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  1. #41
    Join Date
    Feb 2007
    Location
    Summit County, Colo.
    Quote Originally Posted by OldPhiKap View Post
    Okay, so does that mean I have two options to trade Bitcoins -- either through an exchange (for money, lira, Magic The Gathering cards, Kugerrands, whatever is traded there) -- or I can also exchange directly from my private/offline wallet with someone? If I have two Bitcoins, I can put one into an exchange like E*Trade and the other I can send to hurleyfor3 in exchange for that Dick Vitale bobblehead you listed on Ebay?
    Sort of.

    Anyone who knows a valid private key can transact the bitcoin associated with that key. Meaning if you tell me your key, and you go onto some exchange that hasn't failed yet and spend it before I can, I'm SOL. It would be like being able to spend a $100 bill just by telling someone the serial number.

    If you have 2 BTC and want to split them (say, so that one is kept offline), there's also the issue of getting each single bitcoin its own private key. This needs to be done online so it can propagate through the system. Merchants and traders have to worry about this all the time, otherwise it's like having a giant pile of bitpennies.

    I made the analogy to stock certificates, but there are differences. If I keep a certificate for 100 shares of AAPL under my mattress, and you break into my house and take it, you haven't stolen the shares. Apple Inc. and the transfer agent still recognize me as the owner, and the dividend checks are still made out in my name, I get to vote on corporate actions and so on. You could try transferring the shares into your name but you'd have to successfully forge some identity documents and do a few other illegal things along the way, and hope I haven't been trying to do the same legitimately.

  2. #42
    Join Date
    Feb 2007
    Location
    The City of Brotherly Love except when it's cold.
    Quote Originally Posted by hurleyfor3 View Post
    And if you store your blockchain on your hard drive and it crashes, or if you have it on a piece of paper under your mattress and your house burns down, your bitcoins are gone forever. Just as with real currency.
    Well I keep my cash and block chains in the safe, the safety deposit box, and under the mattress. I believe in redundancy and diversification.

  3. #43
    Join Date
    Feb 2007
    Location
    Summit County, Colo.
    Quote Originally Posted by 77devil View Post
    Well I keep my cash and block chains in the safe, the safety deposit box, and under the mattress. I believe in redundancy and diversification.
    Fair enough, but that's more places a potential thief can find your key.

    For many years, I kept an envelope of Duke-acceptance-letter thickness full of savings bonds in my desk drawer. Although my passport was usually right there too, rather defeating the purpose.

  4. #44
    Join Date
    Sep 2007
    Location
    Undisclosed
    Quote Originally Posted by hurleyfor3 View Post
    Sort of.

    Anyone who knows a valid private key can transact the bitcoin associated with that key. Meaning if you tell me your key, and you go onto some exchange that hasn't failed yet and spend it before I can, I'm SOL. It would be like being able to spend a $100 bill just by telling someone the serial number.

    If you have 2 BTC and want to split them (say, so that one is kept offline), there's also the issue of getting each single bitcoin its own private key. This needs to be done online so it can propagate through the system. Merchants and traders have to worry about this all the time, otherwise it's like having a giant pile of bitpennies.

    I made the analogy to stock certificates, but there are differences. If I keep a certificate for 100 shares of AAPL under my mattress, and you break into my house and take it, you haven't stolen the shares. Apple Inc. and the transfer agent still recognize me as the owner, and the dividend checks are still made out in my name, I get to vote on corporate actions and so on. You could try transferring the shares into your name but you'd have to successfully forge some identity documents and do a few other illegal things along the way, and hope I haven't been trying to do the same legitimately.
    Sorry to be an old LP/VCR dolt, but . . . .

    Let's assume I have a bunch of BTCs. I want to buy your Bobblehead collection. Can I exchange with you directly, or do we need to go through an exchange (and if so, how do we decide which)?

  5. #45
    Join Date
    Feb 2007
    Location
    Summit County, Colo.
    Quote Originally Posted by OldPhiKap View Post
    Let's assume I have a bunch of BTCs. I want to buy your Bobblehead collection. Can I exchange with you directly, or do we need to go through an exchange (and if so, how do we decide which)?
    As a seller of goods/receiver of bitcoin, I would want always and everywhere to go through an exchange.

    If you hold 1000 BTC and I'm charging 5 BTC for my bobbleheads, at some point I'm going to want the blockchain record -- the "public" part of all transactions -- to show that I have those 5 BTC. Otherwise when I go to transact those 5 BTC down the line they won't be associated with me in the system. (We need better bitcoin-specific words here. Bitcoinosphere? Bitcollective? Bitcoinomy?) "Associated with me" means those 5 BTC link to my bitcoin address. People use the term "address" rather than "account" for some reason. Just as with Gmail addresses though, you can have have multiple bitcoin addresses, which is in fact how people take part of their assets offline.

    Furthermore, the blockchain will show you now have 995 BTC, so when you try to buy that ultra-rare 1977 Al McGwire bobblehead for 1000 BTC you won't be able to swindle the seller out of those extra 5 BTC.

    You can exchange private keys, but the blockchain (again, the public part) isn't affected until someone (preferably me, but in theory anyone who knows it) goes onto an exchange and inputs that key. That's why there's a blockchain in the first place. The public key can be computed from the private key, but not the reverse.

  6. #46
    Join Date
    Sep 2007
    Location
    Undisclosed
    Quote Originally Posted by hurleyfor3 View Post
    As a seller of goods/receiver of bitcoin, I would want always and everywhere to go through an exchange.

    If you hold 1000 BTC and I'm charging 5 BTC for my bobbleheads, at some point I'm going to want the blockchain record -- the "public" part of all transactions -- to show that I have those 5 BTC. Otherwise when I go to transact those 5 BTC down the line they won't be associated with me in the system. (We need better bitcoin-specific words here. Bitcoinosphere? Bitcollective? Bitcoinomy?) "Associated with me" means those 5 BTC link to my bitcoin address. People use the term "address" rather than "account" for some reason. Just as with Gmail addresses though, you can have have multiple bitcoin addresses, which is in fact how people take part of their assets offline.

    Furthermore, the blockchain will show you now have 995 BTC, so when you try to buy that ultra-rare 1977 Al McGwire bobblehead for 1000 BTC you won't be able to swindle the seller out of those extra 5 BTC.

    You can exchange private keys, but the blockchain (again, the public part) isn't affected until someone (preferably me, but in theory anyone who knows it) goes onto an exchange and inputs that key. That's why there's a blockchain in the first place. The public key can be computed from the private key, but not the reverse.
    For simplicity's sake, let's put aside other folks using our accounts. You have bobble heads, I have Bitcoins.

    Okay, so you offer your bobble heads for 5 BTCs and I accept. Instead of trading directly, as a practical matter we must/should go through some established exchange (I assume seller chooses but maybe that is a whole different discussion -- do not know). So I send 5 BTCs to the exchange, you withdraw them (with the verifying block chain) than ship me the super fantabulous bobble heads.

    1. Have I described the transaction correctly?

    2. To the Mt. Gox question, the exchange only "holds" the BTCs momentarily as it goes from me to you, correct? So they do not get lost in this deal?

  7. #47
    Join Date
    Feb 2007
    Location
    Skinker-DeBaliviere, Saint Louis
    My understanding is almost certainly incomplete, but this whole thing sounds like a massive pain in the butt.

    A movie is not about what it's about; it's about how it's about it.
    ---Roger Ebert


    Some questions cannot be answered
    Who’s gonna bury who
    We need a love like Johnny, Johnny and June
    ---Over the Rhine

  8. #48
    Join Date
    Feb 2007
    Location
    Summit County, Colo.
    The description of a transaction can be found here. You don't need to be on a specific exchange send the BTC; you just need to know my public key, as if it were my credit card number.

    Exchanges mostly function as a marketplace to trade between BTC and hard currency and to do the math, generating new blocks, when BTC are exchanged between people (or other addresses; this includes trading amongst your addresses or taking BTC on or offline). Think of the blockchain as NYSE or Nasdaq and the bitcoin exchange as ETrade -- when you sell stock, ETrade doesn't look for someone else on ETrade who wants to buy it, it sends your order to a stock exchange.

    When you have your BTC wallet "online" on an exchange it just means your account is "live" there. "Online" doesn't mean "actively looking at your account" in the sense of the DBR "Who's online" list. Even if you're not logged into your ETrade account, it's still "online" in the sense that prices are updated real-time, dividends post to it, you can withdraw from it to pay bills, you can have orders working and so on. You don't just log out of ETrade and your 1000 shares of AAPL are now custodied on your hard drive. Merchants, for one, have to have an "online" BTC exchange presence 24/7 so they can accept payments. Other people keep their wallets online to buy stuff, trade, for convenience, or out of laziness or not knowing any better. This explains the BTC that were lost on Mt. Gox.

  9. #49
    Join Date
    Feb 2007
    Location
    Hot'Lanta... home of the Falcons!
    Quote Originally Posted by hurleyfor3 View Post
    ... the BTC that were lost on Mt. Gox.
    Just so I understand. There were not BTC lost on Mt Gox. They were stolen, right? Someone got really rich by hacking in or something like that... I think.

    -Jason "Or I could be 100% wrong, I haven't followed this as closely as I probably should" Evans
    I don't know what you are doing right now, but if you aren't listening to the DBR Podcast, you're doing it wrong.

  10. #50
    Join Date
    Mar 2008
    Location
    raleigh
    how does and exchange become an exchange? it's not "licenesed" or "regulated" is it?


    to a skeptic like myself, it seems to be a bit risky...i could put up "real" money ("real" as in those 1's and 0's that make up the balance in my bank account that are derived from the "real" 1's and 0's that come from the deposits and transfers of other 1's and 0's of others bank accounts...wait...i'm off track here...) and get the ownership of a complex collection of 1's and 0's?
    "Either they're going down, or we are! Kirk out!"

  11. #51
    Join Date
    Feb 2007
    Location
    The City of Brotherly Love except when it's cold.
    One ancillary aspect of this thread that all should think about is the risk of paperless record keeping. Most financial institutions encourage or incent customers to go paperless to save money. While having always been an early adopter of electronic processes, I've always maintained backup paper or offline electronic records as insurance. And, in fact, I have incurred a handful of small errors over the years that were easily documented and corrected based on backup records.

    But the real risk is cyber terrorism. I received an all day briefing on cyber threats more than a year ago and the threat is real and pervasive. U.S. financial institutions are a primary target, incurring extensive network intrusion attempts every minute of every day. Sure, these companies have enormous security, redundancy, and recovery capability, but in the remote chance your bank or investment account goes dark, do you want to rely solely on the institution to restore accurately?

    Perhaps my carefulness in this regard stems, in part, from an early experience at Duke. The first ATM machine I ever used, maybe ever saw, was in 1973 just outside the Great Hall. It shorted me $20 once. It was not a BB&T machine which was the bank branch downstairs. $20 was real money for a college student back then. Getting it sorted out was a real pain.

  12. #52
    Join Date
    Feb 2007
    Location
    Summit County, Colo.
    Quote Originally Posted by JasonEvans View Post
    Just so I understand. There were not BTC lost on Mt Gox. They were stolen, right? Someone got really rich by hacking in or something like that... I think.
    No one really knows. The line from the CEO was, "There was some weakness in the system, and the bitcoins have disappeared."

    That's the scary part. His explanation wasn't "Blah blah blah remote server blah blah secure encryption blah blah blockchain public key", but the bitcoins have disappeared. "Disappeared" is not a word I try to associate with financial assets.

  13. #53
    Join Date
    Feb 2007
    Location
    Atlanta, GA
    Quote Originally Posted by 77devil View Post
    Mt. Gox filed for bankruptcy protection overnight in Japan. Here's an irony of Bitcoin. To protect coin inventory from being lost or stolen, one needs to remove the digital wallet from an accessible computer and print out the serial numbers and store the paper record under the mattress just like paper money.
    Fascinating thread here. Like others, I have come to understand Bitcoin better here than anywhere else.
    My question: If each Bitcoin is essentially a unique, discrete serial number, then shouldn't theft be pretty easy to track? "That number is in your digital wallet, but it used to be in mine, and here is the digital paper trail to prove it."

  14. #54
    Join Date
    Feb 2007
    Location
    Summit County, Colo.
    Quote Originally Posted by wilson View Post
    My question: If each Bitcoin is essentially a unique, discrete serial number, then shouldn't theft be pretty easy to track? "That number is in your digital wallet, but it used to be in mine, and here is the digital paper trail to prove it."
    Yes. Theft IS easy to track. Even if you attempt to launder stolen bitcoins into other "clean" addresses it can be traced. However, this still requires some sort of regulation -- someone has to decide what's been stolen and has to do the tracking. It's conceivable for an exchange or bank not to honor any bitcoin that has been stolen.

  15. #55
    Join Date
    Feb 2007
    Location
    Atlanta, GA
    Quote Originally Posted by hurleyfor3 View Post
    Yes. Theft IS easy to track. Even if you attempt to launder stolen bitcoins into other "clean" addresses it can be traced. However, this still requires some sort of regulation -- someone has to decide what's been stolen and has to do the tracking. It's conceivable for an exchange or bank not to honor any bitcoin that has been stolen.
    Then what's the incentive to steal them? The ease of proving theft would seem to diminish (if not wipe out) the value of stolen bitcoins. Are these hackers' motives purely spiteful?

  16. #56
    Join Date
    Feb 2007
    Location
    Summit County, Colo.
    Quote Originally Posted by wilson View Post
    Then what's the incentive to steal them? The ease of proving theft would seem to diminish (if not wipe out) the value of stolen bitcoins. Are these hackers' motives purely spiteful?
    1. For now, there's no regulation, or even consensus agreement that theft should be tracked in the first place
    2. The thieves may really want the cash in people's accounts at exchanges and the BTC just happens to be there
    3. It may be possible to quickly transact the stolen BTC before getting caught, as with stolen credit cards
    4. spite may certainly enter into it, especially against an exchange or someone who works at one -- people create viruses and malware and make DOS attacks for no obvious economic gain

    Re point 2, there's speculation mtgox was using customer cash to trade bitcoin for itself, perhaps even using leverage, in a combination pump-and-dump/frontrunning/Madoff scheme. If a stockbroker did this it would be easier to list the laws it DIDN'T violate.

  17. #57
    Join Date
    Feb 2007
    Location
    Ashburn, VA
    Quote Originally Posted by 77devil View Post

    Perhaps my carefulness in this regard stems, in part, from an early experience at Duke. The first ATM machine I ever used, maybe ever saw, was in 1973 just outside the Great Hall. It shorted me $20 once. It was not a BB&T machine which was the bank branch downstairs. $20 was real money for a college student back then. Getting it sorted out was a real pain.
    Well, I got half your money back 30 years later if it makes you feel any better.

    I once used the ATM in the Bryan Center and asked for $10, and it spit out a $20 bill. (bank records later verified I did indeed only have $10 debited)


    It didn't dawn on me until many hours later that I should have kept trying to see if it was a one-bill fluke, or a whole stack =)
    Since I was less ethical back then I did indeed go back and try, but it was "fixed" by that point.

  18. #58
    Quote Originally Posted by snowdenscold View Post
    Well, I got half your money back 30 years later if it makes you feel any better.

    I once used the ATM in the Bryan Center and asked for $10, and it spit out a $20 bill. (bank records later verified I did indeed only have $10 debited)


    It didn't dawn on me until many hours later that I should have kept trying to see if it was a one-bill fluke, or a whole stack =)
    Since I was less ethical back then I did indeed go back and try, but it was "fixed" by that point.
    I used to work in a credit union, and remember episodes of people improperly loading ATMs (ie. putting 20's where 10's should have gone). I suspect technology has made it no longer an issue, but it was back then (late 90's).

  19. #59
    Join Date
    Feb 2007
    Location
    Summit County, Colo.
    Quote Originally Posted by Reisen View Post
    I used to work in a credit union, and remember episodes of people improperly loading ATMs (ie. putting 20's where 10's should have gone). I suspect technology has made it no longer an issue, but it was back then (late 90's).
    This is why other countries' moneys are different sizes.

  20. #60
    Join Date
    Sep 2007
    Location
    Undisclosed
    Quote Originally Posted by hurleyfor3 View Post
    This is why other countries' moneys are different sizes.
    And colors.

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