back to article 'Devastating' protocol flaw could paralyze Bitcoin system

Computer scientists say they've identified a fundamental flaw in the Bitcoin electronic currency system that could eventually stunt its development unless developers change the way users are rewarded for their participation. With about 7.5 million Bitcoins in circulation, the highly decentralized system relies on public-key …

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A Web 2.0-naut might try to keep all the rewards...?

That's UNPOSSIBLE!!

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They're about 6 months too late..

Latest stats from @bitcoineconomy show only 200 bitcoin nodes still operating.. since the price crashed nobody is interested any more.

It never really had a chance, really. It's competing against cash - which is acceptable anywhere, can be transferred for free, nearly instantly, and doesn't vanish if you delete the wrong file on your PC..

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Cash can be lost. A bitcoin wallet can be backed up.

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WTF?

Nonsense

This is pure nonsense. It's like pointing out that there is no incentive to seed files in BitTorrent, and suggesting that because of that, nobody will seed files, and concluding that this is a "devastating" flaw in BitTorrent that will send people rushing to Wal-Mart to buy CDs and DVDs again.

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100% of nothing

There might be a few freeloaders operating but even a parasite knows that the host must be kept alive. If they don't share enough transactions to keep it alive then they'll have to find another income.

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Facepalm

Non-fiat currency backed by no assets, being traded in blocks.

Its like the digital version of tulip trading only there isnt any bulbs. Its the stupidest damned thing ive heard of.

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FAIL

It's money

and money doesn't have to be backed by anything - it's just an accounting system for transactions of other things.

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Cash not backed by assets

In almost all countries in the world, cash is not backed by assets. Sterling certainly isn't and hasn't been since we relinquished the gold standard after the war. If it were asset backed, the government wouldn't be able to engage in "quantitative easing" (ie printing money) because it would have needed to acquire assets first.

Your £1 is worth £1 because the Bank of England promises to pay £1 for your £1 and everyone believes that it will. If you go the to BoE they won't "cash in" your money for gold, it's a purely theoretical amount of money that only works because people believe in it.

Bitcoins are no different. They are worth something if people accept them in payment, otherwise, like cash, they are completely worthless. Examples of this happening are not uncommon. Two prominent ones being Germany before the second world war and Zimbabwe, both of which suffered from hyper-inflation as a result of printing huge amounts of money that was not asset backed resulting in a justifiable loss of confidence in the currency.

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Anonymous Coward

And the promises of governments and banks

are fit for /so/ much right now.

(Anon mask because Occupy Everything.)

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Far from the biggest flaw

Not that the other flaws are technical, necessarily, they're more about policy and design.

Whichever individual or group came up with the crypto scheme and the network, they were clearly very clever. However they also pretty clearly had a simple and idealist view of economics which was doomed from the start.

Having spent some time being told I was 'ignorant to the point of fraud or criminality' by bitcoin aficionados for listing problems I saw with the currency and community, I'm getting quite a kick out of watching the value drop to 7% of it's peak and the community dwindle.

I just feel sorry for the folks that lost money on this fools errand, there must be a lot of them.

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WTF?

Better economics than you

There are many non-government currencies operating, and many of those are not physical, such as the WIR bank in Switzerland. You've not said why you thought it was doomed, but all the reasons I've heard have been disproved elsewhere in various economies.

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Idealistic or greedy founders ?

Difficult to ascribe an 'idealist view of economics' to what, in practice, has turned out to be a Ponzi scheme. I said as much on the Bitcoin forums when the short lived bloom was exanding.

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Gartner Adoption Curves

If you think about it, the dollar value of Bitcoins has almost exactly followed the Gartner Hype cycle, and it's now in the "trough of disillusionment". ( http://goo.gl/4Bxvp ).

What will be interesting is whether, as with many technologies, it disappears at this part of the cycle, or whether it finds its way to a plateau of productivity as a niche form of tokens for exchange.

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No Ponzi

Bitcoin does not have a central body promising income as well as return of capital, and was not created with the intention to deceive. It is an asset bubble, not a Ponzi scheme. You buy a Bitcoin, you own a Bitcoin, you always have the Bitcoin and are not promised anything more. Charles Ponzi's scheme was very different.

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Anonymous Coward

Why not behave like a real currency...

and just keep printing more and more and more as and when deemed necessary - e.g. USD, EUR & GBP

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I know you're being sarcastic there

But in order to keep the value of a currency unit somewhere around constant this is a really good idea.

And inflation, when kept reasonably low, is a good incentive for people to actually use money instead of just sitting on it.

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Less and less

Of the currency there is less and less because more and more trade is done using electronic money. The "printing" lately has been money issuance, not new currency. Currency is a subset of money.

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real currencies

You can pay taxes in USD, EUR & GBP. You'll never be able to pay taxes in Bitcoin. Also a reason why LETS in its current format (with the fallout from 2008 and Euro crisis increasingly likely to change) isn't usable for paying taxes. The LETS in my local system are nevertheless more spendable than Bitcoins, even if earned 18 years ago when my local system started.

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Anonymous Coward

erm

The Euro cannot legally print more money, it may help to do so if it could.

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Anonymous Coward

And that's because of the Germans.

Don't mention the war!

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Taxes exist for a reason

Anyone who uses bitcoins is effectively tax-dodging, and therefore really has no right to criticize the government, EU or the way taxes are spent.

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Yes, taxes exist for the purpose of leeches stealing from people. And even if you avoided some taxes with bitcoins, you are still paying some such as sales tax. Taxes on busonesses also drive up the cost sof what you buy so you are paying them indirectly. And of course you can complain about taxes being used to kill people around the world.

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Stop

Why should people be incentivised to spend money? This is exactly the kind of thinking that makes unmanaged currencies appealing to me. As a previous poster said, money should be a simple accounting system, not used as a way to encourage (or discourage) consumption.

Bitcoin isn't yet really useful as a currency because so few people accept it as payment, but it's still more appealing to me than business as usual. Look at the situation: All money is created as debt, that debt must be repayed within a limited period plus interest so the total amount owed is always greater than the total value in circulation, therefore the only way to service today's debts is to create more money and the ever accelerating cycle continues. The really dire consequence of this is that because the debts grow exponentially, so must the rate of value creation (economic activity) required to service them. Exponential economic growth is required at all times if the system is not to collapse. Of course in practice, economic activity means chopping down trees and burning coal, so you can see how constant acceleration of it is a bad (not to mention impossible) thing.

Bitcoin is different. There is no central bank to create and lend money. There is always enough money in the economy to pay off all debts (should there be any.) There is no need to grow the supply exponentially so there is no need to drive constant economic growth. Money becomes a simple accounting system, not a driver of human behaviour. This is a system fit for the stable, or perhaps declining economy that is a physical inevitability.

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spending drives the economy, enriching us all

Whereas stuffing money into an old mattress doesn't achieve much at all.

Yes, Bitcoin is very different. It is a currency with such a tiny amount ever to be created, that if it ever took off on a worldwide scale each one could become worth the equivalent of a billion or more modern-day dollars! Knowing this you'd be a fool not to hang on to them, which of course kills any sort of bitcoin economy as people just hoard. And those that are more short-term thinkers are currently engaged in pure speculation. The 'currency' also lacks several features that many people find useful - for example there's no chargeback if they've been defrauded by a vendor. Which I know is something specifically designed out of bitcoin due to ideology.

Also I actually like the idea of society being able to adjust the amount of currency to fit the economy and keep the currency units worth roughly the same (slightly decreasing as mentioned) day to day. It's a useful mechanism.

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You say that spending drives the economy - enriching is all. You could equally say - spending drives the economy - giving us all more work to do. Of course it a person's rightful choice whether they should work hard and get rich in money or work less and be rich in time. The problem comes because if everyone chooses the former we end up destroying our habitat much quicker. The monetary system should not encourage either type of behaviour - that should be down to free personal choice.

Our current system in which continuous exponential inflation is built in, is not compatible with that free personal choice.

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So both solutions are pyramid schemes

Fancy stuff.

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FAIL

Some use of the word "Devastating" with which I'm not familiar.

Bitcoin was an interesting idea, some people invested in it, most didn't. Infact some of the core developers cautioned against depending on it.

There were obvious problems with it from a sociological and technological point of view, and the currency eventually became devalued. For all the rhetoric you have more chance of a court taking a transaction seriously if it revolved around familiar good, servcies and currencies, and a lot of people want that security these days.

And let's not beat about the bush, some of the people who put money in, didn't know what they were getting, how many thought that "cryptographically secure" magically meant that transactions were untracable? Infact they were far from it!

I don't know for a fact, but it wouldn't surprise me if most of the remaining users are those who feel that the system owes them something. Can't blame them, maybe the system could, without this hit, have ridden out the crash and returned to some sort of value, and it's simple human nature having spent money on something, to keep hold of it.

TBH, they've a better chance than getting original market price on surplus 80287s, but that isn't saying muh :-s

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