I think this is a very interesting arcticle that might enlighten people about Bitcoin Frauds and not necessarily that Bitcoin is all bad

http://qz.com/131084/silk-road-colle...million-exist/

The arrest yesterday of the mastermind behind Silk Road has certainly caused some shockwaves in the bitcoin community. The price immediately plunged from about $145 to $109 but has since firmed-up to $130. (Typical market undershoot on bad news and plenty of profits to be made if you had any fiat in the exchanges).

Interestingly, "Dread Pirate Roberts" wasn't caught by a room of boffins who cracked decryption keys or hyper-analysed the bitcoin block chain, but by old-fashioned detective work - he was pretty stupid when he setup Silk Road in 2011 and posted on some forums under his real name. These posts were then linked to subsequent posts. Anyway, if the indictment is correct, he was a total scumbag who had paid for at least two people to be murdered.

It'll be interesting to see what kind of effect this has on bitcoin; it doesn't seem to be suffering too much at the moment since (I think anyway) it has momentum beyond Silk Road.

very interesting

Slightly off topic, just found out that the General Manager of reddit is a Swiss dual-citizen.

Recently was topping the list of Times most influential people of 2012

http://venturebeat.com/2012/03/30/re...t-influential/

So which EFer is he? :P

Undershoot?!

I didn't really know about Bitcoin until I read this thread - and I'll admit I still don't know much, but the idea of a "digital" currency not underwritten by anything of real worth, coded by open-source code kinda freaks me out in a digital age of cyberhackers with nothing better to do than fèçk systems up.

http://bitcoin.org/en/

That said, it isn't much better than the current currencies we use, given that there's not enough money/gold in the world to underwrite all electronic banking transactions...

Ho-hum...

Undershoot means to "fall or land short of a target". In this case the target is the answer to the question "what is bitcoin's value after absorbing the news of Silk Road?". The answer is "about 130 and slightly rising"; the initial fall to 109 was an undershoot. You may say it was oversold.

Here's a 5 day chart of XBT to USD. The dip to ~110 is just after the Silk Road news broke on Wednesday afternoon:

Ok. Read up on it and get back to us. Because, frankly, your gut instincts about what is a rather elegant and well-made mathematical machine don't really mean much.

I'll give you a TL;DR though: the cryptography behind bitcoin is absolutely secure unless the NSA has compromised certain algorithms that they had a hand in development. If that's the case, though, pretty much all banking systems (and in many other industries) are screwed as well. Bitcoin at least has the advantage that a new version which replaced those algorithms could be deployed fairly simply.

Its main vulnerability is the "51% attack". This could only be achieved by a very wealthy and determined entity (pretty much a government) and would be more expensive than taking out a national currency by flooding it with forged notes. Solution is as above: deploy a new version.

The first half of the "money/gold" think doesn't make any sense: are you saying there isn't enough money to cover all the money in the world? That begs the question of how you defined money.

And why should money be backed with gold? The value of gold is determined by the same sentiments by which people value money. Again, it's begging the question (http://en.wikipedia.org/wiki/Begging_the_question).

If you pull your head out your arse for a few moments you'll realise that the points I raise are probably fairly standard concerns. If hackers get into a bank's system, they won't get to that bank's tangible assets. As for bitcoin... what exactly are those tangible assets, other than the pizza mentioned earlier?

And the money/gold thing... again, don't try to highlight my ignorance of bitcoin by showcasing yours of the way currency was set up and ran for years. Doesn't do you any favours.

http://globe-union-bank.org/charter/article_0110.htm
http://en.wikipedia.org/wiki/Gold_reserve

__________________
Never let right or wrong get in the way of a good opinion

bitcoin is surprisingly well written. whoever did it, knew what they were doing. i really wonder who could have created such a construct that was pretty much perfectly implemented from the beginning.

the one potential uncertainty in my mind was the choice of ECC and secp256k1 curve. ECC is a pretty young area of crypto and the recent NSA revelations create worry over the 'recommended' NIST curves...

i'm not sure where you're going with this. there have been cases where banks have been hacked and the transfer of money out of the banks system is as real a loss as them physically stealing cash.

our bank balances are no more tangible than ones and zeros in a bank computer system.

Do banks have "open" code for their security systems?

Or do governments have open code for currency creation?

You can go to the bank and take your money out in real cash, so while stored as 0/1 electronically, it has real value beyond what looks like a fancy bartering system.

As I say, these are my initial reactions without having looked at it in any depth (and seem to reflect some of the concerns you raised earlier in the thread).

What are a bank's tangible assets? They're a set of records in a computer system that everybody agrees on. (I've spent many years writing such systems).

What are bitcoins assets? That's right: a set of records in a computer system that everybody agrees on.

That difference is that bitcoin's records are much harder to change.

Yea, I've got an o-level in economics too. (BTW, you know that "Global Union Reserve Bank" is not actually a bank but a bunch of flat-earth kooks, don't you?). The thing is, no major currency is backed by a gold reserve; the gold standard was abandoned for the very good reason that it strangled economic growth through an arbitrary restriction on the money supply.

Indeed they don't. And neither does bitcoin.

Bitcoin has never been hacked in terms of unauthorized currency creation or theft through cracking its records (the public block chain). Governments can't say that (banknote forgery) and banks can't say that (hacking their systems).

You could go from XBT to CHF with about the same speed that you could go from USD to CHF. Banks, of course, don't always give you "real cash" in respect of your account records. (Cyprus anybody?)

I'll restate this: a currency is worth what people believe it's worth. At the moment, people believe that a single bitcoin is worth something like $130 and will pay you that on demand. As long as people keep believing that, it's as good a currency as any (all its other problems e.g. deflation (this is one of the things you should read up on) notwithstanding).

OK, but that's not what I've been reading... unless there's a difference between open code and open source code - either way, that you can see what's been coded and how, means that you can more easily plan to trip the system up, surely?

I agree absolutely with your first statement.

But banks are underwritten by governments - witness the whole "too big to fail" concept of recent years.

Or are you suggesting that the world's currencies will be replaced by Bitcoin simply because the cybercommunity will be disgruntled with "the system"?

Even though everyone knows how bitcoin exactly works, they can't trip up the system because they can't get round the mathematical protections (specifically hashing (trapdoor) and public key cryptography functions) - it would take a 'Nobel Prize' (actually Fields Medal) type scientific breakthrough to crack these and the implications for the whole field of IT, mathematics and industry in general would be immense.

Now, there are so-called 'side-channel' attacks which can break some cryptography (e.g. HTTPS sites) under certain conditions, but bitcoin doesn't seem to be affected by these and there are lots of eyes looking to see if this could be the case (one of the benefits of the source being open).

Of course, many people have had bitcoins stolen because their computer was hacked and the private keys to the encrypted money in the bitcoin ledger was stolen (in the same way a pickpocket could steal your wallet), but taking safeguards can protect against this (and there are hardware solutions coming along like the rinky-dinky little USB stick that you can access a UBS account with).

I think bitcoin, as it currently is, would be useless as a national currency because of the same problems that gold-standard currencies have - it has an absolute limit of the number of bitcoins that can be created and can't be inflated under any circumstances. (Many in the bitcoin community would disagree with me - they have a strong bias towards libertarian, anti-government, Austrian school of economics type solutions).

I see bitcoin as useful as a store of value (replacement for gold) and for business-to-business capital transfers. Of course, somebody could come up with a bitcoin-style currency that has some form of inflation embedded within it, but the problem of so-called 'alt-currencies' (there are many fighting to be either the replacement to bitcoin or a 'silver' to bitcoin's 'gold') is gaining the network effect in which you need a sufficient number of users to secure the system (against the '51%' attack).

The real value of bitcoin is really in the public block chain - which is essentially a cryptographically-secure, tamper-proof, public (stored on everybody's computer) ledger of all the transactions that have ever taken place. This same ledger could be leveraged (and there are many experiments ongoing in this space) for secure messaging, binding contracts, financial instruments, distributed currency exchanges and so on.

Allegedly...

In class we got handed a paper about the bitcoins about 2 weeks ago, by a lecturer who I think works at the AG's office in SF. So I told him about the EF and how they some members seemed to be into bitcoins. For another class we were supposed to meet at an SF library to do research, but weren't sure which one yet, so the lecturer being put off. SF Law Library was closed. Then I see the Silk Road arrest at the library- funny!

Define "target" in this specific case (e.g. how do you value an asset that does not produce cash-flows).