Last Forking Warning For Bitcoin 334
ASDFnz writes "It has been just over two months since the bitcoin block chain was rocked by a near disastrous fork causing the bitcoin price to crash. The culprit of the crash was found to be a bug that prevented pre version 7.1 bitcoin clients accepting large blocks that could be generated by version 8 clients. A temporary fix was put into place by Bitcoin Project lead developer Gavin Andresen that forced version 8 clients to generate blocks that version 7.1 could understand. It is important to note though, the fix was a temporary one! In just under two days on the 15th of May the fix will expire and version 8 clients will once again be able to make large blocks that older clients will not be able to understand."
In the 2020s bitcoins will run out anyway (Score:4, Insightful)
Making the whole thing nothing more than an interesting academic exercise. Anyone who thinks bitcoin is the new gold or even frankly a replacement for ordinary money transactions is utterly deluded.
Re:Crap, the sky is falling (Score:4, Insightful)
Re:Crap, the sky is falling (Score:4, Insightful)
Except that isn't even whats happening here. Its more like an issuing bank telling customers are retailers they are not going to do magnetic strip ATM cards any more and people need to replace their cards and equipment with the RIFD variety. Its a non-event except for people who were expecting to never have to upgrade software.
Re:Crap, the sky is falling (Score:4, Insightful)
However, other currencies don't have this problem where the currency just "breaks" suddenly, and basically stops working.
Imagine if bitcoin had been more popular, if everyone had bitcoin applications on their phone which take months to get updated, where half the world if running v7 and half v8. This would have (as I understand it, and I think I do) just fundamentally broken bitcoin, possibly beyond reasonable repair.
Re:In the 2020s bitcoins will run out anyway (Score:5, Insightful)
Re:Crap, the sky is falling (Score:4, Insightful)
This isn't an issue of "two different currencies". What other time in history has a government issued a new currency, exchanged the "old currency" for the "new currency", and *let you keep* the "old currency" when handing you new currency?
The inability to deal with prolonged netsplits sanely is a fundamental limitation of the Bitcoin protocol.
Re:Crap, the sky is falling (Score:5, Insightful)
I agree that the dangers of bitcoin forking have been overstated, and are something of a manufactured drama - technical problems like this are not very difficult to surmount. The real problem with Bitcoin for me is that the system is not transparent, and nothing backs the currency (unlike those fiat ones you mention above).
A currency is a token of trust (trust that others will value it the same amount), and that's a fragile thing.
Bitcoin is currently a small curiosity, it's only just becoming big enough to attract the interest of the real sharks, and I'm not convinced the creators have the resources, motivation or interest to keep the currency fair and secure once serious money becomes involved. Many of the exchanges are still pitifully insecure (run on VPSs !), the infrastructure is not well managed (witness problem above), and the creators probably never expected it to take off or really thought through the implications. Once there is serious money involved, lots of people are going to want to change the rules. If Bitcoin becomes popular it will be easy to coopt, devalue, and tax until it is just another currency, probably tied to a particular corporation or government. There's absolutely nothing you can do about that as a user of bitcoin. If the developers decided to change the direction of the currency you have your life savings in, devalue it, create a new block chain, you don't even have a vote on the matter.
Currently, if the government of your country or anyone else with the power to control the flow of bitcoins decide it should become valueless for you, or illegal, that can easily happen, if someone corners a significant supply of coins, they can manipulate the market (this is probably already happening as there are ZERO controls in place to stop it), if the public panics due to misinformation or rumour in such an illiquid market there is nothing to stop huge swings in value, and if a government decides to coopt the currency, shut down exchanges and change the rules by fiat, no-one is going to be able to trade in it and interest will evaporate. I see that as the largest problem with bitcoin by far - there are no backers putting up their own goods, no-one to trust, and no way to ensure that others continue to play by the same rules as they used to. It's certainly very appealing to utopian crypto-anarchists, but of limited interest to anyone who wants to store value or exchange it, given that it has the disadvantages of cash (anonymous, fungible) with none of the upsides (backed by a sovereign government, relatively stable, regulated to a greater or lesser extent, insurable etc), and a few downsides of its own (massively fluctuating value, built-in deflation, early-adopters privileged).
Because it is untraceable, and not guaranteed by law, it's of no interest to the majority of people who use currencies to store and transfer value and receive payment. I *want* my transactions to be traceable, so that I can prove to gov. and counter-parties that I have fulfilled my part of a bargain, made a payment, and should receive goods or services in return. If I don't want a transaction to be traceable (very rare, but conceivable), I'd use barter or some kind, but a currency outwith the control of government holds little interest for me, *precisely because* it is outwith the control of all the rules of society I value. Those who've had their valuable bits stolen from some VPS have no come-back using bitcoin, and no way to find a thief or enforce punishment - I'd demand far better than that for any currency I put trust in.
Re:Crap, the sky is falling (Score:2, Insightful)
the whole argument for going thru the pain of adopting a new currency is that it's immune to the problems of the existing currencies. If it's going to have the same sort of problems, what's the point? Does it really matter to you whether the result of your currency being devalued is due to government policy or a bug?
Re:Crap, the sky is falling (Score:3, Insightful)
albeit generally one of the lower-tier ones
- I don't know what you consider to be a 'lower-tier one', when one is used on 1/6th of the total land mass of this planet, is it a 'low tier one'? I am talking about the USSR ruble in this case. I think that probably was the biggest currency collapse in terms of land area that used it.
Of-course in the former USSR there were many currency collapses, a number of times ruble was redefined and restructured all due to inflation and lack of productivity but huge government spending. That's what it takes: lack of productivity, government spending and thus inflation (the government controls the fiat currency and prints it to spend on government). But there is no productivity, so the increase in money supply only bids up prices for existing assets and products and prevents businesses from investing, because there are no savings in high inflation scenario and without savings the real interest rates are enormous. Of-course if that's also coupled with regulations and laws that prevent business from occurring then it's a double whammy. But really, think about the SIMILARITY of that to US dollar and the Euro (though in both cases there are areas where productivity is concentrated to a higher level, like in California, Switzerland, Germany, or resource rich areas, like Texas, Norway).
Nobody goes through hyper (or even just high) inflation for giggles, but note that the mainstream 'economics' is ALL about creating inflation. That's all that your 'economists' push for, that's all they promote. Well, that and higher taxes on the productive population, higher income redistribution. Really, those are not economists, from POV of economics they are shamans and politicians not economists.
All fiat currency IS a sham that is subject to whims of politicians, that's why it is FIAT. Fiat is by definition not real money and instead an abstract controlled (inflated) by the politicians, who like the power it gives them to spend without taxing and thus to keep in power.
This is different from Bitcoins in a very important way, though I DO NOT consider Bitcoins to be money. Bitcoins have 1 of 3 properties of money, but it is a useful medium of exchange that allows bypassing the official channels and fees and gives you speed and flexibility.
Also it's not commodities that cause inflation, commodity prices only respond to inflation, inflation is by definition expansion of the money supply.
Misleading use of language to make it look legit (Score:1, Insightful)
Re:In the 2020s bitcoins will run out anyway (Score:5, Insightful)
That's a feature, but it's not a good feature to have (for Bitcoin). A currency's success is measured by its ability to facilitate commercial transactions, not by its ability to make you rich simply by holding it. That's what *investments* are for. Currency isn't an investment and shouldn't be.
The fact that there could never be any more Bitcoins ever again would encourage speculation and hoarding, which is not what you want from a medium of exchange.
If you're worried about currency devaluation and put some of your money/time into Bitcoins, that makes sense as a hedge against inflation (ie. an investment), but nothing more.
Re:Crap, the sky is falling (Score:2, Insightful)
It is not a big thing. Countries do this to their paper money all the time. They issue new bills that are harder to counterfeit. Then they set a date - the old bills will not be accepted after that. No big deal because you can change all your old bills for new ones before the set date. Or just put money in some bank and let them sort it out. It seems "big" because the bills themselves gets invalidated, but it is not. It merely means you can't store money in a mattress (or private safe) indefinitely. Normal people don't do that anyway.
Bitcoin deals in software rather than pieces of paper. Both kinds gets upgraded from time to time, with the "old" kind becoming obsolete.
Re:Crap, the sky is falling (Score:5, Insightful)
I don't think you know enough about Bitcoin, and I encourage you to read more about it. While it is hugely volatile, and even more hugely risky - not to say stupid - to "invest" in, I think many of your criticisms are invalid.
Bitcoin is absolutely traceable - it's far more traceable than cash. Read up about how the blockchain works (and see the Zerocoin proposal to see how it could be made untraceable, optionally, in the future). (The only non-traceable coins are those minted by miners with very paranoid security arrangements).
Cornering a "significant supply of coins" would take a significant investment of "real world" cash to actually corner these coins - not a trivial thing to get your hands on. So I don't think this is a large risk for the current Bitcoin ecosystem.
Also, you suggest that with regard to an entity trying to coopt or alter Bitcoin, "there's absolutely nothing you can do about that as a user of bitcoin". That's not true - simply running the reference software implementation makes you a node in the network, thus enforcing your (i.e. the default software's) set of rules on the transactions you do/do not relay. And additionally, the computing power deployed by today's miners would probably be impossible to exceed except by a very determined and well financed attacker. How much would a government spend to attack Bitcoin?
And if the "creators" (by which I suppose you mean the current set of core devs) try to create a new blockchain, good luck to them - the blockchain is far more resilient and the network runs as a democracy. It wouldn't work unless a vast amount of users also followed.
Your point about exchanges is key of course - they are extremely amateur operations right now. But that's easily changeable by hard work.
Digital cash ought to excite any geek - whether Bitcoin is "it", or simply an alpha version of something better yet to arrive, who knows.
Re:Argentina, Iceland, Hungary, Ukraine, (Score:4, Insightful)
Gotta love how libertarians keep blabbing about "fiat currencies" and how the currencies can collapse "at any time". While technically true, currencies collapsed under gold standards, and probably at a rate faster than what you see in today's economy. What folks don't seem to understand is that money has no value in and of itself, but is based on a population's ability to produce goods and services. Whether you use bitcoins, greenbacks, electrons on a hard drive or gold doesn't change this truth.
By definition, money is simply a means of exchange... tying it to an arbitrary material is silly. In the old days, countries manipulated currencies through artificial means and like today when those means run their course, bad things happen.
So, gold, paper or electrons, a country's prosperity is tied to the competence of its government. While this is a scary fact, it is the truth.
Re:Crap, the sky is falling (Score:5, Insightful)
Can you please explain the $1.25 -> $25 calculation. Do you have a source for this information?
It's just arithmetic, but perhaps I can explain how to do the calculation. In 1964 a quarter was 90% silver. It weighed 6.25 grams, so 5.625 grams of pure silver. data source [coinflation.com].
Five quarters ($1.25) was therefore 28.125 grams of silver. A troy ounce is 31.1 grams, so minimum wage was almost exactly 0.9oz of silver.
The 52-week range [marketwatch.com] of silver has been between $21.12 and $35.30 - currencies are fluctuating wildly with the current financial crisis, but even within that chaos, an equivalent wage would be between $19.00 and $31.78 for the past year. $25.39 is the middle of that range. We also know that the market price is manipulated (like LIBOR and other benchmark rates) since paper funds can't fill their physical orders, so one can consider that price to be depressed to some degree (how much is unknown because it's not a real market).
So, how many of the current financial problems (cost of education, cost of health care, cost of gas, cost of food, etc.) would really be problems if the wages had held steady? The obvious explanation is that those prices are all rising together with monetary inflation and it's just wages that are falling relative to it, causing the economic suffering.
If you follow the 20th Century wage chart, from the beginning to 1971, when the US went off the real-money system, wages rose (in terms of real money) right in step with productivity improvements. Since 1971, productivity has continued to increase steadily, but wages have been flat (the difference goes to the financial sector, on net). If the slope of that chart is extended out to present day, it intersects at about $29/hr, fairly consistent with the real-money methodology. $29 has been the price of 0.9oz of silver in the past year, so with the caveat that prices bounce around from day to day and week to week, on an smoothed basis it's right in the zone of where we should be, or a bit lower.
People aren't taught in school that the Federal Reserve is a private corporation owned by its member banks, with its board and president composed of representatives of the biggest multinational banks. Even though its charge is to protect the value of the US Dollar, the USD has lost 98% of its value over the past century (this year marked 100 years of Federal Reserve control of the currency). However, if anybody suggests that the Fed's policies, which have fabulously enriched the financial sector, led to this currency failure for any reason other than pure chance or bad luck, then they are labelled a 'conspiracy nut'. To avoid being called names, pure faith in their virtue is required and any skepticism must be jettisoned.
Which brings us back to bitcoin...
Re:Crap, the sky is falling (Score:4, Insightful)
I checked two [bls.gov] separate [westegg.com] inflation calculators
Yes, they both use CPI, the government-generated inflation calculation that shows no problems with the government's behavior.
Whihc is fine unless you find interesting that the CPI methodology keeps changing to reflect a lower standard of living (e.g. substituting hamburger for steak in the basket of prices), ignoring the price of energy, etc., while the claim of low inflation is trumpeted in the newspapers. Check out what CPI looks like if only the BLS methodology in place from the late 70's to the early 90's is continued [shadowstats.com] as it was previously calculated.
It's not news that people can lie with statistics. It's incumbent upon people who use statistical indicators to verify the validity of those indicators before using them as proof of anything.
Re:Argentina, Iceland, Hungary, Ukraine, (Score:5, Insightful)
By definition money is store of value, means of exchange and unit of account.
Things only have "value" if (1) other people need them, or (2) you can convince them that having those things will allow them to get other things that they need. The first type of value leads to direct barter; the second leads to a medium of exchange... a currency... "money." What form that "money" takes is up to the people in power who hoard it or give it out and can convince other people to accept it.
Gold is the money, gold standard means that there is an equivalent amount of notes (not fiat money, but redeemable bank notes), so you can get the weight of gold back for that paper from the bank. It's like using deposit box keys where you store gold as medium of exchange. Gold as money doesn't 'collapse',
Gold could easily "collapse" if no one wanted it. If I'm starving out in the middle of the desert, and you offered me some food and fresh water or a bag of gold coins with a thousand times the value of the food, which do you think I'd take?
Anything relatively rare can function as money, but only if people actually believe that anyone else would take it. Your "shiny rocks" don't have any more inherent value than someone else's "green pieces of paper," since neither is particularly useful to humans absent some sort of power structure that endows that "money" with value.
Suppose the world economy completely collapses and all of your fiat currencies go in the toilet. You have 17 gazillion tons of gold in your own personal vault, but nothing else. I have a few crates of canned food and a pile of random rare old bottlecaps that I like to collect. I start telling people I'll accept these particular rare bottlecaps in exchange for food. Pretty soon people in my town understand that those bottlecaps have value, because I -- who have control of food, something people actually need -- accept them as currency.
Now you come to town and try to buy food or other essential goods with your gold. Do you seriously think anyone will sell anything to you? Nobody wants your shiny rocks. The person in power likes rare bottlecaps, and that's the only "money" that matters now... aside from actual food.
The idea that "shiny rocks" have any inherent value is just as stupid as the idea that "green pieces of paper" have inherent value. If you can't see that, I don't know else to say.