In 2006 I read a paper about a cryptosystem for e-cash and it was way worse than BitCoin. When I read about BitCoin, I couldn’t believe how perfect the scheme was. It turns out there’s no “Arrow’s theorem” for e-coins—every desirable criterion can be satisfied at once.
The biggest doubt I had about BitCoin was that it would never gain social traction. But watching the USD/BitCoin exchange rate increase 10x in 5 months has made that doubt smaller in my mind.
And so I offer LW readers this applied-rationality suggestion: If you’re looking to make a high-risk investment, BitCoin seems like an overdetermined choice. I judge it to have a very high expected return—something like 2x in 1 year—and I’m investing today.
The big problem I see with BitCoin is that everyone’s entire transaction history is public. So if you ever use BitCoins to buy something that needs to be mailed to you, or trade them for money sent to your bank, your anonymity is basically gone—anyone who can coerce/subpoena/spy on the “real life” side of a single transaction can link your real identity to any transaction you’ve ever made or will make.
No, the convention and the default is to use a new receiving address for each inbound transaction, so this exposes only a small portion of your transaction history, not the whole thing.
At least according to this, you must spend coins from the same address you received them on, so using different addresses doesn’t buy you much. You still can’t spend the BitCoins you’ve received and keep your anonymity. The page I linked recommends a procedure for money-laundering; I’m not sure how to evaluate how effective it is, but it’s definitely inconvenient.
Inconvenience strikes me as a major strike against a traceable currency; I suspect it would be a lot more tolerable for an untraceable one. But both inconvenience and traceability, particularly if governments are against it, would be pretty bad for it.
In 2006 I read a paper about a cryptosystem for e-cash and it was way worse than BitCoin. When I read about BitCoin, I couldn’t believe how perfect the scheme was. It turns out there’s no “Arrow’s theorem” for e-coins—every desirable criterion can be satisfied at once.
The biggest doubt I had about BitCoin was that it would never gain social traction. But watching the USD/BitCoin exchange rate increase 10x in 5 months has made that doubt smaller in my mind.
And so I offer LW readers this applied-rationality suggestion: If you’re looking to make a high-risk investment, BitCoin seems like an overdetermined choice. I judge it to have a very high expected return—something like 2x in 1 year—and I’m investing today.
The big problem I see with BitCoin is that everyone’s entire transaction history is public. So if you ever use BitCoins to buy something that needs to be mailed to you, or trade them for money sent to your bank, your anonymity is basically gone—anyone who can coerce/subpoena/spy on the “real life” side of a single transaction can link your real identity to any transaction you’ve ever made or will make.
No, the convention and the default is to use a new receiving address for each inbound transaction, so this exposes only a small portion of your transaction history, not the whole thing.
At least according to this, you must spend coins from the same address you received them on, so using different addresses doesn’t buy you much. You still can’t spend the BitCoins you’ve received and keep your anonymity. The page I linked recommends a procedure for money-laundering; I’m not sure how to evaluate how effective it is, but it’s definitely inconvenient.
Inconvenience strikes me as a major strike against a traceable currency; I suspect it would be a lot more tolerable for an untraceable one. But both inconvenience and traceability, particularly if governments are against it, would be pretty bad for it.