Category Archives: Bitcoin

Warner to be Executed

Filed under Bitcoin, Fiction, Political

(CNN) -- On Friday December 19th, 2081, the Mesa Blockchain confirmed its first execution order, issued by judge Ethan Curlond naming convicted murderer Bernie S. Warner as the condemned.  This has been the first known actionable execution order ever recorded by any blockchain.

Warner has been tried and convicted under rules pursuant to The Blockchain of Ethos Judicial Consortium.  The execution block, which is required to contain only one transaction, pay no transaction fee, and be cryptographically padded to double the length of a regular block, was initially verified by Metascape Mining, Ltd.  MesaCoin still yields 476 µMSC as a mining reward and Metascape directed the reward to an address of the victim's families.

The blockchain rules also require a minimum of 23 additional (unrewarded) confirmations for these types of blocks.  Confirmation is still pending at the time of this article, but it is expected to become fully confirmed within 48 hours of the first confirmation.  No fork conditions were predicted prior to or during the entire confirmation.

At least three confirmed, separate appeal motions have already been seen in the blockchain, as well as one motion for mistrial.  During the conviction phase in this case, as well as in other types of cases, these kinds of motions are typically ignored because no other venue has been defined for them as of yet.  The motions relating to the execution order are also expected to be similarly ignored.

Ignored motions are common in blockchain jurisprudence when no other judicial consortiums have been established to challenge the deciding consortium.  It is up to the consortiums to accept motions that challenge decisions by other consortiums.  By ignoring a motion, all consortiums are functionally in agreement with the deciding consortium, which means the decision is currently being upheld.

Warner was convicted of First Degree murder in 2079 for the killing of his business partner, Bryan Gushgrurn.  Gushgrurn was murdered on January 5th, 2075.

Due to jurisdictional disputes leading up to the actual murder trial, Warner's dual citizenship became the primary focus of preliminary court proceedings.  In 2075, Warner's US Citizenship was revoked by the State Department due to Warner's own Motion of Litmus resubmitted by the Expatriation Envoy of the Mesa Blockchain.  This left Warner with sole Mesa Blockchain citizenship.  The envoy immediately placed Warner in custody and transported him to Beadthall Detention Facility, a private jail in the City of Albuquerque, New Mexico.  The facility has a population of only 22 other inmates.  Warner later posted bail of 20,000 µMSC (approximately $11 million USD).

A Motion of Litmus was a document used around the time of the 2045 rush that stated a particular person with existing citizenship had intent to become a citizen of a blockchain.  Although Warner cryptographically signed the Motion of Litmus, it was not used as evidence in the murder trial because the original document predated the tragic events by decades.

Warner was recorded as a stateless citizen in the Mesa Blockchain during the 2045 MesaCoin rush, two years after the final collapse of the now antiquated BitCoin Blockchain.

Warner had declined dropping the motion even though it was originally submitted in 2045 and not processed by the US State Department when it was received with the roughly 120,000 other motions, a practice common during the rush.  Warner's original motion was marked as "sent" and a transaction marked it as confirmed in the Blockchain, which was enough to satisfy the definition of citizenship in the Mesa Blockchain.  Though his motion was left unanswered, like most of the motions at the time, it became fast-tracked due to the pending murder trial in order to establish jurisdiction by the various consortiums of the Mesa Blockchain.

“[The US State Department] still likes to cherry-pick which of those old motions to answer, even to this day," Mark Bentslend, an advocate of blockchain jurisprudence, commented after the State Department accepted the motion.  He continued, "This practice helps maintain their diminishing legitimacy, even though roughly one in four babies born in the US are recorded only by a blockchain and are effectively stateless."

Warner's situation was unique in that it represented the first complete and verifiable murder proceedings of any person by a blockchain.  This is due to Warner's statelessness and cooperation with the interested consortiums.

After the motion was accepted and Warner successfully expatriated, he made a statement, "I feel like I can only get a fair trial recorded within my blockchain.  I'm still fighting this because I'm innocent, but I have no faith in the old ways.  I never did consent to United States jurisprudence.  It's none of their business.  They don't have an incentive to give me a fair trial.  The consortiums do."

Even after the murder conviction, Warner stated that he still had faith in the appeal process.  "I maintain my innocence and I'll start my own consortium if I have to," Warner said.

Warner made no further public statements after the execution order went into the confirmation phase.

CNN and The Associated Press contributed to this report.

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Bitcoin Mining Cartels: A Total Non-Threat

Filed under Bitcoin, History
The short SHORT version of the problem: Cartels are bad.

My short SHORT version of the solution: Fix bugs.  Focus on p2p.  Stay the course.  Ignore the cartels and they'll go away.

There is an interesting discussion on the Bitcoin forum about mining cartels. Some of the forum members are worried that a group of individuals might mount an attack on the Bitcoin network using a cartel style attack.

How is a cartel style attack potentially more of a problem than a non-cartel style attack?

Any cartel entity coordinates itself to represent a threat to the non-cartel entities.  It is comprised of people who want to subvert their target by allying themselves together to share resources and maintain "out of band" communication to that end.

In this case, the worry is that mining cartels will form to target the Bitcoin network.
How can this approach succeed against the Bitcoin network?  A cartel could generate blocks ahead of the network, holding out on announcing these new blocks until they get an advantage by manipulating these withheld blocks.  In other words, they can try to hoard new blocks while they monkey with them by creating cartelized blocks.

A cartelized block contains cartel approved transactions.  If you are being rewarded by the cartel, your transaction will be included in the block.  If you are being punished by the cartel, your transaction will be delayed or dropped completely.

I left out a lot of details in my explanation above.  If you want to know more, take a look at the original thread.

The reason I am skeptical that a mining cartel would ever represent a threat to the Bitcoin network is that in order for the cartel to succeed, it would have to run a very tight ship.

The folk in the thread I mentioned shows that there are all kinds of technical roadblocks to prevent this attack.  The most likely roadblocks typically implement more p2p solutions, not less.

In other words, add more p2p oriented features to Bitcoin so the cartel must cope with things like keeping timestamps in the proper sequence.

And I'm totally in favor of a greater p2p focus, beyond what is already implemented.  The more, the better.

Beyond that and fixing bugs, nothing formal should be done to deal with mining cartels.

Why?  Because they'll do what every other cartel has done in history.  They will self destruct on their own.  It may take some time, but down the line, I can tell, that every cartel in history either self destructs or gets violent.

An example cartel in history may have started off as a friendly pact among good business associates.  But once someone inside the cartel betrays his buddies, something has to give.

And the more p2p focus there is, the less likely violence will be possible in any meaningful way, so the mining cartel can only self destruct.  Maybe it can try to start over with a smaller, more trusted circle.  That's the only option for it: cartel fragmentation.  Fragmentation reduces the chance of a successful attack.

In historical examples, cartels get overtly violent or they join up with government so that the violence becomes legitimized by law.  Cartels benefit from the "captured regulator" effect when they join up with government so they can regulate away competition.  That's just not an option for a well focused p2p implementation.

So what if the cartel is able to maintain control of its members to keep them from breaking ranks?  Well, that's the ultimate boogie-man, isn't it?  It only takes one member to take it down.  But ok, let's say it happens.  Then what?

I'm not suggesting this would be a quick fix, but if the cartel has really done damage to the integrity of the network, then set up a new p2p currency and abandon Bitcoin, if it really is that bad off.  Call it Bytecoin or something.  Or Twobitcoin.  I liked the name Hashcash, but the name doesn't matter.  The cartels can have their own private currency all to themselves.  Either they keep spending CPU time on the old abandoned network they just took over or they start completely over with a brand new network.  Competition makes everything better.

And as Fred Brooks said, "Make one to throw away, you will anyway."

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Did You Give Up On Bitcoin?

Filed under Bitcoin, Economic
One of the more compelling ideas of Bitcoin is that everyone has a chance to be the Ben Bernanke.  Meaning, everyone has a chance to "print money out of thin air."  The specification of Bitcoin is such that its money supply is "generated" by individuals who run the client on the network in "generate mode."  If you run it long enough, at least for now, you have a chance to produce 50 BTC (BTC is the currency code that stands for Bitcoin).

But if you were attracted to this idea, lately you may have noticed that it has been harder and harder to generate.  The simple fact is, the more people trying to produce, the less of a chance you'll have yourself.  On top of that, there are more people who resort to using their GPUs (graphics card) these days than ever before.  In a matter of months, the opportunity to generate Bitcoins seems to have dried up.

The good news is that there are new opportunities.  If you want to generate, I would like to recommend the Bluish Coder:

This is the group that picked the Bitcoin Remote Pooled Mining application to collect lower powered machines together so they can have a chance to generate.  If you have Windows or Linux (Mac OS X has limited support if you really dig), you can contribute your own CPU time to the mix and get a cut.  It's not 50 BTC, but it's something.

The amount you generate depends on the speed of your system, how long you participate, and how many other users are in the pool.  Yes, the amount is much smaller, but it's much better than nothing.

Of course, just like the carrot of 50 BTC, there's a chance your efforts will not pay off.  But you never know unless you try.  Since the time this pool was established, it generated 2 blocks, which means it distributed 100 BTC, so far, among all those who participated.  But the more people who participate, the smaller the winnings.

The advantage of pooling in this way is that none of the participants work against each other.  If you have two systems churning away on the official client, they are working against each one another by definition.  But in an alternative system like this, none of the systems in the pool do redundant work.

It is even possible to set up your own private pool with this kind of software, if that's what you want.  That way, if you have multiple computers, they would no longer work against each other.  But if you have only two computers to devote to Bitcoin generating, you may not see any results.

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Bitcoin Declines After Rally to Record Prompts Investor Selling

Filed under Bitcoin, Economic

Bitcoin declined after a rally to a record prompted some investors sell and as the strengthening dollar reduced the appeal of the crypto-currency as an alternative asset.

Recent price gains have led to profit-taking by some investors but it has probably not lead to an overall digital cash downtrend.  This is likely temporary profit-taking before the end of the year.  Bitcoin will continue to be favored through next year as a haven.

The dollar rose for a third day against most of its major counterparts on expectations an extension of tax cuts will bolster an economic recovery in the U.S. President Barack Obama agreed to extend Bush-era tax cuts for two years. A report tomorrow is forecast to show U.S. initial jobless claims declined.  Bitcoin typically moves inversely to the greenback.

Bitcoin has jumped 29 percent these last months after governments spent trillions of dollars and kept borrowing costs low to bolster economies hurt by the most severe global recession since World War II.

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Reply to The Underground Economist, Why Bitcoin can't be a currency

Filed under Bitcoin, Diary, Economic

I wasn’t going to make a post bashing Bitcoin because their FAQ clearly states that its value only stems from the fact that merchants are willing to accept it. Unfortunately, this hasn’t stopped people from pushing it as the currency of the future, so regretfully, I feel compelled to post why this is not so.

While Bitcoin has managed to bootstrap itself on a limited scale, it lacks any mechanism for dealing with fluctuations in demand. Increasing demand for Bitcoin will cause prices in terms of Bitcoin to drop (deflation), while decreasing demand will cause them to rise (inflation). What happens in each of these cases?

Let’s start with deflation, because right now demand for Bitcoin is on the rise. What do people do when they think something’s value will be higher tomorrow than it is today? Well, they acquire and hold on to it! Who wants to give up money that’s constantly rising in value? In other words, rising demand causes demand to rise further. Irrational exuberance at its finest. Deflation begets deflation, ad infinitum, or at least until something breaks. You could make lots of money on Bitcoin, provided you get out of the market at the right time.

Eventually, of course, prices won’t be able to fall any further. Either people won’t be spending their Bitcoin anyway because they’re making so much money just by holding it, or the merchants will get tired of changing their prices every few seconds, assuming they don’t hit technical issues first, like the indivisibility of coins or their software not being able to handle all the zeros after decimal points.

At this point or shortly before, people will start taking their profits. They’ll start spending or selling their hoarded coins. If this manages to start any inflationary momentum at all, you’ll see the deflation scenario played out in reverse. And who’s going to stop it? The supply of Bitcoin is fixed and there is no other use for it besides as a currency. I doubt prices will have much of a chance to rise, since this will happen so fast. Merchants will go from taking one coin for a year of porn to not taking Bitcoin at all, and a bunch of people will be left with worthless Bitcoin.

The reason this can’t happen with government currencies is that government currencies *are* backed. They’re backed by bullets. If demand for USD starts to fall faster than the USG would like, the USG can just raise taxes without increasing spending, increasing demand and reducing supply simultaneously. There’s a bunch of stuff the FED can do, of course, and the FED tends to act first, but its operations are harder to explain. This is obviously not a perfect mechanism, since bubbles are still blown and popped, but even this mechanism is not available with Bitcoin.

Negative feedback loops like this are basically homeostasis. In nature, positive feedback loops like exist with Bitcoin are lethal; the only thing that’s even kept Bitcoin alive this long is its novelty. Either it will remain a novelty forever or it will transition from novelty status to dead faster than you can blink.

This is an interesting and honest critique. I especially like the part about how governments can protect their currencies with bullets. That is so true.

It is true that merchants must update their prices to reflect the current market price of Bitcoin. But there are mechanisms to make this less tedious. For instance, if you use the shopping cart integration, you can peg your product against USD so your BTC price stays in sync. This isn't a perfect solution because getting an accurate peg relies upon the fledgling market data that comes from the Bitcoin exchanges.

Another barrier against the falling price against the BTC value is the use of inventory. This is something somewhat unheard of in USD denominated economies. If you prepare your inventory blocks for multiple sets of price, when you run out of inventory at one price, then inventory in another price becomes available. Welcome to the deflationary economy. It's fun!

Another problem cited by the author above is the problem of having to handle all the zeros after the decimal point. But many government currencies have this same problem in reverse. I.e., they have to handle all the zeros *in front* of the decimal point.

So the author is very worried about Bitcoin deflation. But I am looking forward to it very much. If demand for Bitcoin is that high, it should be very interesting indeed. I, for one, think the coin division isn't prepared *enough*. I think we should be expecting 10^-32, just to be on the safe side. If you have even 50 BTC, right now, hold it. When scarcity *really* sets in, that will be a tidy sum (e.g. if you think 20¢ one-month rise against USD is a lot, you ain't seen nothing yet).

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Bitcoin May Rise on Demand for Alternative Currencies, Survey Shows

Filed under Bitcoin, Economic
Bitcoin, which rose to a record this week, may extend its advance on demand for an alternate currencies, a survey found.

Twelve of 18 traders, investors and analysts surveyed that the "crypto-currency" will gain next week. Five forecast lower prices and one was neutral. Bitcoin rose to a record 9.2¢ today by the end of trading on BitcoinMarket.

The dollar yesterday slid to the lowest level against the yen in 15 years and dropped to an eight-month low against the euro on speculation that the Federal Reserve will ease monetary policy more to bolster U.S. growth. The Bank of Japan lowered its main interest rate to “virtually zero” this week.

It is speculated that as long as central banks are willing to be led by the Fed down a never-ending pathway of debasement, bitcoin will continue to rise.

The weekly bitcoin survey that started six months ago has forecast prices accurately in 19 of 33 weeks, or 58 percent of the time.

This week’s survey results: Bullish: 12 Bearish: 5 Neutral: 1

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