Buying drugs with bitcoins hitting the mainstream

[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/jonmato...let-sparks-trust-without-jurisdiction-debate/

 

[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

 

[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.

 

[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.

 

[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.

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.

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.

 

[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.

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.

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.

 

[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.

 

[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.

 

[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.

 

[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.

 

[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.

 

[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.

 

[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.

 

[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.

 

[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.

 

[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-secure-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

 

[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.

 

[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.

 

[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

 

[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 shitter.

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.
8. MiB use other methods to eliminate anyone else with any significant mining power.

Result:
1. MiB now verify *all* transactions. MiB introduce a fee (=tax) on all transactions. MiB introduce some bureaucracy which must be followed before obtaining a BTC address, certainly requiring some form of ID.
2. MiB now know exactly how much you earn, and when, and who you got it from.
3. BTC's originating from a transaction pre-MiB are rejected until transferred to a new MiB-approved address in the presence of an MiB official.
4. In short, BTC gives *unprecedented* economic power to MiB, exactly the opposite of what it sought to achieve.

All credits to fergalish @ https://bitcointalk.org/index.php?topic=2436.msg42835#msg42835