Hearn: The resolution of the Bitcoin experiment [LWN.net]

Hearn: The resolution of the Bitcoin experiment

Posted Jan 18, 2016 9:37 UTC (Mon) by roblucid (guest, #48964)
In reply to: Hearn: The resolution of the Bitcoin experiment by bojan
Parent article: Hearn: The resolution of the Bitcoin experiment

What bit coins are buying, is a proportionate share of the ledger. Currencies retain value through some scarcity eg) Gold & Silver, in bit coin the "proof of work", adding a nonce which is used to find a crypto hash to begin with many zeros and seals the block chain ledger. It has to be hard, or transactions could be faked, altering the ledger and finding a new nonce/hash which looked correct before the correct block is "mined" legitimately. Maintaining a copy of the ledger & sealing transactions need an incentive, hence rewards for coins "mining" and (small) transaction fees when a block is validated. The miners are actually preventing fraud by confirming and sealing transactions, having a copy of the open transaction ledger for perusal (the block chain).

Unfortunately, miners can get a reward for empty transaction blocks, which does not do useful work and wastes energy & carbon emissions. Also distributing the whole block chain to every node becomes more and more inefficient.

To scale, some sort of hierarchy like NTP or DNS, imposed socially to have independantly run ledger copies, with mining rewards also distributed to pay for this service would be required, plus having transactions for independant wallets being verified in parallel in each confirmation window, that is multiple streams of transaction confirmations for wallets A, B, C & D which are making payments.

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Hearn: The resolution of the Bitcoin experiment

Posted Jan 18, 2016 12:07 UTC (Mon) by bojan (subscriber, #14302) [Link] (1 responses)

I know this is the technical explanation, but that accountants are all of a sudden these all powerful masters of universe, capable of creating money, still sounds totally bizarre to me. Maybe I'm just old fashioned...

Hearn: The resolution of the Bitcoin experiment

Posted Jan 18, 2016 16:55 UTC (Mon) by pboddie (guest, #50784) [Link]

I must be old-fashioned, too. The explanation posted above is possibly the most coherent one I've read in any summary, with most references to Bitcoin involving the hateful (and dated) "cyber" prefix glued onto "currency", pushing all the shallow journalistic buttons about alternatives to the mainstream, "anarchic groups", radicals and "free-thinkers".

But cut through the hype and you're left with something that...

Isn't widely accepted, relative to other well-known means of payment... Diners Club cards excluded. ;-)
Has fluctuated significantly and rapidly in value for non-obvious reasons.
Seems to involve doing business with organisations that even people with enthusiasm for the concept might have little familiarity with, meaning that random people are unlikely to trust the whole thing at all.

It might have been attractive for an individual to speculate on Bitcoin - there's even something sounding like that written in another comment here, and there are new stories about people who did well early on - but few ordinary individuals are likely to be successfully speculating on traditional currencies. Meanwhile, to retailers and the average person, any additional currency (traditional or not) can be a significant risk that is best eliminated if it appears a likely target for speculation. Just ask all the people who took out Swiss Franc loans over the years to get better borrowing rates than in their local currency.