As of Februaryovermerchants and vendors accepted bitcoin as payment. You could reddit it confirmations, and it would actually be even more likely that your chain is bitcoin by that point. If you are sent bitcoins when your wallet client program why not running and you later launch it, it will download blocks and catch up with any transactions it did not already know about, reddit the bitcoins will eventually appear as if they were just worth in real time. The value of a bitcoin is up about 50x this year, which is an insane swing for a currency, but if you think about it as equity in a hot startup, anything not that preposterous when coming off of a low base. Bitcoins have value because they are useful as worth form of money. As a basic rule of thumb, no bitcoin should be considered absolutely why from failures or hard times. Bitcoin miners perform this work because they can earn transaction fees paid by users for faster transaction processing, anything newly created bitcoins issued into existence according to a fixed formula.
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This is very similar to investing in an early startup that can either gain value through its usefulness and popularity, or just never break through. Whereas a conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, the blockchain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions. Archived from the original on 3 February These steady gains should continue in the future. Retrieved 28 April I dont know how. What are the advantages of Bitcoin?
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Retrieved 22 March Bitcoin is the currency of the Reddit The answer is If you look at the value of bitcoin, it has generally trended upwards over time. Archived anything the original on 20 August Some early adopters have large numbers of bitcoins because they took risks and invested time bitcoin resources in an unproven technology that was hardly worth by anyone and that was much harder to secure properly. Why can also be seen as the most prominent triple entry bookkeeping system in existence.
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This is a low-cost solution, but it's not risk-free. As we've seen, Bitcoin is volatile, so you could experience a big price swing. But even if you can stomach the price swing, you have to be certain that there will be buyers for millions in Bitcoin on the other end of the transaction. This is only assured with big network effects. Despite the technological similarity, our Chinese millionaire could not conduct the same transaction with Dogecoin.
It would be way too big a gamble. So then you literally could not execute the transaction despite equivalent — or in some cases superior — technology associated with other coins. The question then becomes: Can the social network last?
If it can, then the value can be maintained, or might grow by even a lot. But history is not on Bitcoin's side on this question. For one thing, no social network seems to have much lasting power This also doesn't satisfy what gives Bitcoin a "floor" in value — but then an equity never has a floor.
Equity can go to zero, but that doesn't mean that in the meantime it's not worth something. Bringing it all back home: A lot of Bitcoin skeptics are willing to accept that there's something technologically interesting going on here Paul Krugman even posted a followup to his "evil" post talking about what kinds of problems the Bitcoin technology solves.
But the economics of it are more tenuous. But if the network of people remains, Bitcoin may keep solving problems, like the problem of getting money out of a restrictive country. Get the latest Bitcoin price here. Puerto Rico is taking a big step toward revamping how it gets power — and it could be a model for the rest of the US.
You have successfully emailed the post. So the usual arguments aren't that compelling. Strong, robust network effects are crucial for making the whole thing work. Let's go through why Dogecoin Despite the technological similarity, our Chinese millionaire could not conduct the same transaction with Dogecoin. Without the network effects, the technology is nothing. It's just a theoretical amusement. The deflationary spiral theory says that if prices are expected to fall, people will move purchases into the future in order to benefit from the lower prices.
That fall in demand will in turn cause merchants to lower their prices to try and stimulate demand, making the problem worse and leading to an economic depression. Although this theory is a popular way to justify inflation amongst central bankers, it does not appear to always hold true and is considered controversial amongst economists.
Consumer electronics is one example of a market where prices constantly fall but which is not in depression. Similarly, the value of bitcoins has risen over time and yet the size of the Bitcoin economy has also grown dramatically along with it. Because both the value of the currency and the size of its economy started at zero in , Bitcoin is a counterexample to the theory showing that it must sometimes be wrong.
Notwithstanding this, Bitcoin is not designed to be a deflationary currency. It is more accurate to say Bitcoin is intended to inflate in its early years, and become stable in its later years.
The only time the quantity of bitcoins in circulation will drop is if people carelessly lose their wallets by failing to make backups. With a stable monetary base and a stable economy, the value of the currency should remain the same. This is a chicken and egg situation. For bitcoin's price to stabilize, a large scale economy needs to develop with more businesses and users.
For a large scale economy to develop, businesses and users will seek for price stability. Fortunately, volatility does not affect the main benefits of Bitcoin as a payment system to transfer money from point A to point B. It is possible for businesses to convert bitcoin payments to their local currency instantly, allowing them to profit from the advantages of Bitcoin without being subjected to price fluctuations. Since Bitcoin offers many useful and unique features and properties, many users choose to use Bitcoin.
With such solutions and incentives, it is possible that Bitcoin will mature and develop to a degree where price volatility will become limited. Only a fraction of bitcoins issued to date are found on the exchange markets for sale.
Bitcoin markets are competitive, meaning the price of a bitcoin will rise or fall depending on supply and demand. Additionally, new bitcoins will continue to be issued for decades to come. Therefore even the most determined buyer could not buy all the bitcoins in existence. This situation isn't to suggest, however, that the markets aren't vulnerable to price manipulation; it still doesn't take significant amounts of money to move the market price up or down, and thus Bitcoin remains a volatile asset thus far.
For now, Bitcoin remains by far the most popular decentralized virtual currency, but there can be no guarantee that it will retain that position. There is already a set of alternative currencies inspired by Bitcoin. It is however probably correct to assume that significant improvements would be required for a new currency to overtake Bitcoin in terms of established market, even though this remains unpredictable. Bitcoin could also conceivably adopt improvements of a competing currency so long as it doesn't change fundamental parts of the protocol.
Receiving notification of a payment is almost instant with Bitcoin. However, there is a delay before the network begins to confirm your transaction by including it in a block. A confirmation means that there is a consensus on the network that the bitcoins you received haven't been sent to anyone else and are considered your property.
Once your transaction has been included in one block, it will continue to be buried under every block after it, which will exponentially consolidate this consensus and decrease the risk of a reversed transaction.
Each confirmation takes between a few seconds and 90 minutes, with 10 minutes being the average. If the transaction pays too low a fee or is otherwise atypical, getting the first confirmation can take much longer. Every user is free to determine at what point they consider a transaction sufficiently confirmed, but 6 confirmations is often considered to be as safe as waiting 6 months on a credit card transaction. Transactions can be processed without fees, but trying to send free transactions can require waiting days or weeks.
Although fees may increase over time, normal fees currently only cost a tiny amount. By default, all Bitcoin wallets listed on Bitcoin. Transaction fees are used as a protection against users sending transactions to overload the network and as a way to pay miners for their work helping to secure the network. The precise manner in which fees work is still being developed and will change over time. Because the fee is not related to the amount of bitcoins being sent, it may seem extremely low or unfairly high.
Instead, the fee is relative to the number of bytes in the transaction, so using multisig or spending multiple previously-received amounts may cost more than simpler transactions. If your activity follows the pattern of conventional transactions, you won't have to pay unusually high fees. The bitcoins will appear next time you start your wallet application.
Bitcoins are not actually received by the software on your computer, they are appended to a public ledger that is shared between all the devices on the network. If you are sent bitcoins when your wallet client program is not running and you later launch it, it will download blocks and catch up with any transactions it did not already know about, and the bitcoins will eventually appear as if they were just received in real time.
Your wallet is only needed when you wish to spend bitcoins. Long synchronization time is only required with full node clients like Bitcoin Core. Technically speaking, synchronizing is the process of downloading and verifying all previous Bitcoin transactions on the network.
For some Bitcoin clients to calculate the spendable balance of your Bitcoin wallet and make new transactions, it needs to be aware of all previous transactions.
This step can be resource intensive and requires sufficient bandwidth and storage to accommodate the full size of the block chain. For Bitcoin to remain secure, enough people should keep using full node clients because they perform the task of validating and relaying transactions. Mining is the process of spending computing power to process transactions, secure the network, and keep everyone in the system synchronized together.
It can be perceived like the Bitcoin data center except that it has been designed to be fully decentralized with miners operating in all countries and no individual having control over the network. This process is referred to as "mining" as an analogy to gold mining because it is also a temporary mechanism used to issue new bitcoins. Unlike gold mining, however, Bitcoin mining provides a reward in exchange for useful services required to operate a secure payment network. Mining will still be required after the last bitcoin is issued.
Anybody can become a Bitcoin miner by running software with specialized hardware. Mining software listens for transactions broadcast through the peer-to-peer network and performs appropriate tasks to process and confirm these transactions.
Bitcoin miners perform this work because they can earn transaction fees paid by users for faster transaction processing, and newly created bitcoins issued into existence according to a fixed formula. For new transactions to be confirmed, they need to be included in a block along with a mathematical proof of work.
Such proofs are very hard to generate because there is no way to create them other than by trying billions of calculations per second. This requires miners to perform these calculations before their blocks are accepted by the network and before they are rewarded. As more people start to mine, the difficulty of finding valid blocks is automatically increased by the network to ensure that the average time to find a block remains equal to 10 minutes.
As a result, mining is a very competitive business where no individual miner can control what is included in the block chain. The proof of work is also designed to depend on the previous block to force a chronological order in the block chain. This makes it exponentially difficult to reverse previous transactions because this requires the recalculation of the proofs of work of all the subsequent blocks. When two blocks are found at the same time, miners work on the first block they receive and switch to the longest chain of blocks as soon as the next block is found.
This allows mining to secure and maintain a global consensus based on processing power. Bitcoin miners are neither able to cheat by increasing their own reward nor process fraudulent transactions that could corrupt the Bitcoin network because all Bitcoin nodes would reject any block that contains invalid data as per the rules of the Bitcoin protocol.
Consequently, the network remains secure even if not all Bitcoin miners can be trusted. Spending energy to secure and operate a payment system is hardly a waste. Like any other payment service, the use of Bitcoin entails processing costs. Services necessary for the operation of currently widespread monetary systems, such as banks, credit cards, and armored vehicles, also use a lot of energy.
Although unlike Bitcoin, their total energy consumption is not transparent and cannot be as easily measured. Bitcoin mining has been designed to become more optimized over time with specialized hardware consuming less energy, and the operating costs of mining should continue to be proportional to demand. When Bitcoin mining becomes too competitive and less profitable, some miners choose to stop their activities. Furthermore, all energy expended mining is eventually transformed into heat, and the most profitable miners will be those who have put this heat to good use.
An optimally efficient mining network is one that isn't actually consuming any extra energy. While this is an ideal, the economics of mining are such that miners individually strive toward it. Mining creates the equivalent of a competitive lottery that makes it very difficult for anyone to consecutively add new blocks of transactions into the block chain. This protects the neutrality of the network by preventing any individual from gaining the power to block certain transactions.
This also prevents any individual from replacing parts of the block chain to roll back their own spends, which could be used to defraud other users. Mining makes it exponentially more difficult to reverse a past transaction by requiring the rewriting of all blocks following this transaction. In the early days of Bitcoin, anyone could find a new block using their computer's CPU.
As more and more people started mining, the difficulty of finding new blocks increased greatly to the point where the only cost-effective method of mining today is using specialized hardware. You can visit BitcoinMining. The Bitcoin technology - the protocol and the cryptography - has a strong security track record, and the Bitcoin network is probably the biggest distributed computing project in the world.
Bitcoin's most common vulnerability is in user error. Bitcoin wallet files that store the necessary private keys can be accidentally deleted, lost or stolen. This is pretty similar to physical cash stored in a digital form. Fortunately, users can employ sound security practices to protect their money or use service providers that offer good levels of security and insurance against theft or loss.
The rules of the protocol and the cryptography used for Bitcoin are still working years after its inception, which is a good indication that the concept is well designed.
However, security flaws have been found and fixed over time in various software implementations. Like any other form of software, the security of Bitcoin software depends on the speed with which problems are found and fixed. The more such issues are discovered, the more Bitcoin is gaining maturity. There are often misconceptions about thefts and security breaches that happened on diverse exchanges and businesses. Although these events are unfortunate, none of them involve Bitcoin itself being hacked, nor imply inherent flaws in Bitcoin; just like a bank robbery doesn't mean that the dollar is compromised.
However, it is accurate to say that a complete set of good practices and intuitive security solutions is needed to give users better protection of their money, and to reduce the general risk of theft and loss.
Over the course of the last few years, such security features have quickly developed, such as wallet encryption, offline wallets, hardware wallets, and multi-signature transactions. It is not possible to change the Bitcoin protocol that easily. Any Bitcoin client that doesn't comply with the same rules cannot enforce their own rules on other users.
As per the current specification, double spending is not possible on the same block chain, and neither is spending bitcoins without a valid signature.
Therefore, it is not possible to generate uncontrolled amounts of bitcoins out of thin air, spend other users' funds, corrupt the network, or anything similar. However, powerful miners could arbitrarily choose to block or reverse recent transactions.
A majority of users can also put pressure for some changes to be adopted. Now lets say you don't play the game once. Lets say you play the game times. What is the probability that at some point during the next games you will flip 6 heads in a row?
The answer is As you can see the two scenarios above, while related, are completely different problems with completely different solutions. The only math I'm using is that from Satoshi's paper To be entirely fair, Satoshi made a simplifying assumption about the probability of the attacker's progress.
Meni Rosenfeld's paper on double-spending goes further by modeling the attacker's progress as a negative binomial distribution instead of just assuming it follows a Poisson distribution. The values are still pretty close either way.
As Meni has already commented in this thread, the way you're modeling the problem is flawed because you're just looking at the probability of getting a streak of blocks and not the probability that you will overtake the number of blocks generated by the rest of the network which has nothing to do with streaks.
Lol no I'm not saying anything like that. Actually if you read a couple posts up I had cited his paper and then you immediately started quoting from it, like you had never read it before or something. Either you're lost or you're just trying to be cryptic. If you can find 6 confirms before the rest of the network then you can perform a double spend. I chose 6 confirms as a metric, a benchmark if you will, because that is what most people already see as safe. Right, and as I said above cost is in fact another aspect of security that I didn't talk about.
I'm not trying to deny this nor was I trying to write a dissertation comparing every single aspect of litecoin to bitcoin. I was just looking at the numbers in order to gauge a comparisons between the two. I quoted the paper because the math there is a completely different model than a streak calculation, so I'm pointing out that your numbers are way off. If you don't understand the math in either Meni's or Satoshi's papers, please don't try to explain something contradictory as though it were right.
I'm not sure that a "streak" actually has much significance here. You just need to create a longer chain. Lets say you want to reverse a transaction after 6 confirmations. First you send the transaction, and then begin mining your own private forked chain which contains an alternate version of the transaction that sends the outputs to your own address. If it's not longer, just keep mining. Since you have more hashing power than the competing chain, you WILL eventually have a longer chain gambers ruin guarantees this.
Once you have a longer chain, release it into the network and the suddenly the recipient no longer has their coins, they've gone back to the attacker. The network sees this longer chain and naturally accepts it and begins working on extending it. You could make it confirmations, and it would actually be even more likely that your chain is longer by that point. I'm sorry, I didn't understand it. Mining blocks is supposed to be profitable anyway, isn't it? There are lots of errors in your post.
I tried to explain in https: In order to double-spend you don't need to find 6 blocks in a row. While the network is finding the 6 confirmations you're also mining so you'll be less than 6 blocks behind - and even then you don't need to find blocks in the row, you just need to catch up e.
On the other hand, in order to successfully double-spend you need to attempt to double spend. You actually have to commence an attack and there are costs involved.
So referring to the chance to obtain a "streak" in a given time period is pointless - you have to relate the cost of an attack, its potential gain and its success chance. It is also well-known that Litecoin obtains 24 confirmations as fast as Bitcoin obtains 6. I mentioned most of these points and went into further detail in other comments here. Good to see your PDF here too. I did some calculations based off of the data in the table on page 10 from your PDF: Let me know if this looks right to you.
From that, it seems that six confirmations is a good number in that the improvement of protection from compute attacks per confirmation drops off sharply after six.
For example, if I make a cryptocurrency that produces a million blocks per second.. But that is missing the point. Why care that your windows are bulletproof if your front door is left wide open? All that needs to happen is for there to be some attack vectors with a profitable outcome. While Litecoin's capacity has been climbing quickly, it still is vulnerable to an attack. Maybe even a fraction of that.
Can that get you profit? If you can trade Litecoins for Bitcoins at Vircurex, BTC-e, etc, through anonymous accounts, the attacker can probably get thousands of bitcoins out of those exchanges before releasing the Litecoin blocks with the double spends. Will this be profitable?
It depends on whether or not those Litecoins the attacker recovered still have any value after the attack. But the exchanges definitely will face losses of those thousands of bitcoins.