[cryptography] attacks against bitcoin
How safe is the bitcoin cryptosystem and the communication network against targeted attacks? -- Eugen* Leitl http://leitl.org";>leitl http://leitl.org __ ICBM: 48.07100, 11.36820 http://www.ativel.com http://postbiota.org 8B29F6BE: 099D 78BA 2FD3 B014 B08A 7779 75B0 2443 8B29 F6BE ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] attacks against bitcoin
I was thinking a DoS might be a problem. If you could prevent the p2p network broadcasting or receiving broadcasts, maybe you could be the only person able to proceed with minting. If you could keep that up for a while you could reduce the difficulty and create bitcoins with lower cost. A full enough DoS maybe difficult to do as the network is p2p. Also maybe if you could temporarily come in with significantly more compute power than the rest of the network - eg rent ec2's entire gpcpu farm for a little while, or use of a huge bot farm, you could undo transactions. If those transactions were you selling bitcoins, you could then sell them again. eg buy, then sell $100k coins (minus the spread/fluctuation), rent $50k worth of compute for a while; sell the $100k of coins again ... profit :) Adam On Sun, Jun 12, 2011 at 12:16:01PM +0200, Eugen Leitl wrote: How safe is the bitcoin cryptosystem and the communication network against targeted attacks? ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On 12/06/11 4:21 PM, Peter Gutmann wrote: Am I the only one who thinks it's not coincidence that the (supposed) major use of bitcoin is by people buying hallucinogenic substances? The best way to think of this is from the marketing concepts of "product diffusion" or "product life cycle". http://www.quickmba.com/marketing/product/diffusion/ The challenge for the new product is to migrate from left to center to right of that graph in above link. In doing so, the newer groups come to dominate the earlier groups, and the earlier groups typically fall away. Recall the video story? The innovators got in very early, and bought Betamax because it was better quality. But they got stuck when the market was captured by the VHS system. So lesson #1 is that early groups are risking punishment. Same story for DVD. Also, the backroom story for video was that the porn films, the big market that lifted the revenues of the distribution chains, and made it worthwhile. These products/people/chains kept the industry alive while it built up steam for the mainstream. Lesson #2 -- you need these strange uncomfortable groups to get to where you want to get. Later on, as more mainstream comes into play, these strange uncomfortable groups can be eased out. Or they go somewhere else, or we change our minds about them. We also write them out of history... So, as far as recreational pharma product is concerned, this is typical of these things (if that is what it is). E.g., SSL certificates early revenue was also porn, Paypal had some dodgy customers, and for e-gold, it was ponzis / games that pushed the business into the black. The challenge is what to do next, how to grow up. This is going to be practically impossible for BitCoin because it has no guiding hand like e.g., Paypal had. It's only got the invisible hand, which suits the innovators fine ... but it also means it hasn't got much of a chance of going mainstream. iang ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] attacks against bitcoin
On 12/06/11 8:16 PM, Eugen Leitl wrote:
How safe is the bitcoin cryptosystem and the communication network
against targeted attacks?
It depends on what the intention or objective of the attack is. And
that depends on the threat actor.
For example, a phishing threat actor would be looking to steal money.
Whereas the state actor would be looking to figure out who is doing
what, to attack out of band. A competitor would look to attack the
reputation, by e.g., disruption to reliability or mud flinging. A
retailer / consumer would look to dump liability. Insiders would look
to extract rents.
Each of these interests from diverse parties result in different
attractivenesses to different threat scenarios, many of them
uncorrelated. Some of the scenarios and assets can be protected
("mitigated") by tech/crypto, but typically most cannot, and require
non-tech mitigations.
To go any distance on this, you'd rapidly end up doing a major risk
analysis, a lot of work.
The alternative is to start from the classical CIA, etc. The problem
with that is it that it is someone else's threat model, not yours. You
really don't want to discover who that someone is after you've built
your system, it'll so ruin your appetite.
iang
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Re: [cryptography] Digital cash in the news...
On 12/06/2011 13:23, Ian G wrote: On 12/06/11 4:21 PM, Peter Gutmann wrote: Am I the only one who thinks it's not coincidence that the (supposed) major use of bitcoin is by people buying hallucinogenic substances? The best way to think of this is from the marketing concepts of "product diffusion" or "product life cycle". http://www.quickmba.com/marketing/product/diffusion/ The challenge for the new product is to migrate from left to center to right of that graph in above link. In doing so, the newer groups come to dominate the earlier groups, and the earlier groups typically fall away. Recall the video story? The innovators got in very early, and bought Betamax because it was better quality. But they got stuck when the market was captured by the VHS system. So lesson #1 is that early groups are risking punishment. Same story for DVD. Also, the backroom story for video was that the porn films, the big market that lifted the revenues of the distribution chains, and made it worthwhile. These products/people/chains kept the industry alive while it built up steam for the mainstream. Lesson #2 -- you need these strange uncomfortable groups to get to where you want to get. Later on, as more mainstream comes into play, these strange uncomfortable groups can be eased out. Or they go somewhere else, or we change our minds about them. We also write them out of history... So, as far as recreational pharma product is concerned, this is typical of these things (if that is what it is). E.g., SSL certificates early revenue was also porn, Paypal had some dodgy customers, and for e-gold, it was ponzis / games that pushed the business into the black. The challenge is what to do next, how to grow up. This is going to be practically impossible for BitCoin because it has no guiding hand like e.g., Paypal had. It's only got the invisible hand, which suits the innovators fine ... but it also means it hasn't got much of a chance of going mainstream. Ah well. I joined bitcoin quite early, seeing it as like donating spare cycles to an interesting experiment. I ended up with quite a substantial balance, at no cost that I can identify. Now I find I can exchange a little over five bitcoins for a £50 Amazon gift certificate that Amazon seems happy to credit to my account. I quite see the force of the critical comments made here; but they remind me of a (probably apocryphal) remark attributed to the late Garret Fitzgerald when Prime Minister of Ireland. After a new scheme had been outlined to his cabinet, and greeted with enthusiasm by several ministers, he remarked, "Well, it's all very well in practice; but will it work in theory?" Nicholas Bohm -- Contact and PGP key here ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On 12/06/11 10:55 PM, Nicholas Bohm wrote: Ah well. I joined bitcoin quite early, seeing it as like donating spare cycles to an interesting experiment. I do agree whole heartedly that this is a great fun experiment, and worthy of attention. It has pushed the boundaries of what we've known and is possible. Its solution is indeed elegant. I ended up with quite a substantial balance, at no cost that I can identify. Now I find I can exchange a little over five bitcoins for a £50 Amazon gift certificate that Amazon seems happy to credit to my account. Hmmm! So the innovators invested rather little, and came out with a lot. Always attractive :) And from PLC, we can agree that the innovators may deserve some compensation for the risk of a dodgy product. However. Unless the laws of financial conservation have been repealed by the design, those who follow have to invest a lot and come out with less... I quite see the force of the critical comments made here; but they remind me of a (probably apocryphal) remark attributed to the late Garret Fitzgerald when Prime Minister of Ireland. After a new scheme had been outlined to his cabinet, and greeted with enthusiasm by several ministers, he remarked, "Well, it's all very well in practice; but will it work in theory?" Sounds like a very perceptive man, I wonder what he would have thought of Ireland today? In every bubble, there are those that see it is working in practice, and are benefitting from it. (E.g., the banks really loved subprime I mean, they *really truly loved subprime* !!!) Then there are those who are to come, later, and lose. Finally, there are those who have to clean up. When Fitgerald asks whether the theory is against the new innovation, I suspect he's asking whether the supporters/beneficiaries are expecting him to be in the last group, the clean up crew [1] ? In this context, the practice tells us what is happening now. $10 and rising! Yoo hoo! The theory will tell us what is likely to happen in the future. iang [] Keynes replies from his grave, "in the long run, we're all dead." ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On 2011-06-13 9:26 AM, Ian G wrote: However. Unless the laws of financial conservation have been repealed by the design, those who follow have to invest a lot and come out with less... Financial conservation does not apply to money. If paper currency collapses, and is replaced by gold, those who invest in bitcoin will come out with nothing. If paper currency collapses, and is replaced by bitcoin, they will come out with immense fortunes. The market is at present rating the prospect of the world going to a bitcoin standard rather than a gold standard at two chances in a million, which seems reasonably conservative. ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On 2011-06-11 10:41 PM, Ian G wrote: We expect money to be a store of value, among a few other things. BitCoin has nothing in it that speaks to that goal, that I can see [0]. This anti-property would however make it more ideal for a bubble [1]. All money is a bubble. The non monetary value of a bitcoin is exactly the non monetary value of a federal reserve dollar, which is to say, zero. Gold has real non monetary value, but far less than its monetary value. ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On 2011-06-12 6:13 AM, John Levine wrote: Useful for something, but not useful for money. I can't help but note that the level of economic knowledge in the digital cash community is pitifully low, and much of what people think they know is absurd. (Anyone who thinks that a gold standard is better than what we have now, or that the supply of gold is fixed in any but a purely hypothetical sense, is either ignorant of economic history or shilling for gold speculators.) What we have now has been tried many times before, and failed many times before. The gold standard has never suffered the kind of wild alarming fluctuations that fiat currencies routinely suffer. Gold inflation was always very slow, and gold deflation was always very slow, possibly because people expected the value to remain stable, so in the event of deflation, disinvested in gold and increased their investment in other things, and on gold inflation, vice versa. The most alarming gold deflation was the long depression, caused by the demonetization of silver and accompanying rise of the value of gold. By modern standards, it was not even a recession. The most alarming gold inflation was caused by the conquest of the new world, which resulted in inflation at about 1% per year for about a hundred years. ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On 2011-06-12 8:53 AM, Nico Williams wrote: A fiat currency with no capital controls and reasonably free trade is probably the best currency system yet. Details do matter though. If operated by far sighted men with an eye for the long term - for example if operated by a hereditary monarchy. Operated by the current lot of crooks who can scarcely see as far as the next election ... Fiat currencies are subject to wild gyrations, which gold was not. > Which isn't to say it will continue, but if it doesn't, it won't be due to any flaws in this currency system.) I would say that giving total power to the people who brought you affirmative action lending is a flaw. The people operating the system are printing money to benefit cronies and voter blocks. Greece is going broke from too much vote buying. Governments are reluctant let Greece go broke, for fear of contagion. So they lend the Greeks more money, which is another form of contagion. That governments keep bailing out Greece is a sign of weakness and fragility. They fear that if Greece goes, then the next weakest government will go, and then if the next weakest goes, then the one after that, the dominos falling all the way to Washington. ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On 2011-06-12 8:57 AM, Ian G wrote: I wrote a paper about John Levine's observation of low knowledge, way back in 2000, called "Financial Cryptography in 7 Layers." The sort of unstated thesis of this paper was that in order to understand this area you had to become very multi-discipline, you had to understand up to 7 general areas. And that made it very hard, because most of the digital cash startups lacked some of the disciplines. One of the layers you mention is accounting. Recall that in 2005 November, it became widely known that toxic assets were toxic. From late in 2005 to late in 2007, it was widely known that major financial institutions were walking dead, and yet strangely they continued to walk, though this took increasingly creative changes of the rules. Today in 2011, there is still no audit that acknowledges that toxic assets were and are toxic. While doubtless a good monetary system should embrace all these aspects of knowledge, our existing monetary system does not. ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On 13/06/11 12:05 PM, James A. Donald wrote: On 2011-06-13 9:26 AM, Ian G wrote: However. Unless the laws of financial conservation have been repealed by the design, those who follow have to invest a lot and come out with less... Financial conservation does not apply to money. Right, not to money. But it applies to value which was what earlier poster was talking about. He had allegedly put small value in and got large value out. In economics terms, although a monetary unit strives to be a store of value, sometimes it fails to do that. Value being distinct from the price at which any particular monetary unit trades at. (Monies tend to be better units of exchange, perhaps simply because we can do math these days, and they hold for at least instant trades. And people tend to confuse the price with value. And confuse money with value...) The laws of economics are like gods. You don't have to subscribe and obey them every day, nor sacrifice your children to them on a yearly schedule. But you have to respect them and be careful not to anger them. More on point for BitCoin, without a gesture towards the god of store of value -- some fundamental relationship to something that humans value -- then the unit flaunts itself at will, flying like Icarus as high as it feels. As we can see, it flies skywards as the crowd rushes in (notice the upticks in media discussion), and it will collapse just as quickly when they rush out again. If paper currency collapses, and is replaced by gold, those who invest in bitcoin will come out with nothing. If paper currency collapses, and is replaced by bitcoin, they will come out with immense fortunes. The market is at present rating the prospect of the world going to a bitcoin standard rather than a gold standard at two chances in a million, which seems reasonably conservative. :) I don't disagree, opinions on gold, etc, as exercises for the reader. Back to crypto (soon). How to do this properly? Well, the simple way is to elect to denominate the unit in some alternate well understood other monetary unit. So for example, the typical thing is to denominate in USD. You have a field in the packets that says "USD" and each 1 is worth a dollar. You have another field for however many of those, say 10. Simple. We can therefore see that someone has to make that "worth" mean something, so for this we need an "issuer" sometimes known as Ivan. It's beyond the scope of a crypto list to discuss this in depth, but typically Ivan would deposit $1 for every issued electronic dollar in some bank account somewhere. A more complicated way is to /describe the value/ so for example also describe how your deposits weren't to be stolen. Imagine that you overcame the obvious objections to the above by saying you were going to bury gold bricks in your backyard on your private island (as mentioned in some novels). The way to do this is a /contract/ which is a defined format of promise to deliver, date, consideration, etc. You write that down in boring ascii: "I promise to bury one gram of gold in my backyard at approx geoloc X,Y, and promise to redeem that on presentation of one electronic gold gram. Etc etc." *Now we get to the crypto* How do you make that contract work in digital form? Well, you have to /agree/ and you have to be /seen to agree/ by your holder-buyer-customer-user. In detail, every time, unwavering, unforgiven. So: * add in some details (elided here). * append your public key to the end of the document. * sign the document in cleartext using standard digital signature (OpenPGP works well, x509 can be easily hacked to do the same). * take a message digest of the resultant signed document. * stick the MD in every packet as the indicator of which contract. Then, the act of making the first payment(s) of digital issuance includes your MD which includes your PK sig, which then all entangle into every subsequent payment. This process creates an undefeatable chain of evidence over your contracted promise, as well as locking down a whole host of other details such as stopping anyone inserting false payments into the entangled hash sequence. Hey presto, the cryptographic signature finally comes good as a describer of value, and makes payments really work. iang PS: google on Ricardian Contract for more. It's an open concept. It uses a sensible dollop of crypto over a base of classical governance. ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On Sun, Jun 12, 2011 at 10:44 PM, James A. Donald wrote: > On 2011-06-12 8:53 AM, Nico Williams wrote: >> >> A fiat currency with no capital controls and reasonably free >> trade is probably the best currency system yet. Details do matter >> though. > > If operated by far sighted men with an eye for the long term - for example > if operated by a hereditary monarchy. > > Operated by the current lot of crooks who can scarcely see as far as the > next election ... I think Sparta had it right in this instance: put the public officials on trial when their term is over, and make them accountable for their actions. Its funny how those lessons were lost. Jeff ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On Sun, Jun 12, 2011 at 9:44 PM, James A. Donald wrote: > On 2011-06-12 8:53 AM, Nico Williams wrote: >> A fiat currency with no capital controls and reasonably free >> trade is probably the best currency system yet. Details do matter >> though. > > If operated by far sighted men with an eye for the long term - for example > if operated by a hereditary monarchy. > > Operated by the current lot of crooks who can scarcely see as far as the > next election ... Clearly. The nice thing about the U.S. was, and still might turn out to be once the current statist episode is over, that its political system didn't stray too far in the direction that so many democracies have tended to in the 20th century. > Fiat currencies are subject to wild gyrations, which gold was not. Clearly, but at least as long as you have property rights and there's no capital controls to speak of you can work around those gyrations (really, long periods of low, but higher than gold inflation, followed by short but sharp credit contractions, with occasional bouts of hyperinflation, but with the degree of inflation being a political problem, thus manageable in countries with institutions and political traditions that value low inflation). You might note that in the long run all fiat currencies will be debased, but you might also note that in the long run all gold standards tend to get abandoned. The problem is democracy, which you might remember is the worst form of government _but for all the others_. >> Which isn't to say it will >> >> continue, but if it doesn't, it won't be due to any flaws in this >> currency system.) > > I would say that giving total power to the people who brought you > affirmative action lending is a flaw. The people operating the system are > printing money to benefit cronies and voter blocks. Let's not exaggerate, total power looks a bit different than what you see here, so far. Granted, it's getting there, but there's hints that the ship of state might yet right itself, and if not, well, there's not a lot of options (obcrypto: and crypto won't get you any real protection). > Greece is going broke from too much vote buying. Governments are reluctant > let Greece go broke, for fear of contagion. So they lend the Greeks more > money, which is another form of contagion. > > That governments keep bailing out Greece is a sign of weakness and > fragility. They fear that if Greece goes, then the next weakest government > will go, and then if the next weakest goes, then the one after that, the > dominos falling all the way to Washington. The real issue in Europe is that if Greece (and Portugal, and Ireland, ...) default then most of the banking system in the rest of Europe will be insolvent, which means that either they are allowed to fail, and people are allowed to lose part or even most of their deposits, or their debt (deposits) will have to be nationalized and monetized, all in a credit contraction environment (deflation). Either way real wealth has been frittered away, destroyed, and no one wants to be the one to tell the public that they are poorer, thus the game is to make the process by which the loss of wealth becomes apparent take much longer, which only delays real recovery, thus making things worse. Nico -- ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On Sun, Jun 12, 2011 at 10:34 PM, Jeffrey Walton wrote: > I think Sparta had it right in this instance: put the public officials > on trial when their term is over, and make them accountable for their > actions. Its funny how those lessons were lost. Doesn't help. The trials would be political trials, and it's all politics, which in its most naked form is "who has the guns," and next most is "who has the votes." Truth is not dispositive in politics, sadly. ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
Ian G wrote: > The way to do this is a /contract/ which is a defined format of promise to > deliver, date, consideration, etc. You write that down in boring ascii: To your point, each issued BitCoin is a contract -- well, the completion of one, anyway. The contract states as follows: "I have performed a task you have asked me (among many others) to perform. That task is to certify the transaction log of BitCoin exchanges. Here is my proof of work; now pay me." If you were to argue that that task is currently overpaid, I would agree with you; it has been heavily subsidized, to the tune of 50 bitcoins generated by agreement that they have been issued. In spite of this overpayment, the currency appears to be rising in value over the long term. Fortunately, this subsidy wanes. It drops to 25 bitcoins, and then again, and then again, until it drops to nothing. Signing the transaction log is worth only what transactors voluntary choose to pay for the privilege of having their transactions signed. Is that signature worth paying for? Well, it prevents double spending, so probably, yes. So a monetary authority is printing BitCoins and spending them on fiscal stimulus. In spite of that, money is entering the economy because as stores of value go, the alternatives aren't that great either. Reminds me of the US dollar. I wonder whether BitCoin would have been nearly as successful if a demand for stores of stable value did not happen to be higher than they have been in a decade. If we were all rich on housing appreciation and stock speculation, BitCoin would be like the passbook savings account at the local bank paying a whopping 0.65%. But the only part of that that's about crypto is: crypto is hard, and you can get people to perform it on their computers if you pay them. Surprise, surprise. Bet you wish you'd thought of something *you* wanted people to employ thousands of computers to do that paid them money that doesn't even come out of your pocket. I don't know if Satoshi is rich from BitCoins, but if he made a bar bet that he could convince people to run billions of SHA256 hashes a second without paying them even a nickel, he won himself a beer. n ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On Sun, Jun 12, 2011 at 11:54 PM, Nico Williams wrote: > On Sun, Jun 12, 2011 at 10:34 PM, Jeffrey Walton wrote: >> I think Sparta had it right in this instance: put the public officials >> on trial when their term is over, and make them accountable for their >> actions. Its funny how those lessons were lost. > > Doesn't help. The trials would be political trials, and it's all > politics, which in its most naked form is "who has the guns," and next > most is "who has the votes." Truth is not dispositive in politics, > sadly. I'd be willing to take a chance with "doesn't help" since we now have "doesn't work" (or broken, or severly bent). I recall Obama boasting: "My Administration is the only thing saving you from the pitchforks of the American people [sic]" at a banker's lunch after he took office. On the campaign trail, he received over 1M USD from Goldman Sachs alone. In this case, Obama took the bride money (err, PAC contributions) and provided political cover. If you game the Ticket Master system, you will be faced with a PATRIOT Act like rsponse from the US governemnt [1]. If you make a PAC contribution, you can crash the economy with impunity. Obama upset the balance of powers (the best I can tell, the SEC investigations have been laughable - civil fines, but no criminal prosecurtions), and I would love to see him spend the rest of his natural life in jail for conspiring with the economic terrorist who crashed the economy. Its nothing against Obama: I had high hopes for him. I had my fingers crossed for him since he was not from the white, good ole' boy stock. He has turned out to be no better than the rest of them. Jeff [1] http://www.wired.com/threatlevel/2010/11/wiseguys-plead-guilty/ ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On Sun, Jun 12, 2011 at 11:06 PM, Nathan Loofbourrow wrote: > So a monetary authority is printing BitCoins and spending them on fiscal > stimulus. In spite of that, money is entering the economy because as stores > of value go, the alternatives aren't that great either. Reminds me of the US > dollar. Yes, exactly. If you want stable money then you need either a natural resource with naturally limited growth (e.g., gold) (and some other features), or an artificially limited resource (e.g., paper money). The latter is always susceptible to politically caused inflation. Any cryptographic coin based on proof of work is a disaster because of Moore's law and because the "work" is wasted energy -- and energy, you'll note, is a very precious resource. Ergo, a cryptographic coin needs to be based on trusted issuers (or something else I've not seen before nor thought of), and that means, effectively, a fiat currency. Crypto is NOT a solution to political problems; never has been, never will be. > I wonder whether BitCoin would have been nearly as successful if a demand > for stores of stable value did not happen to be higher than they have been > in a decade. If we were all rich on housing appreciation and stock > speculation, BitCoin would be like the passbook savings account at the local > bank paying a whopping 0.65%. Here's a thought experiment: if the present value of all actual, tangible property, things, capital (production and service capacity), as well as less tangible things such as people, and institutions -altogether, basically, a nation's patrimony- were far, far exceeded by nominal value stored in money in banks and mattresses, would that money really be worth all that much? I suspect that the answer is "no". I suspect that the most valuable feature of money is not to store value in the long-term, but to lubricate commerce, that is, to enable transactions on a basis better than barter. > But the only part of that that's about crypto is: crypto is hard, and you > can get people to perform it on their computers if you pay them. Surprise, > surprise. Bet you wish you'd thought of something *you* wanted people to > employ thousands of computers to do that paid them money that doesn't even > come out of your pocket. I don't know if Satoshi is rich from BitCoins, but > if he made a bar bet that he could convince people to run billions of SHA256 > hashes a second without paying them even a nickel, he won himself a beer. It's always possible to get some people to do things that are not in their interest. See various cults. (Note: I'm not saying bitcoin is a cult.) Nico -- ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
>We can therefore see that someone has to make that "worth" mean >something, so for this we need an "issuer" sometimes known as Ivan. >It's beyond the scope of a crypto list to discuss this in depth, but >typically Ivan would deposit $1 for every issued electronic dollar in >some bank account somewhere. You're right, for a crypto currency to be credible in the long term, it needs to be convertible into Real Money(tm), i.e., something you can use to pay your taxes. (That's the actual working definition of money, by the way.) But that really has nothing to do with the crypto part. You can have crypto out the wazoo, and it's worth nothing unless there's an issuer in meatspace who will accept your crypto coins, cancel them, and hand you the agreed amount of money. Or think about the ETF model I suggested a few years ago, which provides a close approximation to convertibility without requiring that the issuer be able to redeem every individual coin on demand. Regards, John Levine, jo...@iecc.com, First Unitarian Society of Ithaca NY Between 200 and 500 members, depending on who's counting PS: For anyone who wants a crypto currency backed by gold, that's functionally equivalent to a gold ETF, of which there are several, such as ticker symbols IAU, GLD, GTU, SGOL, and AGOL. They do what they do perfectly adequately, but they are in no sense currency. Bubble sceptics can trade put options on them. Too bad there's no options on bitcoins. ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On Sun, Jun 12, 2011 at 11:28 PM, Jeffrey Walton wrote: > I recall Obama boasting: "My Administration is the only thing saving > you from the pitchforks of the American people [sic]" at a banker's > lunch after he took office. On the campaign trail, he received over 1M > USD from Goldman Sachs alone. In this case, Obama took the bride money > (err, PAC contributions) and provided political cover. > > If you game the Ticket Master system, you will be faced with a PATRIOT > Act like rsponse from the US governemnt [1]. If you make a PAC > contribution, you can crash the economy with impunity. Obama upset the > balance of powers (the best I can tell, the SEC investigations have > been laughable - civil fines, but no criminal prosecurtions), and I > would love to see him spend the rest of his natural life in jail for > conspiring with the economic terrorist who crashed the economy. Perhaps it's because I earn some of my living from a financial institution (but I doubt it, since I held this opinion back when I didn't), but I don't think it's fair to blame private financial institutions for the ill-effects of an ill-advised government plan to subsidize housing ownership by individuals. Without Frannie, CRA, or anything of the sort I don't think we'd have seen the degree of financialization of housing that we saw, meaning that we wouldn't have seen the home mortgage credit growth that drove the housing bubble, thus neither the bubble nor the crash. (Well, bubbles can happen without the help of the government, so let's say that the likelihood of such an immense bubble would have been pretty low without Frannie and CRA). Now, financial institutions clearly played a role, but mostly it was a fee-taking role (since they mostly passed mortgages through to Frannie), and it was a role they had to play (see CRA). Some played a role in the securitization of lousy mortgages, but I'm not sure that they understood the systemic risk -- the securities' buyers certainly didn't, even though most were also financial institutions with sophisticated people in charge, so it's not too much of a stretch to think that this was all really just a necessary consequence of CRA and Frannie. That's my theory anyways. Nico -- ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
From: "Nico Williams" To: noloa...@gmail.com Cc: "Crypto discussion list" Sent: Monday, June 13, 2011 12:57:58 AM Subject: Re: [cryptography] Digital cash in the news... >Now, financial institutions clearly played a role, but mostly it was a >fee-taking role (since they mostly passed mortgages through to >Frannie), and it was a role they had to play (see CRA). Some played a >role in the securitization of lousy mortgages, but I'm not sure that >they understood the systemic risk -- the securities' buyers certainly >didn't, even though most were also financial institutions with >sophisticated people in charge, so it's not too much of a stretch to >think that this was all really just a necessary consequence of CRA and >Frannie. That's my theory anyways. That's right: POOR PEOPLE caused the Current Unpleasantness! The people who pushed the Liar Loans and the alleged people who packaged those into securities and the alleged people who gave those securities AAA ratings and the alleged people who sold those AAA securities and the alleged people who bought those AAA securities and so on are completely blameless. POOR PEOPLE caused the financial crisis! Of course. ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Nothing to do with digital cash in the news...
> ... I don't think it's fair to blame private financial institutions >for the ill-effects of an ill-advised government plan to subsidize >housing ownership by individuals. Without Frannie, CRA, or anything >of the sort I don't think we'd have seen the degree of >financialization of housing that we saw, meaning that we wouldn't >have seen the home mortgage credit growth that drove the housing >bubble, thus neither the bubble nor the crash. Sigh. This is both unrelated to crypto, and just plain factually wrong (although it is considered gospel in some political circles.) Until very late in the bubble, Fanny and Freddy bought only conventional prime fixed rate loans, so it was roaring along without their help, and the CRA has been around since 1977, so if it had caused a bubble, it would have been during the Reagan administration. The housing bubble was due to the complete abdication of responsibility by the bank regulators and the rating agencies, allowing amoral banks to make mortgages with no realistic chance of repayment, and then to repackage that garbage into allegedly AAA derivatives, and to issue ever more highly leveraged Nth degree derivatives of derivatives. See, for example, Brad Delong in 2008: http://delong.typepad.com/sdj/2008/09/the-cra-and-the.html I suppose the lesson here for cybercurrencies is a reminder that the track record of unregulated financial markets is consistently terrible. Look at the economic history of the pre-federal reserve US if you don't believe me. Perhaps this would be a good time to bring this thread to an end, so we can talk about something cryptographic for a change. Regards, John Levine, jo...@iecc.com, Primary Perpetrator of "The Internet for Dummies", Please consider the environment before reading this e-mail. http://jl.ly ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Digital cash in the news...
On Mon, Jun 13, 2011 at 12:12 AM, Randall Webmail wrote: > That's right: POOR PEOPLE caused the Current Unpleasantness! The people who > pushed the Liar Loans and the alleged people who packaged those into > securities and the alleged people who gave those securities AAA ratings and > the alleged people who sold those AAA securities and the alleged people who > bought those AAA securities and so on are completely blameless. POOR PEOPLE > caused the financial crisis! Who said anything about poor people? Just because CRA and Frannie were sold partly as programs that benefit the poor doesn't mean that was either the actual intention, or the effect. The people who pushed liar loans did it in large part because there were large incentives to doing that, which were mostly a result of not playing with their own nor their bosses' money, but with funny money, since no matter what loans they made there was always a ready buyer in Frannie, backed with a ready lender of last resort in the Fed. Yes, people who made funny loans committed sins, but they wouldn't have been able to (not in the same scale anyways) without the larger, more original sin committed by the politicians (who did it in the name of the poor, or whatever). IF Congress had created an above board $100 billion/year housing subsidy for the poor, that wouldn't have led to a bubble, and it would have helped the poor much more than the actual, hidden $100 billion/year housing subsidy did. If you care about the poor you won't defend CRA and Frannie blindly. Nico -- ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
Re: [cryptography] Nothing to do with digital cash in the news...
On Mon, Jun 13, 2011 at 12:33 AM, John Levine wrote: > Sigh. This is both unrelated to crypto, and just plain factually True, so I'll drop it. > wrong (although it is considered gospel in some political circles.) There's much to debate here that doesn't belong on this list. I'll allow you the last word on that. Nico -- ___ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography
