Bitcoin: Regrets, Triumphs, Going for the Gold, and Bank of America Takes Notice


Bitcoin: hasn't crashed yet (though below 1,000 as I write)! A roundup of some interesting recent tidbits from that world.

•One of the big undertold, and by the nature of it will likely remain undertold since the potential subjects of those stories have every incentive to keep it to themselves, tales of the Bitcoin boom are specific details of the specific visionary liberty and tech types who found their belief in an agorist free future paying off in literal millions for literal half hours of effort.

But Vocativ has a nice profile of early adopted and Bitinstant entrepreneur Charlie Shrem, who without details admits he's living the high life now. Detail:

Many Bitcoiners are fervent libertarians: They believe that because Bitcoin is a decentralized currency, the government can't touch it. Shrem tells me he stays away from all that "libertarian stuff"—and yet his world view is pretty starkly libertarian.

"I don't care about politics," Shrem says. "I don't care for the Fed—I mean, I do. It sucks. I hate our current monetary policy, and I hate our current fiscal policy. I think that technology can change the world, and that technology will trump whatever the government says."

Shrem, who is also the vice chairman of the Bitcoin Foundation, a nonprofit that spreads the word about Bitcoin, plans to re-launch his site in the next few weeks. In the meantime, he's enjoying life—and his fat stockpile of Bitcoin.

"A lot of what I do is making deals, closing deals, getting people to like me. It's impressing people. I have to take a lot of people out to clubs, buying bottles, buying dinners. BitInstant is my day job. Bitcoin is my life. I drink for free, I eat for free. It's a good life so far."

•What did lots of Bitcoin holders spend their Bitcoins on on Black Friday? According to Business Insider, $900,000 in Bitcoin value was spent at one gold and silver exchange, Amagi Metals, over Thanksgiving weekend.

Forbes reports that  Bank of America is now "the first major financial institution to initiate analyst coverage of Bitcoin" and "declared a maximum fair value of $1,300."

Wired reports on homeless men (and they aren't alone) who regret spending any of their Bitcoin on food now that they realized if they'd saved it it would be far, far more valuable now.

Between April and September, while living on the streets of Pensacola, Florida, they used their laptops and smartphones to collect a total of about four or five bitcoins. Some of it arrived through donations. Some of it came from rather unsophisticated online services that dole out tiny fractions of the digital currency if you spend some time looking at videos and ads. And over the course of the summer, this free money bought them a pretty steady supply of pizza and chicken tenders.

Today, after finding a house they can rent with a little help from the government, the trio is off the streets, and life is even better than it was before — except that a bitcoin is now worth over $1,000. "The $600 we spent would now be worth $6,000," says Angle. "I wish we had gone hungry."

His buddy Kantola feels much the same way. "We're definitely kicking ourselves. We spent $5,000 or $6,000 on food!" he says. "Back in 2009, you could have bought four bitcoins for a dollar. If I could go back [and buy some then], I wouldn't be here right now. I'd probably be in a mansion."

I wrote less than three weeks ago with some perspective on zooming Bitcoin prices when they had just topped $500–yes, less than three weeks ago. Jerry Brito wrote for Reason in our December issue on the many uses of Bitcoin protocols for a wonderful human future.

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  1. Does the minimum wage cost jobs? Undoubtedly the answer is yes. But automation also costs jobs. Most research shows that only a few workers will be fired, the rest will benefit. The workers who will be fired will likely eventually find new jobs, which will pay higher wages. The problem is that it costs rich idiots like the reasoniods money and violates their “right” to pay their workers dirt wages.

    1. You dirtied the bitcoin thread with your min wage comment!!!

    2. How many more buggy whip conversations do we have to have?

    3. Market value, how does it work?

    4. I wish we could make the minimum wage $100 an hour. 0r $1,000,000 an hour. It doesn’t really matter what we call ~$8.00 2013 U.S., it will feel pretty good, won’t it?

    5. Re: Jonathan S Davis,

      Yours is the worst case of platitude poisoning I have ever witnessed.

      Take care.

  2. Still reading more about this. Bitcoin (according to study) has fundamental structure flaws which allow ‘miners’ to game the system.

    Thoughts from the bitcoin faithful?…

    The paper that explains the flaw, published by computer science professor Emin G?n Sirer and grad student Ittay Eyal, is more exploitable than previously thought. Now that joining forces to mine in Bitcoin pools is the norm, the paper is indeed correct. The flaw didn’t change, it’s just that the community did ? it’s much larger. When a block is solved, the solver publicly puts it onto the end of the chain. Every miner will then notice the new end of the chain ? the block that was just added ? and shift their mining efforts to solve a new block. When the flaw is exploited, the solved block isn’t put onto the end of the chain, but instead kept hidden. This results in other miners working to find the end of the chain that no longer exists. The more hidden blocks that are added onto the chain at once, the farther back in the chain the unsuspecting miners will be. It’s more complicated than that, but that gets the point across.

    1. This problem is extremely difficult to exploit. Even if you could do it, it would be noticed very quickly and drive the value of BTC to nil, destroying any monetary incentive. Doing it just to destroy BTC would still be way too hard.

      1. Makes one wonder if there’s an entity out there that would have an interest in destroying the integrity and value of BitCoin?

        1. Titcoin!

      2. It actually wouldn’t do much damage at all. Doesn’t allow double spending, doesn’t rewrite history.
        And it can be mitigated against pretty easily.

      3. Like Christophe said, wouldn’t destroy the value. Would probably hurt it a bit is all.

    2. It does not seem to make any more coins then would exist other wise…it just benefits one miner with the best solved block hidder.

      Also how can that miner really benefit? he would have to solve the new block before the rest of the world solved the old block and the rest of the world would already have a huge head start on him solving an easier block then he has to solve.

    3. That’s a terrible summary of the attack.
      No, what’s been described is that a large miner that wants to mine more blocks than their competitors can try to keep newly discovered blocks secret, and, by being very well connected, immediately broadcast it right as someone else finds an alternative.

      You actually don’t make any extra money from this unless you do it for so long that the effective difficulty adjusts downwards. Other miners can trivially defeat this by peering directly with each other, so that the attacker is always behind on the race to publish.

    4. Is this like those guys that sell books and seminars on how to make millions in real estate – while you wonder why they don’t just make millions in real estate? If it’s exploitable, why don’t they just exploit it and never worry about financial stability again?

      1. I think apropos of what some of the commenters are saying here– and if you read the study, it sounds exploitable in theory, based on the possible assumptive behavior of a large number of actors– and computing power.

        1. The key is, it’s exploitable to get more bitcoins than you would by chance, assuming you keep getting a lucky streak, while driving down the value of the coins and making yourself a pariah.

          And a solo could be a pariah. A pool pulling this would be abandoned in a week.

      2. Same reason you never see the headline, “Psychic Wins Lottery”.

  3. Tonight’s bitcoin price is trying to catch a falling knife. 850 on mtgox, no freaking clue where the bottom.

    1. And the Coinbase site broke right after Brian posted this. The Doherty Effect.

      1. Gox is below Bitstamp! Lowest altogether, actually.

        (for non-obsessives, Mt. Gox was the biggest exchange until China got going, and is still very large. It’s price is consistently higher than others,although that may be because it is hard to get dollars out of it, making arbitrage difficult/less profitable.)

  4. People are dreaming if they think the government can’t touch it.

    They’ll say it’s used for money laundering, drugs, assassinations, etc., and shut it down. (Even though Federal Reserve Notes are used for all those things to a much higher degree.)

    1. They already say those things.

      They could shut down exchanges, but then they miss out on the benefits that other countries get.

      To shutdown the protocol? Couldn’t, even with China-style internet controls.

      Look at torrenting — no shutting it down.

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