Author Topic: Bitcoin currency (merged topics)  (Read 244477 times)

Offline FreeLancer

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Re: Bitcoin currency (merged topics)
« Reply #720 on: August 02, 2019, 05:03:05 PM »
Continuing on the Coinkite theme, I also got their Opendime product, a method of physically transferring "small" amounts of bitcoin off-chain with zero knowledge of the private key by any party.  The 1st Bitcoin Bearer Instrument or just call it a "Bitcoin Stick," as they refer to it. 




There have been attempts before at producing a trust-less physical wallet, such as the Casascius coin, but the Achilles heel was always the nagging uncertainty that the manufacturer could retain the private key information and then spend whatever was loaded onto it after an exchange. 

What CK did with the Opendime was to utilize a secure element on the device, which provides secure storage and true random number generator, that doesn't contain a private key when shipped to the original owner.  The initial setup process requires that the device be plugged into a computer, which comes up like a USB drive, and user defined entropy in the form of files are dropped into the Opendime folder.  Once enough entropy has been added by the user the device hashes that with the device's entropy to generate the public/private key pair and stores that private key in the secure element onboard the device. 

Once initialized the device displays a web page with the public key and QR code for loading and verifying funds with a second party for transactions.  The fact that the person accepting the loaded device is able to verify the funds on the spot and has confidence that the person they received the funds from can't steal it back later means there's no need to do an on-chain transaction, which eliminates the associated fees and confirmation time prior to finalizing the business transaction. 

When the time comes to move the funds off the device in an on-chain transaction the owner sticks a pin through a marked hole on the back to pop a resistor off the circuit board to reveal the private key when plugged into a computer.  This alters the device in such a way that it cannot be reset and the funds on the private key must be swept into another wallet to avoid being stolen.  The device is useless after this and can be destroyed or disposed of, it's a one-shot deal. 

Coinkite doesn't recommend storing "large" amounts on the Opendime device, mainly because there is no way to backup the private key.  Unlike every other hardware wallet device, which allows the user to backup their keys with a seed phrase, there is no way to do that with the Opendime without compromising the zero-knowledge aspect of the device.  So, while one could use it for long-term cold storage, there's no way to recover from loss or damage and one needs to adjust the amount stored on the device accordingly.

Honestly, I personally don't have a good use case for this device at the moment, but I can imagine situation where this could be invaluable.

Offline FreeLancer

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Re: Bitcoin currency (merged topics)
« Reply #721 on: August 12, 2019, 08:53:01 AM »
Linked to on Jimmy Song's current newsletter: 

Bitcoin is not too volatile

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The list of bitcoin skeptics is long and distinguished, but the noise contributes directly to the antifragile nature of bitcoin. People that store wealth in bitcoin are forced to think through first principles in order to understand characteristics of bitcoin which otherwise seem, on the surface, to contradict an establishment view of money, which ultimately hardens convictions. Bitcoin volatility is one of these oft-criticized characteristics. A common refrain among skeptics, including central bankers, is that bitcoin is too volatile to be a store of value, medium of exchange or unit of account. Given its volatility, why would anyone hold bitcoin as a savings mechanism? And, how could bitcoin be effective as a transactional currency for payments if its value could reasonably drop tomorrow?

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Ultimately, bitcoin’s lack of a price stability mandate and fixed supply will continue to result in near-term volatility but will drive long-term price stability. It is the literal opposite model pursued by Mark Carney of the BOE, the ECB (and its twitter account), the Federal Reserve and the Bank of Japan. And, it is why bitcoin is antifragile; there are no bailouts and it’s a market devoid of moral hazard, which drives maximum accountability and long-term efficiency. Central banks manage currencies to mute short-term volatility, which creates the instability that leads to long-term volatility. Volatility in bitcoin is the natural function of monetary adoption and this volatility ultimately strengthens the resilience of the bitcoin network, driving long-term stability. Variation is information.

Nassim Taleb & Mark Blyth (Black Swan of Cairo)

    “Complex systems that have artificially suppressed volatility tend to become extremely fragile,
    while at the same time exhibiting no visible risks.”

    “This is one of life’s packages: there is no freedom without noise
    —and no stability without volatility.”

Ben Bernanke, Chairman of the Federal Reserve (during the Great Financial Crisis)

    “The Federal Reserve is not currently forecasting a recession.” – January 10, 2008

    “The risk that the economy has entered a substantial downturn appears to have diminished
    over the past month or so.” – June 9, 2008


Proof of Life: Why Bitcoin is a Living Organism

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The definition of life has been a challenge for scientists and philosophers alike. While many definitions have been put forward, what precisely differentiates the living from the non-living remains elusive. Are viruses alive? DNA molecules? Computer viruses? Biologically produced minerals?

Ralph Merkle, inventor of cryptographic hashing and namesake of the Merkle tree, made the argument that Bitcoin is the first example of a new form of life. In this article series, I intend to take this claim seriously, explore it further, and see what can be gleaned from viewing Bitcoin as a living organism.

The first part will establish that Bitcoin is indeed a living organism. The second part will take a closer look at Bitcoin’s various habitats, and how changes in these habitats might affect the organism. In the third part we will dissect the Bitcoin organism, trying to understand some of its parts in more detail. Finally, we will perform the thought experiment of trying to kill Bitcoin, to illustrate the remarkable resilience of this strange, decentralized organism.