Remember these words: I should have listened.

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  • Wed, Dec 10, 2014 - 01:41am



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    Answers to Hrunner’s questions.

Hrunner brings up very good questions that most people want to know when they first begin to learn of this invention.


Bitcoins require a working infrastructure of electricity, computer servers, DBAs, ever-faster CPUs, trusted networks of internet connections.


Because bitcoin only works on the internet it does require electricity. It is the only single currency used on the internet that can be used worldwide (although made illegal in a few of the most corrupt countries

Much of the networks is run from servers (aka 'miners') in places like Iceland where the cooling is cheap and so is the power, coming from natural thermal vents. If running a bitcoin network pays the bills, they will find a way to get electricity, from generators, solar or whatever means they can. We can't underestimate motivation of the people.

Most bitcoin transactions happen over cellphones. These can be, and often are,  charged with simple and cheap cellphone charging solar panels. Smartphones can now be had for around $20 around the world. This puts and entire bank in somebody's pocket where more than half of the world have no access to banking. With a smartphone they can now buy and sell from all points around the world without needing a bank. They can start businesses get supplies and pay suppliers. The finally enter the world wide market place for the first time. This is a paradigm change.

This has already happened  in Kenya when the villages starting using cell phone and trading a digital currency called mpesa. based on cellphone prepaid minutes. This digital currency now accounts  for over 60% of that country's GDP and all started less than 10 years ago. Often they have no electricity in these villages but do have a solar panel and a phone, and with just this simple advance, many villages have pulled themselves out of poverty. You can enter villages and see solar panels for each hut doing nothing but charging cellphones.

Hopefully that answers your concerns about electricity. The computing power automatically adjusts every two weeks to be harder or easier depending on how many 'miners' are competing for the right to process the last 10 minute block of transactions.  It is self-correcting and honestly far too powerful than the network needs (around 400,000 times the top 500 supercomputers in the world combined, and continuing to climb).  

These processors' effort also protects the network from attack. It's clever and elegant 'game theory' in the product code that acts as Adam Smith's 'Invisible Hand". 

It is no surprise that the "money of freedom" would give reason to scare governments that are in control in corruption (i.e. Russia). Because bitcoin CAN be the most transparent currency ever conceived – as every transaction ever made is traceable back to the beginning of time and each coin ever created for the network.  Although you might not know who owns any particular piece you can see without a doubt that it does exist and cannot be counterfeit. (more on that later)

It does not require dba's as it runs fine today, but it is open source so anybody in the world can suggest changes and even write code to be peer reviewed by the entire community who have a test network and thousands of programmers review each line of new code extremely suspiciously.  The people verifying the bitcoin core code are the elite of the elite of programmers in this world. But everything is completely out in the open for anybody to inspect provided one has the education to read computer code. There are no secrets.

It does not require faster CPUs.  In fact the entire bitcoin network could run on just two laptops located anywhere in the world.  (Although less secure from attack). And it does not need trusted connections at all. In fact that was one of the primary reasons it was invented. It solves the problem of logic in the world of computers known as the Byzantine Generals' Problem

I've been in several global locales where smooth and continuous electricity is not a given.  In a debt crisis, the Western World could start to look like those locales in a relatively short time. As far as I can tell, no electricity, no servers means no bitcoins.  Not true for gold and silver.

Hopefully I've addressed that in speaking of the worst conditions for electricity already proven to be no problem. But what happens if the internet goes down?

With new inventions relating to digital currencies you may not even need ISPs as each pc, smartphone, laptop etc can be immerged into a 'mesh network' that is a true net bypassing all infrastructure. Even the issuance of domain names once reserved by a small US based committee can be replaced by a decentralized program running automatically around the world creating an entirely alternative web.  In short, if SHTF – there is already a backup plan in place that is not controlled by any government. It can be run from solar panels just as easily.  This alternative web may come into existence ad-hoc by people too poor to afford internet access. We have learned that if there's a possibility, people always find a way.

Plus bitcoins do not have 6,000 years of human history, experience and literature to lean on.  But that's not your or anyone else's fault.

This is true. I totally agree. That's why I hold silver. – I actually don't see much use for gold as there is nothing backing it. (Faith in anything can be fleeting – including bitcoin). Silver has industrial uses, rarity and utility to justify its price. So silver is my insurance and backup plan if all else fails. Bitcoin is my growth and optomistic investment. There is obviously room for both. I sure got tired of 'waiting in the bunker' so to speak almost 'wishing' the SHTF so I could be justified. Then realized that's no happy way to live. There has to be room for hope. This of course is measured by not overdoing it and investing an amount you'll loose sleep over.


Secondly, is there a way to counterfeit bitcoins?  I confess ignorance here about how bitcoins are "mined" and authenticated / validated.  But if there is any way to counterfeit them, or even trick some buyer into thinking you are transacting with 'real' bitcoins, then as bitcoins become as valuable as you believe, the pressures to counterfeit will become enormous.  Thus it is always so for things of value, whether paintings, gold, or Chinese copies of DVDs.


Absolutely not. This was the MAIN reason bitcoin was invented. The inventor was shaken up by the 2008 banking crisis. He created a system that tracks every piece of bitcoin down to the one hudredth millionth of a piece and you can track every one of them back to their moment of creation. Every other processor on the network checks and validates every transaction made every ten minutes. If there is any transaction that is not tied to the previous chained block of transactions it is ignored. It is done by simple majority rules consensos, so for somebody to try to 'fool' the network, they would only be able to 'double spend' their own bitcoin twice for that 10 minute block. To do this they would have to own 51% of all the computing power of the entire network to own the consensus. That means you would have to come up with your own method of getting 400 quadrillion calculations per second, and climbing.  

This is all done with unbreakable military grade encryption. Yes there are doubters of encryption abilities – but they have no idea how it works so that is like listening to a five year old explain how brain surgery works. The network has been evaluated by the best of the best experts in all aspects of computer science who've agreed it is unbreakable. As evidence – billions of attempts are made to break it every second of every day. 

Is it perfect? No.  The computer warehouses that are being built to win the mining rights are getting bigger and forcing the little guy out. This is consolidating bitcoin down to an uncomfortably small number in opposition to the inventor's wishes.  But this is being discussed and alternatives are being worked out that would make this scenario obsolete. But good enough reason to not sink your retirement into bitcoin.  It is so new that people are skittish. Every little piece of bad news scares off people and stampedes for the exits happen. Then people get over excited and the price goes up way too fast as well. It is prone to bubbles and will likely have a few more as it grows up. It's immature and probably will be for years to come – but… those possibilities up can be astonishing knowing everything I know.

It is complex and too complex for the average person to ever understand. But so is the internet. Most people don't know how HTTP works or what routers do to transfer packets of information. The internet was unusable to most people on earth in 1994 before the web browser but it didn't take long before most of the entire world used it. Investment in bitcoin companies is already outpacing investment for internet companies in 1995. By the time most poeple use bitcoin – they may not even realize it. It may be just the protocol that runs underneath all financial transactions., just as HTTP proctocol runs underneath the world wide web.  But because it transfers value instead of data – and is limited in quantity – it is valuable because it has to be if it will be effective in transferring money. It's not debt based, its prepaid credit based.  

Kind of like gold.

Here's a link to the original "white paper" describing the invention. I think of it as a 'Deceleration of Independence' against fiat currency. It is very well written and you can skim over the complex math section that is way over my head, but explains why it can't be counterfeit. 

It discusses most things I've talked about and you asked good questions about. Satoshi Nakamoto had the same concerns. It's important to invest early before the rest of the world figures it out and the banksters take it back over  That's why I'm on this board now. I'm in your camp and share your thoughts and fears. I've been visiting this site regularly years before bitcoin came along. I just happen to also be a techie and futurist.

Hope this helps.






  • Wed, Dec 10, 2014 - 02:32am



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    Great Bitcoin Seminar

Thank you, mrees999,  Very thorough and convincing explanations.

This motivates me to read the white paper and take a serious look at bitcoins.

I most like supporting the idea of having a people's money, that is outside of the control of narcissistic, sociopathic governments.

Bitcoiners will have to be ready to fight hard.  The ideas I stated above about people's money will mean that governments will surely come after bitcoins in intensity that is in direct proportion to their adoption success.

Must control the money in order to control taxes and wealth confiscation (i.e. financial repression), pay for those expensive voter bribing operations, and pay for high dollar lifestyles in Manahattan and D.C.


  • Wed, Dec 10, 2014 - 02:35am



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    on the subject of the divisibility of gold

Suppose you have a polyester sheet. Onto that polyester sheet, you print an image with black toner. Then, onto the toner, you electrolytically deposit a specific amount of 99% pure gold.
Then you cover that with a plastic film.

Now, any two points will have a specific resistivity; the bill will have a specific weight; the thickness of the gold will affect the color.

As a result, there is a visual, a weight-based, and a resistive based check on its gold content. And the amount of gold there is tiny, but it is all recoverable.

Just a thought: gold does have inherent value; bitcoin does not.

  • Wed, Dec 10, 2014 - 07:11am



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Sorry for the bad typo's and spelling of the previous post. I should not do that when half asleep at 2am.  It's too late to edit it now, so just accept my deepest apologies. 😉


  • Wed, Dec 10, 2014 - 07:15am



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    Impressive lunch

That would have been a day of fascination for me to get an 'inside' look at what is going on. Of course he must be reserved in public but I could just imagine behind the scenes the mixed weight of 'don't screw up' plus 'this is going to change the world' mixing.


Care to share any more details?



  • Wed, Dec 10, 2014 - 07:22am



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    Thanks for the tidbit on gold

I've done a bit of panning for gold (even in my own back yard). I'll have to try some of your ideas next spring when I dust off the old equipment for another run at my hobby.

As far as bitcoin not having any intrinsic value?  I wrote a piece arguing that idea and came up with 22 reasons that bitcoin does have economic intrinsic value. This list was just off the top of my head and I can probably come up with another 22 in addition now. 

The article turned out to be wildly popular and translated into several languages from what I understand as it was copied among many blogs around the world.  Here's the link to "You Say Bitcoin Has No Intrinsic Value?  22 Reasons to Think Again"

What do you think?


  • Wed, Dec 10, 2014 - 10:27am



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    bitcoin thoughts

Bitcoin market is small, has a global reach (it is easy for "everyone to play"), and it has very little primary utility at the moment.  There is no solid bitcoin economy.  As a result, it is subject to "phase transition" events, where it captures the popular interest, lots of people stampede to get in on the latest thing, and it goes parabolic, only to fade as popular interest wanes.  Speculators rule the bitcoin market right now.

Just look at the price chart.  That tells you all you need to know.  Its a series of phase transition events, which match up perfectly with a "google trends" search on "bitcoin."

Contrast that with the USD.   300 million people use the USD every day in America.  Even though everyone can play in the USD forex market, people in the US aren't going to stampede out of dollars one fine morning – they still have to pay taxes, pay off debts, pay their bills (denominated in dollars), and so on.  In some sense, people are trapped in the USD by long standing custom, contracts, and use.  All those written contracts where payment in USD is required – they provide a constant demand for USD.

Contrast that with bitcoin.  People don't pay taxes in bitcoin, they aren't paid in bitcoin, they don't have debts denominated in bitcoin – bitcoin is a luxury plaything (at the moment) and so as a result, it will be subject to the whims of popular interest.

As a real economy develops around bitcoin, this will change.  As people rely on bitcoin to execute transactions that they couldn't execute with dollars, people will be motivated to retain and use their bitcoins rather than stampeding in and out based on the current whim.  I want to see debts in bitcoin, taxes paid in bitcoin, rents in bitcoin, paychecks in bitcoin, utility bills in bitcoin – then it will truly be unstoppable.

Again – the argument shouldn't be "bitcoin has no intrinsic value".  The dollar doesn't have intrinsic value either, yet it sure is popular.  Instead, the question should be, what can you buy with bitcoins, how necessary is bitcoin for transactions in those things, how large is the community executing those transactions, and what fraction of bitcoin owners are speculators and what fraction own bitcoin as a means of actually conducting business?

The fewer speculators and the more "business users" bitcoin has, the more stable prices will be, and the more value bitcoin will end up having.

That's how I see it anyway.

  • Wed, Dec 10, 2014 - 01:36pm


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    Not much more to say

It's not the first time we've met. It was a casual lunch with friends. He lives in our area and we have a good mutual friend (we're about the same age), so I see him periodically at social gatherings. But since it is a personal connection I'm not comfortable posting too many specifics.  He's a nice guy and is working hard to expand bitcoin's reach. I don't know but I wouldn't be surprised if Chris has met him or knows him since he's in our area. Most of the talk was casual. He is optimistic of how bitcoin is currently being received, and welcomes the other ecurrencies like litecoin. That's was about it.

  • Thu, Dec 11, 2014 - 12:16am



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    Bitcoin and exponential energy and QE (Bitcoin-stylee)


I posted something similar to this in the other thread Jim H mentioned but now that i've had a night to sleep on it i've clarified my wandering thoughts so perhaps you can offer some insights. My concern now is energy requirements. (As a point of reference i'm one of those pesky critical thinkers whose opinion moves with data).

Bitcoin Principles

My understanding is that the bitcoin network requires access to computing power to validate transactions and ensure people have not defrauded the system through duplication or other nefarious deeds. To do this the bitcoin network uses computers around the world to solve SHA-256 algorithms. In exchange for this computing power it rewards miners with bitcoins + some arbitrary transaction fee.

What follows is an analysis derived from this assumption – so if the assumption is wrong please correct me.

Exponential energy

In the other thread Jim H linked to i derived that in Feb 2012 the total daily hash rate was 12,000 Gigahash/s which equates to 600kJ using the most efficient miner rig on the market at that time (50J/Gigahash). With a daily bitcoin rate of 3450 Bitcoins that translates to 174Joules/s/Bitcoin. In Watts that would be 174W/Bitcoin

Fast forward to Dec 2014 and that figure jumps to 32kW/Bitcoin. (300,000,000 Gigahash/s with most efficient mining rig currently available (0.37J/Gigahash) divided by the constant Bitcoin rate of 3450 per day.)

I mean these energy requirements are exponential in growth. Plus i'm being extremely conservative with the figures. I'm assuming everyone has the most efficient rig (which they don't) and that there aren't any losses in the system – impedance losses, transformers losses, cooling requirements, etc – which of course there will be.

Assuming i use more realistic figures (say an average miner rig of 5J/Gigahash) and power losses of 20% that figure today jumps to over 500 kWatts/Bitcoin – that's some serious energy. And we're only a third of the way there – roughly 14 million bitcoins have been mined out of a potential 21 million bitcoins. So if this has been going for 5 years let's say it has another 2 and a half years before all bitcoins are mined.

So with exponential hash rate data and improved rig development for the next 2 and a half years lets do the numbers. I've gone semi-annually starting from Dec '14 at 300,000,000 Gigahash/s (exponential formula is [1 + 1/2]^2 = 2.25) gives 17,300,000,000 Gigahash/s on the final day of Bitcoin mining. Say power losses are at 20% and rig efficiency improves to give an average of 0.3J/Gigahash

= 6.2 Giga Joules per second => 6.2 Giga Watts divided by daily bitcoin rate of 3450 = 1.8 MWatt/Bitcoin

You'd need over 7 Three-Mile Island Nuclear Power Plants to generate that kind of power on a daily basis just to maintain the network.

Bitcoin Quantitative Easing

Now i don't expect that 7 nuclear power stations will be built to maintain the bitcoin network but rather the difficulty rating will be lowered as it did for the first time this December 

Date Difficulty Change Hash Rate
Dec 02 2014 40,007,470,271 -0.73% 286,384,627 GH/s
Nov 18 2014 40,300,030,328 1.76% 288,478,854 GH/s
Nov 05 2014 39,603,666,252 10.05% 283,494,086 GH/s


Incentive for miners to maintain the network can be driven in three ways;

1) Lower the difficulty threshold – which they've actually done as mentioned above
2) Increase transaction rewards to miners
3) Release more Bitcoins per block solved

Yet all these measures reward the miners with the most efficient rigs (read: the big boys). My guess is the intention is to release more money into the system either to offset operating costs or encourage investment in more efficient rigs. Yet these profits can be transferred elsewhere draining the system of impetus. Far from being de-centralised this kind of power requires major investment. Now that the major investment is in place expect the market to be corned (read: centralised). I think it was a noble ambition but they've made it (intentionally or not) so that only the big boys can access the newly released liquidity. Remind you of anything? On that basis it doesn't solve the underlying fundamental problems of fiat currency.

My graph sources remain unchanged (hash rate and bitcoin rate) viewing in 'all time' selected at the bottom of each graph.


All the best,

  • Thu, Dec 11, 2014 - 12:23am



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    It’s all good

Thanks for sharing the tidbit gillbilly. In the interviews I've seen him conduct and the panel discussions he's been involved with give me the impression he's a cool customer and relaxed. If Satoshi trusted him to take over he must know his stuff.

I can appreciate keeping private items private so thank you and trust points earned. As Gavin is close to my age, you and I must be of a similar age as well. It strikes me that his interest is in the science and wonder of the new technology much more than any economic incentive, which is mostly true of me as well. I'm more interested in leaving a legacy to future generations that I took part in something that changed the world.

In my view, that's where the true happiness is found -knowing you did something that mattered.




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