[ExI] extropy-chat Digest, Vol 122, Issue 15

[Omar Rahman]

> Date: Thu, 7 Nov 2013 15:58:02 +0100
> From: Eugen Leitl <eugen at leitl.org>
> To: extropy-chat at lists.extropy.org
> Subject: Re: [ExI] What happens when Bitcoin goes to a million bucks?
> Message-ID: <20131107145802.GJ5661 at leitl.org>
> Content-Type: text/plain; charset=us-ascii
> 
> On Thu, Nov 07, 2013 at 09:38:58AM -0500, Rafal Smigrodzki wrote:
>> On 11/7/13, Omar Rahman <rahmans at me.com> wrote:
>> 
>>> The main problem with bitcoin is precisely this: it is impossible for
>>> everyone to have a bitcoin. The system was designed with an upper limit of
>>> 21 million coins available. The anonymous people behind bitcoin have
>>> designed this as a 'boutique' currency  for test purposes I think. The 21
>>> million upper limit automatically places it out of contention to be a
>>> general means of exchange. Hmm....unless we want to get into 'virtual'
>>> bitcoins. ;)
>> 
>> ### Omar, you think the limit on the number of bitcoins puts it "out
>> of contention to be a general means of exchange"? Lol.
> 
> Psst. Nobody tell him that the current limit (1/100000000) is a satoshi, and it's
> not a fundamental limit.


I guess the 21 million thing is sort of 'old fashioned' of me. It doesn't technically matter if I can or can't have a whole bitcoin but it 'feels' wrong to me that each person on the planet on average can only have about 1/300 of a bitcoin. So, I actually do think that the upper limit of bitcoins is a problem unless the value of a single coin goes right through the roof. I guess that's what you're all hoping for and good luck to you. If all 21 million coins were available right now you would have a currency worth something like $6 000 000 000 or so, yes? On the other hand, if you have a bitcoin you might have 1/21 000 000 of the future money supply.

What, if any, do you think the weaknesses of bitcoin are? The potential for forking in the block chain, the continuing assault on public-private key encryption, and adopting changes to the hashing function seem like serious concerns for bitcoin. Well to be fair any weakness of public-private key encryption is a more general problem.

The most obvious weakness I saw for bitcoin was the possibility for a DDOS attack with many micro-transactions but they have eliminated this with 'transaction fees'. It seems to me that the limits one places on processing a transaction through these fees represent some sort of limit on the effective divisibility of the coin. As the number of bitcions produced goes down towards zero as we approach the 21 million limit these fees are envisioned as the incentive for people to continue processing blocks. At some point won't that actually commoditise bitcoins into a function of the cost of processing power?

What do you do if someone steals your bitcoins? Can't they just transfer them to some other address and they are gone. Isn't your ability to recover them nil? Even if someone is forced by some court to make reparations in real world goods or a traditional currency could they be compelled to accept some exchange rate?

For many libertarians bitcoin is probably a dream come true. However, world politics could force the issue if a major government or group of governments declared that contracts in bitcoins are not enforceable. This seems an obvious move if a government felt threatened by bitcoins. And of course if they can't tax it and revenues fall they will feel threatened. 

As a digital currency which relies on it's users and community to confirm the transactions and use the same hash function it is profoundly democratic and I like that. But it is also therefore open to the possibility of a split if enough people could choose to fork the block chain. This might even be a good thing, but it is something that should be considered.

As I said later in my post I think a digital currency is a good idea, I'm just not sure bitcoin is the right implementation.

Regards,

Omar Rahman




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