<div dir="ltr"><div class="gmail_extra"><div class="gmail_quote">2014-06-15 4:26 GMT+02:00 <span dir="ltr"><<a href="mailto:lmgoodman@hushmail.com" target="_blank">lmgoodman@hushmail.com</a>></span>:<br><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex">
However, the cryptography in Bitcoin is the easy part. </blockquote></div><br>Well..........</div><div class="gmail_extra"><br></div><div class="gmail_extra">It's easy if you only have to use it. Those things not intertwined with N=NP, entropy, signal-to-noise ratio's, and 100% correctness are typically just as important for a good application, but a LOT easier to produce to an acceptable level of correctness.</div>
<div class="gmail_extra"><br></div><div class="gmail_extra">P.S.: Good piece! I'd like to add three:<br><br>Myth #6: Bitcoin is inherently Democratic or at least more democratic than usual money</div><div class="gmail_extra">
Fact: Bitcoin is plutocratic, controlled by the wealthy</div><div class="gmail_extra"><br></div><div class="gmail_extra">When people speak of Bitcoin "voting" they usually refer to the mayority of hashing power agreeing on something. The one who owns the most hashing power invested the most money (Bitcoin or otherwise) into Bitcoin mining hardware. No other conditions exist but to have a lot of money to be able to win a vote. A cheaper alternative is mining-pools, which centralize the vote to the owner of the pool. It is true, nowadays, that mayority is so expensive that the amount of wealthy that could singlehandedly break Bitcoin is decreasing. Yet, even when there isn't anyone who could do it singlehandedly all choices are still made by voting with wealth, not voting per person.</div>
<div class="gmail_extra"><br></div><div class="gmail_extra">Usual money is dictated by the people elected by "the people", at least that's what the wrapper reads. If you're as worried about the correct functioning of "the democratic system" as I am you wouldn't like to use the word democratic anymore. But, certainly, the Euro is more democractic than Bitcoin. The Dollar is about the same (neither the FED nor the global people take orders from USGOV). Many national currencies will be more democratic than the Euro, simply because every individual person has greater influence over it. If everyone were equally wealthy Bitcoin would be democratic, the less equally wealthy people are the less democratic Bitcoin is. There's some people out there that can buy whole cities, and employ their people. So Bitcoin, not very democratic. But democracy, was that really what you were looking for?</div>
<div class="gmail_extra"><br></div><div class="gmail_extra">Myth #7: It's too late to get in and reap huge profits (I can not be an "early adaptor" anymore)<br><br>Fact: Bitcoin's value is arbitrary, based upon nothing and limited by nothing.</div>
<div class="gmail_extra"><br></div><div class="gmail_extra">If nothing goes wrong adaption will steadily grow and the price will fluctuate depending on market liquidity, which can be arbitrarily low. (Note: supply/demand refers to how many people are selling, how many people are buying, not to actual supply or anthing.) Without any organization to smooth over those fluctuations Bitcoin can crash (fully) one day and rise to mighty hights (the sky is no limit) the next. Just because Bitcoin was once x and is now 100x, doesn't mean that it can't be 10000x. Do you think Bitcoin has reached it's maximum adoption? Me nether.</div>
<div class="gmail_extra"><br></div><div class="gmail_extra">Note: Bitcoin's price does not have to climb. I think the biggest risk is a superior altcoin, as all the rest does not truly kill Bitcoin (there is always a purpose).</div>
<div class="gmail_extra"><br></div><div class="gmail_extra">Myth #8: A 51% attack is very, very bad.</div><div class="gmail_extra"><br></div><div class="gmail_extra">Fact: no invalid transactions can be inserted into the blockchain ever. That would make it a different blockchain that is not accepted by "standard" Bitcoin clients. </div>
<div class="gmail_extra">Fact: the greater the attack's hashing power, the higher the chance he might be able to double spend. It is possible (but increasingly less likely) to double spend with less than >50% hashingpower.</div>
<div class="gmail_extra">Fact: above 51% an attack is able to alter the order of transactions, and is thus able to "alter history". That means he might spend money /again/, while undoing his other previous spending (you cannot spend money twice). We call this a double spending attack</div>
<div class="gmail_extra"><br></div><div class="gmail_extra">Many think that having 51% allows you to do anything with the blockchain. The blockchain only timestamps transactions relatively to eachother, and relative to GMT in a non-trivial manner. The need for that is great because of this: I can write two people a check for the sum of my grandmother's savings account. The first person to go to the bank gets the money, the other's check bounces. Before they reached the bank both might consider themselves paid (and they kind of are, in a fractional reserve way). This is why it's called "double spending". In Bitcoin the bank is replaced by the blockchain, first in the blockchain gets the coin. If someone is able to change who was the first, he can change who got the money.</div>
<div class="gmail_extra"><br></div><div class="gmail_extra">The real trick with being an attacker is making sure that person 1 felt like he was paid (he cashed his check) and did something for you. Then after he cannot reverse what he did you alter the blockchain, causing person 2 to be paid instead of person 1. Person 2 is the attacker, and person 1 was tricked.</div>
<div class="gmail_extra"><br></div><div class="gmail_extra">Finally, the blockchain is build up out of different blocks referring one another. Per processingpower unit spend you have a certain chance (lotterylike chance) to be able make a block, this chance is ensured through cryptographic means. That means that someone might get a block even whilst not having significant hashing power. This has tricked some people in the past. It may also happen that two people find a block pretty much at the same time, then two different blocks are validly the longest chain. One has to wait for one of the two to become longer than the other to know which one is valid. This can take many blocks to happen, as much as <a href="https://bitcoin.stackexchange.com/questions/3343/what-is-the-longest-blockchain-fork-that-has-been-orphaned-to-date">4 has happened</a>! </div>
<div class="gmail_extra"><br></div><div class="gmail_extra">The lesson is that you should wait for a few confirmations before you can consider a transaction legitimate. If there's a stronger attacker you should wait longer. At 50% you might have to wait forever, but you are more likely to win or lose eventually. Above 50% you are more likely to never win, the attack might even rewrite history if he attempts to generate a longer chain than has already happened.</div>
<div class="gmail_extra"><br></div><div class="gmail_extra">You can easily calculate if it's worthwhile for an attacker to rewrite your transaction. Only if they really hate you would an attacker lose more money than he makes,</div>
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