"If it's not a currency, it is nothing else"

That's Mark Edge (quote from memory, but I think I got it right) talking about the Bitcoin/Segwit/2x controversy on last night's Free Talk Live. Mark and Ian Freeman did their weekend broadcasts from the Texas Bitcoin Conference.

Mark's statement refers back to Saturday night's show, on which John Sacco defended the current track of Bitcoin, asserting that Bitcoin will never be able to scale up to handle the volume of e.g. Visa and that we might as well just accept that it's going to become and remain a low-transaction-volume, high-transaction-fee "settlement layer" and store of value.

Of course, Mark is saying exactly what I've been saying for some time as well. If Bitcoin is not an increasingly going concern as a cryptocurrency that normal people can buy normal things at normal places with, where's the real value in a large network of expensive graphics processors tossing around bits as "proof of work?"

Let's talk about scaling.

When I was in high school, I worked at a gas station. My guess is that 95% of customers paid cash for their gas.

When one of the 5% pulled out a credit card, I in turn pulled out a bulky analog machine, stuck the credit card on it, filled out two slips of paper (one original, the other one a copy made with a piece of carbon paper between the two slips) with the transaction details by hand with a pen, put the paper on top of the card, slid the machine (KA-CHUNK) to make an impression of the physical card, then went in the back room where I punched the transaction information into a little terminal that took over the phone line (MODEM NOISE) for about two minutes and then let me know whether or not the card was any good.

32 years later, most people use credit or debit cards for most transactions in most stores. There's little or no interaction required by store personnel. See the total, slide the card, hit OK (enter PIN if it's a debit transaction), wait a few seconds, done.

I wonder how many transactions per day Visa handles now versus in 1985?

Better computers, better networks, cheaper bandwidth, cheaper storage ... the wheels may come off Moore's Law at some point, but there doesn't seem to be any particular reason why the Bitcoin network can't scale up well into the future instead of pulling over to the side of the road like it has an empty gas tank and four flat tires as soon as it starts getting popular and its network starts getting congested. Increase the block size and keep on truckin'.

Which, of course, is what Bitcoin Cash is doing, just as envisioned in Satoshi Nakamoto's inaugural white paper. And that's why Bitcoin Cash is "real" Bitcoin and the impostor still calling itself "Bitcoin" and forking off into Segwit, 2x, Bitcoin Gold, Bitcoin Silver, Bitcoin WTF is well on its way to becoming a has-been altcoin.

I do wish that my cloud mining service of choice, HashFlare.io (yes, that's a referral link -- buy some hashrate -- you can get in for single-digit USD, and use code Halloween holiday code HF17HLWN10ALL for 10% off!), would hurry up and start offering Bitcoin Cash mining. It hasn't yet, so for the nonce I'm mining Ethereum and Dash.

Dark Wallet Update

The better anonymous angel of BTC nature responded again to my bleg, upping my BTC-E balance to a total of 0.0102 BTC. So even though I had pretty much called the whole idea off for lack of funds, I figure I owe it to said angel to go ahead and test Dark Wallet instead.

1. I transferred my BTC-E balance to my Dark Wallet.
2. The balance after BTC-E withdrawal fees arrived in my Dark Wallet immediately, marked "unconfirmed" and therefore not spendable.
3. Within a couple of minutes, Dark Wallet stopped displaying "unconfirmed," which presumably means that some threshold of block chain confirmations was met (blockchain.info reported two confirmations).
4. The 0.0102 total that I started with came from three addresses. I had 0.0092 BTC remaining by the time it got to my Dark Wallet, so I decided to send 0.009 BTC back to the address that made the largest contribution (0.01 BTC).
5. Dark Wallet reported for about a minute that it was "mixing" -- this, as I understand it is Dark Wallet's "money laundering" function to obfuscate the origins of Bitcoin transfers -- then reported that it was "sending with no mixing" (this may be related to me clicking on the "mixing" notification).
6. Blockchain.info reported the transfer as complete, with one confirmation, almost immediately.

What does all this tell me? Not a lot, but at least one thing I needed to know: This alpha release of Dark Wallet does in fact work as a Bitcoin wallet and in/out transfer system. It should be obvious that that is one of the non-negotiable specs.

I wish that the "mixing" had happened so that I could comment on its obfuscation functions, and later on when I have some of my own BTC to mess with instead of having to ask others to donate, I'll experiment with that some more.

I'd much appreciate comments from knowledgeable people on the security/privacy aspects of the thing -- whether or not what's there works and works effectively or not -- to the extent that those things can be evaluated form both a use and code analysis standpoint.

For obvious reasons I am not expecting an alpha product to be perfect, but Dark Wallet does look very promising to me. If I'm wrong and anyone out there knows it, please tell me and tell me why. And thanks to the angel or angels for the "messing around with it" coinage!

One of Those Rare Occasions ...

... I actually agree with something I read at Salon. Quoth Andrew Leonard therein:

Exposing [Bitcoin creator Satoshi] Nakamoto's identity is the very definition of "news."

Now, I'm not assuming that Leah McGrath Goodman, of Newsweek, got the right Nakamoto (the person she identifies says he isn't that guy).

Nor do I know what all Goodman did to obtain the information she thinks she obtained. If she broke into Nakamoto's house, stole and rifled through his briefcase, that kind of thing, then she violated his rights ... not by knowing that he is who she says he is, but by doing those specific things.

But if she got her facts right, and if she did so without violating any of Nakamoto's real rights in the process ... well, there's no such thing as a "right to demand that people not know who you are or what you did."

The claim of a right to privacy -- a right to demand that people not know something (or share what they know) -- is an "intellectual property" claim. And like all "intellectual property" claims, it's Grade A Horseapples.

Now, just to be clear: I don't agree with Leonard on anything else in the article. I don't believe for a minute that the outing of Satoshi Nakamoto, even if it turns out to be true and accurate, kills Bitcoin. And it sure as hell doesn't kill cryptocurrency as such. Someone's living in a fantasy world. But that someone is Andrew Leonard, not libertarians.

Polis FTW!

How often do you hear me say anything nice about a politician? Well, this:

Congressman Jared Polis is calling on the Treasury to ban physical dollars in response to Senator Manchin's plea to ban Bitcoin. "The exchange of dollar bills, including high denomination bills, is currently unregulated and has allowed users to participate in illicit activity, while also being highly subject to forgery, theft, and loss," wrote Polis in a statement.

To be sure, the Congressman is being cheeky. "This is just a satirical version of Senator Manchin's letter, meant to draw attention to the fact that BitCoins are not any more susceptible to the problems that the Senator points out than dollars," said Spokesperson Scott Overland.

Oh snap and so forth.

A Brief Note on Value

Q: What makes something valuable?
A: The fact that people value it.

I'm writing this apropos of an email discussion I had with a friend yesterday who remains skeptical about Bitcoin (hopefully you'll be seeing an article from him soon on why he's skeptical).

His point, as you can probably figure out without me saying so, is that Bitcoin is not backed by any physical commodity. His original phrasing of that point, which he may have changed in a subsequent draft of the article, is that Bitcoin is not "intrinsically valuable" while gold is.

His point, of course, is correct. That phraseology, however, is not.

Gold has long been considered valuable by many, perhaps most, people -- and for good reason. It is useful (and has become more so rather than less so over the centuries, because of its electrical conductive properties and so forth), it is scarce, it is fairly easily purified and broken down into uniform small quantities, making it a reliable medium of exchange, etc.

But gold's value is not "intrinsic." It's still subjective. You may consider a given quantity of gold more or less valuable than I do. Sure, there are large marketplaces that generate theoretical average valuations, but the only way to really tell how much each of us values any given amount of gold is to find out what we will trade for it, or trade it for.

Bitcoin is valued by at least some people as well. Whether or not their reasons for valuing it -- because it facilitates digital commerce with low transaction costs, because they think they can profit by speculating on its price fluctuations, because they think it will usher in an era of inability of the state to tax or regulate, etc. -- are good or wise or rational reasons is a separate question from whether or not they do value it. They do. That's just a fact.

And if people value something, it's valuable. That's just a fact too.

A Quick Cryptocurrency Update

Well, Mt. Gox appears to be gone. And of course the usual suspects are out in force,  screaming that Bitcoin is a scam and quacking about "the need for regulation" of cryptocurrencies.

Two initial thoughts on that last part:

• Cryptocurrencies as such -- at least of the Bitcoin variety -- can't be government-regulated, because there's no central authority involved which can be seized, sued or arrested. Specific entities using Bitcoin might be regulatable ... if they decide to allow themselves to be regulated.
  
• Mt. Gox in particular is an existence proof that attempts to regulate aren't going to be helpful. Mt. Gox was one of the first, if not the first, to "voluntarily" start requiring government-issued IDs for cash withdrawals and so forth, in an attempt to ingratiate itself with the US and other governments.

So:

Q: Who lost Bitcoins and/or cash in the Mt. Gox shutdown?

A: Anyone who had an account balance there. For example, me -- I had a few thousandths of a Bitcoin in my account at the time things went south.

Q: Who had to lose Bitcoins and/or cash in the Mt. Gox shutdown?

A: Nobody. While it may be convenient to leave your Bitcoins in an online wallet hosted by an exchange (like Mt. Gox) or an online store (like Silk Road), you don't have to do that (and the history of cryptocurrencies so far says it's a bad idea). You can transfer them to an offline wallet in your possession -- on your hard drive, a USB drive, whatever -- any time you like.

Word to the wise: Don't keep substantial cryptocurrency balances online. Only keep the balances you are actually working with online. When you have a significant stack, or when you don't expect to be using the stuff any time soon, move it to an offline wallet. Then if the exchange falls down and goes boom, it doesn't do so while holding your money.

The old "donate Bitcoin" button here at KN@PPSTER was linked to my Mt. Gox account. That button is gone. I've created two new cryptocurrency "tip jar" buttons (top of the right sidebar, just like the old one) linked to an account at BTC-e.

Now you can tip me in Bitcoin or Litecoin, courtesy of coinwidget. And I hope you will, even if it's just a tiny amount, so that I can test those buttons :)

PSA: Bitcoin is NOT Anonymous

Up-front clarification: I am not "against Bitcoin." I have mined Bitcoin, I have bought Bitcoin, I have earned Bitcoin, I have received Bitcoin, I have spent Bitcoin, and I have exchanged Bitcoin for other currencies and for goods and services. I like Bitcoin (with certain reservations and "wait and see" provisos).

But nearly every day, I see one or more persons extolling Bitcoin for being "anonymous." And it. Is. No. Such. Thing.

It is possible to be anonymous while conducting transactions in Bitcoin, but that anonymity has to be achieved independently of the Bitcoin transaction process -- because that process is not only not anonymous, it is completely the opposite of anonymous: Every Bitcoin transaction is logged, and the log of those transactions (the "block chain") is publicly viewable. See, for example, here.

So, if a Bitcoin address can be associated to you, anyone who's willing to go to even a little trouble can examine each and every transaction you've ever made using that address (want to try it for yourself? Grab my semi-permanent Bitcoin address from the sidebar "donate Bitcoin" button and plug it into the service linked above -- voila, you'll see every bit of activity associated with that address). And if the accounts on the other ends of those transactions can likewise be associated with particular people, anyone can know whom you're dealing with and to what extent in Bitcoin.

Some of the bigger wallet providers / market makers / payment processors are also already cooperating with governments, requiring users (at least users who transact in large amounts) to "verify their identities."

Now, that is not to say that all hope of anonymity is lost. There are steps you can take to protect your anonymity.

For example, you can use one of the wallets that isn't bending over for Uncle Sugar on the ID thing.

You can come to that wallet electronically disguised via proxies or using public Wi-Fi instead of your home Internet connection or whatever.

You can frequently change the Bitcoin addresses associated with that wallet (indeed, some automatically create new addresses with each transaction, although previously used addresses remain functionally linked to the wallet for re-use). That's not bullet-proof protection -- if the bad guys get access to the wallet, with a warrant for example, they can know which addresses are associated with which accounts -- but it's at least a layer of obfuscation.

Using Bitcoin anonymously is something you have to proactively work at. The system itself is not, was never intended to be, and was never advertised as, anonymous.