almost completely frictionless. Yes, that's right, the hacktivists now have a virtual currency that's untraceable, unhackable, and completely Anonymous.

And that's where things start to get interesting. Veteran tech guru Jason Calacanis recently called Bitcoin the most dangerous open source project he's ever seen. TIME suggested that Bitcoin might be able to bring national governments and global financial institutions to their knees. You see, Bitcoin is as much a political statement as it is a virtual currency. If you think there's a shadow banking system now, wait a few more months. The political part is that, unlike other virtual currencies like Facebook Credits (used to buy virtual sock puppets for your friends), Bitcoins are globally transferrable across borders, making them the perfect instrument to finance any cause or any activity -- even if it's banned by a sovereign government.

It'll be interesting to see if it catches on. Perhaps Bitcoin will become the new coin of the realm for online poker?

noxiousdog · Post by **noxiousdog** » Wed May 25, 2011 12:09 am

Anonymous Bosch wrote:Has anyone else here been following the development of Bitcoin? It certainly is an intriguing concept:
Bitcoin is an open-source virtual currency generated by a computer algorithm that is completely beyond the reach of financial intermediaries, central banks and national tax collectors. Bitcoins could be used to purchase anything, at any time, from anyone in the world, in a transaction process that is almost completely frictionless. Yes, that's right, the hacktivists now have a virtual currency that's untraceable, unhackable, and completely Anonymous.

And that's where things start to get interesting. Veteran tech guru Jason Calacanis recently called Bitcoin the most dangerous open source project he's ever seen. TIME suggested that Bitcoin might be able to bring national governments and global financial institutions to their knees. You see, Bitcoin is as much a political statement as it is a virtual currency. If you think there's a shadow banking system now, wait a few more months. The political part is that, unlike other virtual currencies like Facebook Credits (used to buy virtual sock puppets for your friends), Bitcoins are globally transferrable across borders, making them the perfect instrument to finance any cause or any activity -- even if it's banned by a sovereign government.
It'll be interesting to see if it catches on. Perhaps Bitcoin will become the new coin of the realm for online poker?

What prevents you from making bitcoins?

The Meal · Post by **The Meal** » Wed May 25, 2011 2:23 am

Anonymous Bosch wrote:Perhaps Bitcoin will become the new coin of the realm for online poker?

Interesting you say that along with Jason Calacanis' comments. Maybe it's not unrelated.

Pauly hypothesizes it was the banks, and their lack of control over the movement of usable currency, that were the true motivating factors behind online poker getting shut down in the first place. Crazy stuff.

RLMullen · Post by **RLMullen** » Wed May 25, 2011 8:47 am

noxiousdog wrote: What prevents you from making bitcoins?

Nothing! Go to bitcoin.org, get the software and start cranking out your own bitcoins. It is estimated that it will take approximately 5 years for a current CPU to create a new bitcoin.

This is the original whitepaper that describes the system http://www.bitcoin.org/bitcoin.pdf.

Vorret · Post by **Vorret** » Wed May 25, 2011 8:55 am

Interesting stuff

noxiousdog · Post by **noxiousdog** » Wed May 25, 2011 9:20 am

Indeed. I don't know that it's practical, but it's definitely interesting.

Anonymous Bosch · Post by **Anonymous Bosch** » Wed May 25, 2011 11:34 am

noxiousdog wrote:What prevents you from making bitcoins?

As RLMullen pointed out, you're welcome to try your hand at "Bitcoin Mining", though it gets trickier as more people attempt to generate new coins. From the linked piece by Jason Calacanis:

Where Do Bitcoins Come from?
=========
Bitcoins are created by a complex algorithm. Only 21M can be made by the year 2140. Your desktop bitcoin software can make bitcoins, but at this point the electricity and time it would take to produce a bitcoin is larger than the actual value of a bitcoin (your laptop might take five years to make one, and they currently trade at $6.70 per bitcoin [ see https://mtgox.com/trade/buy" target="_blank for the latest exchange rate ].

Bitcoin miners use super cheap GPUs (not CPUs) to create the coins, but as more people come online to make them, the algorithm adjusts so that one block can only be made every 10 minutes.

And from the official FAQ:

How are new Bitcoins created?

New coins are generated by a network node each time it finds the solution to a certain mathematical problem (i.e. creates a new block), which is difficult to perform and can demonstrate a proof of work. The reward for solving a block is automatically adjusted so that in the first 4 years of the Bitcoin network, 10,500,000 BTC will be created. The amount is halved each 4 years, so it will be 5,250,000 over years 4-8, 2,625,000 over years 8-12 and so on. Thus the total number of coins will approach 21,000,000 BTC over time.

In addition, built into the network is a system that attempts to allocate new coins in blocks about every 10 minutes, on average, somewhere on the network. As the number of people who attempt to generate these new coins changes, the difficulty of creating new coins changes. This happens in a manner that is agreed upon by the network as a whole, based upon the time taken to generate the previous 2016 blocks. The difficulty is therefore related to the average computing resources devoted to generate these new coins over the time it took to create these previous blocks. The likelihood of somebody "discovering" one of these blocks is based on the computer they are using compared to all of the computers also generating blocks on the network.

SpaceLord · Post by **SpaceLord** » Wed May 25, 2011 11:37 am

I did quite a bit of research on this stuff the past few days, and I'm just wrapping my head around it.

Think of generating BitCoins via server farms(mining) as labor. BitCoins are awarded to those who contribute to unlocking them. It's very clever.

Kraken · Post by **Kraken** » Wed May 25, 2011 11:46 am

How does one actually spend bitcoins? How do I convert one into $6.70 of actual spendable money?

Enough · Post by **Enough** » Wed May 25, 2011 11:53 am

The Meal wrote:
Anonymous Bosch wrote:Perhaps Bitcoin will become the new coin of the realm for online poker?
Interesting you say that along with Jason Calacanis' comments. Maybe it's not unrelated.

Pauly hypothesizes it was the banks, and their lack of control over the movement of usable currency, that were the true motivating factors behind online poker getting shut down in the first place. Crazy stuff.

Pauly wrote:I'm sure the tin foil hat-wearing, silver hoarding, Max Keiser disciples are going to love this, but I'm sharing this thought that has been bugging me ever since I dropped acid at the top of Machu Picchu....

I'm sure they do, is he one of them?

SpaceLord · Post by **SpaceLord** » Wed May 25, 2011 11:56 am

Kraken wrote:How does one actually spend bitcoins? How do I convert one into $6.70 of actual spendable money?

It's strange. You can't use PayPal, so you use an exchange, like here: Mt Gox and trade there. I'm working on getting an account now. It'll be a fun way to spend few hundred bucks. The price of BitCoins, in January, was 40 cents, it's now over 7 dollars.

Paingod · Post by **Paingod** » Wed May 25, 2011 11:56 am

Kraken wrote:How does one actually spend bitcoins? How do I convert one into $6.70 of actual spendable money?

It becomes a currency unto itself, perhaps.

Say you start "spending" these to renew monthly subscriptions on things online, or to buy digital games. It effectively replaces normal currency (which is equally etherial, we've just gotten used to it being worth something).

Kraken · Post by **Kraken** » Wed May 25, 2011 11:58 am

Paingod wrote:
Kraken wrote:How does one actually spend bitcoins? How do I convert one into $6.70 of actual spendable money?
It becomes a currency unto itself, perhaps.

Say you start "spending" these to renew monthly subscriptions on things online, or to buy digital games. It effectively replaces normal currency (which is equally etherial, we've just gotten used to it being worth something).

I do not want money that can't buy beer.

Paingod · Post by **Paingod** » Wed May 25, 2011 12:03 pm

Kraken wrote:I do not want money that can't buy beer.

What if you had money you could spend instead of $$ - which meant you spend less $$ and can alternately trade that into more beer from the corner store?

Kraken · Post by **Kraken** » Wed May 25, 2011 12:08 pm

Paingod wrote:
Kraken wrote:I do not want money that can't buy beer.
What if you had money you could spend instead of $$ - which meant you spend less $$ and can alternately trade that into more beer from the corner store?

Free money? Good deal if I don't have to trade $$ for bitcoins in the first place.

Rumpy · Post by **Rumpy** » Wed May 25, 2011 12:08 pm

Interesting. The new paypal?

noxiousdog · Post by **noxiousdog** » Wed May 25, 2011 12:11 pm

SpaceLord wrote: It's strange. You can't use PayPal, so you use an exchange, like here: Mt Gox and trade there. I'm working on getting an account now. It'll be a fun way to spend few hundred bucks. The price of BitCoins, in January, was 40 cents, it's now over 7 dollars.

That's what bothers me. Due to the low supply it is inherently susceptible to price manipulation.

El Guapo · Post by **El Guapo** » Wed May 25, 2011 12:18 pm

This seems like the very definition of a speculation bubble. It seems like BitCoins aren't tied to anything, so their value derives solely (I gather) from people assigning them value and speculating that their value will increase in the future.

Assuming, as appears to be the case, that BitCoins are readily exchangeable into currency via Mt Gox and the like, isn't a run on BitCoins inevitable? Eventually the Warren Buffet of BitCoins is going to decide that they are overvalued and cash out en masse. That gets out, and others cash out for fear that they will be left holding worthless currency. That rush, in turn, makes the currency worthless.

To a degree this is true of any currency, but it's certainly different when it's backed by a loose agglomeration of people on the internet vs. the United States government.

SpaceLord · Post by **SpaceLord** » Wed May 25, 2011 12:32 pm

http://www.bitcoinmonitor.com/" target="_blank

Watch the transactions as they go through. Pretty neat.

The BitCoin Faucet - a way to get free Bitcoins...meaning 1/50th of one. It's replenished a few times a day.

SpaceLord · Post by **SpaceLord** » Wed May 25, 2011 12:42 pm

El Guapo wrote:This seems like the very definition of a speculation bubble. It seems like BitCoins aren't tied to anything, so their value derives solely (I gather) from people assigning them value and speculating that their value will increase in the future.

Assuming, as appears to be the case, that BitCoins are readily exchangeable into currency via Mt Gox and the like, isn't a run on BitCoins inevitable? Eventually the Warren Buffet of BitCoins is going to decide that they are overvalued and cash out en masse. That gets out, and others cash out for fear that they will be left holding worthless currency. That rush, in turn, makes the currency worthless.

To a degree this is true of any currency, but it's certainly different when it's backed by a loose agglomeration of people on the internet vs. the United States government.

It's not backed by anything, other than the algorithm. And the genius lies in that algorithm. It's very clever.

To make the BitCoin spendable, the support of two large entities would be key: poker and illicit drugs.

RLMullen · Post by **RLMullen** » Wed May 25, 2011 12:44 pm

Kraken wrote: Free money? Good deal if I don't have to trade $$ for bitcoins in the first place.

*You* don't have to trade $$ for bitcoins. All you have to do is trade merchandise for bitcoins.

Quaro · Post by **Quaro** » Wed May 25, 2011 1:03 pm

http://themonetaryfuture.blogspot.com/2 ... -will.html" target="_blank

What the law accomplishes sounds mundane enough: it requires money transmitters--companies that act like banks, but aren't, such as PayPal--to get licenses. As usual, however, the devil is in the details. Previously, California corporations were only required to get money transmitter licenses for international funds transfers, and domestic transfers were unregulated. Now both kinds of transfers are regulated. Also, the price of each license is a little bit steep: half a million dollars and change.

...

You might argue that innovation in the financial industry is alive and well, but you'd only be right if you mean that in the most cynical terms. Case in point: Square, a payments company that is a media darling frequently cited as a leading innovator, does not disrupt the financial infrastructure in any way. In fact, Visa just invested in Square directly because it does such a good job of propagating the status quo. PayPal similarly exists to promote existing financial infrastructures, not replace them with something better.

The Meal · Post by **The Meal** » Wed May 25, 2011 1:06 pm

Enough wrote:
Pauly wrote:I'm sure the tin foil hat-wearing, silver hoarding, Max Keiser disciples are going to love this, but I'm sharing this thought that has been bugging me ever since I dropped acid at the top of Machu Picchu....
I'm sure they do, is he one of them?

His is one of the more (if not the most) astute voices regarding online poker. The fact that he's so well grounded in who he is and his place in the world is just a bonus.

Enough · Post by **Enough** » Wed May 25, 2011 1:35 pm

The Meal wrote:
Enough wrote:
Pauly wrote:I'm sure the tin foil hat-wearing, silver hoarding, Max Keiser disciples are going to love this, but I'm sharing this thought that has been bugging me ever since I dropped acid at the top of Machu Picchu....
I'm sure they do, is he one of them?
His is one of the more (if not the most) astute voices regarding online poker. The fact that he's so well grounded in who he is and his place in the world is just a bonus.

He comes off as a fantastic top-notch read, no doubt. But going down the road of Federal Reserve conspiracy theory sort of hurts that street cred imo. Maybe it's the history of banking in my family, but it rubbed me the wrong way and it seemed Pauly was out of his depth. We need PreacherMan to get my back...

noxiousdog · Post by **noxiousdog** » Wed May 25, 2011 1:42 pm

Enough wrote:
The Meal wrote:
Enough wrote:
Pauly wrote:I'm sure the tin foil hat-wearing, silver hoarding, Max Keiser disciples are going to love this, but I'm sharing this thought that has been bugging me ever since I dropped acid at the top of Machu Picchu....
I'm sure they do, is he one of them?
His is one of the more (if not the most) astute voices regarding online poker. The fact that he's so well grounded in who he is and his place in the world is just a bonus.
He comes off as a fantastic top-notch read, no doubt. But going down the road of Federal Reserve conspiracy theory sort of hurts that street cred imo. Maybe it's the history of banking in my family, but it rubbed me the wrong way and it seemed Pauly was out of his depth. We need PreacherMan to get my back...

Agreed. It would seem to me there would be MORE online transactions with online poker. Not less.

SpaceLord · Post by **SpaceLord** » Thu May 26, 2011 4:52 pm

So last night, I bought 32 BTC(BitCoin Currency) at 8.30 each via PayPal, on the BitCoin IRC channel. They use a very complicated and secure PGP system to verify people on this channel, and the guy I bought from had a high rating.

Currently, on Mt. Gox, the coins are trading at 8.75-9 bucks each. It's possible it will increase soon, as the "difficulty" will ramp up soon.

The whole experience felt a lot like buying drugs.

SpaceLord · Post by **SpaceLord** » Sat May 28, 2011 1:49 am

Dunno if anyone cares, but:

NPR did a spot on BitCoins earlier this week.
The BitCoin Faucet has free BitCoins again. It gives 0.02 BTC, which at current prices, is around 17 cents. Free money!

Odin · Post by **Odin** » Sat May 28, 2011 7:01 am

Okay, I now have .02 BTC. Lemme know when it becomes useful.

Kraken · Post by **Kraken** » Sat May 28, 2011 11:42 am

I'll sell you my 0.02 btc for one...DOLLAR!

Odin · Post by **Odin** » Sun May 29, 2011 7:27 am

Kraken wrote:I'll sell you my 0.02 btc for one...DOLLAR!

Oka... hey, wait.

SpaceLord · Post by **SpaceLord** » Wed Jun 01, 2011 12:40 pm

Bitcoins are up a buck since last week.
This Podcast from March is the best explanation I've heard yet of how BitCoin works. It's damn impressive.

Smoove_B · Post by **Smoove_B** » Wed Jun 01, 2011 1:35 pm

Gizmodo just released an exclusive piece on how people are using bitcoins to purchase all kinds of drugs on an "underground" website.

Mark, a software developer, had ordered the 100 micrograms of acid through a listing on the online marketplace Silk Road. He found a seller with lots of good feedback who seemed to know what they were talking about, added the acid to his digital shopping cart and hit "check out." He entered his address and paid the seller 50 Bitcoins—untraceable digital currency—worth around $150. Four days later the drugs, sent from Canada, arrived at his house.

...

Since it launched this February, Silk Road has represented the most complete implementation of the Bitcoin vision. Many of its users come from Bitcoin's utopian geek community and see Silk Road as more than just a pace to buy drugs. Silk Road's administrator cites the anarcho-libertarian philosophy of Agorism. "The state is the primary source of violence, oppression, theft and all forms of coercion," Silk Road wrote to us. "Stop funding the state with your tax dollars and direct your productive energies into the black market."

The Meal · Post by **The Meal** » Wed Jun 01, 2011 3:28 pm

That bodes well for online poker.

El Guapo · Post by **El Guapo** » Wed Jun 01, 2011 3:32 pm

Untraceable, huh? I can't imagine it would be too hard for investigators to create accounts, offer drugs or what have you for sale, and then send the police instead of a shipment when someone enters their address.

I feel like a lot of people are going to find that the oppressor state has some very practical tools available to it, though this will be interesting to observe.

Arcanis · Post by **Arcanis** » Wed Jun 01, 2011 3:34 pm

Smoove_B wrote:Gizmodo just released an exclusive piece on how people are using bitcoins to purchase all kinds of drugs on an "underground" website.

Last line of linked article wrote:Republished from http://gawker.com" target="_blank

Same exact article, including claiming it is exclusive.

They keep using that word. I don't think they know what it means.

Smoove_B · Post by **Smoove_B** » Wed Jun 01, 2011 3:41 pm

They probably mean "Exclusive to the Gawker Media network".

The Meal wrote:That bodes well for online poker.

Give it 48 hours. Lets see how this druggie ebay manages to deal with being publicized.

Edit: Yeah; what the Guapster said.

SpaceLord · Post by **SpaceLord** » Wed Jun 01, 2011 4:16 pm

El Guapo wrote:Untraceable, huh? I can't imagine it would be too hard for investigators to create accounts, offer drugs or what have you for sale, and then send the police instead of a shipment when someone enters their address.

I feel like a lot of people are going to find that the oppressor state has some very practical tools available to it, though this will be interesting to observe.

Yeah, getting actual stuff shipped to you is hard to hide. BitCoin itself, however, is very, very anonymous.

Odin · Post by **Odin** » Wed Jun 01, 2011 4:57 pm

SpaceLord wrote:
El Guapo wrote:Untraceable, huh? I can't imagine it would be too hard for investigators to create accounts, offer drugs or what have you for sale, and then send the police instead of a shipment when someone enters their address.

I feel like a lot of people are going to find that the oppressor state has some very practical tools available to it, though this will be interesting to observe.
Yeah, getting actual stuff shipped to you is hard to hide. BitCoin itself, however, is very, very anonymous.

That's not my experience - when I got my fraction of a bitcoin from the faucet, they put my email address (modified with the addition of a single letter that was easily recognizable as not being part of my address) AND my IP address. I found that rather annoying, actually.

SpaceLord · Post by **SpaceLord** » Wed Jun 01, 2011 5:04 pm

Odin wrote:
SpaceLord wrote:
El Guapo wrote:Untraceable, huh? I can't imagine it would be too hard for investigators to create accounts, offer drugs or what have you for sale, and then send the police instead of a shipment when someone enters their address.

I feel like a lot of people are going to find that the oppressor state has some very practical tools available to it, though this will be interesting to observe.
Yeah, getting actual stuff shipped to you is hard to hide. BitCoin itself, however, is very, very anonymous.
That's not my experience - when I got my fraction of a bitcoin from the faucet, they put my email address (modified with the addition of a single letter that was easily recognizable as not being part of my address) AND my IP address. I found that rather annoying, actually.

That's not BitCoin, that's the Faucet. BitCoin to BitCoin only require your public key, which changes with every transaction, and is effectively unbreakable due to the strict implementation of PGP.

Wargus · Post by **Wargus** » Wed Jun 01, 2011 10:43 pm

SpaceLord wrote:
Odin wrote:
SpaceLord wrote:
El Guapo wrote:Untraceable, huh? I can't imagine it would be too hard for investigators to create accounts, offer drugs or what have you for sale, and then send the police instead of a shipment when someone enters their address.

I feel like a lot of people are going to find that the oppressor state has some very practical tools available to it, though this will be interesting to observe.
Yeah, getting actual stuff shipped to you is hard to hide. BitCoin itself, however, is very, very anonymous.
That's not my experience - when I got my fraction of a bitcoin from the faucet, they put my email address (modified with the addition of a single letter that was easily recognizable as not being part of my address) AND my IP address. I found that rather annoying, actually.
That's not BitCoin, that's the Faucet. BitCoin to BitCoin only require your public key, which changes with every transaction, and is effectively unbreakable due to the strict implementation of PGP.

Effectively unbreakable today maybe. Not sure I'd hold my breath that it will be unbreakable in a year or 5.