# Lifestyles & Discussion > Bitcoin / Cryptocurrencies >  Buying drugs with bitcoins hitting the mainstream

## hazek

No, not by the state prohibited drugs but the drugs the state not only allows but also subsidizes:





> http://theswisspharmacy.blogspot.com....html?spref=tw
> 
> 
> 
> 
> 
> 			
> 				THURSDAY, 14 JUNE 2012
> 
> ...


You just have to know $#@! gets real when you can buy "legal" drugs with bitcoins

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## jkr

soooooo this is a competing currency, yes?

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## Steven Douglas

> soooooo this is a competing currency, yes?


No question about it - in many respects.  Bitcoins float against all other currencies.  It's no more a store of value than FRN's or any other currency, but it does compete with all of them in that it bypasses functions ordinarily reserved to traditional banks -- especially fees taken through currency conversion. 

For now people are still forced, by and large, to convert back into legal tender, or fiat currency for most transactions.  Bitcoins are a teensy microcosm of the overall economy for now, but as bitcoin usage becomes more common, more popular, and more trusted, the overall velocity of bitcoin transactions increases.  You might sell something in exchange for bitcoins, and decide NOT to convert it back to fiat currency, but immediately use the bitcoin proceeds to make a purchase of your own - bypassing banks altogether. The more that happens, the more it affects the velocity of transactions that would normally be forced through the banking system.

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## dannno

> No question about it - in many respects.  Bitcoins float against all other currencies.  It's no more a store of value than FRN's or any other currency, but it does compete with all of them in that it bypasses functions ordinarily reserved to traditional banks -- especially fees taken through currency conversion. 
> 
> For now people are still forced, by and large, to convert back into legal tender, or fiat currency for most transactions.  Bitcoins are a teensy microcosm of the overall economy for now, but as bitcoin usage becomes more common, more popular, and more trusted, the overall velocity of bitcoin transactions increases.  You might sell something in exchange for bitcoins, and decide NOT to convert it back to fiat currency, but immediately use the bitcoin proceeds to make a purchase of your own - bypassing banks altogether. The more that happens, the more it affects the velocity of transactions that would normally be forced through the banking system.


Interesting, anybody know how taxes are handled with bitcoins?

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## Steven Douglas

> Interesting, anybody know how taxes are handled with bitcoins?


Good question.  Everyone will have a different perspective, of course, but here's how the bitcoin wiki handles it: (delicately)




> This guide is intended for small business owners who wish to help promote Bitcoin by accepting it as payment for goods and services. It's *written with the assumption that you* operate a regular business that sells goods or services for regular national currency such as dollars, and that you wish to accept Bitcoin as another legal way to pay, and that you *intend to pay taxes on your Bitcoin income just like any other income*.
> 
> With Bitcoin being touted as a way to conduct anonymous transactions and as way to compete with government currency, many small business owners wonder what's the right way to accept and account Bitcoin, or if it's legal or ethical, or whether and how they should pay taxes on income received through Bitcoin.
> 
> As far as we know, Bitcoin *isn't yet formally recognized by governments and authorities as a "currency"*. But in practice, Bitcoin is *likely no different than accepting payment in other forms, such as cash, or gold, or scrip, or gift cards or foreign currency*. We think that it is pretty much the same as the local businesses of Great Barrington, Massachusetts choosing to accept their locally-printed "Berkshire Bucks" to support their local economy.

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## losinglife

when can i start buying herb is all i care about

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## DerailingDaTrain

^ I edited out the site name but seriously you've been able to do that for years

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## muh_roads

Bitcoins aren't taxed.  Transaction fees are low.  Wire money to mt. gox for the exchange to happen by sending via Dwolla.  This combo seems to be the cheapest when converting USD to BTC.

Only 21 million bitcoins can be mined in existence from now until 2030 I believe.  8 million have been dug up so far from blocks.  Difficulty increases over time to mine coins as better hash crunching technology hits the market.

Bitcoins can't be fraudulently inflated because transaction data is checked and double-checked with all others contributing to the P2P network.  If a bad hash gets thru, it would be identified immediately and the transaction is void.  This is what gives them their store of value.

BTC will be a huge headache for central banks in the coming years.  Price of things in BTC will constantly go down over time.  The currency transaction is anonymous and your location itself is even more anonymous if you are using Tor.  Silk Road can only be accessed with it anyway.  But other vendors accepting BTC are popping up daily.

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## heavenlyboy34

> Bitcoins aren't taxed.  Transaction fees are low.  Wire money to mt. gox for the exchange to happen by sending via Dwolla.  This combo seems to be the cheapest when converting USD to BTC.
> 
> Only 21 million bitcoins can be mined in existence from now until 2030 I believe.  8 million have been dug up so far from blocks.  Difficulty increases over time to mine coins as better hash crunching technology hits the market.
> 
> Bitcoins can't be fraudulently inflated because transaction data is checked and double-checked with all others contributing to the P2P network.  If a bad hash gets thru, it would be identified immediately and the transaction is void.  This is what gives them their store of value.


Bitcoins are hard currency?  I was under the impression that they were digital fiat.  I haz teh intrigued.

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## muh_roads

> Bitcoins are hard currency?  I was under the impression that they were digital fiat.  I haz teh intrigued.


It's actually a very fool proof system in terms of preventing from phony inflation.  The global community keeps all bitcoins in check.

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## heavenlyboy34

> It's actually a very fool proof system in terms of preventing from phony inflation.  The global community keeps all bitcoins in check.


How quickly does the bitcoin supply expand?  /curious

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## heavenlyboy34

> It's actually a very fool proof system in terms of preventing from phony inflation.  The global community keeps all bitcoins in check.


How quickly does the bitcoin supply expand?  /curious

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## hazek

The reward for "mining" a block started out at 50BTC per and will get halved approx. every 4 years until it reaches 0 which will happen sometime 2130, although most will be mined around 2030.




As you can see, we are approaching the first time the reward will be halved sometime in December this year.

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## Kluge

> It's actually a very fool proof system in terms of preventing from phony inflation.  The global community keeps all bitcoins in check.


It's really a pretty incredible system.

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## soulcyon

The second that quantum computers come into existence, Bitcoins will hit the $#@!ter (Bitcoins specifically).  There are better alternatives for the long run than the current hashing algorithm that Bitcoin uses.  As a software engineer, http://solidcoin.info, is alot more exciting than Bitcoins.  In the end, its all about acceptance and popularity - nothing wrong with a little competition.

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## DerailingDaTrain

> The second that quantum computers come into existence, Bitcoins will hit the $#@!ter (Bitcoins specifically).  There are better alternatives for the long run than the current hashing algorithm that Bitcoin uses.  As a software engineer, http://www.geistgeld.org/, is alot more exciting than Bitcoins.  In the end, its all about acceptance and popularity - nothing wrong with a little competition.


//

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## DEGuy

> Interesting, anybody know how taxes are handled with bitcoins?


Technically, the IRS could treat bitcoin transactions as a type of barter since bitcoins are not recognized as currency. So the fair value in fiat for Bitcoins would need to be reported for each transaction. Like most barter transactions, most individuals will choose not to report these transactions. If a big business, like Amazon, chooses to accept bitcoins, they would likely follow IRS guidelines and pay taxes in fiat.

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## soulcyon

> //


edited my post :P

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## jkr

but if we dont use rfn's they dont have standing do they?

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## hazek

> but if we dont use rfn's they dont have standing do they?


Don't be naive, they will have standing where they'll say they have standing.

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## Mahkato

Whether BTC itself will mature enough to serve as a "real world" currency remains to be seen, but it shows the potential for digital currencies where the value is derived from the users rather than government fiat. There's nothing physical to back BTC, of course, but it has developed real value due to its advantages over government-issued currencies.

Note: BTC is _not_ fully anonymous. If you don't want your name ever attached to a given transaction, you have to know what you're doing.

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## soulcyon

http://microcash.org/

This seems to be promising alternative to BTC

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## hazek

> http://microcash.org/
> 
> This seems to be promising alternative to BTC


Not really because it's a centralized solution hence no solution at all.

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## soulcyon

> Not really because it's a centralized solution hence no solution at all.


Wtf where do you read that? 

"Microcash is a micropayment currency operated on a decentralized network to offer fast, low fee, and anonymous monetary transactions. The network's decentralized nature removes the need for a central authority."

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## soulcyon

This is Microcash's predecessor (Microcash improves upon Solid Coin 2.0).   I wish there was a third party writing on the claims here, but clearly Bitcoins are not secure and will fail in the near future.  For those who don't like to read:  *the essential difference between Bitcoin and Solidcoin is also the real difference between Democracy and a Representative Democracy.   If malicious users take up 51% of the Bitcoin miners, then the whole network can be compromised and nobody will know about it!*




> SolidCoin - Officially the most secure P2P currency
> 
> 51% protection algorithm
> 
> Pretext
> 
> Trying to solve the 51% attack issue inherent in cryptocurrency designs like Bitcoin is quite challenging. On the one hand it is fantastic having thousands of nodes around the world processing transactions, on the other it is also quite the security issue. In his Bitcoin paper, Satoshi identified several issues, with the 51% attack being the greatest.
> 
> So what is the 51% attack? To understand that you have to understand how Bitcoin works. Essentially Bitcoin is a collection of nodes performing "virtual work", the more work you do the higher your rating on the network. So what happens when malicious users get together and manage to do more "virtual work" than the "good people" ? Well that is the 51% attack, and it basically means you can wake up tomorrow with zero Bitcoins in your wallet. It means any business that accepts Bitcoins can get robbed and have all their goods taken with fake Bitcoins. It also means if they wanted, governments, large corporations or hackers can "shut down the network" by refusing to accept any new transactions. Complete network shutdown. Can't do anything with your Bitcoins, neither can anyone else.
> ...


http://solidcoin.info/solidcoin-most...e-currency.php


edit: RealSolid (founder of SolidCoin) is a libertarian and he doesn't even know it:



> In some places you are a criminal if you eat pig meat or drink alcohol. Should we attempt to therefore ban beer and ham sales with SolidCoins? You may think that buying alcohol shouldn't be a crime but 80 years ago the USA said it was, so people need to realize that laws are quite subjective and often change. SolidCoin is not a government or culture, it is merely a currency that people can use for whatever they want to trade. We will never artificially restrict trade, no matter how offensive we personally may find them.


http://solidcoin.info/myths.html

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## psi2941

> This is Microcash's predecessor (Microcash improves upon Solid Coin 2.0).   I wish there was a third party writing on the claims here, but clearly Bitcoins are not secure and will fail in the near future.  For those who don't like to read:  *the essential difference between Bitcoin and Solidcoin is also the real difference between Democracy and a Representative Democracy.   If malicious users take up 51% of the Bitcoin miners, then the whole network can be compromised and nobody will know about it!*
> 
> 
> 
> http://solidcoin.info/solidcoin-most...e-currency.php
> 
> 
> edit: RealSolid (founder of SolidCoin) is a libertarian and he doesn't even know it:
> 
> http://solidcoin.info/myths.html


thx for posting, +rep, but half the people here are bitcoin trolls. They don't see the fundamental issue of "if it was created by man, it can be recreated by man period."

for those, who are unsure about bitcoins, its such a dumb idea, you really want data bites as your money? $#@!in wake up, stick to tangleable assets, but if you want another "fiat" currency just stick with federal reserve notes, their more useful.

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## LibertyRevolution

Another bitcoin thread by Hazek.. 

Bitcoin is just a pyramid scheme.
It is backed by nothing.
It is a digital currency and will be hacked eventually.

It is basically the honor system when it comes to transferring them.
You send someone bitcoins and they promise to send you stuff, but they can keep your bitcoins and send you nothing and there is NO recourse.

Having to use a place my mt gox or dwolaa or whatever to convert your bitcoins into dollars...
They could just totally $#@! everyone, just decide that today is the day to keep everything, YOU HAVE NO RECOURSE.


Using bitcoins is like handing a crackhead $20 to go get you some crack, there is always that chance they wont come back with your $#@!.

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## soulcyon

> Another bitcoin thread by Hazek.. 
> 
> Bitcoin is just a pyramid scheme.
> It is backed by nothing.
> It is a digital currency and will be hacked eventually.
> 
> It is basically the honor system when it comes to transferring them.
> You send someone bitcoins and they promise to send you stuff, but they can keep your bitcoins and send you nothing and there is NO recourse.
> 
> ...


Check out my posts on Solidcoin/Microcash.  I think its fair to say that Bitcoin can't be clubbed together with all crypto-currencies, and there are viable alternatives to Bitcoin out there.

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## hazek

> Another bitcoin thread by Hazek.. 
> 
> *Gold* is just a pyramid scheme.
> It is backed by nothing.
> It is a lump of rock and can be lost or stolen eventually.
> 
> It is basically the honor system when it comes to transferring it.
> You send someone *gold* and they promise to send you stuff, but they can keep your *gold* and send you nothing and there is NO recourse.
> 
> ...



Do you see how silly you sound?

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## Elwar

fiat currency = issued by fiat

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## LibertyRevolution

> Do you see how silly you sound?


Hazek, go peddle your pyramid scheme elsewhere. 

Your editing of my quote shows you have no $#@!ing idea what your talking about.

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## Kluge

> Hazek, go peddle your pyramid scheme elsewhere. 
> 
> Your editing of my quote shows you have no $#@!ing idea what your talking about.


Bitcoin isn't a pyramid scheme. I'm not the most knowledgeable person on the subject, but I do know it isn't that.

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## hazek

> Hazek, go peddle your pyramid scheme elsewhere. 
> 
> Your editing of my quote shows you have no $#@!ing idea what your talking about.


Man, I'm probably the worst peddler I have ever heard of. I never tell people to use bitcoins, I never tell people to buy butcoins, I never link any websites where they could buy them, all I do is link to articles or news with the aim to inform people of the current events around Bitcoin. Worst peddler ever!

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## psi2941

> Man, I'm probably the worst peddler I have ever heard of. I never tell people to use bitcoins, I never tell people to buy butcoins, I never link any websites where they could buy them, all I do is link to articles or news with the aim to inform people of the current events around Bitcoin. Worst peddler ever!


you don't peddle bit coins but you sure do defend it, its just another "fiat" system that is worthless.

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## dannno

> This is Microcash's predecessor (Microcash improves upon Solid Coin 2.0).   I wish there was a third party writing on the claims here, but clearly Bitcoins are not secure and will fail in the near future.  For those who don't like to read:  *the essential difference between Bitcoin and Solidcoin is also the real difference between Democracy and a Representative Democracy.   If malicious users take up 51% of the Bitcoin miners, then the whole network can be compromised and nobody will know about it!*
> 
> 
> 
> http://solidcoin.info/solidcoin-most...e-currency.php
> 
> 
> edit: RealSolid (founder of SolidCoin) is a libertarian and he doesn't even know it:
> 
> http://solidcoin.info/myths.html


Interesting, but realistically, if everybody had their bitcoins stolen then they would probably completely lose their value almost instantly.

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## helmuth_hubener

> Bitcoin is just a pyramid scheme.


 I disagree.



> It is backed by nothing.


 This is obviously true.  This is the basic problem with bitcoin.  



> It is a digital currency and will be hacked eventually.


 This is debatable.



> You send someone bitcoins and they promise to send you stuff, but they can keep your bitcoins and send you nothing and there is NO recourse.


 Irrevocability is not necessarily a bad thing.  I consider it a good thing.  Remember that cash, also, is an irrevocable payment.  For the payer, it can be a risk.  This risk can be mitigated or eliminated by various means, such as third-party escrow.




> Having to use a place my mt gox or dwolaa or whatever to convert your bitcoins into dollars...
> They could just decide that today is the day to keep everything, YOU HAVE NO RECOURSE.


 It is much much more likely that the gov't goons will do that, they will attack all the exchangers.  It would be a relatively small and easy project for them to shut down all the commercial exchangers, severing the link between the (totally gov't-controlled) banking system and bitcoin.  This would make it essentially impossible to get established currencies in exchange for bitcoin.




> Using bitcoins is like handing a crackhead $20 to go get you some crack, there is always that chance they wont come back.


The more important element in that transaction, in my opinion, is not that you are using cash, an irrevocable payment medium, but that you are dealing with a vendor of disrepute or unknown repute.  Paying "the crackhead" with a check does not necessarily completely solve your problem and make this into a wise transaction.

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## Steven Douglas

> It is much much more likely that the gov't goons will do that, they will attack all the exchangers.  It would be a relatively small and easy project for them to shut down all the commercial exchangers, severing the link between the (totally gov't-controlled) banking system and bitcoin.  This would make it essentially impossible to get established currencies in exchange for bitcoin.


When you think about it, that's really all it took for gold to be taken out of circulation.  Roosevelt outlawed ownership of gold, and by extension transactions in gold, and for as much of an outcry as there was at the time, it amounted to a whimper from an already ignorant and easily subdued public. There were no house-to-house searches and or seizures. No physical confiscation required.  Most people simply complied, the rest were left alone, forced to hide what they owned but would not give over to the government.  Making it illegal was sufficient to remove it completely out of circulation. 

That same thing could happen to bitcoins.  No big internet crackdowns required.  Maybe a couple of larger users are tracked down and prosecuted, made examples of to intimidate everyone else into compliance -- no different than the few high-profile tax cases (Irwin Schiff et al), or the two major cases involving hard specie (Liberty Dollars and the contractor out of Las Vegas who is now serving time).  The details of those cases are irrelevant to their effectiveness in shutting others down.  Already people are asking how many merchants will accept them as payment. What happens to those few if they're made illegal?  

That really is the as-yet unsolved problem for any competing currency, including bitcoins, and that stems, ironically, from the very reason that fiat currencies are so easy for governments to impose.  Gold, silver, bitcoins, barter, you name it: they can all work to a degree on a silk road or a black market, but for any of them to be used in any kind of normal, regular circulation requires some kind of economic catastrophe, or a showdown between people and their government. 

Absent an actual competing currencies Act (read=government's "fiat" blessing), and a revocation of legal tender laws, the only real threat from competing currencies is that it gives people a taste of what is possible, along with the opportunity to prepare for the INEVITABLE death of the reigning currency. Most importantly, it establishes a black market.  And if times are tough enough, a MASSIVE portion of the population faced with survival will avail themselves of it.  The Great Firewall of China didn't stop my Chinese friends from accessing and using Youtube and Facebook.  It just forced them underground, while the remainder of the population stopped using them.

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## kpitcher

Ah the typical bitcoin arguments. 

It's not a pyramind scheme, yes it is growing in acceptance, yes it's real money. There are a few places you can walk in with cash in hand and get bitcoins, and vice versa - not many but growing. People get fixated on the mining and that's just a technical issue and a small bit of overall usage. Outside of the bubble because of hyped press it's had a very stable growth.

The quantum computers comment make me laugh. If quantum computers start breaking encryptions the last thing we have to worry about is bitcoins. Not having any secrets or be able to reliably communicate with existing infrastructure would change the world overnight and governments, businesses, people would have major issues. Personally I think we'll have a nanoscale builders before quantum computers and allow people to churn gold out of hydrogen. But I'm not going to worry about either for a decade.

Bitcoins are not anonymous. There are bitcoin laundries so you can try to hide but if you want to oh, use silk road, you still need a postal address to pick up whatever you order. So the digital to real world goods does leave a trail.

With the success of bitcoins there are a number of people trying to be alternatives, most of those are setup as a pyramind scheme with the "inventors" having a big chunk of money and just hope for the masses to come. Until there is a reason to switch I don't see people leave bitcoins.

Now you want to talk about an pyramind scheme of digital money, there is always the Diablo 3 auction house. Selling virtual goods for realworld cash, run by the company that gets a piece of the action. What a scam! South Korea has already banned it.

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## hazek

> you don't peddle bit coins but you sure do defend it, its just another "fiat" system that is worthless.


I don't defend anything but the truth. If someone states a false claim I tend to be annoyed and tend to correct them, whether it's about Bitcoin or religion, or philosophy or whatever, that's what I usually do. 

It just so happens to be that this is the Economics & Sound Money which I most often read, under which the topic of Bitcoin falls and it just so happens to be there are a lot of misunderstandings and false beliefs about it out there finding their way into threads informing people of new developments around it which all together are the reasons why I just so happen to usually dispel the false beliefs and appear to defend it in threads in this section of the forum.

If you're going to hold that against me, so be it.

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## osan

This is a most interesting development.  It shall be more interesting still to see what the various "governments" do about it.  If it begins to gain traction beyond the trivial, rest assured government action will be forthcoming.  The question will be on what pretext shall they interfere yet again with the market?  Counterfeiting appears to be an unlikely candidate for plausibility.  There are, of course, the good old standbys of the drug war and that of terr'izm.  And of course there is always the tax man's interests in all of this - which is one of the truly problematic aspects of the bitcoin and why I cannot come to trust them as the technologies currently stand: they are eminently traceable by those one may not want tracing.  

I can see a possible business opportunity here: an anonymous transaction clearing house whereby all bitcoin transfers are opaquely affected such that only the parties to the transactions would have knowledge of when, how much, and between whom the exchanges occur.  A transaction cost of, say, 0.01% is charged to the initiator of the action.  One percent of one percent of all  such transactions could result in a very tidy sum, the operations of which would be HQ'd on some rock such as Vanuatu or the Caymans.  Of course, if it got as big as it might, I would expect US Marines to eventually be called in to "clean things up" a bit and take possession of the infrastructure in the name of the USA and "fairness".  Ugh.

I will be watching this carefully.

One other concern about bitcoins, and this is something that we should all be thinking about**: what if they start to take over?  There has been much talk over the years of eliminating cash.  If enough people begin using them and if using them becomes convenient and using cash becomes far less so, there is nothing to prevent cash from being phased out such that eventually it becomes extinct.  If this happens and there come no honest competitors to the bitcoin, we end up going from frying pan to fire.  I would also ask, where did bitcoin come from?  Who are the people?  These questions should be made very public.  How do we know they are not fronts for some covert economic initiative to gain greater control over currency movements?  After all, barring the existence of a trustworthy anonymous clearing house per above, there will be no more Mr. Employer paying Mr. Employee under the table.  Pay in bitcoins WILL be readily traceable and will indeed be tracked.  Of that, one may bet the farm.

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## hazek

> I can see a possible business opportunity here: an anonymous transaction clearing house whereby all bitcoin transfers are opaquely affected such that only the parties to the transactions would have knowledge of when, how much, and between whom the exchanges occur.  A transaction cost of, say, 0.01% is charged to the initiator of the action.  One percent of one percent of all  such transactions could result in a very tidy sum, the operations of which would be HQ'd on some rock such as Vanuatu or the Caymans.  Of course, if it got as big as it might, I would expect US Marines to eventually be called in to "clean things up" a bit and take possession of the infrastructure in the name of the USA and "fairness".  Ugh.


It already exists.  This is just one example of it: http://www.forbes.com/sites/jonmaton...iction-debate/

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## hazek

> One other concern about bitcoins, and this is something that we should all be thinking about**: what if they start to take over?  There has been much talk over the years of eliminating cash.  If enough people begin using them and if using them becomes convenient and using cash becomes far less so, there is nothing to prevent cash from being phased out such that eventually it becomes extinct.  If this happens and there come no honest competitors to the bitcoin, we end up going from frying pan to fire.  I would also ask, where did bitcoin come from?  Who are the people?  These questions should be made very public.  How do we know they are not fronts for some covert economic initiative to gain greater control over currency movements?  After all, barring the existence of a trustworthy anonymous clearing house per above, there will be no more Mr. Employer paying Mr. Employee under the table.  Pay in bitcoins WILL be readily traceable and will indeed be tracked.  Of that, one may bet the farm.


The answers to your questions and concerns are already given and are very public and reviewed by many many peers, the source code is open source, meaning anyone who wants to can know exactly how it works and even create their own version if they like..

You can learn more about it through my videos: http://www.youtube.com/user/bitcoincurve/videos

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## DEGuy

I don't think hazek is saying everyone should drain their bank accounts and buy as many bitcoins as possible. 

Probably 9 out of 10 Ron Paul Forumers will agree that fiat currency (USD, EUR, etc) is a terrible place to store all your wealth. The real question, is where do you store your hard earned wealth? For most people, the goal is to be able save wealth in a form that will retain value for when it will eventually be needed to buy gas, food, bullets, etc. And (god willing) actually make some interest on that, so that it's worth something. So what are the options? Dollars, bonds, stocks, gold, silver, real estate, your own business, fine wines, silver age comic books, lottery tickets, etc. Nothing is 100% guaranteed to retain value, much less grow in value. Most investment managers advise diversification of funds based on an appropriate level of risk. Bitcoin is extremely risky, but is potentially extremely profitable. No one is recommending that anyone should put all their money into Bitcoin. But on that same note, it's a bad idea to put all of your wealth into stocks, wines, real estate, and yes, even gold.

Diversification:  The next best thing after a crystal ball.

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## LibertyRevolution

> Bitcoin isn't a pyramid scheme. I'm not the most knowledgeable person on the subject, but I do know it isn't that.


This pyramid scheme works on the idea that the guys that got in early make all the money by convincing other to get into the community.
This is the same as any other pyramid scheme.

Not only is is it pure fiat backed by nothing, it is pure digital and doesn't even exist.

Bitcoins have the same value to me as gear in your online MMORPG, NOTHING.

You keep hording your bitcoins, and ill keep hording my silver, and in 2031 will come back and compare preservation of wealth.

I'm sorry if I come across as a dick.. Its just this is the Ron Paul Forums, where we believe in sound money. 
Bitcoins are NOT sound money.

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## Kluge

> This pyramid scheme works on the idea that the guys that got in early make all the money by convincing other to get into the community.
> This is the same as any other pyramid scheme.
> 
> Not only is is it pure fiat backed by nothing, it is pure digital and doesn't even exist.
> 
> Bitcoins have the same value to me as gear in your online MMORPG, NOTHING.
> 
> You keep hording your bitcoins, and ill keep hording my silver, and in 2031 will come back and compare preservation of wealth.
> 
> ...


Incorrect sir. On almost all counts.

But you don't have to participate, that's what's nice. I'm invested in three types of currency: regular old investment accounts, silver and bitcoin. If the real Kludge were here, he could "school" you, but he honestly probably wouldn't even bother. Neither will I, this has been gone over _ad nauseum_.

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## muh_roads

> This pyramid scheme works on the idea that the guys that got in early make all the money by convincing other to get into the community.
> This is the same as any other pyramid scheme.
> 
> Not only is is it pure fiat backed by nothing, it is pure digital and doesn't even exist.
> 
> Bitcoins have the same value to me as gear in your online MMORPG, NOTHING.
> 
> You keep hording your bitcoins, and ill keep hording my silver, and in 2031 will come back and compare preservation of wealth.
> 
> ...


If you find no value in your Diablo 3 gear then you can give it to me where I will gladly sell it.

Things have value because people give it value.  Aside from the destruction of the USD and another avenue to escape from it, bitcoin currently has value because it can't be taxed by governments.  This leads to less accounting overhead for vendors.  Then this leads to cheaper prices for the consumer.

Another reason bitcoin has value to people is because it cannot be hacked or inflated beyond what reside in the mining blocks.  There are a finite amount of bitcoins that the worldwide P2P system will only recognize.  Every single miner on the planet keeps everyone in check to verify the transaction is legit.

The downside to bitcoin is also its greatest strength.  It is completely decentralized.  You can't attach your name to your bitcoins once they leave your bitcoin wallet.  But this is why central banks can't touch it and it is completely anonymous.  It is both a blessing and a risk.  Without any accountability it is like filling an envelope full of cash and sending it through the mail and hope the seller won't screw you over.

If people want completely decentralized money some day, they have to be willing to understand what exactly that means.  People will need to grow a pair and put up with the risk.  Only trade bitcoins with people you know.

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## osan

> The answers to your questions and concerns are already given and are very public and reviewed by many many peers, the source code is open source, meaning anyone who wants to can know exactly how it works and even create their own version if they like..
> 
> You can learn more about it through my videos: http://www.youtube.com/user/bitcoincurve/videos


As I suspected, bitcoin is NOT anonymous.  I spent 10 years designing network controllers for Bell Labs and the whole anonymity deal with bitcoin was a big question in my mind, knowing what I have known.  Sure enough, anonymity is NOT a feature of bitcoin.  Users are certainly not anonymous to those who really want to find out who one is.  So long as a transaction is tied to an IP address one is exposed to miners.  I also find it interesting that use of TOR does not seem to be a built-in option in the bitcoin protocol.

See http://www.youtube.com/watch?v=-FaQNPCqG58 at around the 40 minute mark where a thorough statistical analysis of the bitcoin network is presented.  One of the conclusions drawn, and I believe rightly, is that because of the relatively easy mining through faucets and the sort, bitcoin is not likely to be embraced by the corporate world because the protocol constitutes essentially open disclosure of a large body of sensitive corporate information.

Another problem is the issue of bitcoin status including that of lying fallow for extended periods and loss through material destruction of computers, loss of passwords, and so forth.  Statistically speaking, all currently extant bitcoins are doomed to loss given sufficient time.  The question becomes how does one know how many bitcoins are "out there" at any given time?  That _appears_ to be an issue of centralized control, which is a problem bitcoin seeks to evade.  Is there a distributed method for determining this?  Perhaps.  My immediate thought would be to provide a separate means of verifying ownership so that when a disk burns one is able to recover his holdings, but that is a discussion for another day.

Another semi-baloney aspect of bitcoin is the claim that there are only 21 million bitcoins to be generated.  Because the divisibility of bitcoins goes down to 10^-8 and may be extended to even smaller subdivisions, inflation is actually built in to the bitcoin so far as I can see.  Firstly, there are 21 TRILLION effective bitcoins to be generated, given the current divisibility.  As bitcoins wend their ways into the economy, the individual value of each coin increases in terms of purchasing power.  This is perforce true because as demand for bitcoins increases, so goes the value of each unit, which is to say its price.  The increase in price raises the purchasing power of each coin.  What cost me one bitcoin today now costs half a coin.  My stock in bitcoins has effectively split and the supply of bitcoins has _effectively_ doubled because I may divide the coins to that mesh.  This can keep going until I have divided each coin I hold into one billion parts.  That constitutes an effective increase in the number of coins from the purely practical perspective because it effectively redefines what a bitcoin _is_ in quantitative terms.  It would be similar to taking a pair of snips and slicing a gold coin in half and redoubling that action again and again until a loaf of bread is had for a microscopic flake of gold.  I am not saying this is necessarily bad, but that it should be recognized. 

After all bitcoins are split to their billionth parts, then things may become interesting... or not, depending on the precise state of the economy at that point.  It all really depends on how each bitcoin performs in terms of actual purchasing power.  So in this the bitcoin is not much different than any other currency.  The one saving grace here is that there are supposed to remain a constant supply of "top level" (undivided) bitcoins in circulation at 21 million (an odd number, no?)  If that can be maintained, then at least in terms of its power as actual _money_, the bitcoin should be good.  The big question is how will "lost" coins be handled.  Also, what will be the effect and responses to someone hording coins, holding them quiesced in large amounts for long periods?  If I manage to get my fingers on 1 million bitcoins, I then control just under 5% of the bitcoin economy.  That is a LOT of power, relatively speaking.  People being what they are and wanting what they tend to want, I can readily envision third party (government) intervention - forcing the individual to "release" his stores for the sake of the "common good" and "fairness".  I can also see the public losing faith in bitcoins and abandoning them, the response to which would INVARIABLY be to generate more coins.  Enter inflation.  So we can readily see that this thing is far from perfected and needs to be tweaked quite a bit before it could be considered stable and effective for the long term.

I am not saying bitcoin is not a good thing, but that there are clear deficiencies that need to be addressed.

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## hazek

> As I suspected, bitcoin is NOT anonymous.  I spent 10 years designing network controllers for Bell Labs and the whole anonymity deal with bitcoin was a big question in my mind, knowing what I have known.  Sure enough, anonymity is NOT a feature of bitcoin.  Users are certainly not anonymous to those who really want to find out who one is.  So long as a transaction is tied to an IP address one is exposed to miners.


No one of importance or with any credibility ever said it was, I certainly never did. Bitcoin is at best pseudononymous and even that only if you really know what you're doing and are very careful how you use it.




> I also find it interesting that use of TOR does not seem to be a built-in option in the bitcoin protocol.


It's getting there AFAIK.

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## hazek

> Another problem is the issue of bitcoin status including that of lying fallow for extended periods and loss through material destruction of computers, loss of passwords, and so forth.  Statistically speaking, all currently extant bitcoins are doomed to loss given sufficient time.


Highly unlikely given the triviality of backing up your wallet file.




> The question becomes how does one know how many bitcoins are "out there" at any given time?  That _appears_ to be an issue of centralized control, which is a problem bitcoin seeks to evade.  Is there a distributed method for determining this?  Perhaps.  My immediate thought would be to provide a separate means of verifying ownership so that when a disk burns one is able to recover his holdings, but that is a discussion for another day.


There is no finding out how many are out there and therefor it's not an issue being evaded at all, neither decentralized or centralized, there is no recovery if you lose your last copy of the private key pair. If you lose your bitcoins, you lost them, period.

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## hazek

Frankly I'm a bit surprised by this next paragraph where you show an obvious lack of understanding of free market economics.




> Another semi-baloney aspect of bitcoin is the claim that there are only 21 million bitcoins to be generated.  Because the divisibility of bitcoins goes down to 10^-8 and may be extended to even smaller subdivisions, inflation is actually built in to the bitcoin so far as I can see.  Firstly, there are 21 TRILLION effective bitcoins to be generated, given the current divisibility.  As bitcoins wend their ways into the economy, the individual value of each coin increases in terms of purchasing power.  This is perforce true because as demand for bitcoins increases, so goes the value of each unit, which is to say its price.  The increase in price raises the purchasing power of each coin.  What cost me one bitcoin today now costs half a coin.  My stock in bitcoins has effectively split and the supply of bitcoins has _effectively_ doubled because I may divide the coins to that mesh.  This can keep going until I have divided each coin I hold into one billion parts.  That constitutes an effective increase in the number of coins from the purely practical perspective because it effectively redefines what a bitcoin _is_ in quantitative terms.  It would be similar to taking a pair of snips and slicing a gold coin in half and redoubling that action again and again until a loaf of bread is had for a microscopic flake of gold.  I am not saying this is necessarily bad, but that it should be recognized.


Let me demonstrate the silliness of some what you wrote by substituting the word bitcoin with gold.




> Another semi-baloney aspect of gold is the claim that there are only 170k tones of gold mined.  Because the divisibility of gold goes down to 1 atom and may be extended to even smaller subdivisions, inflation is actually built in to the gold so far as I can see.  Firstly, there are 170k tones*atoms per tone effective of gold, given the current divisibility.  As gold wend their ways into the economy, the individual value of each gold atom increases in terms of purchasing power.  This is perforce true because as demand for gold increases, so goes the value of each unit, which is to say its price.  The increase in price raises the purchasing power of each gold gram.  What cost me one gold atom today now costs half a gold atom.  My stock in gold has effectively split and the supply of gold has _effectively_ doubled because I may divide the gold atoms to that mesh.  This can keep going until I have divided each coin I hold into one billion parts.  That constitutes an effective increase in the number of gold atoms from the purely practical perspective because it effectively redefines what a gold _is_ in quantitative terms.

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## hazek

> I am not saying bitcoin is not a good thing, but that there are clear deficiencies that need to be addressed.


I will be the first to tell you that there definitely are huge deficiencies right now that could be a reason for concern about it's future but sadly you listed none of them in your post.

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## Steven Douglas

> The question becomes how does one know how many bitcoins are "out there" at any given time?


Just a quick thought on this, from the perspective of someone who is not a bitcoin devotee, but who is excited about the principles involved, and the future possibilities that could crop up from what is being tried now: 

The exchange value of any commodity isn't determined by the total amount in existence, but rather the total amount _actively circulating_ (the only relevant meaning of "out there" in terms of price or exchange value).    

It is sometimes stated that the act of saving _increases_ the value of every like thing in circulation. The reality, however, it is that whatever is withheld from circulation simply _does not decrease_ the value of all other like things in circulation.  'Not decreased' is not the same thing as increased.  

If all theoretically possible bitcoins were finally mined, and fully half of them were forever lost over time, it would be the equivalent of 21 Trillion bitcoins in existence possible being reduced to 11.5 Trillion. All of them can be said to be in existence, but the net effect on the lost half is that they are forever saved -- permanently removed from even the possibility of circulation.  To that extent it is permanently deflationary, albeit with an equilibrium of its own that is permanent over time.  




> That appears to be an issue of centralized control, which is a problem bitcoin seeks to evade.


The lack of centralized control, in terms of the inability to appeal to a central authority to verify or prove ownership for the sake of recovery, equates to risk for anyone who loses their bitcoins.  But that is no different than what happens when cash, gold or or other valuable commodities that are lost, with one exception that can be seen as a virtue to current and future holders: When you lose anything else that has exchange value, there is always a chance that someone else might later recover it and cause it to be put back into circulation. When bitcoins are truly lost, with no chance of recovery by the owner, it is like cash that has been shredded and burned, forever lost to everyone else.  Knowing the serial numbers wouldn't help, as those numbers don't exist for the purpose of recovery, but only to verify authenticity of something that must be in the bearer's physical possession to have any value.  Thus, nobody has any way of knowing whether serial numbers that are never seen circulating again (bitcoins or cash) have been destroyed, or are simply hoarded in a safe somewhere.

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## psi2941

> I don't think hazek is saying everyone should drain their bank accounts and buy as many bitcoins as possible. 
> 
> Probably 9 out of 10 Ron Paul Forumers will agree that fiat currency (USD, EUR, etc) is a terrible place to store all your wealth. The real question, is where do you store your hard earned wealth? For most people, the goal is to be able save wealth in a form that will retain value for when it will eventually be needed to buy gas, food, bullets, etc. And (god willing) actually make some interest on that, so that it's worth something. So what are the options? Dollars, bonds, stocks, gold, silver, real estate, your own business, fine wines, silver age comic books, lottery tickets, etc. Nothing is 100% guaranteed to retain value, much less grow in value. Most investment managers advise diversification of funds based on an appropriate level of risk. Bitcoin is extremely risky, but is potentially extremely profitable. No one is recommending that anyone should put all their money into Bitcoin. But on that same note, it's a bad idea to put all of your wealth into stocks, wines, real estate, and yes, even gold.
> 
> Diversification:  The next best thing after a crystal ball.


nope, u can't go wrong with gold/silver. If i had a life savings it would all go into gold. EVEN if its down 300-400 dollars. I don't care what happens a few months to years from now. I know for FACT its going to infinity in terms of US Dollar.

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## soulcyon

There are way too many problems with Bitcoin for it to be sustainable... although I agree it is NOT a pyramid scheme. I'm still holding out for MicroCash, since there seems to be great promise, primarily: "Resistant against 51% mining attacks. Money is used to help solve block disputes but now nearly everyone can contribute to this process instead of only a few trust nodes."

Essentially, if any one person (or any group of people) gains enough computation power to control 51% of the total coins in BTC, then he will essentially control the market flow and can technically hack his client to deny all other transactions.   This will, in turn, completely shut down the BTC economy.

As for Gold/Silver or any other commodity, it can be destroyed, which is one of the biggest problems with that type of money.

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## hazek

> There are way too many problems with Bitcoin for it to be sustainable... although I agree it is NOT a pyramid scheme. I'm still holding out for MicroCash, since there seems to be great promise, primarily: "Resistant against 51% mining attacks. Money is used to help solve block disputes but now nearly everyone can contribute to this process instead of only a few trust nodes."
> 
> Essentially, if any one person (or any group of people) gains enough computation power to control 51% of the total coins in BTC, then he will essentially control the market flow and can technically hack his client to deny all other transactions.   This will, in turn, completely shut down the BTC economy.


Which MicroCash solves with centralization which of course you can't and wont admit. Besides the 51% attack has no upside, it could only damage Bitcoin by being disruptive which I can't see happening once the miners get their ASICs running because of the costs involved such an attack would carry. But you are right, there is a risk something might go wrong, Bitcoin after it's still only beta and still only an experiment.

Nonetheless I'll personally take a decentralized no guarantees currency over a centralized and all kinds of guarantees currency any day.

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## soulcyon

> Which MicroCash solves with centralization which of course you can't and wont admit. Besides the 51% attack has no upside, it could only damage Bitcoin by being disruptive which I can't see happening once the miners get their ASICs running because of the costs involved such an attack would carry. But you are right, there is a risk something might go wrong, Bitcoin after it's still only beta and still only an experiment.
> 
> Nonetheless I'll personally take a decentralized no guarantees currency over a centralized and all kinds of guarantees currency any day.


If enough people on the Bitcoin network are effected by a trojan, then technically 51% attack is much easier to accomplish than through a single source.  The trojan simply has to hijack the transaction request packets, and always reply false - and once "51%"+ of the people are effected by the trojan, the whole economy will flatline.  There is no need for this attack to produce a benefit, hackers could/would just do it for fun - which is much more dubious than attacking for benefit 

More info on the 51% attack: http://solidcoin.info/solidcoin-most...e-currency.php




> n his Bitcoin paper, Satoshi identified several issues, with the 51% attack being the greatest.
> 
> So what is the 51% attack? To understand that you have to understand how Bitcoin works. Essentially Bitcoin is a collection of nodes performing "virtual work", the more work you do the higher your rating on the network. So what happens when malicious users get together and manage to do more "virtual work" than the "good people" ? Well that is the 51% attack, and it basically means you can wake up tomorrow with zero Bitcoins in your wallet. It means any business that accepts Bitcoins can get robbed and have all their goods taken with fake Bitcoins. It also means if they wanted, governments, large corporations or hackers can "shut down the network" by refusing to accept any new transactions. Complete network shutdown. Can't do anything with your Bitcoins, neither can anyone else.
> 
> Now obviously Bitcoin proponents will say things like "Yes well we just need to pool together the good users" or "it's unlikely anyone will have that much network power" . Yet as this article is being written one person (deepbit) controls nearly 50% of the Bitcoin network. One person. Could you operate a Bitcoin business in conditions where you the only thing standing between you and complete bankrupty is words like "well only if" or "it's sort of unlikely, but" ? Will any serious business open themselves up to a group of hackers able to steal millions of dollars from them? The short answer of course is NO.
> 
> Obviously to reach the next evolution of p2p cryptocurrencies we cannot sit around holding hands and praying that nefarious people don't attack the network. We know they will, it's human nature. Furthermore serious businesses will not accept a cryptocurrency until it's easy for them to implement, secure for them to do so and they can be sure their funds are as secure, if not more secure than funds in the traditional banking system.


When did I ever talk about centralization and why won't I admit to it?  Microcash won't be using trust nodes anymore, however there is partial centralization to protect price stability and enhance security, read @ http://wiki.solidcoin.info/wiki/SolidCoin_Foundation

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## soulcyon

> Interesting, but realistically, if everybody had their bitcoins stolen then they would probably completely lose their value almost instantly.


AFAIK, they can't be "stolen", but rather they can be thrown out of circulation easily.

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## hazek

> however there is partial centralization to protect price stability and enhance security, read @ http://wiki.solidcoin.info/wiki/SolidCoin_Foundation


Exactly, hence why I wont even think about using it, I'll take my chances with the decentralized "riskier" option any time.

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## tangent4ronpaul

This thread is in economics, so I'm not surprised the other half of the OP has been ignored and should be split off to the health sub-forum.  swisspharmacy is not Swiss, it's based on a small Island state that I also suspect has very nice banking laws. What is interesting is that they are a source of Indian drugs at 50% or less of their US cost and ships in a plain brown wrapper.  They don't list "fun" drugs and say they won't deal with anything "scheduled" - though that begs the question "scheduled where"?  They say to inquire about anything not listed by drug name or class...  For anyone stuck on maintenance drugs this could be a budget saver!  

Most of the trade names they list are not ones you find in the US.  If anyone is trying to figure out if a drug they list is the equivalent of what they are currently on, you can PM me and I'll see what I can find.  I have an international pharmacopedia that lists trade names and content across countries.

They take other forms of payment besides BTC.

-t

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## soulcyon

> Exactly, hence why I wont even think about using it, I'll take my chances with the decentralized "riskier" option any time.


I can quote you and say this without sounding like a troll:   You will look at any form centralization, and you will never admit that it is better than decentralization.   

I bet you didn't even read how the partial centralization works in MC. inb4, government hijacks all the mints.

You should really look into actually researching these topics and realize why centralization can and will be better when it comes to currency.   There is no need to follow the "decentralization" balloon like a blind sheeple.   I've given you many credible arguments as to why pure decentralization is bad, and no real investor will ever put their trust into BTC - ever.   Here I'm thinking that people on RPF (not excluding the numerous other libertarian communities) actually like to look things up before making up their minds - but this is just another example as to why Sheep willl always be Sheep.   The only way you will learn that BTC is truly awful is when the BTC economy hits the $#@!ter.

Here is a good example of an attack, which is only possible thanks to the decentralization of BTC:




> Is essence it is this (MiB=Men-in-Black):
> 
> 1. MiB surreptitiously and slowly buy up lots of GPU's (reasonably cheaply - the entire BTC mining community is equivalent to about 200Ghps, one 5870 ~ 0.5Ghps, => only 400 5870s required, cost ~ $200k).
> 2. everybody rejoices - the BTC network is getting stronger!
> 3. MiB approach and exceed 50% of entire BTC net. 
> 4. When MiB have, say, 80% of mining, they start to reject blocks generated by anyone else.  First slowly, but increasing.
> 5. Eventually, most, or all, blocks generated only by MiB.
> 6. Community realises what's happened!  Panic!  Releases new client to blacklist MiB's cluster.
> 7. MiB have already thought of this and have their cluster instantly distributed to new IP addresses, apparently from many different countries etc, behind Tor if you like.
> ...


All credits to fergalish @ https://bitcointalk.org/index.php?to...42835#msg42835

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## efiniti

> I also find it interesting that use of TOR does not seem to be a built-in option in the bitcoin protocol.


Tor just operates as a SOCKS proxy.  As long as your application supports SOCKS, your connections can be anonymized through tor.  Bitcoin-Qt supports it.  

Anonymous transactions ftw.

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