[TehDoctor]

Whats your view on bitcoin?
If you don't know what bitcoin is then read these:

http://en.wikipedia.org/wiki/Bitcoin
http://bitcoin.org
http://forum.bitcoin.org/
https://en.bitcoin.it/wiki/Main_Page

Talk about bitcoin here!

[gokujr93]

It seems convincing enough. I might try it...

[Frag_Bag]

A group of friends and I have been mining for the past 2 months or so, we've come up with enough money to build a dedicated rig making anywhere between 30 and 40 a day with really not doing anything. Good stuff, though currently the market looks like its about to topple if an investor setting on top of a good deal of coins pays out.

[FirtY]

It's getting some major attention from law enforcement both sides of the pond. It's un-taxable and untraceable... But more and more places are/were starting to accept bitcoin as currency, now a few places have dropped support for fear of angering the man.

I like the philosophy behind it but it does appear somewhat like a pyramid scheme in application. Get in early, you have a much greater chance of hitting the sweet blocs. If I had a few grand to spare, I'd set up a dedicated miner though... get in while the goings good...

[curb193]

Sounds good, but there's always the risk that retailers and exchange bureau one day decide they're only worth half of what they were the day before, or not at all. Totally giving it a try though.

[FirtY]

Currency experiences massive inflation in a single day, markets stay open

The day was October 28, 1929 and the sky was falling. That Monday the DOW Jones Industrial Average (DJIA) fell 12.82 percent. History books show that the next day the DJIA bled another 11.73 percent. Vast amounts of wealth were wiped out in an instant.

Today modern exchanges automatically close to prevent such catastrophic sell offs. Or, they do in the real world, at least. But on June 10, a new kind of market -- Bitcoins suffered a massive decline, that may signal the start of the world's first digital depression.

I. A 30 Percent Decline in One Day

This Friday the New York Stock Exchange (NYSE) was hammered, losing 172.45 points (approximately a 1.4 percent dip) to close below 12,000 for the first time since March 18, 2011 -- nearly three months ago. Traders greeted signs of slowdowns in global markets with serious concern.

But as bad a day as Friday was for NYSE traders, it was far worse for those who invested in an increasingly popular digital currency -- Bitcoins (BTC). At the opening bell at Mt. Gox, the world's largest Bitcoin exchange, a single BTC cost $28.919 USD. By mid-day that total had plunged to $20.01 USD -- a drop of 30.8 percent.

Granted, in recent weeks the market for Bitcoins has soared upwards, nearly tripling, due to increased demand and built in technical issues. So perhaps this inflation was merely reactionary. Nonetheless, it took many by surprise, as inflation on this scale had never before been seen in the fledgling Bitcoin market.

But, wait let's not get ahead of ourselves. Why should anyone care if the Bitcoin market crashed?

Well, today on Mt. Gox alone, approximately $2M USD in Bitcoins were bought and sold in 5,871 trades. That's unusual in and of itself -- only a total of $19M USD in trading volume occurred over the past six months.

The bottom line is that several things are clear from today's trading.

1. The Bitcoin market endured its first digital equivalent of a "bank rush" with people rushing to exchange their BTC for U.S. Dollars.
2. People have a large amount of money -- millions of USD sunk into Bitcoins lost big in the flash crash.
3. Unlike modern markets, which automatically close to prevent massive inflation, the digital Bitcoin markets stayed open.
4. Something major is moving the Bitcoin market in a sharp inflationary direction, in contrast to the predict deflationary trend

So what are Bitcoins and why is this intriguing? Let's take a look.

II. What is a Bitcoin?

Bitcoins [wiki] are virtual currency similar to the Linden Dollars (L$) used by Second Life users.

However, unlike L$, which are ultimately controlled by Linden Labs, a company (or "governing body" in some people's eyes), BTC have no central authority. The currency instead relies on a peer-to-peer system where everyone logs transactions and monetary events, prevent false transactions.

Also, unlike the L$, the focus of BTC is to exchange the virtual currency for real world services, not virtual ones.

People can obtain Bitcoins in two ways -- buying them or generating them.

To generate them, you have to run a complex math hashing algorithm, which tries to find a new bitcoin "block". Parallel computing devices -- namely GPUs have shown themselves most capable for this task. In fact with modern AMD GPUs it is possible to "break even" on your hardware costs by generating Bitcoins.

For more info about Bitcoin generation, refer to DailyTech founder Kristopher Kubicki's webpage bitminer.info.

The other method of gaining Bitcoins is to purchase them at an exchange -- the largest of which is Mt. Gox. For a full list of exchanges, refer here.

III. Are Bitcoins Anonymous?

One of the biggest monkeys on the back of Bitcoins is public misconceptions about privacy.

For example a Reuters report quotes a letter from Senators Charles Schumer (D,New York) and Joe Manchin (D, West Virginia) wrote to Attorney General Eric Holder and Drug Enforcement Administration head Michele Leonhart stating:

The only method of payment for these illegal purchases is an untraceable peer-to-peer currency known as Bitcoins. After purchasing Bitcoins through an exchange, a user can create an account on Silk Road and start purchasing illegal drugs from individuals around the world and have them delivered to their homes within days.


Now this is somewhat misleading in that Bitcoins themselves can be more or less traceable than how the user communicates with uses their IPs. Any time a transaction occurs, it's sent out from an initial IP to nodes on the Bitcoin network, which verify its authenticity.

Take Silk Road, for example -- the topic of a recent Gawker piece. An IP accesses this site, which is known for selling narcotics illegal in the U.S. If this is a user's direct IP, anyone who can sniff the traffic of the site can trace that user back to their home address, assuming cooperation of the internet service provider.

However, if you first route your IP through Tor -- an anonymizing service, you can make it extremely difficult for anyone to trace you. This is because BitCoin "accounts" are regularly generated and a single individual holds keys to multiple microaccounts rather than a single large account. To an outsider, this account is just a random-looking string -- nobody can tell who owns it. But using your personal key, you can sign transactions on the accounts you own.

As long as the public/private key cryptography scheme is sound, and you anonymize your IP, even the government will have a relatively tough time tracking you. The same can be said about any activity that occurs online.

That said, there's numerous ways your privacy could be compromised if your buying drugs or performing elicit activities. Some points of possible attack include:
1. Failure to anonymize IP due to using your direct ISP-provided IP address.
2. Failure to anonymize IP due to misconfiguration of Tor or other anonymizer (a surprisingly common occurrence).
3. Tracking of physical goods associated with purchases.

Wait, you say, how could #3 occur? Well, let's say you order a kilo of powder cocaine, using your Bitcoin treasure trove. Well the kilo comes from a well known dealer who's being monitored by law enforcement for their real world activities. Law enforcement note the package arrives at your house. They wait for you to take it in and then begin using it. They obtain a warrant and raid your house.

Remember, almost no "drug dealer" is going to be exclusively doing business via Bitcoins. So they're likely engaging in real world transactions that will make it likely for law enforcement to inspect anything they decide to mail.

In other words Bitcoin does provide users with a bit of anonymity, but to claim it's generally "untraceable" in principle is pure paranoia on certain government officials' and journalists' part. Bitcoin-driven transactions are very traceable; it's just that so far nobody has been interested in investing the large amount of effort it would take to trace them, as they have with copyright infringement or child pornography.

The DEA's response indeed seems to hint at this. Reuters quotes agency spokeswoman Dawn Dearden as stating, "The DEA is constantly evaluating and analyzing new technologies and schemes perpetrated by drug trafficking networks. While we won't confirm or deny the existence of specific investigations, DEA is well aware of these emerging threats and we will act accordingly."

IV. A Big Problem -- Getting Money In Or Out

While the threat of the U.S. government taking some sort of action over anonymity fears is certainly looming over the Bitcoin market, a far more serious problem is liquidity. In the traditional global currency markets, you can instantly exchange your currency for other foreign currencies on a number of exchanges. These exchanges can take bank wires or funds from digital accounts, such as Paypal.

By contrast Bitcoin exchanges like Mt. Gox do not accept debit/credit transactions. Up until last week they did accept eBay, Inc. (EBAY) subsidiary PayPal. However, PayPal has blocked transactions to the site. This is because PayPal has a policy against virtual currencies.

With an easy PayPal route gone, market liquidity was dramatically reduced. This may be a major cause for the market crash.

Currently the most well published ways to convert Bitcoins to USD or vice versa is to use Dwolla or Liberty Reserve. These methods are relatively straightforward, but transactions through these online billing services often move at a glacial pace, hampering liquidity. API problems with Dwolla further exacerbated the liquidity issues in recent weeks at Mt. Gox.

You can also mail a check to a certain individual known as "Bitcoin Morpheus" listed at the exchange, who will add funds to your Mt. Gox account. Granted this route might not be for the faint of heart as it seems rather "unorthodox" to say the least.

Now there is another method that could work slightly faster than any of the above. For now you can use a variety of means to quickly buy L$ (Second Life currency) and then use the virwoxSLL exchange to exchange L$ to BTC. The purpose of L$ and BTC is quite different, so it's unclear how long this route will stay viable, and many people don't realize you can get Bitcoins in this fashion.

At the end of the day Bitcoin has a very real liquidity problem.

V. What's Next for Bitcoin?

Unless Gawker and other media outlets can drum up enough unfounded paranoia about peer-to-peer currency to evoke some kind of draconian action by the U.S. federal government, it's unlikely that Bitcoins will go away.

However, market volatility poses a very serious risk to BTC users -- be they miners, traders, or merchants who accept BTC as payment for goods or services. To that end, a major improvement would be for Bitcoin exchanges to implement mandatory market closures if the currency value dropped below a threshold. In theory this would be relatively easy to implement, and we expect that it will be done at some point to prevent one-day flash inflation/deflation.

At the same time, a viable billing service must step up and offer people the ability to use credit or debit card billable transactions in USD to buy bitcoins quickly and directly on a major exchange (e.g. Mt. Gox). If this can be done, market liquidity can be restored and the currency will once more flourish.

Last, but not least, concerns about deflation must be addressed as demand grows and production slows. As mentioned in the introduction, if deflation is not controlled, reactionary inflation spurts could be experienced. Indeed, a reactionary market movement could have been part of the cause for today's record-setting inflation.

It is possible that additional bitcoins could be distributed or other mechanism employed to prevent deflation, much as they are with standard currencies.

Bitcoins are certainly a novel idea in their implementation details and purpose. This article offers an introduction, but barely skims the surface of this phenomena and the true facts about it.

Ask some and they'll say Bitcoins are a scam/pyramid scheme. Ask others and they'll say the Bitcoin market has the promise to offer sustained success. There's valid arguments on both sides, but at the end of the day Bitcoins will still be around for the forseeable future.

In trading late Friday, Bitcoins recouped nearly half their losses, bouncing back to 24.34. That's still a massive crash -- around 15 percent in one day. But it shows that the market isn't dead. The U.S. economy survived Black Friday and today sustains a massive amount of wealth. Likewise, perhaps the Bitcoin movement can survive this tough time and find its way. After all -- people are still buying Bitcoins.

Source:

http://www.dailytech.com/Digital+Black+Friday+First+Bitcoin+Depression+Hits/article21877.htm

[FirtY]

Bitcoin, the decentralized virtual currency whose value has skyrocketed in recent weeks, faced a key test Monday as a veteran user reported that Bitcoins worth hundreds of thousands of dollars had been stolen from his computer.

Ars Technica was unable to independently verify the user's story, and he did not respond to our request for an interview. But whether the story is true or not, it highlights a major disadvantage of the currency's much-touted lack of intermediaries. Bypassing middlemen frees users from government meddling and bank fees. But it also deprives them of the benefits those intermediaries provide, including protection against theft and fraud.

As we reported last week, Bitcoin's key selling point is its clever peer-to-peer scheme for recording transactions. Rather than relying on a centralized database, the Bitcoin protocol allows any computer on the Internet to participate in the payment clearing process. At the end of each 10-minute round, one of the nodes is chosen at random to receive a payment for his contribution to the process. For this reason, participating in the clearing process is known as "mining" Bitcoins.


Wiped out

The user known as "allinvain" is a long-time contributor to the Bitcoin forums. He says he's been mining Bitcoins for over a year, and had amassed a fortune of 25,000 BTC. This was a modest sum a few months ago, when Bitcoins were worth pennies, but over the last two months the value of a Bitcoin skyrocketed to around $20, which means 25,000 BTC would have been worth half a million dollars. "I remember watching the price like a hawk," he wrote.

And then disaster struck. "I just woke up to see a very large chunk of my bitcoin balance gone," he wrote. "Needles [sic] to say I feel like I have lost faith in bitcoin." He speculated that a Windows security flaw may have allowed the culprit to gain access to his digital wallet. "I feel like killing myself now," he said.

Some other members of the Bitcoin forum expressed skepticism about allinvain's story, but most believed it. Another member of the Bitcoin forums chimed in to report that he'd lost a smaller amount of money to the same Bitcoin address.

Forum members discussed several options, including calling the police and asking MtGox, the popular Bitcoin currency exchange, to block the funds from being converted into more traditional currencies.


"An expensive test case"

Ars Technica talked to Gavin Andresen, the leader of the Bitcoin software project, about the incident. Andresen said that it would be difficult to confirm the authenticity of the report. "All Bitcoin transactions are broadcast on the network," he said. "So if someone wanted to claim they lost a bunch of bitcoins, they could claim that any transaction on the network belonged to them."

Still, the kind of attack described in the post is certainly possible. Andresen says he always emphasizes that Bitcoin is an experiment, and not (yet) for the faint of heart. "Unfortunately, this is an expensive test case for the guy who lost the Bitcoins," he said.

Andresen says that there's currently no good infrastructure for tracking down stolen Bitcoins. And, he said, there may never be a good mechanism for reversing unauthorized transactions because Bitcoin transactions are designed to be irreversible. "Once a transaction hits the network, you can generate other transactions that depend on that transaction," he said. "So Bitcoin transactions get tangled up fairly quickly."

Even if it were technically feasible, adding a mechanism for disputing transactions would create headaches of its own, because that mechanism could be used fraudulently as well. "Merchants like that there are no chargebacks" with Bitcoin transactions, Andresen said.

Right now, then, Bitcoin is a "work in progress" only suitable for the most technically savvy users. Will Bitcoin eventually be ready for the masses? Andresen thinks so. He told Ars that the Bitcoin protocol is flexible enough to support clients that handle security in a more sophisticated way. For example, a future client could split a user's private key between his PC and his cell phone. As long as no one compromised both devices simultaneously, the user's bitcoin would be safe.


The benefits of intermediaries

Still, a financial system without intermediaries has some inherent downsides. Splitting a Bitcoin user's private key between a computer and a cell phone makes it harder to compromise, but it also creates new risks. For example, unless the user backs up his cell phone separately from his computer, losing the phone would mean losing the Bitcoins. A multifactor authentication scheme also can't protect a user who is tricked into authorizing a payment to the wrong party.

Indeed, the traditional banking system offers consumers protections against fraud that are hard to replicate in any system without intermediaries. For example, federal regulations limit consumer liability for fraudulent credit card transactions to $50, and some banks offer cards that reduce the consumer's liability to zero.

And because liability for fraud falls mostly on the banks and credit card networks, these parties have invested in infrastructure to detect and deter fraud. They set minimum standards for getting a merchant account to exclude fly-by-night companies. They carefully monitor their customers' transactions and investigate any that look suspicious. And with the help of law enforcement, they aggressively prosecute fraud, both to recover lost funds and to deter other potential criminals.

Of course, some anti-theft and anti-fraud services can be built on top of the extant Bitcoin infrastructure. For example, Clearcoin holds payments in escrow for sellers until buyers receive their orders, making Bitcoin purchases less risky. And services like MyBitcoin hold Bitcoins on their customers' behalf. Presumably, these "online wallet" services can invest more heavily in securing their systems than individual users would.

But this is just to say that the disadvantages of an intermediary-free banking system can be mitigated by reintroducing intermediaries. And if most users are interacting with Bitcoin via intermediaries like ClearCoin and MyBitcoin, it's not obvious how many of the system's much-touted advantages are preserved. If your Bitcoins are held by a third party like MyBitcoin, then a government can force MyBitcoin to freeze your account just as it can force a traditional bank to do so.

In any event, Andresen seems unfazed by the heist and confident of Bitcoin's long-term viability. "These problems will get solved," he told Ars, arguing that the Bitcoin community simply hasn't grown large enough to throw serious engineering resources at them. And the broader Bitcoin community seems to agree. The market price of a Bitcoin has been stable over the last 48 hours at just under $20..

Source:

http://arstechnica.com/tech-policy/news/2011/06/bitcoin-the-decentralized-virtual-currencyrisky-currency-500000-bitcoin-heist-raises-questions.ars

[DrEarlInsanity]

call me a crazy mac user, but i'd rather FULL OUT PIRATE than "purchase" with a digital currency...

[tomandsusan]

The only person that makes money in a Pyramid Scheme is the original BUILDER! He usually controls all the money only giving back pennies on the investment. If it sounds too good to be true, it usually is.

[mariacanet]

"The market price of a Bitcoin has been stable over the last 48 hours at just under $20.."

Look at its value now. With all due respect and as a ~joke~:

Tips: 1JsVAnRkHy3FsPMdFD99bvkge1Gk5sBC3q

[Gairnok]

Why you digging up two year old thread?

[mariacanet]

Because I felt like it..... Why not ?

[FirtY]

http://www.thebitcointrader.com/2013/04/torbroker-silk-road-of-stock-brokers.html

[Andre69er]

Quote: Originally Posted by Gairnok

Why you digging up two year old thread?

With the recent events in Cyprus, BTC has skyrocketed. Surpassing a 1BN market cap. Current trade value is 174USD

http://bitcoin.clarkmoody.com/

WHAT!? Anyone regret not investing in p2p cryptocurrencies now?