Whatever I feel like talking about.
posted by David Friedman @ 8:03 PM
Nelson's vide is pretty captivating, but there's just way too little evidence to go on. There's no reason to think that Satoshi is an academic. My impression has always been that he's just like any of the other developers of the project: a libertarian computer nerd. It's not clear that he even left the project. If I were him, I would have just retired the alias so I can work more openly on it without being a target.David:I'm looking forward to a blog post about the recent action in bitcoin, your predictions, thoughts about its regulation, etc... Have you been following closely?
I have not been following bitcoin closely. I had an explanation of it some time back from someone who appeared to understand it, but it's complicated enough that I don't really feel I understand how it works and am reluctant to comment on it without doing so.I thought Nelson was correct, however, in the close analogy to gold. It has the same disadvantage as gold--the cost of producing the monetary commodity. It has the same advantages--it isn't under state control and is at least potentially anonymous.
I agree: in terms of its monetary properties, bitcoin is very much like gold, but more convenient in some ways.Yet for that exact reason, more politically vulnerable as well. At least you can throw a grenade at an illegal transaction in gold; bitcoin makes it much harder to track and control individual transactions; if not impossible, with reasonable precaution. If for that reason the USG decides everyone trading bitcoins for dollars is headed for jail, that will not be good for the exchange rate of bitcoins versus anything. Crytography is nice, but in the end, the only money worth having is the one that buys stuff in the real world, and the real world is full of people who might just decide to put a gun under your nose.The considerable probability of that happening is what has held me back from jumping on the bandwagon.That said: the thesis laid out in the video doesn't sound too compelling to me. Plenty of shy and overtly modest academics out there, with a good command of English. If this was a probable lead, shouldn't there be some connections regarding the programming, economic, or crypto-anarchic background of the individual in question? It is rare for a programmer to reach that kind of programming affinity without leaving some digital footprint.
Well a good way to test the hypothesis of Satoshi's identity are statistical methods of comparing texts. If you have enough text by Satoshi and enough text by Mochizuki, you can test whether the authors are the same. Every author tends to use some words more or less often, write longer or shorter sentences and so on. Basically what we call style - and there are some pretty good statistical tests of that. Of course, you won't have a 100% sure proof, but if the test doesn't reject the hypothesis of Satoshi=Mochizuki, that is one more quite convincing argument for him being Satoshi.
It is basically a chain. You can add a block to the end of the chain by meeting the following conditions- Your block must contain only valid transactions- Your block must reference the previous end of the chain- Your block solves a maths problemThe chain inherently defines the ordering of transactions.A transaction is valid if it has proper digital signatures for the coins it is spending and doesn't spend a coin that was already spent.Each transaction effective destroys coins and creates new ones. Coins can have any value. However the total value for the new coins must be less than or equal the total value for the destroyed coins. The difference is the transaction fee.The latest client has rules for "dust" coins, and won't add them into blocks.Your "wallet" remembers the public keys for all coins that you have control over.Each block has 1 special transaction called the coinbase. This transaction has no inputs. The value of the outputs is equal to the sum of the transaction fees in the block and the minting fee.The minting fee started at 50 per block and drops by a factor of 2 every so often. The total minting fee for all blocks is less than 21 million. It is 25 at the moment.Every 2016 blocks the difficulty of the maths problem is adjusted so that they are solved once every 10 minutes.It is like gold mining, except with a control loop so that if lots of gold is mined, then gold gets more scarce in the mines.This means that mining is a zero sum game between miners. If you add more processing power (so you solve the maths problem faster), then the difficulty per block will be increased. However, more processing power makes it harder to reverse a transaction by brute force.The rule is that miners should add to the longest chain. If there is a tie, add to the block that was received first.If 2 miners find a solution to the maths problem at roughly the same time, then some miners will try add to one and some will try add to the other. The situation resolves itself when someone finds the next block. The new block create a chain which is clearly longest.This is why you should wait until a transactions is buried deeply into the chain. The more blocks that are added after your transaction, the less likely a reversal. The recommended wait is 6 blocks. It is very unlikely that randomness will cause a 6 block reversal.The system sets up a Nash equilibrium. Miners add to the longest chain, since all other miners are adding to the longest chain. If you build on a shorter chain, then nobody will build on your block, even if you win.
It's sort of funny that someone who has a PhD in physics, is an academic economist, and was an early internet adapter states that he doesn't really understand how it works and is reluctant to comment on it. Meanwhile, policy hacks of all stripes have been filling up airwaves with their false sense of certainty about bitcoin for months.
Bitcoin is not like gold. Gold is a commodity, bitcoin is like a bank. But instead of the bank ledger being held in a central computer, it's distributed. The maintenance of the bitcoin system isn't make-work, any more than running a bank is make-work.The problem with bitcoin is that the credits aren't backed by anything, not even a vague promise. So the value will be super volatile until it ultimately collapses to zero. Rising from the ashes will be a version of bitcoin that is redeemable in dollars or something.
@anonymousWhy wont objective theories of value die?As you may have noted, gold isn't 'backed' by anything either. Its value does not derive from anything other than the eye of the beholder. Naturally, the eye of the beholder is influenced by many properties; and with regard to those properties, gold and bitcoin could hardly be more alike. The supply is inelastic, it stores well, and is a convenient medium of exchange. These are the principal reasons people value gold. Or silver or platinum, or any substance sharing its properties, for that matter. There is nothing 'magical' about gold.
EH, I'm floored by the statement that gold is a "convenient medium of exchange". Really? You use it often then?
Relative to cows and houses, certainly. But indeed it has long since been surpassed in that capacity by both fiat currencies, and now bitcoin as well. I don't mean to say that its current day value is due to its role as a medium of exchange, to be sure.
Anonymous #2, you talk about bitcoin's value collapsing to zero. You know that bitcoins started at zero, right? Clearly, people value it for one reason or another.Rising from the ashes will be a version of bitcoin that is redeemable in dollars or something.What are dollars backed by, again? EH is right. Nothing has any inherent value, especially money. Even more especially, dollars, which have depreciating value.
Joseph, I like to understand why things have value. Besides mere curiosity, it's important for making good investments. Someone who thinks "nothing has any inherent value" probably subscribes to penny stock newsletters.
My impression is that Nelson went looking for someone Japanese who could have created Bitcoin.Perhaps on the basis that Nakamoto is a Japanese name being used as a pseudonym.I think that's an error. Purely personal opinion of course: but I have a feeling that the choice of a Japanese sounding pseudonym was much more likely to have come as a result of being immersed in cyberpunk and Willian Gibson style stuff.
"Rising from the ashes will be a version of bitcoin that is redeemable in dollars or something."We have known how to do anonymous digital cash for a long time--David Chaum worked out the math. But the sort of system you are imagining requires a bank somewhere that people can trust, that does the redeeming, which requires a country people trust willing to host such a bank. Since anonymous digital cash makes money laundering laws unenforceable as well as making law enforcement more difficult in related ways, governments are generally against it. That, almost certainly, is why no such money has come into existence.The beauty of bitcoin is that it doesn't have such a requirement, and so can exist without the approval of any government, let alone a government strong enough to resist pressures from countries such as the U.S.
Anonymous,You make it sound like I value nothing; that's obvious nonsense. Your point that bitcoins are doomed because they aren't backed by anything is just as weak as a criticism of gold for that reason. People value things that are useful, and usefulness is contextual. That's what I and the other commenter meant by nothing having inherent value.In other words, uranium had no value in the stone age.
Bitcoin is neither a commodity nor a financial asset. So what is the basis for valuing it? It's a pure bubble. It has value because you can sell it to a greater fool, and no other reason.People sometimes say that gold is "useless", but that isn't true. People use it for jewelry, electronic parts, etc.
This comment has been removed by the author.
Gold can also be used as a paperweight, but its uses don't explain its price of $1400/oz. Its uses only help it gain traction as money.The definition of a "financial asset" is extensional and lazy, so it's not important. Bitcoin is a great form of money because it can be used as a store of wealth, like gold, and can be transferred around the world without needing anybody's approval, like nothing the world has ever seen.It also doesn't have the chronic problem of inflation like paper money does.... Meanwhile, policy hacks of all stripes have been filling up airwaves with their false sense of certainty about bitcoin for months.Ha!The real bitmillionaires don't draw attention to themselves. If David has the key to this address, he is acting exactly as I would expect.All joking aside, my favorite part about bitcoin is that if it takes off, it will coincide with an enormous wealth transfer to libertarians.
Post a Comment
an academic economist, teach in a law school, have never taken a course for
credit in either field.
Interests include poetry, medieval cooking, science fiction and fantasy,
computers, and much else.
I also write books.
View my complete profile