RoR: Forum

Jules,

Cost effective? Yea its more cost effective in the winter to heat your home with bitcoin hashing rather than in the summer when you might be actually fighting the heat generated with AC, making it even more expensive to hash. But then other people might do the same thing... and market participants generally do what is more profitable. Yet I think there will be for a while people who just hash, not for profitability, but simply to participate in the distributed money revolution. But after people start using the ASICs like in the article above, using graphics cards will be a waste of electricity (The ASICs are custom built for efficiently computing SHA256 hashes).

Will they even be able to trace it? Only if the person you are trading with reports you, or if your communication with the person isn't secure.

Ohyea, back to your computer specs... you said you have 64GB of memory? Are you sure that is correct? That's quite a lot of memory. Holly crap didn't realize they sell 16GB modules now!

==================

I thought of a better way to describe the proof of work idea in Bitcoin:

Imagine that each time a bitcoin solution is found, everyone has to start afresh looking through a new lottery bin the size of the earth, with 1.1579209e+77 balls in it (That is 2^256, the number of distinct outputs of the SHA256 algorithm). The bin doesn't just have lottery balls in it, it also has lots of dirt in it to, so its a real pain in the butt to even find a ball. The balls are randomly distributed through the Earth.

As I speak (2013-03-29), the Bitcoin algorithm says you need to find a number less than 4026319404534786334009451711043898716884778820756489262596096 (4.0263194e+60) in order for your block solution to be accepted.

Its much harder to find a ball with a smaller number... proof of work.

Post 21

Friday, March 29, 2013 - 7:17pm

I believe it is actually 8x8GB ram, I will check when I get home in the morning. It also has a 1.2TB solid state hard drive for the os and 2 x 3.5TB hard drives set as a raid array. (Room for 11 more hard drives and another video card as well).

Post 22

Saturday, March 30, 2013 - 8:47am

SW: You wrote about collectors paying more in today's currency for Continental dollars than they were worth when they were issued. So what? You aren't talking about apples and apples. You are talking about a current exchange media versus a collectible that is no longer an exchange media. You are talking about currency versus no longer a currency. That is a total evasion of the issue of fiat money versus intrinsic worth.

You can goto a numismatic convention and exchange Confederate currency for gold bullion. Numismatics is the last and largest unregulated money market in the world. We know more about money than the international bankers (obviously). Errors abound, of course. At a show, I met a collector who admired Mussolini and advocated fascism. Can't help that. But, largely, the absolute facts of the marketplace are found on the bourse floor at a numismatic convention. The idea that money is a "universal medium" is just plain wrong. Different people prefer different kinds of money for different purposes at different times. Continentals came and went and then came back... big time...

F. A. Hayek said in "The Denationalisation of Money" that freed from government controls, banking will take on forms we do not yet imagine. That is true, but also, something of an oversight. Bitcoin proves that. In fact, the governments - even Cyprus - only control some kinds of money and banking. Many other options do exist and people engage in them all the time. You may have seen ads for cellphone banking. Maybe you do this, or have an Isis or something that lets you shop and pay from your phone. In Africa, they have been doing this for years. Lacking a reliable banking system in the first place, and being too poor to have money in the bank any way, people in Africa use cellphone minutes as an ad hoc currency which they can trade among themselves.

DMG and Jules: Nothing about computers surprises me any longer. I recently read of a brute force attack on every possible password from huge respositories that were hacked into such as Experian, the State of South Carolina, LinkedIn, and many many others. The cracking machine was made from four game stations whose powerful graphics processors broke every one of hundreds of thousands of 8-character passwords by brute force in a matter of a few minutes. From Ars Technica: Why Passwords Have Never Been Weaker.

At a recent computer convention here, I met a vendor selling solid state memory: disk is dead. The stuff is measured in terabytes: quadrillions.

Post 23

Saturday, March 30, 2013 - 9:53am

Michael,

I said that you were comparing apples to oranges in discussing collectors paying more in today's dollars for Continental dollars. Apples to oranges because one is a collectable and the other being a medium of exchanage. I said that was evading the issue we were discussing: the issue of fiat money versus intrinsic worth and scarcity.

That should have been obvious since to be a collectible it needs a bit of scarcity, and not being a medium of exchange you can not exchange it for anything at the local supermarket. And it is more a case of a barter than a purchase with a recognized medium of exchange. After all, how many businesses across this country would be happy to receive some numismatic collectible in exchange for their wares? This is the difference between a barter and a purchase using an exchange medium.

That some people at a numismatic convention barter one collectible for another, or for gold which is also sold there is irrelevant to the issue at hand. Again, a total evasion of the issue of intrinsic worth versus fiat currency. (p.s, I'll bet most, if not all, of the people who did such a barter mentally or on paper did a quick calculation of the going market price - in dollars - for the Confederate currency and the market price - in dollars- of the gold being offered in trade.)

And as to some people in Africa trading cell phone minutes... Wouldn't you say that is an instance of intrinsic value? In prison they trade cigarettes - again, intrinsic worth (as long as there are people that smoke).

I repeat, gold is, and has been, and in the foreseeable future will be valued for physical properties - within economics that is called having "intrinsic value." Combined with its natural scarcity, homogeneous nature, high unit value, and durability (along with other intrinsic properties) that makes it a good medium of exchange and a good store of value. And the recognition of this is in its adoption in the market place as a store of value when paper is looking shaky.

Post 24

Saturday, March 30, 2013 - 11:29am

My wife and I went out shopping and out to lunch; and while on the road, I realized that you are confusing the intrinsic characteristics of gold with intrinsic value. Gold has no intrinsic value. Nothing does. Value can be objective or subjective, but value always is in relationship to a person and for a purpose.

I offered example after example of changing values. Values change with persons and contexts.

You must know the Liberty Dollars of Bernard von Nothaus. They were a preferred money for a network of patriots. I know such people who do indeed buy gasoline with silver coins. You call it "barter." But the gas station owner is not going to eat the coins, but only spend them among other patriots for the things he wants. Silver coins are money.

I wager that given some product knowledge or "consultative selling" you could buy gasoline from some of those same patriots with genuine early-date Conferedate money, or hereabouts with genuine Republic of Texas "redbacks" or Continential currency signed by Signers of the Declaration, etc. Offer enough duplicates and you would empower that person to pass them on to the next patriot as money, also.

Scarcity has little to do with value. Scarcity is a factor in price, but not value.

To say that cigarettes have intrinsic value in prison is to change the context. It may be the fallacy of the stolen concept. The concept is the subjectivity of values in the marketplace.

Values are objective when they serve my life and my purposes. The values of other people are subjective to them from my point of view because their motivations are irrelevant to me in the marketplace. (Other considerations apply in other contexts, of course.)

Post 25

Saturday, March 30, 2013 - 1:16pm

Speaking of passwords... For my valuable stuff I now use 16 character passwords that use the full US keyboard character set, using cryptographic quality random character selection. 8 character passwords can now be broken pretty quickly (within a year) if a person has direct access to the encrypted files.

Post 26

Saturday, March 30, 2013 - 2:04pm

Michael, You are thinking that the only context in which one can speak of value is where an individual person is actively valuing something in the moment. That act is the root of human values, and no collective can perform the act of valuing apart from that which is done by individuals. But it can be valid to say that Americans tend to value hamburgers more the Japanese do. We can use the plural here to say who is valuing. We can 'average' (use phrases like "tend to") since some Americans might not like hamburgers. We can also use the past and future tenses. "Even 50 years ago, Americans tended to value a good hamburger. And, I bet that in another 50 years Americans will still tend to like hamburgers."

You are correct in asserting that I'm speaking of intrinsic characteristics. But I'm going beyond that to say that these characteristics tend to be of value. And in economics it is common to use the short hand way of saying of that by saying gold has intrinsic value. That does NOT mean that the valuer somehow lives inside of each particle of gold, or that there is NO valuer ever involved!

Back to the hamburger. I can ask you if a hot, juicy, well-made hamburger is of value. You could waffle and say, "Not without a valuer." And I'd point out that I could stand on a busy American street corner with a grill, make a hamburger and be assured that someone would value the burger I made. I am predicting that humans, given our natures and within our society and culture, will value certain things - and that some of those things will be valued for their intrinsic characteristics. For those things, I can say they have intrinsic value.

Notice that NOWHERE do I say that the value is not in relation to a person and for a purpose. Nothing requires me to know who that person is in advance, or to know all such people of the past, or to understand any details of their purpose, or the specific measurement of the valuing they did, or will do.

Bottom line: There are characteristics of things that tend to make them valuable to people. The more universal the valuing (across cultures and time and taste) the higher the demand for the thing for that purpose. Because, as you point out, there is a purpose in the valuing, we can examine the valuing people tend to do for things being used as a store of value. Why would we not tend to value sand for a store of value? Takes too many units (grains, pounds, tons) to store even a moderate amount of wealth. Not very homogeneous - one batch of sand might be a different color, or grain size, etc. You can go on and on and what you find is not that gold is the only good store of value, or even the best for all people at all times, but you will find that it does quite well. It is the intrinsic characteristics of gold that make it valuable - it has intrinsic value.

If you are an oxygen breathing animal, then our atmosphere has intrinsic value for you. You don't have to engage in an act of valuing. You don't even have to be conscious. There is a relationship between your nature and the characteristics of our atmosphere that make it of objective value to you - intrinsic value.

You keep implying or outright stating that I'm disassociating the value from the valuer. I'm not. I'm using the adjective "intrinsic" to distinguish those characteristics inherent in an object that have been, are being, or will be valued. Those characteristics are there even if a valuer has yet to be born: There will be people in the future, not yet born, for whom the oxygen in our atmosphere will be a necessary value. For humans, oxygen is an intrinsic value in the atmosphere.

The characteristics inherent in paper money allow it to be printed in ever greater supply. The value of the printed money is not inherent in the physical entities (paper and ink); it's intrinsic worth is very, very low. Here is where value and scarcity become related. It is the natural scarcity of gold that keeps it from being abused like fiat money. Gold holds its value while the value of a printed dollar can vary in an extreme fashion with the number of them printed and that amount is nearly unlimited. No scarcity - no value.

Post 27

Thursday, April 4, 2013 - 9:58am

Bitcoin Hacked: Price Stumbles After Buying Frenzy

Online currency bitcoin had 20 percent knocked off its price overnight on Thursday as one of its major exchanges became the victim of a hacking attack leading to a sell-off in the virtual currency after reaching an all-time high.

Post 28

Thursday, April 4, 2013 - 4:08pm

20 percent movements in one day has so far been normal, although generally its going up. The company that was hacked was not a very big exchange... I'm guessing the price movements were not related.

Mtgox, the biggest exchange, had apparently been experiencing a "denial of service" attack, which is basically where a botnet makes tons of requests, overwhelming the company's server, making their website slow. Its not a very long term threatening thing, its just a little unpleasant until the company adds some protections. I don't think this had much of an effect on the price either... well I think back when it was about $30, there were a few people who sold out of fear.

I calculate that if bitcoin were to replace USD, then given the current USD monetary base is 3 trillion, and bitcoin's monetary base is 21 million, each bitcoin would be worth $143,000. That's probably a low estimate given the fractional reserve policies of today.

Post 29

Friday, April 5, 2013 - 1:49pm

SE: ... as one of its major exchanges became the victim of a hacking attack leading to a sell-off ...

Every form of money has risks.

The reason that banks fire tellers who try to stop robberies is that no one cares about the money. I got that from two different tours of Federal Reserve Banks, Cleveland and Dallas. They said, in effect, "Yes, we have machine guns in the walls, but, no, we do not care about the money because the BEP will create more to replace it if it is stolen."

Plus paper money comes with serial numbers that let it be traced. This has been done in some high-profile criminal cases, especially ransoms. In theory, then, the government can track the money you get and spend.

On the other hand, if you owned 100 certificate shares of Rearden Steel and they were stolen you could call your broker and have them cancelled and reissued. Of course, now, everything is electronic. That causes some hard core libertarian economists to question the very foundation of NYSE and S&P reports. In the old days when a share was sold, it was transferred and cancelled like a bank draft (check). Armies of clerks did the work. Now, who knows? With everyone electronic, what if a million share of General Electric were stolen? Who would know? And so, more basically, how do you know how many shares actually are bought and sold? Or issued?

Of course, you don't need computers for that. Did not Gould and Fisk have a printing press running off Erie Railroad stock certificates? Vanderbilt was forced to buy them all up until he could find the press and shut it down. Just to say ...

With gold coins, once they are stolen, they are gone and you are out of luck. In the days of the Old West, the reason that the town possed up and chased bank robbers is that it really was someone's money - gold, silver, paper - that was being stolen. In the story of the Peace Dollar silver dollar issue, Congressman William A. Ashbrook of Ohio was an early proponent of the commemorative. However, the bank where he kept his own numismatic collection was robbed, and his vault was looted. He lost interest in numismatics and never collected again. Gold and silver have their downside.

(Edited by Michael E. Marotta on 4/05, 1:52pm)

Post 30

Tuesday, April 9, 2013 - 12:45pm

I think that fiat (and maybe bitcoin, but my guess is governments will kill it at some point) will remain to do what Michael says - act as a medium of exchange. Physical Gold, is, however, unique in that its best use is as a store of value - not a medium of exchange. I am a believer in what is called "free gold" - http://fofoa.blogspot.com/

The narrative of freegold appears to best fit the facts as to what has and likely will happen. Good news is that we don't need to do anything politically at all, it will fix itself once the current messy regime collapses, which appears inevitable. Meanwhile, accumulate physical gold.

Post 31

Tuesday, April 9, 2013 - 3:48pm

Kurt,

Thanks for the link. I found: FOFOA: Flow Addendum. In this article (written in 1999), the author explains that:
1. Unlike my previous belief, oil producers actually didn't keep dollars so much, they traded them in for gold.
2. At about 1980, the oil producers started using the gold futures market instead of the spot gold market, which pulled the price back. (Which partially explains the cause of the drop of the gold price in ~1980, combined with higher interest rates). The supply of paper gold and gold futures has taken a large bite out of the demand for delivered gold...

But then as we got closer to ~2003, with the new ridiculously low interest rates, the demand for delivered gold has begun to cause the price of gold in dollars to increase once again, despite the huge paper gold market.

Peter Schiff claims that the current plateau of the gold price is caused by some investors falling for the Government's claims that the economy is recovering. Of course the Fed's claims are boloney... the economic growth rate they claim is way below the real inflation rate that we see of food, gas, and the M0/M1.

Maybe the gold price has also kind of been held down by that the US government has confiscated it on multiple occasions: 1933 (US citizens could not redeem their deposits), 1971 (foreign countries could not redeem their deposits), 2007 (e-gold & Liberty Dollar). With the government confiscating gold from anyone trying to make a gold bank, gold's function as money has been severely hampered, and hence its market value has been reduced.

Anybody have any good links on what is going on in Cyrpus/Europe?

Post 32

Wednesday, April 10, 2013 - 10:20am

Some other blogs that discuss Cyprus:

http://detlevschlichter.com/

http://www.oftwominds.com/blog.html

Post 33

Wednesday, April 10, 2013 - 5:54pm

Bitcoin went through some wild rides today. High of 266, low of 101. Sitting around 130 ATM.

Post 34

Wednesday, April 10, 2013 - 7:59pm

Over time, those wild rides must smooth out for it to be a universal store of value.

To be a store of value the market has to have confidence that there won't be radical variations. It should find some rough ratio to the dollar, to gold, to a basket of currencies. If it is to become a standard, like gold is, it needs to make sense to say that given the current number of dollars in circulation, the dollar is worth about X bitcoins... and know that it will stay in that general neighborhood.

It's new, and we don't yet have confidence in it. Only time will tell.

Post 35

Wednesday, April 10, 2013 - 8:01pm

Just over 90 million USD traded hands at Mt. Gox (largest bitcoin exchange) in the last 7 days. bitcoincharts.com view of recent volume & price history Currently trading at around $170.

Post 36

Thursday, April 11, 2013 - 7:46am

Peter Schiff talking about latest gold market events. Says Goldman Sachs is probably saying to sell gold to help the Fed suppress the gold price, and that physical demand is increasing. Also at the end they throw in Bitcoin... Peter Schiff says people are looking for alternatives to the dollar.

Post 37

Thursday, April 11, 2013 - 8:44am

At the rate that Bernanke is throwing out fiat currency - billions per month - and the given lack of any light at the end of the tunnel (nothing this administration or this congress are offering give a reasonable person reason to hope), I suspect that the pressures to find alternatives are growing throughout different markets.

What scares me is that the move away from the dollar could suddenly take on a steam-roller like force. I'm not talking about just domestic transactions, but foreign exchange, central bank interactions, large commodity contracts, etc.

A sudden shift of that kind would result in our prices going up by as much as 30% in as little as a few weeks. Followed by a massive runaway inflation.

Hyperinflation could occur in the middle of a depression suddenly induced by a massive credit market collapse (Bernanke has been holding up the bond market with his purchases - a hidden bubble). I'm going to go get a cup of coffee before I depress myself.

Post 38

Thursday, April 11, 2013 - 8:55am

I suspect that the recent decline in the price of gold is nothing more than the short-term effect of some money that was in gold being drawn into the rising stock market. If that is so, then the slightest shakiness in equities and that money will come back. But this isn't an area where I'm either an expert or in touch with numbers on a day to day basis.

Post 39

Friday, April 12, 2013 - 9:56am