Quote from: unk on June 05, 2011, 06:09:55 AM

Quote from: Astrohacker on June 05, 2011, 05:49:42 AM

Your point about there not being a difference between 5000 and 3000 is simply wrong. It's different a factor of 5/3. How many billionaires would turn down the opportunity to have 5/3 more money? None.

the opportunity to get it isn't costless. most people would be irrational to take a substantial risk of bankruptcy for a chance to have $5 billion instead of $3 billion, given, among other things, the diminishing marginal utility of wealth.

Correct.

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And my conclusions have done nothing but sharpen on the incredible outcome: bitcoin is likely to actually be adopted as a currency by a huge fraction of the world.

for one thing, three weeks isn't enough time to make lifelong investment decisions. if you feel rushed, that itself is probably the result of counterproductive speculative pressures. recall that 'get in before it's too late' is an almost certain hallmark of a scam or at least hypothetical speculation. in non-speculative investments, there's a presumption that the price impounds at least some rational calculus by the market, so that waiting a month ought not to make a big difference.

It's not like I'm going to stop learning and just stick with my decisions no matter what for the rest of my life. If I acquire new information that suggests I should sell, then I will sell. Also, feeling "rushed" is what you feel if you only have one second to make a decision. Three weeks of research is obviously not a rushed decision.

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as to the particulars, your interesting article runs into a few potential problems that you might want to consider being more cautious about.

first, exponential growth is almost always unsustainable and, in practice, is almost never sustained. relatedly, past performance of any commodity does not predict future performance. to assume that it's as easy (and rapid) to grow from 1000 to 10000 users as it is to grow from 100,000 to 1,000,000 would have been an incorrect assumption for almost any technology, and it's not justified here.

The numbers I plugged in are obviously gross approximations, but it's not unreasonable to think that every person who participates in commerce on the internet will use this. And I'm also not saying the future behavior will be exponential because the past was exponential. I'm saying it was, is, and will be exponential because of the incentives for using it. It will only stop being exponential when it gets close to saturating, which is when basically everyone uses it.

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second, you downplay various attack vectors. it's very hard to predict, but many have offered at least credible analyses that suggest (for example) that governments could readily shut down bitcoin. there are also potential internal problems, like scalability and the evolution of the fee structure. at the very least, there are more unknowns than knowns here.

Perhaps I have downplayed the government threat. It may very well be possible for government to shut it down, at least at a technological level. However, governments "could" shut down the entire internet, but that's not going to happen because it's politically impossible. If bitcoin catches on, it would be equally impossible to shut it down. And if they tried, they would just be committing economic suicide.

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third, i don't see a justification for your claim that there can be only one decentralised online currency. you tie this claim only to the notion of the security of the block chain based on hashing power, but

(1) alternative currencies could rely on alternative proof of work,

(2) alternative currencies could rely on alternatives to the need for proof of work, and this becomes sharply easier as soon as you relax the design criterion of 'total decentralisation' toward 'decentralised for all practical purposes', and

(3) 'most secure' is never important in the real world; what's important is whether a technology is secure enough for the purposes for which it's being used, in view of its threat models.

(as a rough analogy, the rijndael cypher was adopted as the advanced encryption standard, aes, even though almost everyone believed it to be less secure than serpent and twofish. but it was faster and good enough for all conceivable practical purposes, given the standard's timeframe, threat model, and use cases.)

Suppose you constructed a bitcoin competitor, say bitcoin2, that relied on proof-of-work. Your bitcoin competitor has much less computational power than bitcoin. Any of the bitcoin miners could therefore conquer your tiny network and start reversing transactions whenever they pleased. For this reason, there can only be one. Even if your bitcoin competitor were technologically different than bitcoin, but still relied on proof-of-work, then it could be conquered by any of the bitcoin miners at any time.

I agree that if a decentralized currency didn't rely on proof-of-work then it could compete with bitcoin. But no one has actually invented such a thing, and I suspect that it's not possible.

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i'm not sure why i keep engaging these discussions, only to be misinterpreted as a bitcoin detractor. i'm actually trying to help people make better investment decisions, and though you don't have any particular reason to believe me, i have quite a lot of experience in this area. as a matter of full disclosure, at today's rates about 3% of my wealth is currently in a large pile of bitcoins that i mined cheaply early on, though that was not a conscious investment decision and amounts to little more than a lottery win.

Thanks for engaging.