19 votes

Bitcoin: What You're Not Being Told


Just posting this cause I have seen a lot of Bitcoin posts lately, and thought you folks might find it interesting. I didn't know that everyone who uses Bitcoin has to download a file of all Bitcoin transactions ever made, and that this file is growing exponentially in size as more people start using Bitcoin.

I don't have any Bitcoins. Not trying to make some statement for or against. I'm still just learning about this. I'm in "wait and see" mode on it.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.

Bitcoin Down; Dollar Up!!!

Here is for y'all that don't have a clue about Bitcoin and yet talk as if you were experts:

Thank you for bashing the spear-end of the liberty movement. Here is your results:


"We’ve moved beyond the Mises textbook. We’re running in the open market." - Erik Voorhees

The bitcoin developers did

The bitcoin developers did think of this from the very beginning. There are a few factors, bandwidth, which is increasing and becoming cheaper and storage which is doing the same thing. A 10gb blockchain isn't that big of a deal now, and a 250 gb one won't be in a few years. However, from my understanding, clients in the near future won't have to use the whole blockchain as bitcoin implements a cryptographic function called the Merkle root which allows a client to verify a transaction without having to download the entire blockchain.

Online wallets will most likely work from the full blockchain. And local clients that are just processing transactions will be designed not to have to.

It won't take a complete rewrite of bitcoin, just a continuation of what has already been designed.

My Rebuttal

valid concerns

But there already seems to be a remedy for most. You don't necessarily need to download the whole block-chain to use bitcoin, although that's the most secure way to store your bitcoins.

Right now you could simply keep your btc in an online wallet on one of the exchanges or any sort of online bitcoin bank/depository.

To me it sounds like more opportunity for Bitcoin and more room to grow!

Right on!

A great example of such is http://electrum.org/

"We’ve moved beyond the Mises textbook. We’re running in the open market." - Erik Voorhees

Open Letter to Peter Schiff


"We’ve moved beyond the Mises textbook. We’re running in the open market." - Erik Voorhees


ALL of the concerns of this post and in the comments are valid. Rest assured that the Bitcoin community has already been planning to handle these issues from Bitcoin's inception. Nakamoto himself (or herself/themselves) noted the issue raised in this video and stated that by the time the Block Chain reaches such capacity we won't need to have ALL of the historical transactions from the beginning of the Bitcoin protocol saved in our computers. All we need to have is as much historical precedence that we (individually) would find important to have store in our computers. As for me, I have will always have numerous copies of the totality of the Block Chain stored in many different places around the world. Y'all don't have to do the same; just the most recent blocks would be sufficient for you to store.

This solution is best represented by what already happens within the communication protocol Bitmessage.

"We’ve moved beyond the Mises textbook. We’re running in the open market." - Erik Voorhees

This is all the alalysis that I need to avoid Bitcoin

"I, Broken Pencil": An Economic Analysis of Bitcoins

By Gary North


December 6, 2013
Email Print

Reality Check

In 1958, Leonard E Read wrote an essay, “I, Pencil.” He did not know it at the time, but this article soon became the most important description of the division of labor that has ever been written. It is not as famous as Adam Smith’s description of the pin makers, but analytically, it is far superior. It is also a lot more fun to read.

The article begins with the narrative of a pencil. The pencil tells of his origin. He makes the crucial point thatnobody knows how to make a pencil. This seems fantastic. Yet, as the narrative continues, it becomes obvious that the statement is true. There is so much that goes into a pencil. There is wood, carbon, rubber, metal, and paint. There is also all of the equipment to make these items into a single pencil.

But this just is the beginning. How is the metal made? How is the tree harvested? What about the chainsaws that cut down the tree? This goes on, and on, and on. That is the whole point of the article.

Read makes this point: all this is done without central planning. All of this is done by means of the division of labor.

But what Read doesn’t mention, which is the heart of the matter, is the monetary system. It is only through a system of prices, meaning monetary prices, that all of this can be coordinated by the market process. It is the miracle of the market, as Read called it, but this miracle depends completely on one thing: a monetary system. Without a monetary system, the division of labor simply collapses.


Now let’s talk about Bitcoins. Bitcoins exist as a means of payment only because there is yet money in the general economy. Bitcoins is a spinoff of the fee it money systems of the world. Bitcoins could not exist if there were not an integrated system of digital currency. Continued:


“Disobedience is the true foundation of liberty. The obedient must be slaves.”― Henry David Thoreau

Gary North does not understand Bitcoin...

and he shouldn't be commenting on it.

Here's some rebuttals to his previous article a few days ago.

If I had to guess, I'd say gary north doesn't understand technology or he has some serious confirmation bias going on.

By the way - Thanks for posting it.

I will never question anyone questioning anything.

More points of view are always better - especially with something so new and unknown.

It's my nature to question everything anyway so...good post!

"We have allowed our nation to be over-taxed, over-regulated, and overrun by bureaucrats. The founders would be ashamed of us for what we are putting up with."
-Ron Paul

Manipulation seems to be a bigger threat than the block chain

What happens when not if a miner takes control of bitcoin

Please subscribe to smaulgld.com


Yes, the 51% attack is something that us miners care about and are constantly on top of.


"We’ve moved beyond the Mises textbook. We’re running in the open market." - Erik Voorhees

To tell you the truth, I don''t know what to think about Bitcoin

Now there are other digital currencies popping up. So who knows where it will end?

But I do know that if...

1. You can't hold it in your hand and trade it face to face and

2. It's not a non-manmade commodity with at least some semblence of rarity and

3. It can't be traded without a record og having done so...

Then it still is nowhere near a perfect form of money.

"We have allowed our nation to be over-taxed, over-regulated, and overrun by bureaucrats. The founders would be ashamed of us for what we are putting up with."
-Ron Paul

Nothing is perfect, but imperfection itself :P

1. You can print your bitcoins onto paper if you really wanna hold them.

2. You could argue that gold coins are man made. A currency does not need to be rare, it needs to be divisible enough and it needs to be widespread enough to be useful. Bitcoin is rare enough that you can't just click a button and get some but if you put effort and resources into mining you can definitely extract some.

3. There's a log of each transaction but only you and the person you are transacting with know each others identities (maybe not even). The identities of the people transacting are anonymous.

If bitcoin hadn't gone up in price you

wouldn't think about it at all because you don't need it. Unlike oil and silver, if they did not exist your world would be a whole lot different

Please subscribe to smaulgld.com

Bitcoin Mining

How does bitcoin mining make sense if it costs $14 mil in electricity for miners to be paid $4 mil? (info from blockchain)

How much do greenbacks cost to make?

There are "cheaper"

There are "cheaper" crypto-currencies. For example, the next "best" coin is Litecoin and there are far more beyond that.

"Doom and Gloom" bitcoin blockchain FUD debunked

Bitcoin Report Volume 64 (Blockchain FUD)

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms

He debunks a youtube comment instead of the video itself

I haven't seen one of this guy's videos yet that wasn't weak. Here he picks a youtube comment to debunk, rather than responding to the points made in the video. How lame is that? And he doesn't even get the argument right.

The discussion here:
is pro-bitcoin, and takes the scalability issues a lot more seriously. A key thing to understand is that the miners produce blocks, but what goes in the blocks are the transactions. Every transaction ever made is recorded in the blockchain that way. The difficulty is adjusted to keep the block generation rate at about one every ten minutes. So if you know how many transactions per second you need to handle, and the size of a transaction record, you can figure out how much the block chain would have to grow with each block.

For storage, the article note that "At very high transaction rates each block can be over half a gigabyte in size." That's three gigabytes per hour, 8 terabytes per year. [Did a quick edit here to correct my math.]

At the bottom of that page are some links to ideas for trying to address the scalability problem, some of which would require a hard fork (nearly but not entirely impossible to pull off in practice).

P.S. One thing I learned just now: Satoshi Dice accounts for 80% of all bitcoin transactions. WTF?


i thought he did a good job and always enjoy his videos.
maybe we all just don't get it but this is not something that i'm worried about. bitcoin has lots of of other way more serious issues and i'm confident the bitcoin geek gods wiil figure this out. the cloud wallets and online (blochchain.info) wallets already have.

keep doing what you do though because without people (coders?) like yourself and others with constructive criticism the bad guys would figure out weaknesses first and exploit them.

p.s. i've been thinking about roiling a few satoshi dice. but yeah they do spam up the bc but the btc geek gods are hard at work looking at workarounds.

Official Daily Paul BTC address: 16oZXSGAcDrSbZeBnSu84w5UWwbLtZsBms

Michael Nystrom's picture

Thanks MMJ

Interesting discussion. Thank you.

The only way to make sense out of change is to plunge into it, move with it, and join the dance. - Alan Watts

workaround is

All people have to do is use altcoins such as litecoin, quarkcoin etc. They work just as good as bitcoin, in some cases better, and their blockchains are young.

One day when their blockchains get too big then use a newer altcoin. Easy as pie.

Thanks to exchanges they are all compatible with each other in minutes. Change your money around whatever crypto you want nearly instantly.

Check the list here http://coinmarketcap.com/

The best part of crypto coins

The best part of crypto coins is their portability.

The worst is that — at least in the case of Bitcoin — it is infinitely divisible, which essentially makes the 'coin' as bad as FRNs (just found this out yesterday).

Infinitely divisible

Doesn't equate to printing more or monetary inflation. If you divide a Bitcoin into more parts, the sum still remains the same. No extra value is created or diluted. All it is useful for is purchasing/trading in smaller denominations.

I can't figure this out

With anything physical, such as gold, there are practical limits of divisibility. If you're making coins out of gold (and pure enough that it's easy for people to verify that it is, in fact, gold) then the maximum supply of gold coins is limited by how small a coin you can make with it for practical use.

With something like bitcoin, there's no such limit. Here's a thought experiment. Imagine a digital currency in which there is only one coin, ever. Call it the supercoin. It's divisible into 2.1 quadrillion units. Is it scarce because there's only one? Is it not scarce because there are 2.1 quadrillion units? Suppose we arbitrarily define a "bitcoin" to be 0.000000047619 of that one supercoin. What we now have is equivalent to the current bitcoin definition, except that I've defined a "supercoin" to be 2.1 quadrillion satoshis. That's all I've done is add that definition, just as a bitcoin is defined to be 100 million satoshis.

Suppose we have a single-coin digital currency, and it's infinitely divisible. You can divide it into 2.1 quadrillion units, then divide each of those into 2.1 quadrillion units, and keep dividing that way for as many digits of precision as you care to represent. You could still define a "bitcoin" to be 0.000000047619 of that supercoin, and again we're back to bitcoin except without the satoshi to limit divisibility. Is it scarce? Why?

Good thought experiment

As I see it, the answer still lies in the original value before and after the split. Think of it like a stock value of a company. If there are 100,000,000 shares of apple at $1,000 each and they do a stock split, you now have 200,000,000 shares at $500 each. Is there any change in the value of your ownership? The total market cap? The taxes, fees or anything else? I would say no.

Take the other side in terms of pies. The Fed makes a pie and you own 1/8th of it. Cutting your piece if half yields two 1/16th pieces of the same total pie amount on your plate. However, if the Fed bakes another pie (prints money), that doesn't affect the amount of pieces you have. It just dilutes it because you now own half as much of the total quantity of pie. To eat it, you wouldn't see any difference but to use it to store value for bartering, the market sees two pies in existence so prices would double. That means your plateful buys half as much.

If you remain in the fiat dollar system but use BTC as a medium of exchange, none of this matters to you. You will purchase x BTC for Y dollars in your location, transfer them for free, and your recipient (the store or your brother in Afghanistan) will hopefully sell x BTC to someone else for Y dollars again. You could have used x BTC, 2x BTC, 100,000,000x BTC or 1 quadrillionth of a BTC.

The market cap for them is wide open for total value. Some (BoA) say it's around $15 Billion (meaning each would cost $1300) because they're playing down all its potential. Others speculate that it could nearly take over the global currency market, the real estate market, payrolls, supplier chains, gold and silver asset store, or even mega-markets like stocks. If it did take a huge chunk of all those, it would take a long time or a major change in thinking... but it would end up being worth 1000 times that tiny $15B. This is where some people get the prediction that it could be worth over a million dollars each. (Of course, to do that there would be no value left in the dollar so we'd be past the SHTF crash!)

Thought experiment continued

I agree that if you have a value defined, and you do a split, it doesn't change the market cap, although it can have a psychological effect which is the only reason the dot coms did it so much during the bubble. If a bitcoin is valued at $1000 then changing to millibitcoins at $1 doesn't change the market cap, although the psychological effect may be very real.

But the thought experiment is about the pre-split value. When the perceived value depends on scarcity, it's worth figuring out what scarcity means for a digital artifact that can be arbitrarily subdivided.

Suppose we have a digital currency called Unicoin. There is exactly one unicoin, and no possibility of any more. It's arbitrarily divisible. It's equivalent to bitcoin (except with greater divisibility) since we can divide the unicoin into 21 million bitcoins and 2.1 quadrillion satoshis. But it's also equivalent to an imaginary crypto-currency with 2.1 quadrillion bitcoins and 2.1 septillion satoshis. Or a scarcer cryto-currency with only 210,000 bitcoins and 2.1 billion satoshis. Or whatever we want.

So is unicoin scarce? I don't know how to answer that, but it seems clear that scarcity can't be defined in terms of arbitrarily labeling some divisor the "coin" unit so that the number of coins is small, when a different arbitrary divisor would give you any number of coins you want, larger or smaller.

Continued again

Ah, now I understand more of what you're driving at.

I think the answer lies in the question "how much can each person get hold of?" In either case, bitcoin or unicoin, the people can only get what their $100 will convert to at the time of the exchange. If that should change (as in bitcoin's rapid adoption bringing in more money), then they get a gain for nothing. If they then look at what they can get hold of, this new wealth is included.

If the market puts all they're going to into bitcoin and it stabilizes, then I think scarcity becomes a non-issue. It doesn't matter how much total value went in there (imho) but rather what it translates to in goods and services. Since it's not debt based, there's no interest or monetary inflation affecting it's value. So, in effect, putting a pickup truck's worth there today would buy your grandkids a pickup truck in a century. Of course that's assuming that pickup prices didn't change. (and still existed)

Scarcity seems to me to be an attribute that's used to qualify the balance of supply and demand. In this case, the supply of BTC is fixed so the balance against higher demand is the value of it.

Is this making any sense or making it worse?

I didn't vote you down (voted

I didn't vote you down (voted you up, in fact) because if I'm wrong, I want to be proven wrong. I understand a good deal of the very positive aspects of not only Bitcoin, but the many other near-identical and non-identical crypto-currencies.

I'd like to hear and see more about the negatives followed with serious discussion.


Negatives? Fine, then name one/them? I can't find any that aren't merely an aspect we have to wait for. (Volatility comes to mind first)

For me, BTC is the perfect solution. That volatility is keeping the sheep out until it gets more matured. It's got the panache of being first and the right amount of hype surrounding it. It has some competitors (not too many, not too few) to play the silver role against gold of support. It is as anonymous as people want it to be and not 100% private to the general public. It's the solution to everything I want to assist us in ending the fractional reserve banking monopoly.

I really do love watching it shoot down and then you see people testing the waters with purchases before it returns to its rise. I picture that as what the 'flash crash' would have been like had the market been truly free of manipulation.