Posts Tagged ‘bitcoin’

Bitcoin crisis

Friday, January 15th, 2016

Back in the beginning, I argued bitcoin would not scale.

The counter argument was that we could muddle our way through somehow with ad hoc solutions, which could be sort of true, in principle.

The scaling problems started to bite in 2013.  They are now biting really hard.

The scaling problems are now well and truly here.  Downloading the blockchain is slow and expensive.  Doing transactions is slow, unpredictable, expensive, and unpredictably expensive.

Any solutions hurt, are partial, incomplete, unsatisfactory, and will  disadvantage some people financially.   Civil war in the bitcoin community has ensued over which people it is to be.

That outcomes are determined by weight of computing power (the miners) rather than weight of bitcoins owned has led to problems.  The miners don’t face the same incentives as the people trying to do bitcoin based businesses.

Bitcoin has grown to about as large as it can get.  It is doing about as many transactions as it can do, arguably rather more transactions that it is really suited for doing.  Any fixes are at best small tune ups to get a little bit more performance out of the system, are at worst just burden shifting and burden hiding – hence the civil war. I have been trying to design a coin that could scale, by having a dispersed blockchain, where no one entity has to keep all transactions.   You keep your own transactions, and summary information about entities you transact with, and summary aggregate information about all transactions, and the chain of hashes that links the ownership of your money and your transactions into the global hash, which chain would only grow as log of the total number of transaction, rather than grow with the total number of transactions. This means that parts of the blockchain will get lost temporarily or permanently, and the problem is to create a method for dealing with such losses that does not give anyone incentive to cause such losses, apart from the general deflation that such losses cause.  Have been trying to design this for some time.  Not making much progress these days.

Another solution, compatible with existing bitcoin is to have account based money built on top of bitcoin, bitcoin backed banks, analogous to gold backed banks.  People are talking about this solution, but not actually implementing it, even though it seems a good deal easier than the solution that I proposed.

Silk Road 2.0 goes down

Saturday, November 8th, 2014

“This hidden site has been seized”

We are going to need a heavily decentralized solution, so that if a relatively small number of nodes get shut down or taken over by law enforcement, the network continues to function correctly, and, because no single node is central, no single node has traffic patterns that make it stand out.

The Tor hidden site system will always fail if a hidden site generates too much traffic for too long. We need a non Tor solution for publishing and curating reputations and performing transactions.

Technological failure of the silk road system

Friday, October 4th, 2013

Silk Road servers stored all messages in the clear forever.

The government placed malware on Tor exit nodes, located the Silk Road servers, raided servers, game over.

Private messages should have been end to end encrypted, existing in the clear only on the computers of the sender and recipient, and should have been deniable, except for messages containing money, where the sender needed to be able to prove that the recipient account had received a message with a particular hash, and thus able to prove that the recipient account received a message with particular content including payment. (more…)

On ripple

Friday, June 28th, 2013

Ripple is a scam cryptocurrency.  Pity, since the alleged design is more scalable than bitcoin.

A cryptocurrency is mainly worth its speculative value, worth the possibility it could replace the US$. Obviously Ripple is not going to replace the US$, being a wholly controlled muppet of Cathedral minions.

If Ripple was funded by Baidu rather than Google, I would be on it like a tomcat on a pussy in heat. (more…)

Bitcoin scaling problems

Friday, June 14th, 2013

When bitcoin was first proposed, I argued that the proposed algorithm failed to scale.

Well, when getting started, scaling does not matter.  Now, however, a bitcoin wallet is starting to cost substantial bandwidth and processing power.  There are plans to address this, but I am underwhelmed by those plans. The proposed plans will make bitcoin more centralized, and will still have scaling issues.

Seems to me that we need an algorithm where no one computer needs to keep a copy of all transactions, or even a complete listing of who owns what coins, so as to maintain scaling all the way to operating all of the world’s transactions, and full decentralization both. (more…)

Bitcoin as a speculative bet

Sunday, April 14th, 2013

Charting bitcoin, it looks good, if you are inclined to gamble on charts.  The recent collapse from two hundred dollars tested support at the hundred dollar mark, found plenty of support around there.  By and large, it is a good idea to buy at major support levels, since a speculative property is a lot more likely to go up than to break through the support level.   If it did not penetrate the support level for very long during the panic, likely will not do so now.

But I am an intrinsic value investor.  What is the intrinsic value of Bitcoin? (more…)