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Another day, another inexplicable, indecipherable Bitcoin drama.

Lots of folks don't even get what the whole thing about Bitcoin is.  Here you go in a nutshell:

Bitcoin is a virtual currency (think gold in an MMO). When it was established, it was set that there would only ever be a finite amount.  Computers can "mine" Bitcoin by solving equations and therefore unlocking some.  The more that's unlocked, the harder it is to unlock more; this means computers have to work longer to gain more Bitcoin.

With me so far?  Okay, good.  Bitcoin transactions are all loosely documented in a chain.  By "loosely," I mean that the chain for example records that 3 Bitcoins were moved from one wallet to another, wallets being a digital storage locker for Bitcoins.  It also documents when someone unlocks more Bitcoins.  What it doesn't do is establish a paper trail as to ownership of said wallets.  Someone, somewhere can access that wallet, but who that person is remains anyone's guess.

That's the appeal of Bitcoin; anonymity, no central authority, no regulation.  If a lot of you dispute my use of the word "appeal," then you're probably a sane person.  In terms of Bitcoin's anonymity, it's already being used to enable anonymous extortion via malware, and sneaking bitcoin miners into other people's computers.  Thanks to its lack of central authority, no one is capable of stopping a consortium from banding together to manipulate the underlying structure of how Bitcoins move from place to place.  And (in my opinion) what mostly appeals to fans of Bitcoin is the lack of regulation; if you lose money via nefarious means, tough.  You can't go get some enforcement entity involved.  Maybe you can sue, if you know who to sue in the first place.  Maybe.  Law of the jungle, baby!

If this sounds familiar to some of you, it probably is; it's essentially the Anarchist paradise of EVE Online translated into the real world.  EVE Online is a completely cutthroat MMO, where more or less anything goes.  Your shit can be stolen.  Players can lie to and cheat one another.  The bottom line is profit, and the developers actively encourage any and all behaviors outside of actually hacking the game itself.

While that's all well and good for a game, the fervor of Bitcoin fans to move that mentality into real-world markets is frightening.  It's ideology trumping common sense, where falling prey to predatory behavior isn't a cause for sympathy but some form of moral judgement on one's worth as a person. (Obviously if you let your things get stolen, you didn't deserve them, etc.)

However, in practice it's already starting to look like bands of gangs led by warlords and pirates creating their own digital Somalia.  That's actually a good thing, in terms of the whole Bitcoin movement acting as a sociology experiment.  Everyone who's balked at regulation and cheers completely free markets without any intervention is getting a front-row seat as to what that would look like. represents a large group of people who banded together and now have the power not just to control Bitcoin, but to prevent Bitcoins from moving anywhere without their say-so, and erasing transactions entirely.  They haven't done it as of yet, but they could.  We merely have their word that they won't ... and note, they already gave their word that they wouldn't put themselves in the 51% position to start with, so take that for what it's worth.  There's no law enforcement agency or regulatory body to stop them, so the response has been very EVE Online as well: DDoS attacks, the digital version of a siege.  I suppose this is their idea of "market correction."

Folks, anyone who ever tells you people will act rationally and in their best interests when it comes to "important" stuff like finance is an idiot.  We sit on the rubble of one recession with banks already fighting to pull down what few regulations were put in place to avert it from happening again.  Never underestimate the awesome power brought into play by a combination of greed, arrogance and stupidity ... which honestly is what the entire Bitcoin affair has seemed to me.

But hey, you go throw your all your money into a mining rig and call it your retirement investment.  Thankfully in the real world there's a (tattered) social safety net to save you from your own idiocy born of ideology so at least you won't starve in your old age.  You're welcome.

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Comment Preferences

  •  People who rely on bitcoin's anonymity (6+ / 0-)

    are even dumber than those who rely on its investment value.

    •  the whole bitcoin universe (5+ / 0-)

      appears to be a scam from the beginning and another pyramid scheme.  Those who started it and got in early and got out probably made out like "bandits".   Now there seems to be just the BANDITS stealing whatever is left.

      •  I don't know why some on the Left.... (5+ / 0-)

        ardently defend and even promote Bitcoin.  As everyone from Warren Buffet to various FED officials have observed, it is not a currency but rather a virtual commodity.  This is why it is worth $400 one day and $800 the next.  Because it is not regulated by the government.  

        The underlying mathematical mechanism may be useful if adopted by actual governments for currency transactions, but as it is, it is a way for kids and rebels to show their independence, and lose money in the process.

        •  I don't even understand the whole "virtual (3+ / 0-)
          Recommended by:
          hnichols, True North, Villabolo

          commodity" shtick. It is a mathematical construct with NO basis in reality.  "Mining" Bitcoin?  Come on!  The emperor's clothes of currency.  There is no "there" there.  Unless I am missing something I have never understood how it can be taken seriously by anyone, left or right.

          •  It's an interesting concept for the technically (0+ / 0-)

            The cryptocurrency protocol do solve the following issues.
            1. How do you ensure that a token cannot be copied (the public-ledger).
            2. How do you ensure that a transfer of token cannot be falsified (digital signing + blockchain ordering).
            3. How do you do the above without trusting anyone else (computationally expensive blockchain generation).

            The mining of Bitcoin is essentially the implementation of 3. It forces those who wants to add an entry into the public ledger to try to find a magic number (the key to unlock the next "page" in the ledger). Statistically, unless someone has more than 51% of all computation power working on mining, no one can gain full control of the ledger.

            The solution by cryptocurrency do rely on one major assumption, that no group can "overpower" the network in terms of computation power (51%+).

            The major issue with Bitcoin, however, is that unlike fiat currency, which is at least backed by a government (at it's simplest, the government promises that they will accept those currencies, either as taxes or fees, in exchange for the services they provide), Bitcoin has absolutely zero backing (no one promises to accept Bitcoin in exchange for services).

            There's also the issue with deflation, but that's another topic entirely (and a result of a variant of implementation and can be easily circumvented by tweaking the protocol).

  •  Suggest Not Explaining an Unknown w an Unknown (2+ / 0-)
    Recommended by:
    hnichols, wilderness voice
    Bitcoin is a virtual currency (think gold in an MMO).
    Ohhh kayyy.

    There's an international audience of all ages here, not even all English 1st language speakers.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sun Jun 15, 2014 at 05:24:28 AM PDT

  •  Bitcoin only works as long as people (3+ / 0-)
    Recommended by:
    hnichols, True North, eagleray

    are crazy enough to believe in it.

    Sounds like a bunch of other things I can think of.

    Just another underemployed IT professional computer geek.

    by RhodeIslandAspie on Sun Jun 15, 2014 at 07:06:45 AM PDT

  •  It's the new beanie babies (3+ / 0-)
    Recommended by:
    hnichols, True North, eagleray

    It will die out soon enough.  

  •  ...bitcoins were created... (2+ / 0-)
    Recommended by:
    eagleray, Ahianne gamers. And the whole thing was set up to be "gamed." Is your computer a bot for these WoW folks behind all this? Who knows?...

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    by paradise50 on Sun Jun 15, 2014 at 09:56:56 AM PDT

  •  It looks like someone may have control 51% of (0+ / 0-)

    all computational processing in Bitcoin.

    Basically, said individual now has the power to control the entire Bitcoin transaction until such time the protocol can be updated to remove said 51% power.

    A short info on why: Bitcoin depends on a public ledger (block-chain), who gets to "add" a page (block) to said public ledger is dependent on guessing a magic number that's determined through a mathematics function that's, currently, is considered to be NP hard (hard to guess, but pretty easy to verify that it's the right number). Essentially, it's a lottery, with those possessing more computation power "draws" for the magic number more times than those with less computation power.
    The "valid" public ledger is defined as one with the largest number of pages (longest block-chain). The theory is that as long as no single entity controls more computation power than anyone else, no body can win the race to generate a longer chain than anyone else.

    However, the 51% scenario is just that, someone has control of enough computation power that, starting from the latest block, they can, overtime consistently generate a longer block-chain than anyone else.

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