Welcome
to the start of a brand new week and plenty of crypto-currency related news as
well.
As
bitcoin grows in popularity, more and more people are hearing about it and it
is getting increasingly wider coverage in the mainstream press. Over the
weekend, The Economist published a insightful piece about bitcoin, outlining
its flaws as well as the underlying beauty in its mathematics. Whereas much
press tends towards the negative, this is a well-written critical analysis and
explores some of the potential weaknesses we should all be aware of.
ALL currencies involve some measure of
consensual hallucination, but Bitcoin, a virtual monetary system, involves more
than most. It is a peer-to-peer currency with no central bank, based on digital
tokens with no intrinsic value. Rather than relying on confidence in a central
authority, it depends instead on a distributed system of trust, based on a
transaction ledger which is cryptographically verified and jointly maintained
by the currency’s users.
Transactions can occur directly between the
system’s participants at almost zero cost, without the need for a trusted third
party or any other intermediary, and are irreversible once committed to a
permanent and fully public record. Bitcoin’s mathematically elegant design ensures
that the money supply can increase only at a fixed rate that slows over time
and then stops altogether. Anonymity, while not assured, is possible with the
right precautions and tools. No wonder Bitcoin is so appealing to geeks,
libertarians, drug dealers, speculators and gold bugs.
When
it comes to U-turns, it is usually a reference to a political change of heart,
or perhaps at another end of the scale, a footballer not transferring to
another club. Here’s one that is going to prove very interesting to bitcoin
enthusiasts. Joe Weisenthal
(@TheStalwart) of Business Insider is changing his mind about bitcoin.
Despite
several articles writing off bitcoin as “a joke”, he is now eating those words. Here’s his article explaining
why.
Joe Wesenthal: Business Insider
I’m changing my mind about Bitcoin.
I used to think it was a joke or at best a
currency for clowns.
Now, I no longer think that. Now, I don’t know
what its future is.
Here, let me explain.
I’ve gone through two phrases writing about the
“crypto-currency” called Bitcoin. I first started paying close attention to it
early this year. In April, during its first big mega-spike, I wrote Bitcoin Has
No Intrinsic Value, And Will Never Be A Threat To Fiat Currency.
Then the price of Bitcoin crashed, and I kind of
lost interest.
Then a few weeks ago, as the price of Bitcoin
started exploding again, I wrote a post that earned me all kinds of trolls and
anger on the Internet. That post was titled Bitcoin Is A
Joke.
That post seriously caused a major ruckus.
Everyone on the Bitcoin message boards freaked out. Someone tried turning me
into a meme.
Ever
wondered what sort of research and work is going into bitcoin and the protocol
behind the scenes?
Well,
this is an interesting blog post from Ed
Felten about some of the research currently being carried out at Princeton.
There are some interesting thoughts about Prediction Markets...
Continuing our post series on ongoing research
in computer security and privacy here at Princeton, today I’d like to survey
some of our research on Bitcoin. Bitcoin is hot right now because of the recent
run-up in its value. At the same time, Bitcoin is a fascinating example of how
technology, economics, and social interactions fit together to create something
of value.
Our Bitcoin work started with a paper by
Josh Kroll, Ian Davey and me, about the dynamics and stability of the Bitcoin
mining mechanism. There was a folk theorem that the Bitcoin system was stable,
in the sense that if everyone acted according to their incentives, the
inevitable result would be that everyone followed the rules of Bitcoin as
written. We showed that this is not the case, that there are infinitely many
outcomes that are stable yet differ from the written rules of Bitcoin. So the
rule-following behavior that we currently see is at best stable in the weaker
sense that if everyone else is following the rules (and no one mining entity
has too much power) then deviating from the rules will cost you money.
Beyond this, we have built a better
understanding of the “political economy” of Bitcoin—how the Bitcoin community
governs itself to keep the system operating well, despite the lack of a central
authority and despite the complicated issues around the theoretical stability
of the protocol. The ultimate goal of this line of work is to understand how
Bitcoin is likely to deal with challenges in the future, and whether there are
feasible changes that could improve the governance of Bitcoin.
One
video that looks at ‘The True Value of Bitcoin’ has been published online by
Canadian philosopher and author, Stephan Molyneux. He has been talking about
bitcoin for over two years now and this is his latest look at what bitcoin is,
other than just ‘Internet money’. It is sure to provoke a few questions as well
as answering them.
Watch it on YouTube
And we could not complete our roundup without mentioning the story that is still doing the rounds and might send any bitcoiner with a few stashed away, running to double check their wallet security (and perhaps more importantly, whereabouts.) Matthew Norman in The Telegraph tells the story of James Howells, who has lost what now equates to nearly £5 million worth of bitcoin.
The timing may strike you as another informal application to be sectioned, coming in the week the Government performed its latest nimble U-turn over plain packaging for cigarettes. None the less, allow me to propose that the ban on tobacco advertising be suspended for one product, and that the famous Hamlet cigar campaign be revived for one glorious last hurrah.
Mature readers will fondly recall the commercials in which a sufferer of some personal calamity lit up, and was so utterly becalmed and revived that a beatific smile spread over his recently distraught features. “Happiness is a cigar called Hamlet,” went the tag line, to the background strains of Bach’s Air on the G String.
The star I have in mind for the new advert is one James Howells. In the absence of a miraculous tobacco curative, the only sensible use this IT worker from South Wales might have for a G string – be it taken from a violin or a lingerie drawer – is as a makeshift noose.
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