Quote from: bitcoinbitcoin113 on April 05, 2013, 05:04:37 AM

Quote

Then there is what I consider to be Bitcoin's fatal flaw -- the inherent design and de-coupling of the currency from the obligation of sovereigns. Yes, obligation -- not privilege.

Bitcoins are basically cryptographic "solutions." The design is such that when the system was initialized it was reasonably easy to compute a new solution, and thus "mine" a coin. As each coin is "mined" the next solution becomes more difficult. The scale of difficulty was set up in such a fashion that it is computationally infeasable using known technology and that expected to be able to be developed in the foreseeable future to reach the maximum number of coins that can be in circulation. Since each cryptographic solution is finite and singular, and each one gets progressively harder to discern, those who first initiated Bitcoin were rewarded with a large number of easily-mined coins for a very cheap "investment" while the computational difficulty of "extracting" each additional one goes up.

That means that if you were one of the early adopters you get paid through the difficulty of those who attempt to mine coins later! That is, your value increases because the later person's expenditure of energy increases rather than through your own expenditure of energy. If that sounds kind of like a pyramid scheme, it's because it is very similar to to how the "early adopters" in all pyramid schemes get a return -- your later and ever-increasing effort for each subsequent unit of return accrues far more to the early adopter than it does to you!

I'll just cover this excerpt:

1) I have no idea what this "obligation of sovereigns" has to do with bitcoin. Sounds pretty weird and not something I want anything to do with if I can help it.

Yeah - and if history is any guide WRT the Fed, and their "obligation" to "maintain a strong dollar" / "provide liquidity in a crisis" / "provide solvency in a crisis" as directed by the sovereign...how cute. They did exactly the opposite for every crisis.

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