[Chugalug] Bitcoin ... algorithms, and scams

Lynn Dixon boodaddy at gmail.com
Thu Sep 5 03:56:24 UTC 2013

Great points.  But I would like to add something to them.  Once the rewards
for finding a block have all been used (meaning no more BTC awarded for
finding a block), miners can still make money from the transaction fees.
 Whenever a miner finds a block, that miner will write the transactions (as
in people sending/received BTC to one another) into that block.  The
network has a transaction fee mechanism, but most miners are not currently
concerned with the transaction fee, since the rewards are still high per
However, once the rewards evaporate, I predict miners will start using the
transaction fee mechanisms to offset the loss of the rewards.  Sure, miners
will leave the market since there is no more reward, but this is a great
example of a self balancing ecosystem.  Those that think its non-profitable
to mine with no rewards will leave, which allows miners that can make
profit from transactions fees to reap the revenues.

On Wed, Sep 4, 2013 at 11:22 PM, Keith <uspatentpending at gmail.com> wrote:

> Hi Mike,
> I'm no bitcoin expert but I do have some thoughts on the subject of
> currency.
> First of all, all currency, including physical currency, like gold and
> silver is a fabrication. It only has value because we assign it value.
> Also you are overlooking the fact that bitcoins will eventually be
> completely mined. There are a finite number of them. So, what you are
> seeing now is like a gold rush, but with a definite and predictable total
> supply of gold.
> After the supply available for mining ends, BTC will be the same as any
> other currency from a value standpoint, with one exception. All currencies
> are valued based on public perception of that currency's value. Most
> currencies are valued in part by the faith people have in the nation/body
> that issues the currency and can be directly influenced by the policies of
> that body.
> Bitcoin is the same in that it's valued by people's perception of its
> value, and different in that the value is not based at all on the faith in
> or policies of the nation/body that issued it, since there is none.
> I see only three watch points in bitcoin. One is that it seems like a
> currency with no political base could be far more volatile, with traders
> having a much larger impact on the value of the currency than the people
> using it for purchasing.
> The second is whether it will truly become widely adopted as an acceptable
> form of credit. Only time will tell.
> The third watch point for me is the fact that the number of bitcoins is
> static. Whether it's good to have a money supply that can never grow is
> something that has been debated for years. To me, it seems bad to be
> inflexible this way, but I'm no economist and I could do to read more on
> this subject.
> All that being said, I think an argument that this is somehow a ponzi
> scheme or a scam is probably not a good one. How the currency works is
> fairly well documented and it has been working this way for a while.
> Mining the currency while it can be mined is something that people are
> going to make money on, both in supplying the equipment for mining and
> mining itself. When all the coins are mined, that profit is over for both
> parties. Until then, the question of whether it will be profitable to mine
> is just a cost/benefit analysis based on facts that are openly available.
> There is probably not much use telling people that are making money mining
> that they are idiots for doing it. As long as they are immediately trading
> the bitcoins they mine for USD, I see no value in your arguments against
> them.
> Thanks,
> Keith
> On Sep 4, 2013 9:28 PM, "Mike Robinson" <miker at sundialservices.com> wrote:
>> > Much more intelligent people than I have taken apart the Bitcoin
>> algorithms
>> > (after all, it's all open-source), and to my knowledge, these are the
>> only
>> > significant vulnerabilities of Bitcoin that have not already been
>> addressed
>> > in software updates.  The first is being watched closely (for example,
>> > https://blockchain.info/pools).  I'm not sure what consequences the
>> second
>> > would have, but the SHA-256 / SHA-2 algorithm has been around for a long
>> > time without showing signs of cracking.
>> All right, ladies and gentlemen, at this point I believe that it is
>> appropriate for me to be "a great deal more specific than I have been up to
>> now."
>> "Currency," first of all, in any and every form, is a purely =human=
>> enterprise.  It could be a gold coin; it could be a gold nugget; it could
>> be a seashell; it could be a massive stone disk; it could even be a piece
>> of paper.  It doesn't really matter, as long as it is (simultaneously ...):
>> - accepted
>> - hard to pick-up on the roadside
>> - (yet) widely accepted, and
>> - relatively common, such that it can be produced in (!) NECESSARY (!)
>> "The perfect currency unit" today is probably "the ACH wire-transfer data
>> packet."  On the appropriate, presumed-to-be-secure data network, such a
>> packet is, upon receipt, sufficient to cause the "wire transfer of" an
>> arbitrary "(amount)" of "(currency_units)" from one international
>> bank-account to another.  Billions of (currency_units) change hands every
>> single day, based upon nothing more than this ... including every check
>> that we write, which these days is optically-scanned "even by the ATM
>> machine at Wal-Mart."
>> But ... "bitcoin is not based on this dynamic."  No, not at all.
>> Bitcoin is based on a =purely= =psychological= alter-dynamic:  the notion
>> of standing in some mountain-stream somewhere, with a metal pan in your
>> hand, and reaching down into that pan and OMG .. A .. HUGE .. GOLD ..
>> NUGGET!! .. I'M .. RICH! .. "and up from the ground came a'bubblin' crude
>> .. OIL, that is .. BLACK GOLD .. TEXAS TEA .."
>> The "bitcoin con," first and foremost, is based on the dynamic that
>> "VALUE = SCARCITY."  There are only so-many fish in the sea, and there will
>> never be more.  (Thus saith an "assumed to be trustworthy real-person" who,
>> so far as anyone can actually determine, might not even exist.)  The only
>> way to "have one" is .. to "get one" .. which means that you must (pay
>> $5,000 USD to ... heh ...) "dig one up."  According to whom?  Why,
>> according to this maybe-non-existent unnamed person, of course!!
>> Fast-forward to "tomorrow, 7-AM at Chattz."  Oops... you can't buy a cup
>> of coffee, because you have not yet been lucky-enough (sorry, it is the
>> luck of the digital draw...) to dig-up another digital gold-nugget.  (And,
>> until you do, you can't eat anything for lunch, or fill-up your car, or buy
>> anything at Hamilton Place.)  Yessir, both you and your employer and your
>> shopkeeper and the guy who takes away your garbage CAN RUN OUT OF ...
>> "Money(!), itself."  Indeed, to extricate yourself from this conundrum,
>> someone's got to (a) discover a nugget .. (b) trade it two-or-three times
>> so that it .. (c) somehow winds up in YOUR hands so that you C-A-N .. (d)
>> BUY - YOUR - DAMN(!) - COFFEE!!
>> ... which, to make things very short, "does not sound like such a
>> practical Currency System."
>> Nope... "the hallmark of a truly successful HUMAN currency system" ... is
>> not SCARCITY at all.  But ... liquidity.
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