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rasputinOffline
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PostPosted: 06-11-2013 19:22    Post subject: Bitcoin Reply with quote

I couldn't find a bitcoin thread so I thought I would start one.

To anyone that is unfamiliar with bitcoin, it is is a cryptocurrency created by the mysterious "Satoshi Nakamoto" in 2008. Nakamoto has never been identified and is likely to be a pseudonym. It is not known whether "he" is an individual, a group of people or even a government. The conspiracies regarding his identity are already numerous.

Here is an interesting article about the possible contenders who could be behind the cryptocurrency:

http://motherboard.vice.com/blog/who-is-satoshi-nakamoto-the-creator-of-bitcoin
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rynner2Offline
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PostPosted: 07-11-2013 20:57    Post subject: Reply with quote

Bitcoin might have problems:

Bitcoin flaw could threaten booming virtual currency
14:57 06 November 2013
by Chris Baraniuk

Bitcoin contains a hitherto unnoticed flaw which threatens to upset the balance of the $1.5 billion economy built on the virtual currency.

Ittay Eyal and Emin Gun Sirer, of Cornell University in New York have discovered the "devastating" potential for Bitcoin "mining" – the process by which Bitcoins are generated – to be manipulated (arxiv.org/abs/1311.0243v1).

Bitcoins are generated when people connect their computers to the network and set them to work on a cryptographic puzzle. This is known as mining. When a puzzle has been solved it adds a digital "block" to the public record of all Bitcoin transactions, known as the "blockchain". The miners are then rewarded with a set amount of Bitcoins.

etc...

http://www.newscientist.com/article/dn24534?cmpid=NLC%7CNSNS%7C2013-1010-GLOBAL&utm_medium=NLC&utm_source=NSNS&

New Scientist is touchy about copyright issues,so I won't quote it all. However, this article should be accessible to everyone.
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ZoffreOffline
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PostPosted: 06-12-2013 23:28    Post subject: Reply with quote

Fascinating - it could almost be a plot of a sci-fi novel!
Quote:
There's a £60m Bitcoin heist going down right now, and you can watch in real-time

One of the largest heists in bitcoin history is happening right now. 96,000 bitcoins - that’s roughly £60m as of the time of writing - was taken from the accounts of customers, vendors and administrators of the Sheep Marketplace over the weekend.

Sheep was one of the main sites that came to replace the Silk Road when it closed in October, but it too has now closed as a result of this theft. It’s a little hard to work out exactly what’s happened, but Sheep customers have been piecing it together on reddit’s r/sheepmarketplace.

Here's what happened: someone (or some group) managed to fake the balances in peoples’ accounts on the site, showing that they had their bitcoins in their wallets when they’d actually been transferred out. Over the course of a week the whole site was drained, until the weekend when the site's administrators realised what was happening and shut everything down.

Originally it was thought that only 5,200BTC - or £3m - was taken, with a message posted on Sheep's homepage blaming a vendor called "EBOOK101" for finding and exploiting a bug. However, over the weekend it became clear that the amount stolen was much, much larger.

In a normal robbery that money would be gone by now, but it isn't. Bitcoin is pseudonymous, not anonymous, and bitcoins can’t just disappear. It works because each and every transaction is public and visible to each and every other person using the Bitcoin network, and a person is only as anonymous as their link to their wallet.


A couple of reddit users realised that the sheer size of the heist makes “tumbling” the coins - the normal method of laundering bitcoins - impossible, as long as they kept on their toes. Someone with bitcoin can send some to a tumbler like bitcoinfog, where it will be split into smaller subdivisions and mixed with other bitcoins from other places, recombining and splitting again several times over until the whole amount eventually comes out the other end, theoretically in such a way that it’s impossible to track. Silk Road’s in-built tumbler successfully foiled the FBI, allegedly.

However, reddit user TheNodManOut managed to track where the first bunch of transfers out of Sheep went, and from there and silkroadreloaded2 worked out which tumbler that the thief was using. Here’s how silkroadreloaded2 describes what’s happened since (“Tomas” is the alleged owner of Sheep, and one of the suspects for many users):

All day, we've been chasing the scoundrel with our stolen bitcoins through the blockchain. Around lunchtime (UK), I was chasing him across the roof of a moving train, (metaphorically). I was less than 20 minutes, or 2 blockchain confirmations, behind "Tomas".

He was desperately creating new wallet addresses and moving his 49 retirement wallets through them, but having to wait for 3 or 4 confirmations each time before moving them again. Each time I caught up, I "666"ed him - sent 0.00666 bitcoins to mess up his lovely round numbers like 4,000. Then,all of a sudden, decimal places started appearing, and fractions of bitcoins were jumping from wallet to wallet like grasshoppers on a hotplate without stopping for confirmations.

Shit!

He was tumbling our stolen bitcoins a second time, and a tumbler is unbeatable....

Unless you guess which one it is, nearly all the coins belong to the person you're tracking, jump in with him, and get jumbled up through the same wallets using the same algorithm. I was hopping from foot to foot shouting "come on!" at my laptop, waiting an age for 6 blockchain confirmations to get 0.5 btc into "bitcoin fog". My half a bitcoin got sliced and diced through loads of wallets and I followed the biggest chunk with blockchain.info - along with 96,000 stolen ones!

Or, in other words:

He gathered 96,000 in one pot, then split it into about 50 smaller ones. then he saw me 666ing them all. Imagine a sports stadium with 96,000 people in it, each with $1000.

He sent them all via different routes all over the world, but the same 96,000 people then arrived at a different stadium and he went to bed.

Now there are 96,001, and I just phoned you on my mobile to tell you where the stadium is.

A major problem with tumblers is that they only work with lots of bitcoins coming and going from a lot of different sources - if a tumbler is taking in 96,000 bitcoins, those will massively outnumber all other bitcoins being tumbled and it’ll be easy to spot them coming out the other end. Mix in a little of your own with all those other ones and you'll find out the wallet addresses that the tumbler uses, and it should be easy to spot large transactions splitting off from there.

The fascinating consequence of this is that you can see the stolen bitcoins on the public blockchain, and as long as there are people keeping tabs on it there’s going to be no way for the thief to cash in on their haul. Considering how people rely on tumblers to maintain anonymity when buying illegal stuff online, this unusual loophole is something of a revelation.

Right now, as you’re reading this, you can watch as the the thief starts trying to move their bitcoins on again - it’s currently down to 92,000 bitcoins and dropping as smaller chunks begin going out. Selling those bitcoins and turning them into cash is going to be extremely difficult, as the major Bitcoin exchanges all demand proof of identity (specifically to avoid charges that they're involved in money laundering), and if they're broken down into smaller quantities to sell via a site like localbitcoins.com a paper trail will still be generated. As soon as it's possible to link one real-life bank account or identity to any bitcoins from that stash, it will be possible to work out their real-life identity.

This counts as one of the largest robberies in history at Bitcoin's current market value, ranking in the same company as real-life thefts like the $108m diamond theft at the Harry Winston store in Paris in 2008. 96,000 bitcoins also places the thief as one of the wealthiest Bitcoin millionaires on the current rich list (but bear in mind that few serious Bitcoin players keep their currency in just one wallet) - and all without having to go to the trouble of wearing balaclavas or threatening someone with a gun.

Let's watch and see what happens next.


Source

I can't say I even really fully grasp what's happening here, but it's interesting nonetheless.
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OneWingedBirdOffline
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PostPosted: 07-12-2013 13:31    Post subject: Reply with quote

I don't entirely understand it either.

Won't the bitcoin currency devalue to nothing if a large enough (and unknown) proportion of it is hot?

Surely it's only 'backed' metaphorically by what rate people are willing to honour it at when it's used to pay for something material?
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Pietro_Mercurios
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PostPosted: 07-12-2013 14:50    Post subject: Reply with quote

I wish I'd bought some, when I first read about them. Sad
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Anome_Offline
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PostPosted: 07-12-2013 22:31    Post subject: Reply with quote

As I understand it, the value is partly down to scarcity, and the difficulty of "mining" more of them. These factors are built into the system, but there's also a trading market that sets value by what people are willing to pay for them. If anyone loses interest, it could all come crashing down around your ears.

I always meant to set up a miner, but now there's no value in it if you don't use specialised hardware, which costs a lot to set up.
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paranoid420Offline
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PostPosted: 08-12-2013 04:05    Post subject: Reply with quote

Did Satoshi Nakamoto transfer 1,000 bitcoins to the Silk Road?

Jeremy Kirk, IDG News Service
Nov 24, 2013 7:35 PM
print Jeremy Kirk, IDG News Service Australia correspondent, IDG News Service
Two computer scientists in Israel say a bitcoin transaction now worth more than $1 million suggests a possible link between a creator of the virtual currency and Ross William Ulbricht, the 29-year-old accused of running the Silk Road underground online marketplace.

The 1,000-bitcoin transfer was found during an analysis of the movement of the Silk Road’s bitcoins, according to a forthcoming research paper written by Adi Shamir and Dorit Ron of the Weizmann Institute of Science.

The finding suggests a partnership or investment in the Silk Road on the part of someone involved very early on in Bitcoin “but this is pure speculation,” the researchers wrote.

The amount was transferred on March 20 from an account established just a week after the bitcoin network launched in January 2009. Early bitcoin accounts are believed to be controlled by Satoshi Nakamoto, a pseudonym for the person or group of people who created Bitcoin.

The receiving account has been linked to “DPR,” short for “Dread Pirate Roberts,” the operator of the Silk Road who authorities alleged is Ulbricht. The bitcoins were worth about $60,000 at the time, but the price of bitcoin has since surged.

“The short path we found suggests (but does not prove) the existence of a surprising link between the two mysterious figures of the Bitcoin community, Satoshi Nakamoto and DPR,” they wrote.

Nakamoto’s real identity has never been uncovered despite attempts to figure out who has the cryptography and mathematical skills to create such a system. He stopped writing posts on a bitcoin forum in 2010.

As many as 20,000 of the first groupings of transactions, known as “blocks” in bitcoin’s public ledger, are believed to have been performed by computers controlled by Nakamoto, according to the paper. He may have accumulated up to 1 million bitcoins worth close to $1 billion today.

The bulk of the research paper focuses on the movement of the Silk Road’s bitcoin commissions. Before it was shut down in October, the site collected as many as 633,000 bitcoins from its commissions, which ranged from 1.5 to 10 percent of the value a product sold on the Silk Road.

The U.S. Federal Bureau of Investigation seized 144,336 bitcoins from a laptop after Ulbricht’s arrest on Oct. 1 in a San Francisco public library. Those bitcoins, worth around $28 million, were transferred in 324-bitcoin chunks—which the researchers noted spells out “FBI” on a telephone number pad—to an account the agency controlled.

But the amount the FBI seized is just 22 percent of the 633,000 bitcoins the Silk Road is believed to have taken in, they wrote.

Up to a third of the commissions were moved to new bitcoin wallets prior to Ulbricht’s arrest. As to the whereabouts of the rest of the bitcoins, it seems likely that DPR “was simply using a different computer during these periods, which the FBI had not found or was unable to penetrate. “

Ulbricht, denied bail last week, is in pre-trial confinement in Brooklyn’s Metropolitan Detention Center. He is facing charges in federal courts in New York and Maryland, including murder-for-hire, narcotics trafficking and computer hacking.

Prosecutors allege they linked Ulbricht to the Silk Road after tracing a few forum posts promoting the Silk Road, one of which contained an email address: “rossulbricht@gmail.com.”

http://www.pcworld.com/article/2066780/did-satoshi-nakamoto-transfer-1000-bitcoins-to-the-silk-road.html
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OneWingedBirdOffline
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PostPosted: 08-12-2013 09:25    Post subject: Reply with quote

Any they wonder why no-one trusts gmail. Laughing

Interesting scam though, if that is what bitcoin was meant to be from the very beginning.
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rynner2Offline
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PostPosted: 08-12-2013 10:11    Post subject: Reply with quote

OneWingedBird wrote:

Interesting scam though, if that is what bitcoin was meant to be from the very beginning.

I still don't understand bitcoin. If it's a scam, who has been scammed, and for how much?
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Pietro_Mercurios
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PostPosted: 08-12-2013 10:22    Post subject: Reply with quote

Bitcoins are the essence of money, in its purest form. Spun out of nothing more than some clever encryption algorithms, they only really exist as long as enough people believe in them.
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jimv1Offline
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PostPosted: 08-12-2013 10:45    Post subject: Reply with quote

Pietro_Mercurios wrote:
Bitcoins are the essence of money, in its purest form. Spun out of nothing more than some clever encryption algorithms, they only really exist as long as enough people believe in them.


And that, in a nutshell, is the problem with the US dollar and how we could have another huge global economic catastrophe in the next few years.
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OneWingedBirdOffline
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PostPosted: 08-12-2013 20:16    Post subject: Reply with quote

You beat me to it Jim.

Money as a concept only exist so long as people believe in it.
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MythopoeikaOffline
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PostPosted: 08-12-2013 20:43    Post subject: Reply with quote

Bitcoin is just another fiat currency, invented to create an alternative money market to currently-existing currencies.
Essentially, thanks to the way it is created (derived from some complex cryptographic formula), it is mathematically limited to a maximum of 21 million Bitcoins.
The way it derives value despite not being backed by something else that is perceived to have value (i.e. gold, silver) is through the 'mining' process - powerful computers do massive number-crunching exercises to generate unique cryptographic IDs for each Bitcoin. This process costs money and takes time.
That 'computer time' is perceived to have a value, so each Bitcoin has that value.
It's a similar concept to how gold is valued. In and of itself, gold does have a real-world value - it is used in industrial processes, electronics and jewellery. However, gold derives most of its value from the fact that it is difficult and expensive to mine, refine and distribute. That process is what adds value.
Bitcoin, on the other hand, has no tangible presence or use outside of the world of financial transactions. It is completely volatile and unpredictable.

I wouldn't touch it with a bargepole.
I would much prefer to invest in something that can be broken down into smaller units, that won't deteriorate physically/notionally, etc. Gold and silver are pretty good for this.
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Anome_Offline
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PostPosted: 09-12-2013 09:28    Post subject: Reply with quote

Mythopoeika wrote:
However, gold derives most of its value from the fact that it is difficult and expensive to mine, refine and distribute. That process is what adds value.

Which is why the price of gold crashes whenever someone finds another source of it. Well, not really, it's actually expensive because it's scarce. It's actually less valuable these days since everyone shifted their currencies off the gold standard, and sold off all their gold stocks, flooding the market.

Quote:
Bitcoin, on the other hand, has no tangible presence or use outside of the world of financial transactions. It is completely volatile and unpredictable.

Unlike rare metals... Ask Kodak how much their silver reserves are worth these days.

Quote:
I wouldn't touch it with a bargepole.
I would much prefer to invest in something that can be broken down into smaller units, that won't deteriorate physically/notionally, etc. Gold and silver are pretty good for this.

Except when they aren't. After all, silver tarnishes. Each time you polish the candlesticks, you're throwing away trace amounts of the actual silver.

And gold holds its value until someone dumps a heap of it on the market. Or something else happens. Looks like in inflation adjusted US$s, gold is just about back up to where it was in 1979. Only one chart I saw showed it was heading down again.

I'm not trying to defend Bitcoin, it's just that the idea that everything is better when the economy is based on something tangible, like gold, is outdated and wrong. There are a lot of reasons not to trust Bitcoin, but not being based on gold is not one of them.
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MythopoeikaOffline
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PostPosted: 09-12-2013 11:01    Post subject: Reply with quote

Gold and silver aren't as scarce as you might think - there's a whole load of it in the sea. It's just that collecting it and refining it would make it really expensive, so people prefer to find easy deposits in the ground.

It's true that gold and silver do devalue when new stocks are found, but they won't ever completely lose a value. Whereas Bitcoin might.

What would you suggest as a possible reliable alternative to gold, silver or Bitcoin?
I thought - bottles of old malt whisky, perhaps... Smile
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