Thank you especially to nc501c who finally explained that the linked tutorials for electrum are outdated and tab names and steps have been changed for some reason.  Makes me wonder if few people check the tutorials, does anyone actually check the code of electrum?

I had one additional question if someone could please help another gen x who is even less computer capable.  What if I want to use the “signing offline with electrum” method but want to send from one paper wallet to multiple new addresses at once?  When I follow the linked tutorials, electrum seems to only allow me to send from one wallet to one wallet.  Granted I could just repeat the steps sending smaller amounts out of the original wallet each time.   Once I sign for a transaction offline and then transmit that transaction with the online computer, does that mean the original wallet’s private key is now insecure?   If so, how do I safely transmit from one paper wallet to multiple wallets - preferably using electrum?  Thank you all so much for taking the time to explain these complex procedures. 

It's not really uncharted territory.  There are countless examples of countries (the more despotic the more likely) outlawing or restricting currencies and precious metal.  In fact we see this to a large degree with bitcoin today.  I imagine the usage, and therefore value, would be a bit higher if you didn't have to worry about having your bank account shut, an audit generated, or $ in your trading platform seized due to govt (banking industry) attempts to damage bitcoin. 

However as someone mentioned, bitcoin is global.  When a govt tries to outlaw a certain currency or metal, generally this only has a very limited effect on the value you can obtain when selling within that country on the black (free) market.  Plus bitcoin is so much easier to transfer out or into a despotic country.  I'm guessing that outlawing in the US would create an almost insignificant value differential compared to the world market.

There is a second half of the equation, since currency has ultimate value because of the user pool and the investment pool.  At the moment I'm guessing the investment pool in bitcoin accounts for far more value than the user pool.  I don't know that "making it illegal" would currently stop too many US investors who wanted to buy, however it would certainly cripple the legal segment of our emerging user pool.  If the entire US commercial bitcoin market were shut down, that might remove 1/3 of the potential worldwide user pool for the next decade.  However I still don't think it would do too much damage because most of the value would still be derived from investors, overseas users, and the illegal user pool in the US.    All it would really do is wake up and piss off a lot of smart people. 

The only thing that worries me is if the govt can crash bitcoin thru some software attack, because I don't know enough to guess at their likelihood of success that way.

Just my 2 bits.  I've spent years successfully educating about precious metals and you have to look at things from the other person's perspective.  What is the real difficulty outsiders have in adopting new technology or taking risks?  It is fear of the unknown.  People have never bought a bitcoin before, all the average person knows is that it looks complicated, lots of unknowns, wallet could get hacked, etc. 

#25 on the list is the real way to get new users imo.  For example nobody had to proselytize me on bitcoin.  I wanted to buy back when it was 10 cents.  But I'm not a computer guy and I didn't want the hassle.  Yeah I expected it would rise, probably double or triple - haha - but who needed the headache.  I had many friends into bitcoin and I researched it somewhat online, but I didn't want to bother anyone to sit down and waste their time showing me how to safely buy bitcoin and nobody volunteered.  Finally I learned and the platforms got better and I started buying but only because I was always convinced it was a good idea.  The average outsider has twice as many issues - first you have to convince them of the usefulness/potential and then you have to show them how to handle bitcoin safely. 

Once I learned myself, within days I was helping friends just like me (convinced but didn't know the technology) buy thousands of dollars in bitcoin.   That made me uncomfortable being a total novice, but again nobody else was willing to sit down and guide anyone.  Just like with precious metal, there are 10,000 videos and discussions hyping "how great it is" but very rarely do you see a coherent explanation for lay people about the basic concept and most importantly a very very simple guide to buying and using coins.  Human nature always amazes me....

I'll try once again to answer this and then go back to the original question.  Bitcoin was set up specifically because the govt took down earlier models which were more vulnerable.  Again, research EGold, Liberty Dollar, etc.  To say the banks/govt will just stand around while they lose control over currency (power) is unrealistic imo, but nonetheless that discussion needs a different thread. 

Could an attack such as a 51% attack succeed in eradicating bitcoin (erasing all or "recent" transactions)?  Could it be done anonymously?  And again, most importantly, is there any solution to this within the bitcoin framework or in a proposed cryptocurrency.  For example what if the blockchain of a new cryptocurrency were hosted only through servers in safe countries run by vetted individuals?  What if the coins were not mined but donated at a given rate to a basket of legal protection & PR entities while the trusted servers ran off transaction fees?  Is anything being considered or constructed as a backup in case bitcoin is taken down by a 51% attack - is there a consensus solution?  Because if there is no backup or solution it makes such an attack far more likely.

Thanks, that is encouraging.  However, during the time period while an attacker had control of 51% of the cloud, could they destroy/redirect all records of existing bitcoin ownership - or new ownership going back ___ (please estimate) weeks?  Could an attacker hide within mining pools or is it certain the offending nodes could be detected and removed?

Sorry I'm not software savvy.  Could you explain in layman's terms how an "attack on the software" could destroy bitcoin?  I have never heard of this.  As I understand it, the best way to eradicate bitcoin would be a 51% attack which can apparently be launched secretly at an insignificant price compared to the monetary benefit for the US Govt/banks. 

As for other methods of attack centering around "make it illegal and start seizing bitcoins and punishing users" - we have countless exmples for how that plays out in the gold market.  It works to an extent but never entirely - and there is currently not even the political will in the US to keep gold illegal, much less bitcoin.  Furthermore the "make it illegal" approach would likely be slower moving and more predictable.  Many of my friends and myself are traders and investors, but it is the uncertainty surrounding an unexpected takedown of bitcoin that is generally our biggest concern and impediment to significant buy-in at this point. 

Thank you for the detailed response Danny. 

I guess a rough cost estimate could be obtained by determining the value of bitcoins mined (around half a billion $ per year?).   The mining operations cost less than this to run per year or it wouldn't be profitable.  Yes perhaps the payback period for the equipment is several years but that is not what I recall hearing.  If the attacking entity decided to sell the coins they mined they might offset most of that cost.  But assuming it is an inefficient govt agency, and they don't even sell the coins mined, it looks like 51% of the network computing power could still be obtained for under $1 billion.  That is less than the average fighter jet costs - to save US dollar hegemony worth trillions.

The question of "could it be blamed on another entity" is very important imo, since public backlash currently makes an overt attack politically unpalatable or perhaps impossible.   However the govt has proven very willing and able historically to engage in secret operations that would otherwise be rejected by the public. 

My main question now is:  If a government agency developed a "mining" operation equal to 51% of the network, could it be brought online to appear as just more private miners - or would there be clues that the operation was concentrated in a few locations with massive computing power in each location?

As I understand it, if the US Govt chose to entirely eradicate bitcoin worldwide the most likely way would be through a 51% attack (please correct me if some other software-based attack might be more effective).

I think this makes a few questions extremely important to understand:

Would the US Govt be able to keep a 51% attack secret or shift blame to another entity? 
Would there be signals of a 51% attack or could this occur with no warning?
How much would a 51% attack cost to implement roughly?
Most importantly - Could any responses be developed within the bitcoin framework or do you see another existing or proposed cryptocurrency that would be safe from a 51% attack? (for example I hear something about bitcoins being traded "individually"? after such an attack).

Sorry I know it is a messy bunch of questions, but perhaps also the most important to consider long-term.  Please just start with the premise that such an attack would occur rather than the entirely different question of "if" the govt would ever do such a bad thing.  Thank you.

The discussion keeps drifting from my original technical question, but OK I should have posted on the tech board - and for most people understanding if an attack would come is more important.  Yes, the govt is a collective consciousness - I didn't want to get into this since it is part of the side issue of if or when "they" attack.  The reason bitcoin wasn't taken down immediately, imo, is precisely because a collective consciousness is slow to act and bitcoin was hard to attack.  Eventually the collective consciousness of the Establishment will recognize the threat and act more forcefully.  Yes that may be years in the future but this is a different debate vs the originally technical question of how an attack would occur, could blame be shifted, and if there would be warning.

Thanks for the answers, to diverge again as to why:  If bitcoin continues unchecked it will likely displace fiat currency to a large degree.  Fiat currency is the main power source for the entire banking industry and to a lesser degree the US Govt.  The US / European Establishment are very unlikely to stand by as a large portion of their power structure is dismantled and handed over to diffuse individuals.  You can see already with the Mt Gox account seizure, bank account closures, etc. what the govt/banks think of bitcoin - they want to destroy it.  They have already done the same with EGold, Liberty Dollar, and many others.  However, bitcoin is so widely held, popular, apparently difficult to attack, and clearly a moral good that a traceable attack, at this point, is going to be a last resort.  I'd expect to first see a continued propaganda effort and further attacks on the fiat-bitcoin interface.  This will drive bitcoin further underground and give impetus to the propaganda that it is the currency of illegal activities.  Eventually this can attempt to build public support for destroying bitcoin.  So, back to the most important questions...

Yes, I should have said I'm focused on more "techinical" attacks like a 51% attack - things that could take it down worldwide.  I think we have a good idea with precious metals how things would play out with the traditional "make it illegal" approach.

I want to bypass a side debate on whether they would try to take it down and just begin with the premise they try.  If you want to consider whether they would try such a thing research: Liberty dollar, EGold, MFGlobal, etc. 

As I understand it a 51% attack would be one possibility, but I'm not an expert and really admire the collective knowledge enabled by focused discussion on this forum.

Starting with the premise that the US Government tries to take down bitcoin entirely. 

What would be the most likely form(s) of attack? 
Would they be able to keep any viable form of attack secret or shift blame to another entity? 
Which if any methods do you believe would have a likelihood of success given a concerted effort? 
What would very rough dollar cost estimates be for various methods?
Would there be signals of an attack or could this occur with no warning?
Could any responses be developed within the bitcoin framework or do you see another existing or proposed cryptocurrency that would be safe from such attacks?

Sorry I know it is a messy bunch of questions, but perhaps also the most important to consider long-term.

How long have you owned bitcoins?
About 6 months but larger purchase just 2 weeks.

How much have you been spending your bitcoins?
bought lotsa drugs - just kidding - I'm planning to use them when travelling and hold an equivalent amount just in case they continue to appreciate in price.  I hate dealing with traveller's checks, etc overseas and bitcoin seems like it might be the best and safest way to carry money while travelling for an exteneded period.  Also hopefully a nice way to meet some interesting people in each country thru localbitcoins.

Are you saving bitcoins in the hope they go up?
Yeah, that too.

Do you currently, or plan to, start bitcoin related businesses or accept them in your existing businesses in the near future?
No, I don't like getting audited - otherwise I would.

What business are you in?
retired engineer, now run online precious metals business

Sorry total noob question.  I'm told the best way to safely store bitcoins is in a paper wallet.  I'm told to go to www.bitaddress.org and, for greatest safety, download and run their "wallet generating software" while offline.  So this will give me a wallet with a public and a private key - and supposedly nobody else can know the private key because the wallet was generated offline and it is only printed on paper. 

Then I'm told it is safe to start transferring bitcoins to the wallet by giving out the public key (bitcoin wallet address).  I'm told that at some future point, when I want to transfer coins out of this wallet, I can go to www.blockchain.info for example and then I'll have to enter the private key to access that wallet and get the coins out.

My dumb question is:  If nobody knows the private key associated with this wallet and it was never sent out to the cloud, how does the network know if the private key is correct once I finally enter it to access my bitcoins?   Or to summarize colloquially, "How do it know?"   

Thanks, that makes sense.  Hope this is the near certain explanation for the anomoly.

OK I'll preface by saying I'm relatively new to bitcoin and not a computer guy.  Hopefully someone can explain - I hear about a "51% attack" where if any entity ever took over 51% of the computing power of the network, it would allow them to control the blockchain and, in effect, bitcoin.  As I understand it, miners collectively "control" the blockchain now.  So according to this chart:

https://blockchain.info/charts/miners-operating-profit-margin?timespan=1year&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=

the profitability of mining has dropped massively since June 2013 while the values of bitcoin have soared.  The miners now have a NEGATIVE 800% profitability.  Now knowing these guys aren't stupid I would tend to assume that the only entities "mining" at the moment are the ones WILLING to take a massive loss for some reason.  The only reason I can think is some entity is willing to lose a lot of money to gain control of the blockchain.  Tell me where I'm wrong because again, I'm no expert but don't see another logical explanation based on my limited knowledge of bitcoin.

Thanks very much Odo for the detailed response.   

What is the normal process thru localbitcoins then?

Trying to buy first time thru Localbitcoins.  I initiated a purchase and the seller enabled and funded escrow.  He then said I just deposit $ into his bank account and after I send him a scan of the deposit slip, he will release the coins.  He says he only sends me my verify code from local bitcoins after i deposit $.

I just want to check this is the normal/correct procedure.  For example, how does anyone verify that the bitcoins were sent to the correct wallet.  I assume it must go thru my localbitcoins wallet but there is no instruction to that effect.  What if $ is deposited and bitcoins never sent?  Can seller claim i requested sent to a different wallet or must it always go to my localbitcoins wallet?  Is localbitcoins good at taking the loss and paying my bitcoins in such a case - and if so what do i need to prove the $ was deposited?  Just my deposit slip from seller's bank?