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Serious Bitcoin Question Re Bitcoin Heist

I am reading about this bitcoin heist(link below) and hearing that the thief will have trouble converting them.

Ok, but is that really problem solved? If a thief or group of thieves can steal millions of dollars of bitcoins doesn't that screw up the entire econ system's concept of just 21 million if millions of bitcoins could get stolen (or lost).

If millions of bitcoins disappear from the system doesn't that undermine it?

http://www.newrepublic.com/article/115807/bitcoin-thief-stea...

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You might

want to get your facts straight, Smaulgld.com, before piecing together your arguments and criticisms...

Nobody stole millions of bitcoins. Somebody (or a group) stole millions of dollars worth of bitcoins.

thanks rpcongress- I fixed the OP to indicate as such

the concept however remains- if millions of dollars worth of bitcoins were stolen, Millions of bitcoins also can be stolen

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Smaulgld.com

think a bit and you might answer your own question.

If you were to put together ALL the gold ever mined by man in one place you could only build about one-third of the Washington Monument.

Apply your argument to gold. People can steal lots of gold too. Does that mean gold could no longer be used as money? No. It only means whatever gold is left is even more scarce, and therefore more valuable, so it can be broken down into smaller pieces for trade, just like bitcoins.

not really- bitcoin has an absolute limit

new gold discoveries can be made and treasure found.
If a commodity is TOO rare it can't operate as a currency.
For that reason platinum while rarer and more valuable can't be used as a currency

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Bitcoin

has an absolute limit on the number of WHOLE units, but not on the number of fractional units.

(technically there is now a limit on fractional units at .00000001 of a bitcoin, but that can be changed if absolutely necessary)

Even if there was only ONE bitcoin for the entire world it could be used as currency because people would trade the fractions of it - the only problem is that one person obviously can't own too much of that ONE.

EDIT: right now 1 bitcoin = 1,000 dollars. That means you can "carry" 1 bitcoin in place of 1,000 one dollar bills. Think about that for a moment.

It's not an absolute limit

It's a limit maintained by consensus. You say "technically there is now a limit on fractional units at .00000001 of a bitcoin, but that can be changed if absolutely necessary" the same thing could be said about the 21 million cap. Changing to a smaller fundamental unit than the satoshi is neither more nor less difficult than changing the 21 million cap. Neither is likely to happen, but both are possible, and by the same mechanism.

Anyway, 2.1 quadrillion satoshis is the current limit and that's more than enough for all but the bitcoin advocates with the wildest of imaginations.

doggydogworld

you're not entirely wrong, but I disagree. I don't think an argument over raising the hard cap is the same as allowing more divisibility of that cap.

The reason? When you create more WHOLE units of something (like dollars or bitcoins) you get inflation. Nobody wants that. However, making something more divisible doesn't result in inflation. For example, currently the penny is the smallest unit of a US dollar at 1/100. If congress voted to create 1/2 pennies or .25 pennies does that result in inflation? No. It only means the market can price goods with further precision. The holders of whole dollars experience no loss of purchasing power, no matter how small pennies get.

I commend you though on your obvious research and gained understanding into Bitcoin (it's more than many people...).

I have thought of that

but that also cuts against the "limit" argument. Don't think people would trust a currency with one unit especially if the other 21.9 million had vanished in a theft!

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I only

used that as an example. It's impossible for 90% or more of the bitcoins to vanish by theft because they are spread out now among thousands (more like hundreds of thousands, maybe millions by now) of people.

Next, there are only about 10-15 million (I forget) bitcoins NOW in existence. The world won't see all 21 million until after 2040 (approx) because bitcoin's inflation rate is fixed and decreases over time.

There have been big gold

There have been big gold heists and stories of lost gold (buried treasure etc..) as well.

What incentives do thieves have in stealing and burying bitcoins rather than spend them? Thieves cannot steal enough bitcoins to affect liquidity in the market. Infact in the average case, bitcoins lost to forgetfulness and carelessness (forgotten password, crashed computer etc..) would be larger than those stolen.

here is the difference

"What incentives do thieves have in stealing and burying bitcoins rather than spend them?"

Hackers could do it for fun
Those who are threatened by Bitcoin could do it for malicious purposes

"Thieves cannot steal enough bitcoins to affect liquidity in the market. "

What makes you so sure? The most recent heist was pretty big. As the stakes rise there will be more attempts

"There have been big gold heists and stories of lost gold (buried treasure etc..) as well."

Correct but Bitcoin has a hard stop at 21 million, there can be no further discoveries and if there are not enough coins confidence in the system could bel ost

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[i]Those who are threatened

Those who are threatened by Bitcoin could do it for malicious purposes
Even if they attempt to do it, their success rating will be less than what they could do with gold/silver hoarding. Because confiscation is difficult in bitcoin than precious metals. Security software/ideas will continue to compete and grow with hackers.

Off tangent, I feel that currently (in light of recent DP threads) the one most threatened by Bitcoin is smaulgld.com ;)

What makes you so sure? The most recent heist was pretty big. As the stakes rise there will be more attempts
Hacking and moving bitcoins is plain thievery and this will be much much more difficult when bitcoin starts to become spread more thin across the user-base. The more volume we see in the bitcoin exchanges and the bitcoin recipients, the less likely that such an attack is possible. Also historically, only governments have been able to affect liquidity of commodities by use of force and even they can't affect bitcoin directly.

Correct but Bitcoin has a hard stop at 21 million, there can be no further discoveries and if there are not enough coins confidence in the system could bel ost
Bitcoin is a digital currency and currently fungible (without loss in value) upto microBTCs (1 muBTC = 1/1,000,000 of a BTC). The bitcoin community will be more likely to agree on allowing further split-ability to nano/fermi levels rather than increasing the supply of bitcoins. This way liquidity is always guaranteed in bitcoins.

Once the bitcoin community starts making "exceptions"

it gets knocked down a few pegs. Its like a company that has become a penny stock and tries to boost its stock price by doing a reverse stock split

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First observation is this isn't a break in bitcoin

it's a hack against the computer serving web pages and whatever database contained the digits. Pretty serious hack too. They were able to insert metaware into the metaware without anybody noticing.

There's some standard IDS alerts that could have prevented this but anyone in IT security will tell you there is no such thing as IT security and that is IMMUTABLE for ALL TIME AND ALL PLACES.

Many other hacks exist at this level which is basically the blockchain itself and the end user. Man in the middle comes to mind as spoofs can occur at the residential level. Malware of all sorts is gonna start popping up in bitcoin wallets and exchange interfaces.

It doesn't call the system in general into question but my stars does it factor into the MASSIVE RISK FACTOR here.

I might be on the Treubig Show tonight to discuss my present thinking on bitcoin.

There is nothing strange about having a bar of soap in your right pocket, it's just what's happening.

The 21 million limit is a dual edged sword

It is positive in that you cant have a massive inflationary increase ala the Fed BUT it means NO further discoveries EVEN if half or more of the entire supply is stolen or lost- without those coins the systme may die and has a built in kill switch that won't allow more bitcoins to come into existence

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The 21 million limit isn't a hard limit

It's in the category of many kinds of changes that would require a "hard fork". It's listed here:
https://en.bitcoin.it/wiki/Prohibited_changes
as one of the changes that is "prohibited" because they would be "against the spirit of Bitcoin." But "prohibited" here carries no weight of enforcement, of course. What makes the limit reliable is not that it's unchangeable but that, at present, there's no reason that people would come to the kind of consensus needed to change it.

So, first, your scenario is silly. Someone steals and destroys half the supply of bitcoins? If there's an SHA-256 back door or something like that then it could happen, but in that case all the SHA-256-based currencies go down the tubes together, completely. That's too unlikely to spend any time worrying about IMO.

But even if your silly scenario could happen, with the remaining bitcoins continuing to circulate but half of them destroyed, the thieves would have just given the bitcoin community a valid reason to raise the limit by whatever number of bitcoins were provably destroyed.

ok go ahead, raise the limit, THEN hackers strike again

confidence in bitcoin gone

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Sillier and sillier

So now you're hackers who could be rich beyond their wildest dreams but decide instead to bring down bitcoin entirely just for lulz, and whatever exploit they used to steal the five billion bitcoins or whatever from a non-existent site you're imagining (since no one site controls anywhere near a large enough number of bitcoins to do what you're talking about) is an exploit that isn't patched. Geez.

Hackers are malicious

surprising you don't see why someone or entity would want to bring down bitcoin.
BTW a failure in bitcoin might make other assets rise that they are invested in-so there could be a profit motive too.
Scoffing at hacking efforts is dangerous

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I didn't say that

I just said that the scenario you're describing is pretty silly, in multiple ways.

You could instead hypothesize that there's a backdoor in SHA-256 as some think.
https://bitcointalk.org/index.php?topic=291217.0

You could hypothesize that if bitcoin is used to bypass currency controls to an extent that gets the Chinese government to crack down on it, bitcoin would be toast. Here's a discussion of an estimate of what that would cost -- about 2 billion, not likely to happen with an individual but a drop in the bucket for the Chinese government (and also toss in the fact that the ASIC chips are made in China ...)
http://www.reddit.com/r/Bitcoin/comments/1ky4om/a_realtime_t...

You could easily find less silly scenarios than the vague "hackers might want to bring it down" stuff, riffing off of a story about a scam that wasn't even a hacker exploit BTW. You're letting your feelings about bitcoin cloud your judgement I think.

Couldn't a hacker steal ( and not even use) enough Bitcoins

to render the whole system near worthless?

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No

There's plenty to be skeptical about with bitcoins but you're starting to do to bitcoin skepticism what the holographic-plane people / dustification-rays-from-outer-space people / potential-energy-does-not-exist people do to 9/11 skepticism.

Not really a theif DID steal a large amount of bitcoins

and a guy lost a large sum recently.
If someone wants to do harm to the system that is how it can be done

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Get a grip

You asked "Couldn't a hacker steal (and not even use) enough Bitcoins to render the whole system near worthless?"

How does that make any sense? Your evidence is that "a guy lost a large sum recently"?

How did he lose them? How are these alleged anti-bitcoin masterminds going to manage to do that kind of theft enough times to make bitcoin useless (as opposed to *helping* bitcoin by making the circulating bitcoins even scarcer), and why exactly would they be stealing them and then not spending them?

My evidence is not that a guy lost a large sum

the link up top shows that a large amount of bitcoins were stolen.
My point is a hacker could steal even more,not intending to use them but to steal enough of them to shut down the system.

You asked why :"and why exactly would they be stealing them and then not spending them?"

Never heard of hacking?

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Hacking

Never heard of hacking?

So you're imagining some hackers who find a vulnerability that lets them steal large quantities of bitcoins. Rather than stealing millions and buying houses and sports cars and private jets and whatever, they steal billions and then destroy them all just for lulz.

There are scenarios I'd worry about if I put a significant amount of money in bitcoin, quite a few of them, but nothing like what you're trying to come up with here.

they could be stolen to disrupt the system

or they could be stolen to profit from a competing crypto currency.

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