A beginner's guide to Bitcoin


#1

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#2

What is your take on Coinbase? They claim to keep the majority of client funds in offline cold storage.


#3

I have an even shorter beginners guide to Bitcoin: Don't.


#4

So, let me get this straight, instead of governments dictating monetary policy we should install the bitcoin entrepreneurs as the arbiters of our economy? Can we ask these people to repair our roads, pay our teachers or put out our fires? What would happen to such public institutions if everyone used bitcoins?

Because of this inherent lack of social responsibility and many other reasons (piracy, insider trading, currency fluxuation, etc. ) bitcoin will fail. Being part of an untraceable, unregulated, untaxable economy might seem like great idea to anyone with anti-capitalist leanings but if you look back at economic history you will see that the only winners will be those already at the top of the ponzzi pyramid, and of them only those who can cash out early enough in this Greater Fool game.

I am saddened that boing-boing has outed itself as a Judas Goat for this scam, but I guess the Winklevoss twins need to find their flock of fools somewhere…


#5

It's really hard for me to reconcile articles like this with what I perceive to be Boing Boing's (collective?) economic stance.

Oh, and if you've somehow decided to donate your terrible internet money to charity (instead of sitting on it, waiting to become super rich), be aware that two of the links given don't work, while the third is headlined by a news post concerning theft.


#6

@jandrese interested to know what you're reasoning is?


#7

Andreas M. Antonopoulos is the Chief Security Officer of Blockchain.

So obviously an impartial source and not someone with a vested interest in a speculation bubble, right?

I wrote a beginner's guide to Bitcoin too, for non-technical people.

But you can send me dogecoin at DPPT3iviNwLXQSsEfREDLgUepcb1jczitP if you like.


#8

Because it's a big speculation bubble in the "rope in as many suckers as possible" phase? Also because the whole system is rife with scammers and it's pretty much impossible to figure out who isn't a scammer in the Bitcoin world. Even the relatively big and well established players continually find that they've "been hacked" and that 60% of their reserves were stolen.

There are a lot of stories about Bitcoin millionaires who got in early and then rode their coins up the hill, but not too many about people who were successful in converting those into millions of fiat currency that they were able to exchange for goods and services. It's like those Ponzi schemes where everybody is making a ton of money as long as not too many try to take any out. Once the crash happens though, they discover that all of the value was on paper only and in practice they have nothing.


#9

I'm just here waiting for the "gold is the only secure way!" crowd.


#10
Dollar bills, on the other hand, have some intrinsic value in that government will accept them as payment for services and to pay your taxes.

I thought this was a particularly worthwhile thing to say. A lot of people seem to treat fiat money as if its value was pure legislative fiction, instead of having value because someone has promised they will accept it, and presumably someone you can count on still doing so for the rest of your life and beyond.

Currencies like bitcoin are often argued to have some instrinsic value from scarcity, but that's artifical – in that the precise rules for bitcoins make them scarce, but it's easy to make up other things just like them. So that doesn't convey them real value. Instead it would have to come from the same place, there being someone we could trust will accept them for lifetimes.

That doesn't seem promising, though, when even among the cryptocurrency enthusiasts there are more and more competitors. So this line does a good job summarizing why bitcoin seems like a false start to me.


#11

Yup. I talk about that in another article on my site. Not only is the scarcity somewhat diluted by other cryptocurrencies, it would even be possible to expand Bitcoin itself.

Imagine if Walmart started accepting Bitcoin, and then said that they would actually accept coins generated via a hostile fork of the Bitcoin software which had an extended coinspace but built on the same blockchain. (Much as the blockchain almost forked already due to a software bug.) Sure, you could say "No, I'm only accepting the original 21m Bitcoins which the original software accepts and generates" -- but if someone as big as Walmart will accept Extended Bitcoin coins as payment then they have value, and hence dilute the currency.

So instead of a currency not controlled by anyone, you actually end up with a currency controlled by whoever has enough market force to get away with whatever they want to do by coercing people to accept their decisions. I don't see that as a major improvement over government-controlled currency.


#12

I, too, wish to invest my money in the equivalent of internet Itchy & Scratchy Dollars


#13

This is precisely the sort of misinformation that gets brandished about, but betrays a complete lack of knowledge about how bitcoin actually works. In order to fork bitcoin you'd need to acquire 51% of the network's hashing power, this would require a multi-billion dollar investment in the required hardware to pull off.

I'm not saying a company like Walmart couldn't do this but it would make absolutely no economic sense as it would effectively destroy the value in the network as the trust element has been subverted. The reason bitcoin can act as a store of value is because it is built upon a system of distributed trust. So Walmart would be better off using their hashing power to mine bitcoins as this would generate a greater return. Sure Walmart or any opposing entity with the financial will could commit an act of sabotage to destroy bitcoin, but it would make absolutely no sense.

And yes Walmart could even setup their own crypto-currency, but that wouldn't be bitcoin it would be WalmartCoin and it could never be used to dilute the value of Bitcoin. And unless WalmartCoin can add any significant utility over Bitcoin it will likely just languish, like the 100s of other alternative digital currencies out there which when combined are worth a fraction of bitcoin.

The intrinsic value in bitcoin is the network that secures the trust. Also show me any other payment system that can be used to move millions of dollars of value around the globe, requiring no bank account and costing just a few cents.


#14

No, you wouldn't. Read about how it almost forked already, in spite of nobody having 51% of the network's hashing power. All you need is two different versions of the code which disagree about block validity.

Since there's no central authority to dictate what counts as Bitcoin, Bitcoin is whatever most users say it is. So if Walmart called their forked Bitcoin "Bitcoin" and most people agreed, it would be Bitcoin. Just like X.Org gets called X11, even though X11 used to refer to XFree86.


#15

The one thing that WalmartCoin could do that Bitcoin can't is allow you to buy goods at Walmart. That alone would make it more valuable.


#16

Yes but this is very different to a "hostile" fork that you previously alluded to. In this instance the miners only needed to agree which version of the code and corresponding blockchain to adopt. And the key point on the Reddit post you linked to:

What did this mean for regular users?
Nothing. Almost.
A regular user making a transaction during that time would broadcast his transaction to both ledgers and it would be included in both. Obviously one would be abandoned sooner or later, but that doesn't matter to the regular user because he broadcasted it to both and he would be fine with whatever was the outcome.

True and how many regular users do you think would ever call a centralised WallmartCoin (That could be hyper-inflated at will) Bitcoin?

Also you can already spend bitcoin with a number of different retailers (inc Amazon) using Gyft. The places where you can spend bitcoin is growing by the day, with Stripe and Dish recently announcing bitcoin options.


#17

If you wanted a coin you could only spend in Walmart, why wouldn't you just buy a Walmart giftcard?


#18

No need. Bitcoin boosters pretty much are goldbugs with a thin veneer of technological competence, to the extent that Bitcoin deliberately copies a number of the negative aspects of the use of gold as a currency.

we have:

  • Pointless busywork called "mining" to bring new units of the currency into play
  • Arbitrary limits on the supply of money, rather than allowing it to grow with the size of the economy it services.
  • Deflation by design. Never mind the known negative effects of deflation on an economy- it's vitally important for people holding assets to get a healthy risk-free return because Reasons.
  • Imposition of a wider set of political priorities under the guise of "sound currency".


#19

I agree with all your points, but it's not as much fun without them yelling at each other about how their currency system is better, is it? smile


#20

Indeed. If you already have fiat, then why would you need Bitcoin?