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[r007]

@Deadly: Probably nothing, but then there's always possible surprises.

@Junta: The "mining" has nothing inherently important to do with the valuation of the currency. It's beneficial (necessary?) to the security scheme to have many independently generated block chains (essentially transaction logs), which should be relatively hard to generate (so no one person can feasibly swamp the system with their own blocks). Thus the system makes block generation harder as user count increases; to provide an incentive to still generate blocks, you get money. Technically, you're allowed to credit a set amount to yourself as the first transaction in the log without providing a source for the transaction and without all of the other clients rejecting your block.

[CruelCow]

I still don't get that part. How do you count users in a decentralized network? How do you prevent people from faking many users? And how are you scaling against better hardware?

[r007]

Counting users:
Easy answer: You don't.
Hard answer: You could rely on your peers keeping halfway accurate counts (discard outliers), like every other P2P network. Though I was merely abstracting; the P2P part gives you reliable distribution of blocks, hence your client can keep track of new blocks per timeframe and start rejecting start blocks as soon as the saturation threshold is reached. If the majority of clients does that, getting a block accepted is a matter of distributing it fast enough.

Faking many users:
Is just not helping, you'd make it even herder to mine blocks. From the above, the next possible step would be: Fake many untrustworthy clients. Yes, that's a weakness, although taking over the absolute majority of a p2p network is rather hard. (Same flaw works for Skype btw.)

Scaling against hardware:
Again, the accepted source blocks per timeframe solves that.

Disclaimer: IANAbitcoinDeveloper.

[Jebus]

No, it probably isn't worth it unless you don't pay for your electricity. The link he posted has links on it that discuss whether or not it's worth it given the costs of electricity etc.

And I think as more people mine currency, the value of it is going / goes down - so the reward for doing it is getting less.

Yeah I read an article a while ago about a school technician who basically turned the schools IT department into a farm/mine? over the summer when no-one was using it. Basically if you have a lot of resource and not paying the bills it works.

I don't think the currency devalues as you mine (if anything its trend is up as more people use it?) but as I understand it, the problems that have to be solved to generate a block are becoming harder and harder solve making it less profitable to do so. According to wikipedia:

"The drawback is that the amount of work that has to be done for one bitcoin is currently over 500,000 times more than the amount of work at which the first bitcoins were going."

I just find it quite amazing that whoever set this up seemed to have got it almost perfect from the start?

[Junta]

As clever as it is, it will fail I think. Most currencies don't need the wider support of the general public in order to generate new instances ( if you ignore the general Principle of currency needing the general population to spend, save it etc)

[claws]

The general public doesn't need to do that, it's just one way of acquiring the currency.

[Jebus]

Most currencies don't need the wider support of the general public in order to generate new instances ( if you ignore the general Principle of currency needing the general population to spend, save it etc)

No but most currencies have a centralised issuer. bitcoin doesn't. (again borrowing heavily from wikipedia ): The total number of bitcoins is programmed to approach 21 million over time. Due to it getting more and more time/resource consuming to generate new blocks, it rewards people who mine them in order to ensure new currency is being fed into the system regularly. If you don't want to/can't mine, you just go to an exchange and swap pounds for bitcoins as you would any other currency.

The bit I don't understand is how it reacts to market forces - inflation/deflation etc. In June they just reset all the transactions back to before the hack but you couldn't do that if it was widely adopted?

[r007]

IIRC, those transactions in June that were reset were within MtGox (originally "Magic The Gathering Online Exchange" *lol*), at that point acting like a bank on behalf of some users. Private transactions "out there" propagated through the block chains are irreversible, by design, and a good thing too.

I don't think the currency devalues as you mine (if anything its trend is up as more people use it?) but as I understand it, the problems that have to be solved to generate a block are becoming harder and harder solve making it less profitable to do so.

I just find it quite amazing that whoever set this up seemed to have got it almost perfect from the start?

The problem in and by itself is not actually becoming harder. You're still computing SHA hashes. What's becoming harder is getting your block (hash) accepted by a majority of clients. Again, IIRC, the more blocks are out there the more leading zeroes your hash has to have. If you've seen a few hashes then you know finding one with even a few leading zeroes is not a common thing.

But you're right, aside from a few minor details, the cryptography behind it is amazingly sound. That's probably what attracts all of the geeks.

[r007]

As clever as it is, it will fail I think. Most currencies don't need the wider support of the general public in order to generate new instances ( if you ignore the general Principle of currency needing the general population to spend, save it etc)

I love it as a psycho-econo-social experiment: How are people giving value to an artificially scarce "currency" not backed by anything but their desire to have it. (Hell you probably couldn't even buy a slice of bread with it, directly, if you wanted to.) The twist of new instances being harder to generate as demand rises plays nicely into this and is (IMHO) a perfectly deliberate psychological choice on behalf of the designer.

I'd probably still not use it in everyday life.

[discordance]

some form of digital currency will eventually take hold, it would be nice if it was decentralised and also energy based. :>

Lets just hope its not M$

[CruelCow]

I dunno, being able to trace/revert transactions seemed like quite a nice feature to me.

[r007]

Indeed, but that boils down to trust again. Specifically, who to arbitrate such disputes? With classical banks, if you can convince them a transaction was made in error (they trust in your statement), then you can trust in them to reverse that transaction. In a fully decentralized system, who is there to trust with these kinds of arbitrations? Nobody. If both parties agree on the rollback, then they just make the inverse transaction. Hence the lack of a rollback.

... which kinda drives my point home with wallet encryption. Right now anyone that has your wallet.dat file can make any amount of transactions on your behalf. If you have to type (at least) a password before a transaction is signed, you can hardly claim negligence. (Caution: two-beer security consideration ahead:) Probably best to throw a transaction serial number in there as well.

[Zarf]

Indeed, but that boils down to trust again. Specifically, who to arbitrate such disputes? With classical banks, if you can convince them a transaction was made in error (they trust in your statement), then you can trust in them to reverse that transaction. In a fully decentralized system, who is there to trust with these kinds of arbitrations? Nobody. If both parties agree on the rollback, then they just make the inverse transaction. Hence the lack of a rollback.

... which kinda drives my point home with wallet encryption. Right now anyone that has your wallet.dat file can make any amount of transactions on your behalf. If you have to type (at least) a password before a transaction is signed, you can hardly claim negligence. (Caution: two-beer security consideration ahead:) Probably best to throw a transaction serial number in there as well.

But then again, If someone has enough access to your computer to get your wallet.dat file in the first place, they can almost certainly keylog a password. It's pretty trivial to encrypt files anyway, plenty of free apps out there. Best solution is going two factor, wallet.dat on an encrypted thumb drive so you need both the physical thumb drive and the password in your head.  If you were using it seriously you can always go old school, move your savings on to encrypted thumb drives and stick them in a bank safety deposit box, that way you minimise your potential losses to just your living expenses account.

Personally I don't think i'll bother making things too complicated, will probably just cash out to GBP every £20 or so. If someone gets high level access to my comp i'll have bigger issues than a £20 wallet.dat
 

[Junta]

Personally I don't think i'll bother making things too complicated, will probably just cash out to GBP every £20 or so. If someone gets high level access to my comp i'll have bigger issues than a £20 wallet.dat

Good points well made!

The general public doesn't need to do that, it's just one way of acquiring the currency.

I assumed that some people DID have to do that, and that the purpose of mining WAS to help create the currency (as described https://en.bitcoin.it/wiki/FAQ#How_can_I_get_Bitcoins.3F)

If nobody mines, then the total number of coins released remains static, although there is apparently a maximum number of coins to be generated anyway.

[Zarf]

Just as a followup, using www.britcoin.co.uk I have successfully converted Bitcoins into "real" money in my bank account