https://tests.bitcoin.it/w/api.php?action=feedcontributions&user=Gidgreen&feedformat=atomBitcoin Wiki - User contributions [en]2024-03-28T20:21:18ZUser contributionsMediaWiki 1.30.0https://tests.bitcoin.it/w/index.php?title=Colored_Coins&diff=51535Colored Coins2014-10-01T05:46:27Z<p>Gidgreen: Added CoinSpark protocol</p>
<hr />
<div>Colored Coins is a colored bitcoin minting and exchange protocol that works on top of the Bitcoin blockchain infrastructure.<br />
<br />
Colored coins allow you to store assets on the [[Coinprism.info|Bitcoin blockchain]]. There are many interesting applications to colored coin. You could have an IPO on the blockchain by issuing shares as a colored coins, and send them to your shareholders. The shares can then be traded almost instantaneously and for free through the Bitcoin blockchain. You could have smart properties represented by colored coins. You could store your house on the blockchain by issuing a single coin, then the ownership of the house can be transferred with a simple Bitcoin transaction.<br />
<br />
==Block Explorer==<br />
[[Coinprism]] offers a colored coin [[Coinprism.info|Bitcoin blockchain]] explorer.<br />
<br />
==Open Assets==<br />
[https://github.com/OpenAssets/open-assets-protocol/blob/master/specification.mediawiki Open Assets] is a Colored Coin implementation based on the [[Script#Provably_Unspendable.2FPrunable_Outputs|OP_RETURN]] operator. Metadata is linked from the Blockchain and stored on the web.<br />
<br />
===Example of an Open Assets OP_RETURN marker output===<br />
This example illustrates how a marker output is decoded. Assuming the marker output is output 1:<br />
<br />
Data in the marker output Description<br />
----------------------------- -------------------------------------------------------------------<br />
0x6a The OP_RETURN opcode.<br />
0x10 The marker output is 16 bytes long.<br />
0x4f 0x41 The Open Assets Protocol tag.<br />
0x01 0x00 Version 1 of the protocol.<br />
0x03 There are 3 items in the asset quantity list.<br />
0xac 0x02 0x00 0xe5 0x8e 0x26 The asset quantity list:<br />
- '0xac 0x02' means output 0 has an asset quantity of 300.<br />
- Output 1 is skipped and has an asset quantity of 0<br />
because it is the marker output.<br />
- '0x00' means output 2 has an asset quantity of 0.<br />
- '0xe5 0x8e 0x26' means output 3 has an asset quantity of 624,485.<br />
- Outputs after output 3 (if any) have an asset quantity of 0.<br />
0x04 The metadata is 4 bytes long.<br />
0x12 0x34 0x56 0x78 Some arbitrary metadata.<br />
<br />
===Current projects leveraging Open Assets===<br />
* [[File:Coinprism_Favicon.png|16px|link=https://www.coinprism.com]] [[Coinprism]] colored coins web wallet<br />
* [https://github.com/OpenAssets/openassets Reference implementation] on GitHub<br />
* [https://github.com/OpenAssets/colorcore Colorcore]: Open source wallet for Open Assets<br />
* [[Coinprism.info]] colored coins blockchain explorer<br />
* [https://www.coinprism.info/assets Coinprism Assets directory]<br />
* [https://github.com/OpenAssets/openassets openassets Python library]<br />
<br />
==CoinSpark==<br />
<br />
[http://coinspark.org/ CoinSpark] is a Colored Coin implementation that uses a lightweight (SPV) desktop wallet for Windows, Mac or Linux. In CoinSpark, contracts are hosted on the issuer's website and notarized on the blockchain. Like Open Assets, it uses [[Script#Provably_Unspendable.2FPrunable_Outputs|OP_RETURNs]] to store metadata, with a highly efficient encoding scheme that allows multiple transfers of different assets to be encoded in a single transaction. CoinSpark [http://coinspark.org/developers/source-libraries/ software libraries] are available for C/C++, Java, Javascript, PHP and Python, and there's a detailed [http://coinspark.org/developers/ developers guide] with examples.<br />
<br />
[[Category:Financial]]<br />
[[Category:Colored Coins]]<br />
[[Category:Digital currencies]]</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Talk:List_of_address_prefixes&diff=48969Talk:List of address prefixes2014-07-20T06:29:35Z<p>Gidgreen: </p>
<hr />
<div>Shouldn't the line<br />
128 5 Bitcoin Private key 5Htn3FzuH3b1X5VF2zLTsAQzBcyzkZNJsa2egXN8ZFJTCqQm3Rq<br />
be<br />
128 t Bitcoin Private key tHtn3FzuH3b1X5VF2zLTsAQzBcyzkZNJsa2egXN8ZFJTCqQm3Rq<br />
according to<br />
127-128 t 34<br />
?<br />
--[[User:ThePiachu|ThePiachu]] ([[User talk:ThePiachu|talk]]) 01:59, 27 June 2012 (GMT)<br />
<br />
What is the policy regarding addresses which are not altcoins but which relate to protocols being built on top of bitcoin? I think there is value in some kind of registry for such protocols to prevent address clashes, and help users know the purpose of different addresses. But I don't want to overstep if that's not the purpose of this page.<br />
--[[User:gidgreen|gidgreen]] 7 July 2014 (GMT)<br />
<br />
* I'm not sure what you mean by that. Altcoins abusing bitcoin's blockchain are still altcoins. Also note that the version byte is for a version, not a namespace. CoinSpark seems to be inserting a "features" in the address. It makes sense to have this, I think, but it should be based on version 5 addresses (p2sh), not the obsolete version 0 (p2pkh)... Perhaps more importantly, this should be proposed on the development mailing list and made a BIP before appearing on this page. --[[User:Luke-jr|Luke-jr]] ([[User talk:Luke-jr|talk]]) 20:47, 7 July 2014 (UTC)<br />
<br />
:: CoinSpark is not an altcoin. It's a protocol for enriching bitcoin transactions via OP_RETURNs. Of the 5 features on the current roadmap, one is a variant on the idea of colored coins (I don't know if you would call that an altcoin or not) but the rest are all about making regular bitcoin transactions easier and more useful. I imagine it will be one of many such protocols which come out during the coming years, and I think there is sense in avoiding addressing clashes between these different protocols. As you say, [http://coinspark.org/developers/coinspark-addresses/ CoinSpark addresses] encode several types of information but this is not really appropriate for a BIP since it's not an enhancement to the bitcoin protocol itself. (Think TCP/IP and the Web.) So what mechanism would you suggest for avoiding addressing clashes? [[User:Gidgreen|Gidgreen]] ([[User talk:Gidgreen|talk]]) 06:28, 20 July 2014 (UTC)</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Talk:List_of_address_prefixes&diff=48968Talk:List of address prefixes2014-07-20T06:28:27Z<p>Gidgreen: </p>
<hr />
<div>Shouldn't the line<br />
128 5 Bitcoin Private key 5Htn3FzuH3b1X5VF2zLTsAQzBcyzkZNJsa2egXN8ZFJTCqQm3Rq<br />
be<br />
128 t Bitcoin Private key tHtn3FzuH3b1X5VF2zLTsAQzBcyzkZNJsa2egXN8ZFJTCqQm3Rq<br />
according to<br />
127-128 t 34<br />
?<br />
--[[User:ThePiachu|ThePiachu]] ([[User talk:ThePiachu|talk]]) 01:59, 27 June 2012 (GMT)<br />
<br />
What is the policy regarding addresses which are not altcoins but which relate to protocols being built on top of bitcoin? I think there is value in some kind of registry for such protocols to prevent address clashes, and help users know the purpose of different addresses. But I don't want to overstep if that's not the purpose of this page.<br />
--[[User:gidgreen|gidgreen]] 7 July 2014 (GMT)<br />
<br />
* I'm not sure what you mean by that. Altcoins abusing bitcoin's blockchain are still altcoins. Also note that the version byte is for a version, not a namespace. CoinSpark seems to be inserting a "features" in the address. It makes sense to have this, I think, but it should be based on version 5 addresses (p2sh), not the obsolete version 0 (p2pkh)... Perhaps more importantly, this should be proposed on the development mailing list and made a BIP before appearing on this page. --[[User:Luke-jr|Luke-jr]] ([[User talk:Luke-jr|talk]]) 20:47, 7 July 2014 (UTC)<br />
<br />
:: CoinSpark is not an altcoin. It's a protocol for enriching bitcoin transactions via OP_RETURNs. Of the 5 features on the current roadmap, one is a variant on the idea of colored coins (I don't know if you would call that an altcoin or not) but the rest are all about making regular bitcoin transactions easier and more useful. I imagine it will be one of many such protocols which come out during the coming years, and I think there is sense in avoiding addressing clashes between these different protocols. As you say, [CoinSpark addresses http://coinspark.org/developers/coinspark-addresses/] encode several types of information but this is not really appropriate for a BIP since it's not an enhancement to the bitcoin protocol itself. (Think TCP/IP and the Web.) So what mechanism would you suggest for avoiding addressing clashes? [[User:Gidgreen|Gidgreen]] ([[User talk:Gidgreen|talk]]) 06:28, 20 July 2014 (UTC)</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Talk:List_of_address_prefixes&diff=48967Talk:List of address prefixes2014-07-20T06:27:40Z<p>Gidgreen: </p>
<hr />
<div>Shouldn't the line<br />
128 5 Bitcoin Private key 5Htn3FzuH3b1X5VF2zLTsAQzBcyzkZNJsa2egXN8ZFJTCqQm3Rq<br />
be<br />
128 t Bitcoin Private key tHtn3FzuH3b1X5VF2zLTsAQzBcyzkZNJsa2egXN8ZFJTCqQm3Rq<br />
according to<br />
127-128 t 34<br />
?<br />
--[[User:ThePiachu|ThePiachu]] ([[User talk:ThePiachu|talk]]) 01:59, 27 June 2012 (GMT)<br />
<br />
What is the policy regarding addresses which are not altcoins but which relate to protocols being built on top of bitcoin? I think there is value in some kind of registry for such protocols to prevent address clashes, and help users know the purpose of different addresses. But I don't want to overstep if that's not the purpose of this page.<br />
--[[User:gidgreen|gidgreen]] 7 July 2014 (GMT)<br />
<br />
* I'm not sure what you mean by that. Altcoins abusing bitcoin's blockchain are still altcoins. Also note that the version byte is for a version, not a namespace. CoinSpark seems to be inserting a "features" in the address. It makes sense to have this, I think, but it should be based on version 5 addresses (p2sh), not the obsolete version 0 (p2pkh)... Perhaps more importantly, this should be proposed on the development mailing list and made a BIP before appearing on this page. --[[User:Luke-jr|Luke-jr]] ([[User talk:Luke-jr|talk]]) 20:47, 7 July 2014 (UTC)<br />
<br />
:: CoinSpark is not an altcoin. It's a protocol for enriching bitcoin transactions via OP_RETURNs. Of the 5 features on the current roadmap, one is a variant on the idea of colored coins (I don't know if you would call that an altcoin or not) but the rest are all about making regular bitcoin transactions easier and more useful. I imagine it will be one of many such protocols which come out during the coming years, and I think there is sense in avoiding addressing clashes between these different protocols. As you say, [CoinSpark addresses http://coinspark.org/developers/coinspark-addresses/] encode several types of information but this is not really appropriate for a BIP since it's not an enhancement to the bitcoin protocol itself. (Think TCP/IP and the Web.) So what mechanism would you suggest for avoiding addressing clashes?</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Talk:List_of_address_prefixes&diff=48670Talk:List of address prefixes2014-07-07T12:32:12Z<p>Gidgreen: </p>
<hr />
<div>Shouldn't the line<br />
128 5 Bitcoin Private key 5Htn3FzuH3b1X5VF2zLTsAQzBcyzkZNJsa2egXN8ZFJTCqQm3Rq<br />
be<br />
128 t Bitcoin Private key tHtn3FzuH3b1X5VF2zLTsAQzBcyzkZNJsa2egXN8ZFJTCqQm3Rq<br />
according to<br />
127-128 t 34<br />
?<br />
--[[User:ThePiachu|ThePiachu]] ([[User talk:ThePiachu|talk]]) 01:59, 27 June 2012 (GMT)<br />
<br />
What is the policy regarding addresses which are not altcoins but which relate to protocols being built on top of bitcoin? I think there is value in some kind of registry for such protocols to prevent address clashes, and help users know the purpose of different addresses. But I don't want to overstep if that's not the purpose of this page.<br />
--[[User:gidgreen|gidgreen]] 7 July 2014 (GMT)</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Talk:List_of_address_prefixes&diff=48669Talk:List of address prefixes2014-07-07T12:31:40Z<p>Gidgreen: </p>
<hr />
<div>Shouldn't the line<br />
128 5 Bitcoin Private key 5Htn3FzuH3b1X5VF2zLTsAQzBcyzkZNJsa2egXN8ZFJTCqQm3Rq<br />
be<br />
128 t Bitcoin Private key tHtn3FzuH3b1X5VF2zLTsAQzBcyzkZNJsa2egXN8ZFJTCqQm3Rq<br />
according to<br />
127-128 t 34<br />
?<br />
--[[User:ThePiachu|ThePiachu]] ([[User talk:ThePiachu|talk]]) 01:59, 27 June 2012 (GMT)<br />
<br />
What is the policy regarding addresses which are not altcoins but which relate to protocols being built on top of bitcoin? I think there is value in some kind of registry for such protocols to prevent address clashes, and help users know the purpose of different addresses. But I don't want to overstep if that's not the purpose of this page.</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=List_of_address_prefixes&diff=48668List of address prefixes2014-07-07T12:30:24Z<p>Gidgreen: Added CoinSpark keys (please see the note I left in discussion)</p>
<hr />
<div>Blockchain-based currencies use addresses, which are a [[Base58Check encoding]] of some hash, typically that of a public key. The encoding includes a version byte, which affects the first character in the address. The following is a list of some prefixes which are in use.<br />
<br />
{| class="wikitable" <br />
|-<br />
!Decimal version<br />
!Leading symbol<br />
!Use<br />
!Example<br />
|-<br />
|0<br />
|1<br />
|Bitcoin pubkey hash<br />
|<tt>17VZNX1SN5NtKa8UQFxwQbFeFc3iqRYhem</tt><br />
|-<br />
|5<br />
|3<br />
|Bitcoin script hash<br />
| <tt>3EktnHQD7RiAE6uzMj2ZifT9YgRrkSgzQX</tt><br />
|-<br />
|111<br />
|m or n<br />
|Bitcoin testnet pubkey hash<br />
|<tt>mipcBbFg9gMiCh81Kj8tqqdgoZub1ZJRfn</tt><br />
|-<br />
|128<br />
|5<br />
|Bitcoin Private key (for uncompressed pubkey)<br />
|<tt>5Hwgr3u458GLafKBgxtssHSPqJnYoGrSzgQsPwLFhLNYskDPyyA</tt><br />
|-<br />
|128<br />
|K or L<br />
|Bitcoin Private key (for compressed pubkey)<br />
|<tt>L1aW4aubDFB7yfras2S1mN3bqg9nwySY8nkoLmJebSLD5BWv3ENZ</tt><br />
|-<br />
|196<br />
|2<br />
|Testnet script hash<br />
|<tt>2MzQwSSnBHWHqSAqtTVQ6v47XtaisrJa1Vc</tt><br />
|-<br />
|239<br />
|9<br />
|Testnet Private key (for uncompressed pubkey)<br />
|<tt>92Pg46rUhgTT7romnV7iGW6W1gbGdeezqdbJCzShkCsYNzyyNcc</tt><br />
|-<br />
|239<br />
|c<br />
|Testnet Private key (for compressed pubkey)<br />
|<tt>cNJFgo1driFnPcBdBX8BrJrpxchBWXwXCvNH5SoSkdcF6JXXwHMm</tt><br />
|-<br />
|&ndash;<br />
|s<br />
|CoinSpark address (wraps bitcoin pubkey hash)<br />
|<tt>s22FJPBXibpJFm1Gy2o85vfCPJ9WqoTPzdm2g</tt><br />
|}<br />
<br />
Note that private keys for compressed and uncompressed bitcoin public keys use the same version byte. The reason for the compressed form starting with a different character is because a 0x01 byte is appended to the private key before base58 encoding.<br />
<br />
The following table shows the leading symbol(s) and address length(s) for 160 bit hashes for each of the possible decimal version values:<br />
<br />
{| class="wikitable"<br />
|-<br />
!Decimal version<br />
!Leading symbol<br />
!Address length<br />
|-<br />
|0<br />
|1<br />
|up to 34<br />
|-<br />
|1<br />
|Q-Z, a-k, m-o<br />
|33<br />
|-<br />
|2<br />
|o-z, 2<br />
|33 or 34<br />
|-<br />
|3<br />
|2<br />
|34<br />
|-<br />
|4<br />
|2 or 3<br />
|34<br />
|-<br />
|5-6<br />
|3<br />
|34<br />
|-<br />
|7<br />
|3 or 4<br />
|34<br />
|-<br />
|8<br />
|4<br />
|34<br />
|-<br />
|9<br />
|4 or 5<br />
|34<br />
|-<br />
|10-11<br />
|5<br />
|34<br />
|-<br />
|12<br />
|5 or 6<br />
|34<br />
|-<br />
|13<br />
|6<br />
|34<br />
|-<br />
|14<br />
|6 or 7<br />
|34<br />
|-<br />
|15-16<br />
|7<br />
|34<br />
|-<br />
|17<br />
|7 or 8<br />
|34<br />
|-<br />
|18<br />
|8<br />
|34<br />
|-<br />
|19<br />
|8 or 9<br />
|34<br />
|-<br />
|20-21<br />
|9<br />
|34<br />
|-<br />
|22<br />
|9 or A<br />
|34<br />
|-<br />
|23<br />
|A<br />
|34<br />
|-<br />
|24<br />
|A or B<br />
|34<br />
|-<br />
|25-26<br />
|B<br />
|34<br />
|-<br />
|27<br />
|B or C<br />
|34<br />
|-<br />
|28<br />
|C<br />
|34<br />
|-<br />
|29<br />
|C or D<br />
|34<br />
|-<br />
|30-31<br />
|D<br />
|34<br />
|-<br />
|32<br />
|D or E<br />
|34<br />
|-<br />
|33<br />
|E<br />
|34<br />
|-<br />
|34<br />
|E or F<br />
|34<br />
|-<br />
|35-36<br />
|F<br />
|34<br />
|-<br />
|37<br />
|F or G<br />
|34<br />
|-<br />
|38<br />
|G<br />
|34<br />
|-<br />
|39<br />
|G or H<br />
|34<br />
|-<br />
|40-41<br />
|H<br />
|34<br />
|-<br />
|42<br />
|H or J<br />
|34<br />
|-<br />
|43<br />
|J<br />
|34<br />
|-<br />
|44<br />
|J or K<br />
|34<br />
|-<br />
|45-46<br />
|K<br />
|34<br />
|-<br />
|47<br />
|K or L<br />
|34<br />
|-<br />
|48<br />
|L<br />
|34<br />
|-<br />
|49<br />
|L or M<br />
|34<br />
|-<br />
|50-51<br />
|M<br />
|34<br />
|-<br />
|52<br />
|M or N<br />
|34<br />
|-<br />
|53<br />
|N<br />
|34<br />
|-<br />
|54<br />
|N or P<br />
|34<br />
|-<br />
|55-56<br />
|P<br />
|34<br />
|-<br />
|57<br />
|P or Q<br />
|34<br />
|-<br />
|58<br />
|Q<br />
|34<br />
|-<br />
|59<br />
|Q or R<br />
|34<br />
|-<br />
|60-61<br />
|R<br />
|34<br />
|-<br />
|62<br />
|R or S<br />
|34<br />
|-<br />
|63<br />
|S<br />
|34<br />
|-<br />
|64<br />
|S or T<br />
|34<br />
|-<br />
|65-66<br />
|T<br />
|34<br />
|-<br />
|67<br />
|T or U<br />
|34<br />
|-<br />
|68<br />
|U<br />
|34<br />
|-<br />
|69<br />
|U or V<br />
|34<br />
|-<br />
|70-71<br />
|V<br />
|34<br />
|-<br />
|72<br />
|V or W<br />
|34<br />
|-<br />
|73<br />
|W<br />
|34<br />
|-<br />
|74<br />
|W or X<br />
|34<br />
|-<br />
|75-76<br />
|X<br />
|34<br />
|-<br />
|77<br />
|X or Y<br />
|34<br />
|-<br />
|78<br />
|Y<br />
|34<br />
|-<br />
|79<br />
|Y or Z<br />
|34<br />
|-<br />
|80-81<br />
|Z<br />
|34<br />
|-<br />
|82<br />
|Z or a<br />
|34<br />
|-<br />
|83<br />
|a<br />
|34<br />
|-<br />
|84<br />
|a or b<br />
|34<br />
|-<br />
|85<br />
|b<br />
|34<br />
|-<br />
|86<br />
|b or c<br />
|34<br />
|-<br />
|87-88<br />
|c<br />
|34<br />
|-<br />
|89<br />
|c or d<br />
|34<br />
|-<br />
|90<br />
|d<br />
|34<br />
|-<br />
|91<br />
|d or e<br />
|34<br />
|-<br />
|92-93<br />
|e<br />
|34<br />
|-<br />
|94<br />
|e or f<br />
|34<br />
|-<br />
|95<br />
|f<br />
|34<br />
|-<br />
|96<br />
|f or g<br />
|34<br />
|-<br />
|97-98<br />
|g<br />
|34<br />
|-<br />
|99<br />
|g or h<br />
|34<br />
|-<br />
|100<br />
|h<br />
|34<br />
|-<br />
|101<br />
|h or i<br />
|34<br />
|-<br />
|102-103<br />
|i<br />
|34<br />
|-<br />
|104<br />
|i or j<br />
|34<br />
|-<br />
|105<br />
|j<br />
|34<br />
|-<br />
|106<br />
|j or k<br />
|34<br />
|-<br />
|107-108<br />
|k<br />
|34<br />
|-<br />
|109<br />
|k or m<br />
|34<br />
|-<br />
|110<br />
|m<br />
|34<br />
|-<br />
|111<br />
|m or n<br />
|34<br />
|-<br />
|112-113<br />
|n<br />
|34<br />
|-<br />
|114<br />
|n or o<br />
|34<br />
|-<br />
|115<br />
|o<br />
|34<br />
|-<br />
|116<br />
|o or p<br />
|34<br />
|-<br />
|117-118<br />
|p<br />
|34<br />
|-<br />
|119<br />
|p or q<br />
|34<br />
|-<br />
|120<br />
|q<br />
|34<br />
|-<br />
|121<br />
|q or r<br />
|34<br />
|-<br />
|122-123<br />
|r<br />
|34<br />
|-<br />
|124<br />
|r or s<br />
|34<br />
|-<br />
|125<br />
|s<br />
|34<br />
|-<br />
|126<br />
|s or t<br />
|34<br />
|-<br />
|127-128<br />
|t<br />
|34<br />
|-<br />
|129<br />
|t or u<br />
|34<br />
|-<br />
|130<br />
|u<br />
|34<br />
|-<br />
|131<br />
|u or v<br />
|34<br />
|-<br />
|132-133<br />
|v<br />
|34<br />
|-<br />
|134<br />
|v or w<br />
|34<br />
|-<br />
|135<br />
|w<br />
|34<br />
|-<br />
|136<br />
|w or x<br />
|34<br />
|-<br />
|137-138<br />
|x<br />
|34<br />
|-<br />
|139<br />
|x or y<br />
|34<br />
|-<br />
|140<br />
|y<br />
|34<br />
|-<br />
|141<br />
|y or z<br />
|34<br />
|-<br />
|142-143<br />
|z<br />
|34<br />
|-<br />
|144<br />
|z or 2<br />
|34 or 35<br />
|-<br />
|145-255<br />
|2<br />
|35<br />
|}</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Technical_background_of_version_1_Bitcoin_addresses&diff=43742Technical background of version 1 Bitcoin addresses2014-01-15T04:32:07Z<p>Gidgreen: "Stage" sounds to me like a string offset, so I renamed it "stage"</p>
<hr />
<div>[[File:PubKeyToAddr.png|thumb|right|Conversion from ECDSA public key to Bitcoin Address]]<br />
This article may be too technical for some users. The more basic article on [[Address|Bitcoin Addresses]] may be more appropriate.<br />
<br />
A [[Bitcoin address]] is a 160-bit hash of the public portion of a public/private [[Wikipedia:Elliptic_Curve_DSA|ECDSA]] keypair. Using [[Wikipedia:Public-key_cryptography|public-key cryptography]], you can "sign" data with your [[private key]] and anyone who knows your public key can verify that the signature is valid.<br />
<br />
A new keypair is generated for each receiving address. Bitcoin addresses (the public keys) and their associated private keys are stored in the [[wallet]] data file. This is the only file you need to [[backup|back up]]. A "send" transaction to a specific Bitcoin address requires that the corresponding private key exist in the recipient's wallet. This has the implication that if you create a receiving address and receive coins to that address, then restore the wallet from an earlier backup, before the address was generated, then the coins associated with that address are lost. Addresses are added to an address [[key pool]] prior to being used for receiving coins. If you lose your wallet entirely, all of your coins are lost and can never be recovered.<br />
<br />
"Generate" transactions happen in the same way as a send transaction: each batch of 50 generated coins is "sent" to a unique address that you generate just for that purpose. These addresses are also stored in your wallet, but they are not shown in the "your receiving addresses" section.<br />
<br />
Bitcoin allows you to create as many addresses as you want, and each one is completely separate. There is no "master address": the "Your Bitcoin address" area in the Bitcoin UI has no special importance. It's only there for your convenience, and it will change automatically from time to time to enhance your anonymity. All of your other addresses will continue to work forever. They're listed in the "your receiving addresses" section. Each address takes up only about 500 bytes, so having a large number of addresses in your wallet is generally not a problem.<br />
<br />
Bitcoin addresses contain a built-in check code, so it's generally not possible to send Bitcoins to a mistyped address. However, if the address is well-formed but no one owns it (or the owner lost their wallet.dat), any coins sent to that address will be lost forever.<br />
<br />
Hash values and the checksum data are converted to an alpha-numeric representation using a custom scheme: the [[Base58Check encoding]] scheme. Under Base58Check, addresses can contain all alphanumeric characters except 0, O, I, and l. Normal addresses currently always start with 1 (addresses from script hashes use 3), though this might change in a future version. Testnet addresses usually start with ''m'' or ''n''. Mainline addresses can be 25-34 characters in length, and testnet addresses can be 26-34 characters in length. Most addresses are 33 or 34 characters long.<br />
<br />
It is also possible to send Bitcoins directly to an [[IP address]] but this method is never recommended as a man-in-the-middle attacks makes redirecting coins trivial.<br />
<br />
Since Bitcoin addresses are basically random numbers, it is possible, although extremely unlikely, for two people to independently generate the same address. This is called a [[Wikipedia:Collision_(computer_science)|collision]]. If this happens, then both the original owner of the address and the colliding owner could spend money sent to that address. It would not be possible for the colliding person to spend the original owner's entire wallet (or vice versa). If you were to intentionally try to make a collision, it would currently take 2^107 times longer to generate a colliding Bitcoin address than to generate a block. As long as the signing and hashing algorithms remain cryptographically strong, it will likely always be more profitable to collect generations and [[transaction fee|transaction fees]] than to try to create collisions.<br />
<br />
==How to create Bitcoin Address==<br />
0 - Having a private [[ECDSA]] key<br />
18E14A7B6A307F426A94F8114701E7C8E774E7F9A47E2C2035DB29A206321725<br />
1 - Take the corresponding public key generated with it (65 bytes, 1 byte 0x04, 32 bytes corresponding to X coordinate, 32 bytes corresponding to Y coordinate)<br />
0450863AD64A87AE8A2FE83C1AF1A8403CB53F53E486D8511DAD8A04887E5B23522CD470243453A299FA9E77237716103ABC11A1DF38855ED6F2EE187E9C582BA6<br />
2 - Perform SHA-256 hashing on the public key<br />
600FFE422B4E00731A59557A5CCA46CC183944191006324A447BDB2D98D4B408<br />
3 - Perform RIPEMD-160 hashing on the result of SHA-256<br />
010966776006953D5567439E5E39F86A0D273BEE<br />
4 - Add version byte in front of RIPEMD-160 hash (0x00 for Main Network)<br />
00010966776006953D5567439E5E39F86A0D273BEE<br />
5 - Perform SHA-256 hash on the extended RIPEMD-160 result<br />
445C7A8007A93D8733188288BB320A8FE2DEBD2AE1B47F0F50BC10BAE845C094<br />
6 - Perform SHA-256 hash on the result of the previous SHA-256 hash<br />
D61967F63C7DD183914A4AE452C9F6AD5D462CE3D277798075B107615C1A8A30<br />
7 - Take the first 4 bytes of the second SHA-256 hash. This is the address checksum<br />
D61967F6<br />
8 - Add the 4 checksum bytes from stage 7 at the end of extended RIPEMD-160 hash from stage 4. This is the 25-byte binary Bitcoin Address.<br />
00010966776006953D5567439E5E39F86A0D273BEED61967F6<br />
9 - Convert the result from a byte string into a base58 string using [[Base58Check encoding]]. This is the most commonly used Bitcoin Address format<br />
16UwLL9Risc3QfPqBUvKofHmBQ7wMtjvM<br />
<br />
==See Also==<br />
* [[Address]]<br />
* [http://gobittest.appspot.com/Address Address testing suite]<br />
<br />
[[Category:Technical]]</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Transaction&diff=43655Transaction2014-01-10T20:14:07Z<p>Gidgreen: /* Output */</p>
<hr />
<div>[[File:TxBinaryMap.png|thumb|right|Byte-map of Transaction with each type of TxIn and TxOut]]<br />
A '''transaction''' is a signed section of data that is broadcast to the [[network]] and collected into [[block|blocks]]. It typically references previous transaction(s) and dedicates a certain number of bitcoins from it to one or more new public key(s) (Bitcoin address). It is not encrypted (nothing in Bitcoin is encrypted).<br />
<br />
A [[block chain browser]] is a site where every transaction included within the block chain can be viewed. This is useful for seeing the technical details of transaction in action, and for payment verification purposes.<br />
<br />
=== general format of a Bitcoin transaction (inside a block) ===<br />
{| class="wikitable"<br />
|-<br />
! Field<br />
! Description<br />
! Size<br />
|-<br />
|Version no<br />
|currently 1<br />
|4 bytes<br />
|-<br />
|In-counter<br />
| positive integer [[ Protocol_specification#Variable_length_integer|VI = VarInt]]<br />
| 1 - 9 bytes <br />
|-<br />
|list of inputs<br />
|[[Transactions#general_format_.28inside_a_block.29_of_each_input_of_a_transaction_-_Txin|the first input of the first transaction is also called "coinbase" (its content was ignored in earlier versions)]]<br />
|<in-counter>-many inputs<br />
|-<br />
|Out-counter<br />
| positive integer [[ Protocol_specification#Variable_length_integer|VI = VarInt]]<br />
| 1 - 9 bytes<br />
|-<br />
|list of outputs<br />
|[[Transactions#general_format_.28inside_a_block.29_of_each_output_of_a_transaction_-_Txout|the outputs of the first transaction spend the mined bitcoins for the block]]<br />
|<out-counter>-many outputs<br />
|-<br />
|lock_time<br />
|if non-zero and sequence numbers are < 0xFFFFFFFF: block height or timestamp when transaction is final<br />
|4 bytes<br />
|}<br />
<br />
=== Principle example of a Bitcoin transaction with 1 input and 1 output only ===<br />
<br />
==== Data ====<br />
<br />
<pre>Input:<br />
Previous tx: f5d8ee39a430901c91a5917b9f2dc19d6d1a0e9cea205b009ca73dd04470b9a6<br />
Index: 0<br />
scriptSig: 304502206e21798a42fae0e854281abd38bacd1aeed3ee3738d9e1446618c4571d10<br />
90db022100e2ac980643b0b82c0e88ffdfec6b64e3e6ba35e7ba5fdd7d5d6cc8d25c6b241501<br />
<br />
Output:<br />
Value: 5000000000<br />
scriptPubKey: OP_DUP OP_HASH160 404371705fa9bd789a2fcd52d2c580b65d35549d<br />
OP_EQUALVERIFY OP_CHECKSIG</pre><br />
<br />
==== Explanation ====<br />
<br />
The input in this transaction imports 50 BTC from output #0 in transaction f5d8... Then the output sends 50 BTC to a Bitcoin address (expressed here in hexadecimal 4043... instead of the normal base58). When the recipient wants to spend this money, he will reference output #0 of this transaction in an input of his own transaction.<br />
<br />
===== Input =====<br />
<br />
An '''input''' is a reference to an output in a different transaction. Multiple inputs are often listed in a transaction. The values of the referenced outputs are added up, and the total is usable in the outputs of this transaction. '''Previous tx''' is a [[hash]] of a previous transaction. '''Index''' is the specific output in the referenced transaction. '''ScriptSig''' is the first half of a [[script]] (discussed in more detail later).<br />
<br />
The script contains two components, a signature and a public key. The public key belongs to the redeemer of the output transaction and proves the creator is allowed to redeem the outputs value. The other component is an ECDSA signature over a hash of a simplified version of the transaction. It, combined with the public key, proves the transaction was created by the real owner of the address in question. Various flags define how the transaction is simplified and can be used to create different types of payment.<br />
<br />
===== Output =====<br />
<br />
An '''output''' contains instructions for sending bitcoins. '''Value''' is the number of Satoshi (1 BTC = 100,000,000 Satoshi) that this output will be worth when claimed. '''ScriptPubKey''' is the second half of a script (discussed later). There can be more than one output, and they share the combined value of the inputs. Because each output from one transaction can only ever be referenced once by an input of a subsequent transaction, the entire combined input value needs to be sent in an output if you don't want to lose it. If the input is worth 50 BTC but you only want to send 25 BTC, Bitcoin will create two outputs worth 25 BTC: one to the destination, and one back to you (known as "[[change]]", though you send it to yourself). Any input bitcoins not redeemed in an output is considered a [[transaction fee]]; whoever generates the block will get it.<br />
[[File:transaction.png|thumb|A sends 100 BTC to C and C generates 50 BTC. C sends 101 BTC to D, and he needs to send himself some change. D sends the 101 BTC to someone else, but they haven't redeemed it yet. Only D's output and C's change are capable of being spent in the current state.]]<br />
<br />
===== Verification =====<br />
<br />
To verify that inputs are authorized to collect the values of referenced outputs, Bitcoin uses a custom Forth-like [[script|scripting]] system. The input's scriptSig and the ''referenced'' output's scriptPubKey are evaluated (in that order), with scriptPubKey using the values left on the stack by scriptSig. The input is authorized if scriptPubKey returns true. Through the scripting system, the sender can create very complex conditions that people have to meet in order to claim the output's value. For example, it's possible to create an output that can be claimed by anyone without any authorization. It's also possible to require that an input be signed by ten different keys, or be redeemable with a password instead of a key.<br />
<br />
=== Types of Transaction ===<br />
Bitcoin currently creates two different scriptSig/scriptPubKey pairs. These are described below.<br />
<br />
It is possible to design more complex types of transactions, and link them together into cryptographically enforced agreements. These are known as [[Contracts]].<br />
<br />
==== Pay-to-PubkeyHash ====<br />
<br />
scriptPubKey: OP_DUP OP_HASH160 <pubKeyHash> OP_EQUALVERIFY OP_CHECKSIG<br />
scriptSig: <sig> <pubKey><br />
A Bitcoin [[address]] is only a hash, so the sender can't provide a full public key in scriptPubKey. When redeeming coins that have been sent to a Bitcoin address, the recipient provides both the signature and the public key. The script verifies that the provided public key does hash to the hash in scriptPubKey, and then it also checks the signature against the public key.<br />
<br />
Checking process:<br />
{| class="wikitable" <br />
|-<br />
! Stack <br />
! Script <br />
! Description <br />
|-<br />
|Empty.<br />
| <sig> <pubKey> OP_DUP OP_HASH160 <pubKeyHash> OP_EQUALVERIFY OP_CHECKSIG <br />
| scriptSig and scriptPubKey are combined.<br />
|-<br />
|<sig> <pubKey><br />
| OP_DUP OP_HASH160 <pubKeyHash> OP_EQUALVERIFY OP_CHECKSIG <br />
| Constants are added to the stack.<br />
|-<br />
|<sig> <pubKey> <pubKey><br />
| OP_HASH160 <pubKeyHash> OP_EQUALVERIFY OP_CHECKSIG <br />
| Top stack item is duplicated.<br />
|-<br />
|<sig> <pubKey> <pubHashA><br />
|<pubKeyHash> OP_EQUALVERIFY OP_CHECKSIG<br />
| Top stack item is hashed.<br />
|-<br />
|<sig> <pubKey> <pubHashA> <pubKeyHash><br />
|OP_EQUALVERIFY OP_CHECKSIG<br />
| Constant added.<br />
|-<br />
|<sig> <pubKey><br />
|OP_CHECKSIG<br />
| Equality is checked between the top two stack items.<br />
|-<br />
|true<br />
|Empty.<br />
|Signature is checked for top two stack items.<br />
|}<br />
<br />
==== Pay-to-ScriptHash ====<br />
<br />
{{stub}}<br />
<br />
See also [[BIP 0016]]<br />
<br />
==== Generation ====<br />
<br />
Generations have a single input, and this input has a "coinbase" parameter instead of a scriptSig. The data in "coinbase" can be anything; it isn't used. Bitcoin puts the current compact-format [[target]] and the arbitrary-precision "extraNonce" number there, which increments every time the Nonce field in the [[block_hashing_algorithm|block header]] overflows. Outputs can be anything, but Bitcoin creates one exactly like an IP address transaction.<br />
The extranonce contributes to enlarge the domain for the proof of work function. Miners can easily modify nonce (4byte), timestamp and extranonce (2 to 100bytes).<br />
<br />
=== general format (inside a block) of each input of a transaction - Txin ===<br />
{| class="wikitable"<br />
|-<br />
! Field<br />
! Description<br />
! Size<br />
|-<br />
|Previous Transaction hash <br />
| doubled [[Wikipedia:SHA-256|SHA256]]-[[hash|hashed]] of a (previous) to-be-used transaction<br />
|32 bytes<br />
|-<br />
|Previous Txout-index<br />
| non negative integer indexing an output of the to-be-used transaction<br />
|4 bytes<br />
|-<br />
|Txin-script length<br />
|non negative integer [[ Protocol_specification#Variable_length_integer|VI = VarInt]]<br />
|1 - 9 bytes<br />
|-<br />
|Txin-script / scriptSig<br />
|[[Script]]<br />
|<in-script length>-many bytes<br />
|-<br />
|sequence_no<br />
|normally 0xFFFFFFFF; irrelevant unless transaction's lock_time is > 0<br />
|4 bytes<br />
|}<br />
<br />
The input sufficiently describes where and how to get the bitcoin amout to be redeemed.<br />
If it is the (only) input of the first transaction of a block, it is called the generation transaction input and its content completely ignored. (Historically the Previous Transaction hash is 0 and the Previous Txout-index is -1.)<br />
<br />
=== general format (inside a block) of each output of a transaction - Txout ===<br />
{| class="wikitable"<br />
|-<br />
! Field<br />
! Description<br />
! Size<br />
|-<br />
|value<br />
|non negative integer giving the number of [[FAQ#What_do_I_call_the_various_denominations_of_bitcoins.3F|Satoshis(BTC/10^8)]] to be transfered<br />
|8 bytes<br />
|-<br />
|Txout-script length<br />
|non negative integer<br />
|1 - 9 bytes [[ Protocol_specification#Variable_length_integer|VI = VarInt]]<br />
|-<br />
|Txout-script / scriptPubKey<br />
|[[Script]]<br />
|<out-script length>-many bytes<br />
|}<br />
The output sets the conditions to release this bitcoin amount later. The sum of the output values of the first transaction is the value of the mined bitcoins for the block plus possible transactions fees of the other transactions in the block.<br />
<br />
==See Also==<br />
<br />
* [[Script]]<br />
* [[BTC Sender]] Transmit raw, hand-crafted transactions<br />
* [[Raw Transactions]]<br />
* [[Transaction Malleability]]<br />
<br />
[[Category:Technical]]<br />
[[Category:Vocabulary]]<br />
[[de:Transaktion]]<br />
[[es:Transacción]]<br />
[[pl:Transakcje]]</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Myths&diff=43499Myths2013-12-29T09:43:23Z<p>Gidgreen: /* Bitcoins have no intrinsic value (unlike some other things) */</p>
<hr />
<div>Let's clear up some common Bitcoin misconceptions.<br />
<br />
== Bitcoin is just like all other digital currencies; nothing new ==<br />
<br />
Nearly all other digital currencies are centrally controlled. This means that:<br />
* They can be printed at the subjective whims of the controllers<br />
* They can be destroyed by attacking the central point of control<br />
* Arbitrary rules can be imposed upon their users by the controllers<br />
<br />
Being decentralized, Bitcoin solves all of these problems.<br />
<br />
== Bitcoins don't solve any problems that fiat currency and/or gold doesn't solve ==<br />
<br />
Unlike gold, bitcoins are:<br />
* Easy to transfer<br />
* Easy to secure<br />
* Easy to verify<br />
* Easy to granulate<br />
<br />
Unlike fiat currencies, bitcoins are:<br />
* Predictable and limited in [[Controlled_Currency_Supply|supply]]<br />
* Not controlled by a central authority (such as [http://en.wikipedia.org/wiki/Federal_Reserve The United States Federal Reserve])<br />
* Not debt-based<br />
<br />
Unlike electronic fiat currency systems, bitcoins are:<br />
* Potentially anonymous<br />
* Freeze-proof<br />
* Faster to transfer<br />
* Cheaper to transfer<br />
<br />
== Bitcoin is backed by processing power ==<br />
<br />
It is not correct to say that Bitcoin is "backed by" processing power. A currency being "backed" means that it is pegged to something else via a central party at a certain exchange rate yet you cannot exchange bitcoins for the computing power that was used to create them. Bitcoin is in this sense not backed by anything. It is a currency in its own right. Just as gold is not backed by anything, the same applies to Bitcoin. <br />
<br />
The Bitcoin currency is ''created'' via processing power, and the integrity of the block chain is ''protected'' by the existence of a network of powerful computing nodes from certain [[Weaknesses#Attacker_has_a_lot_of_computing_power|attacks]].<br />
<br />
== Bitcoins are worthless because they aren't backed by anything ==<br />
<br />
One could argue that gold isn't backed by anything either. Bitcoins have properties resulting from the system's design that allows them to be subjectively valued by individuals. This valuation is demonstrated when individuals freely exchange for or with bitcoins. Please refer to the [http://en.wikipedia.org/wiki/Subjective_theory_of_value Subjective Theory of Value].<br />
<br />
See also: the "[[#Bitcoin_is_backed_by_processing_power|Bitcoin is backed by processing power]]" myth.<br />
<br />
== The value of bitcoins are based on how much electricity and computing power it takes to mine them ==<br />
<br />
This statement is an attempt to apply to Bitcoin the [http://en.wikipedia.org/wiki/Labor_theory_of_value labor theory of value], which is generally accepted as false. Just because something takes X resources to create does not mean that the resulting product will be worth X. It can be worth more, or less, depending on the utility thereof to its users.<br />
<br />
In fact the causality is the reverse of that (this applies to the labor theory of value in general). The cost to mine bitcoins is based on how much they are worth. If bitcoins go up in value, more people will mine (because [[Mining|mining]] is profitable), thus [[difficulty]] will go up, thus the cost of mining will go up. The inverse happens if bitcoins go down in value. These effects balance out to cause mining to always cost an amount proportional to the value of bitcoins it produces.<br />
<br />
== Bitcoins have no intrinsic value (unlike some other things) ==<br />
<br />
This is simply not true. Each bitcoin gives the holder the ability to embed a large number of short in-transaction messages in a globally distributed and timestamped permanent data store, namely the bitcoin blockchain. There is no other similar datastore which is so widely distributed. There is a tradeoff between the exact number of messages and how quickly they can be embedded. But as of December 2013, it's fair to say that one bitcoin allows around 1000 such messages to be embedded, each within about 10 minutes of being sent, since a fee of 0.001 BTC is enough to get transactions confirmed quickly. This message embedding certainly has intrinsic value since it can be used to prove ownership of a document at a certain time, by including a one-way hash of that document in a transaction. Considering that electronic notarization services charge something like $10/document, this would give an intrinsic value of around $10,000 per bitcoin.<br />
<br />
While some other tangible commodities do have intrinsic value, that value is generally much less than its trading price. Consider for example that gold, if it were not used as an inflation-proof store of value, but rather only for its industrial uses, would certainly not be worth what it is today, since the industrial requirements for gold are far smaller than the available supply thereof.<br />
<br />
In any event, while historically intrinsic value, as well as other attributes like divisibility, fungibility, scarcity, durability, helped establish certain commodities as mediums of exchange, it is certainly not a prerequisite. While bitcoins are accused of lacking 'intrinsic value' in this sense, they make up for it in spades by possessing the other qualities necessary to make it a good medium of exchange, equal to or better than [http://en.wikipedia.org/wiki/Commodity_money commodity money].<br />
<br />
Another way to think about this is to consider the value of bitcoin the global network, rather than each bitcoin in isolation. The value of an individual telephone is derived from the network it is connected to. If there was no phone network, a telephone would be useless. Similarly the value of an individual bitcoin derives from the global network of bitcoin-enabled merchants, exchanges, wallets, etc... Just like a phone is necessary to transmit vocal information through the network, a bitcoin is necessary to transmit economic information through the network.<br />
<br />
Value is ultimately determined by what people are willing to trade for - by supply and demand.<br />
<br />
== Bitcoins are illegal because they're not legal tender ==<br />
In March 2013, the U.S. [http://en.wikipedia.org/wiki/Financial_Crimes_Enforcement_Network Financial Crimes Enforcement Network] issues a new set of guidelines on "de-centralized virtual currency", clearly targeting Bitcoin. Under the new guidelines, "a user of virtual currency is not a Money Services Businesses (MSB) under FinCEN's regulations and therefore is not subject to MSB registration, reporting, and record keeping regulations." [[Mining|Miners]] on the other hand, might need to register, if they sell bitcoins for "real currency or its equivalent".<ref>[http://arstechnica.com/tech-policy/2013/03/us-regulator-bitcoin-exchanges-must-comply-with-money-laundering-laws/ US regulator: Bitcoin exchanges must comply with money-laundering laws | Ars Technica]</ref><br />
<br />
In general, there are a [http://en.wikipedia.org/wiki/Local_currency number of currencies] in existence that are not official government-backed currencies. A currency is, after all, nothing more than a convenient unit of account. While national laws may vary from country to country, and you should certainly check the laws of your jurisdiction, in general trading in any commodity, including digital currency like Bitcoin, [http://en.wikipedia.org/wiki/BerkShares BerkShares], game currencies like WoW gold, or Linden dollars, is not illegal.<br />
<br />
== Bitcoin is a form of domestic terrorism because it only harms the economic stability of the USA and its currency ==<br />
<br />
According to [http://en.wikipedia.org/wiki/Definitions_of_terrorism#United_States the definition of terrorism in the United States], you need to do violent activities to be considered a terrorist for legal purposes. Recent off-the-cuff remarks by politicians have no basis in law or fact.<br />
<br />
Also, Bitcoin isn't domestic to the US or any other country. It's a worldwide community, as can be seen in this [https://bitcointalk.org/?topic=2346.0 map of Bitcoin nodes].<br />
<br />
== Bitcoin will only enable tax evaders which will lead to the eventual downfall of civilization ==<br />
<br />
Cash transactions hold the same level of anonymity but are still taxed successfully. It is up to you to follow the applicable state laws in your home country, or face the consequences.<br />
<br />
While it may be easy to transfer bitcoins anonymously, ''spending'' them anonymously on tangibles is just as hard as spending any other kind of money anonymously. Tax evaders are often caught because their lifestyle and assets are inconsistent with their reported income, and not necessarily because government is able to follow their money.<br />
<br />
== Bitcoins can be printed/minted by anyone and are therefore worthless ==<br />
<br />
Bitcoins are not printed/minted. Instead, [[Blocks]] are computed by miners and for their efforts they are awarded a specific amount of bitcoins and transaction fees paid by others. See [[Mining]] for more information on how this process works.<br />
<br />
== Bitcoins are worthless because they're based on unproven cryptography ==<br />
<br />
SHA256 and ECDSA which are used in Bitcoin are well-known industry standard algorithms. SHA256 is endorsed and used by the US Government and is standardized (FIPS180-3 Secure Hash Standard). If you believe that these algorithms are untrustworthy then you should not trust Bitcoin, credit card transactions or any type of electronic bank transfer. Bitcoin has a sound basis in well understood cryptography.<br />
<br />
== Early adopters are unfairly rewarded ==<br />
<br />
Early adopters are rewarded for taking the higher risk with their time and money. The capital invested in bitcoin at each stage of its life invigorated the community and helped the currency to reach subsequent milestones. Arguing that early adopters do not deserve to profit from this is akin to saying that early investors in a company, or people who buy stock at a company IPO (Initial Public Offering), are unfairly rewarded.<br />
<br />
This argument also depends on bitcoin early adopters using bitcoins to store rather than transfer value. The daily trade on the exchanges (as of Jan 2012) indicates that smaller transactions are becoming the norm, indicating trade rather than investment. In more pragmatic terms, "fairness" is an arbitrary concept that is improbable to be agreed upon by a large population. Establishing "fairness" is no goal of Bitcoin, as this would be impossible.<br />
<br />
Looking forwards, considering the amount of publicity bitcoin received as of April 2013, there can be no reasonable grounds for complaint for people who did not invest at that time, and then see the value (possibly) rising drastically higher.<br />
<br />
By starting to mine or acquire bitcoins today, you too can become an early adopter.<br />
<br />
== 21 million coins isn't enough; doesn't scale ==<br />
<br />
One Bitcoin is divisible down to eight decimal places. There are really 2,099,999,997,690,000 (just over 2 quadrillion) maximum possible atomic units in the bitcoin system.<br />
<br />
The value of "1 BTC" represents 100,000,000 of these. In other words, each is divisible by up to 10^8. <br />
<br />
As the value of the unit of 1 BTC grows too large to be useful for day to day transactions, people can start dealing in smaller [[Units|units]], such as milli-bitcoins (mBTC) or micro-bitcoins (μBTC).<br />
<br />
== Bitcoins are stored in wallet files, just copy the wallet file to get more coins! ==<br />
<br />
No, your wallet contains your secret keys, giving you the rights to spend your bitcoins. Think of it like having bank details stored in a file. If you give your bank details (or bitcoin wallet) to someone else, that doesn't double the amount of money in your account. You can spend your money or they can spend your money, but not both.<br />
<br />
== Lost coins can't be replaced and this is bad ==<br />
<br />
Bitcoins are divisible to 0.00000001, so there being fewer bitcoins remaining is not a problem for the currency itself. If you lose your coins, all other coins will go up in value a little. Consider it a donation to all other bitcoin users.<br />
<br />
A related question is: Why don't we have a mechanism to replace lost coins? The answer is that it is impossible to distinguish between a 'lost' coin and one that is simply sitting unused in someone's wallet.<br />
<br />
== It's a giant ponzi scheme ==<br />
In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.<br />
<br />
A ponzi scheme is a zero sum game. In a ponzi scheme, early adopters can only profit at the expense of late adopters, and the late adopters always lose. Bitcoin has an expected win-win outcome. Early and present adopters profit from the rise in value as Bitcoins become better understood and in turn demanded by the public at large. All adopters benefit from the usefulness of a reliable and widely-accepted decentralized peer-to-peer currency.<br />
<br />
== Finite coins plus lost coins means deflationary spiral ==<br />
As deflationary forces may apply, economic factors such as hoarding are offset by human factors that may lessen the chances that a [[Deflationary spiral]] will occur.<br />
<br />
== Bitcoin can't work because there is no way to control inflation ==<br />
<br />
Inflation is simply a rise of prices over time, which is generally the result of the devaluing of a currency. This is a function of supply and demand. Given the fact that the supply of bitcoins is fixed at a certain amount, unlike fiat money, the only way for inflation to get out of control is for demand to disappear. Temporary inflation is possible with a rapid adoption of Fractional Reserve Banking but will stabilize once a substantial number of the 21 million "hard" bitcoins are stored as reserves by banks.<br />
<br />
Given the fact that Bitcoin is a distributed system of currency, if demand were to decrease to almost nothing, the currency would be doomed anyway.<br />
<br />
The key point here is that Bitcoin as a currency can't be inflated by any single person or entity, like a government, as there's no way to increase supply past a certain amount.<br />
<br />
Indeed, the most likely scenario, as Bitcoin becomes more popular and demand increases, is for the currency to increase in value, or deflate, until demand stabilizes.<br />
<br />
== Alternative Currencies are useless, Bitcoin is the only important cryptocurrency ==<br />
Bitcoin is the biggest and most popular crypto currency, but other currencies like Litecoins shouldn't be neglected. Obviously, minor currencies with prices of $0.06 per coin aren't very interesting, but maybe worth an investment. Alternative cryptocurrencies will be especially important when the capacicty of all BTC has been reached.<br />
<br />
== The Bitcoin community consists of anarchist/conspiracy theorist/gold standard 'weenies' ==<br />
<br />
The members of the community vary in their ideological stances. While it may have been started by ideological enthusiasts, Bitcoin now speaks to a large number of regular pragmatic folk, who simply see its potential for reducing the costs and friction of global e-commerce.<br />
<br />
== Anyone with enough computing power can take over the network ==<br />
<br />
CONFIRMED, see [[Weaknesses]].<br />
<br />
That said, as the network grows, it becomes harder and harder for a single entity to do so. Already the Bitcoin network's computing power is quite ahead of the world's fastest supercomputers, together.<br />
<br />
What an attacker can do once the network is taken over is quite limited. Under no circumstances could an attacker create counterfeit coins, fake transactions, or take anybody else's money. An attacker's capabilities are limited to taking back their own money that they very recently spent, and preventing other people's transactions from receiving confirmations. Such an attack would be very costly in resources, and for such meager benefits there is little rational economic incentive to do such a thing.<br />
<br />
Furthermore, this attack scenario would only be feasible for as long as it was actively underway. As soon as the attack stopped, the network would resume normal operation.<br />
<br />
== Bitcoin violates governmental regulations ==<br />
<br />
There is no known governmental regulation which disallows the use of Bitcoin.<br />
<br />
See also: the "[[#Bitcoins_are_illegal_because_they.27re_not_legal_tender|Bitcoins are illegal because they're not legal tender]]" myth.<br />
<br />
== Fractional reserve banking is not possible ==<br />
<br />
It is possible. See the main article, [[Fractional Reserve Banking and Bitcoin]]<br />
<br />
== Point of sale with bitcoins isn't possible because of the 10 minute wait for confirmation ==<br />
<br />
It is true that transactions [[FAQ#Why_do_I_have_to_wait_10_minutes_before_I_can_spend_money_I_received.3F|can]] sometimes take tens of minutes to become ''confirmed''. Despite this, retailers can accept unconfirmed transactions with very little risk by simply 'listening' on the network for a double-spend transaction, or partnering with a company that provides this service. After a head start of merely several seconds, the original transaction would reach so much of the Bitcoin network that a fraudulent double-spend transaction would almost certainly be fruitless. An attacker would have to commit easily-detectable fraud, in person, several hundred or several thousand times, before one of these low-value double-spend attempts would likely succeed.<br />
<br />
An attacker could work around the necessity of sending out a second fraudulent transaction to the Bitcoin network by attempting to [[Mining|solo-mine]] an attack block containing the attack transaction himself - temporarily withholding the block with the rest of the network - and then execute the fraudulent purchase within seconds, or minutes at most, of mining the attack block, before broadcasting the attack block. However, the cost of such an activity would dramatically outweigh the value of anything typically offered without a confirmation wait for several reasons.<br />
<br />
First, mining a block (attack or otherwise) entitles the miner to a valuable block reward, and because the attack involves temporarily withholding the block from the network, the attacker would put himself in the likely position of his block becoming [[Stale block|stale]], which would result in forfeiture of the entire reward. Most solo miners solve less than one block per month, so this would represent the loss of proceeds of potentially several weeks of mining.<br />
<br />
Second, it is not possible for a solo miner to know exactly when his mining activity will yield a block, and because the attack must be carried out within seconds or minutes of successfully mining a block, the attacker will not be able to know or plan in advance the brief window when the attack would be likely to succeed. While it may be easy for a determined attacker to get low-value items that are sold and delivered online instantly without waiting for confirmations (such as downloads), this unpredictability and the briefness of the opportunity would make it extremely difficult to commit any kind of fraud where real-life interaction is required, such as visiting a merchant or taking possession of goods. Petty shoplifting would be far simpler. Even if an attacker went forward with this attack, the retailer would be notified of the fraud the moment the attack block is released seconds later.<br />
<br />
In short, the 10-minute wait for confirmation is only practically necessary when delivering goods of value that significantly exceed the block reward an attacker would have to risk to perform an attack and where recourse after delivery is practically nonexistent, such as money transfers.<br />
<br />
== After 21 million coins are mined, no one will generate new blocks ==<br />
<br />
When operating costs can't be covered by the block creation bounty, which will happen some time before the total amount of BTC is reached, miners will earn some profit from [[transaction fees]]. However unlike the block reward, there is [http://bitcoin.stackexchange.com/questions/876/how-much-will-transaction-fees-eventually-be/895#895 no coupling between transaction fees and the need for security], so there is less of a guarantee that the amount of [[Mining|mining]] being performed will be sufficient to maintain the network's security.<br />
<br />
== Bitcoin has no built-in chargeback mechanism, and this isn't good ==<br />
<br />
'''Why some people think this is bad''': Chargebacks are useful for limiting fraud. The person handling your money has a responsibility to prevent fraud. If you buy something on eBay and the seller never ships it, PayPal takes funds from the seller's account and gives you back the money. This strengthens the eBay economy, because people recognize that their risk is limited and are more willing to purchase items from risky sellers.<br />
<br />
'''Why it's actually a good thing''': Bitcoin is designed such that your money is yours and yours alone. Allowing chargebacks implies that it is possible for another entity to take your money from you. You can have either total ownership rights of your money, or fraud protection, but not both. That said, nothing inherent in the dollar or euro or any other currency is necessary for chargebacks to be possible, and likewise, nothing prevents the creation of PayPal-like services denominated in Bitcoin that provide chargebacks or fraud protection.<br />
<br />
The statement "The person handling your money has a responsibility to prevent fraud" is still true; the power has been shifted into your own hands. Fraud will always exist. It's up to you to only send bitcoins to trusted entities. It is possible to trust an online identity without ever knowing their physical identity; see the [http://wiki.bitcoin-otc.com/wiki/OTC_Rating_System OTC Web of Trust].<br />
<br />
== Quantum computers would break Bitcoin's security ==<br />
<br />
While ECDSA is indeed not secure under quantum computing, quantum computers don't yet exist and probably won't for a while.<br />
The DWAVE system often written about in the press is, even if all their claims are true, not a quantum computer of a kind that could be used for cryptography.<br />
Bitcoin's security, when used properly with a new address on each transaction, depends on more than just ECDSA: Cryptographic hashes are much stronger than ECDSA under QC.<br />
Bitcoin's security was designed to be upgraded in a forward compatible way and could be [http://en.wikipedia.org/wiki/Post-quantum_cryptography upgraded] if this were considered an imminent threat.<br />
<br />
See the implications of quantum computers on public key cryptography here http://en.wikipedia.org/wiki/Quantum_computer#Potential<br />
<br />
The ''risk'' of quantum computers is also there for financial institutions, like banks, because they heavily rely on cryptography when doing transactions.<br />
<br />
== Bitcoin makes self-sufficient artificial intelligence possible, which will in turn become self-aware and decide to exterminate humanity ==<br />
An artificial intelligence powerful enough to be threatening to mankind wouldn't depend on mankind to make Bitcoin, it would just invent something like Bitcoin itself and design it to be so attractive to us that we couldn't resist using it.<br />
<br />
== [[Mining|Bitcoin mining]] is a waste of energy and harmful for ecology ==<br />
No more so than the wastefulness of mining gold out of the ground, melting it down and shaping it into bars, and then putting it back underground again. Not to mention the building of big fancy buildings, the waste of energy printing and minting all the various fiat currencies, the transportation thereof in armored cars by no less than two security guards for each who could probably be doing something more productive, etc. <br />
<br />
As far as mediums of exchange go, Bitcoin is actually quite economical of resources, compared to others.<br />
<br />
'''Economic Argument 1'''<br />
<br />
[[Mining|Bitcoin mining]] is a highly competitive, dynamic, almost [http://en.wikipedia.org/wiki/Perfect_market perfect], market. Mining rigs can be set up and dismantled almost anywhere in the world with relative ease. Thus, market forces are constantly pushing mining activity to ''places'' and ''times'' where the marginal price of electricity is low or zero. These electricity products are cheap for a reason. Often it’s because the electricity is difficult (and wasteful) to transport, difficult to store, or because there is low demand and high supply. Using electricity in this way is a lot less wasteful than simply plugging a mining rig into the mains indiscriminately. <br />
<br />
For example, Iceland produces an excess of cheap electricity from renewable sources, but it has no way of exporting electricity because of its remote location. It is conceivable that at some point in future Bitcoin mining will only be profitable in places like Iceland, and unprofitable in places like central Europe, where electricity comes mostly from nuclear and fossil sources. <br />
<br />
Market forces could even push mining into innovative solutions that have an effective electricity consumption of ''zero''. Mining always produces heat equivalent to the energy consumed - for example, 1000 watts of mining equipment produces the same amount of heat as a 1000 watt heating element used in an electric space heater, hot tub, water heater, or similar appliance. Someone already in a willing position to incur the cost of electricity for its heat value alone could run mining equipment specially designed to mine bitcoins while capturing and utilizing the heat produced, without incurring any energy costs beyond what they already intended to spend on heating.<br />
<br />
'''Economic Argument 2'''<br />
<br />
When the environmental costs of mining are considered, they need to be weighed up against the benefits. If you question Bitcoin on the grounds that it consumes electricity, then you should also ask questions like this: Will Bitcoin promote economic growth by freeing up trade? Will this speed up the rate of technological innovation? Will this lead to faster development of green technologies? Will Bitcoin enable new, border crossing [http://en.wikipedia.org/wiki/Smart_grid smart grid] technologies? …<br />
<br />
Dismissal of Bitcoin because of its costs, while ignoring its benefits, is a dishonest argument. In fact, any environmental argument of this type is dishonest, not just pertaining to Bitcoin. Along similar lines, it could be argued that wind turbines are bad for the environment because making the steel structure consumes energy.<br />
<br />
'''Ratio of Capital Costs versus Electrical Costs'''<br />
<br />
The BFL Jalapeno hashes at 5.5 Gh/s using 30W. That device consumes about $40 per year in electricity (using U.S. residential average of about $0.15 per kWh.) But the device costs over $300 including shipping. Thus just about a quarter of all costs over a two-year useful life goes to electricity. This compares to GPUs where more than 90% of costs over a two-year life went to electricity. Even more efficient designs can be expected in the future.<br />
<br />
== Shopkeepers can't seriously set prices in bitcoins because of the volatile exchange rate ==<br />
<br />
The assumption is that bitcoins must be sold immediately to cover operating expenses. If the shopkeeper's back-end expenses were transacted in bitcoins as well, then the exchange rate would be irrelevant. Larger adoption of Bitcoin would make prices [http://en.wikipedia.org/wiki/Sticky_%28economics%29 sticky]. Future volatility is expected to decrease, as the size and depth of the market grows. <br />
<br />
In the meantime, many merchants simply regularly pull the latest market rates from the exchanges and automatically update the prices on their websites. Also you might be able to buy a put option in order to sell at a fixed rate for a given amount of time. This would protect you from drops in price and simplify your operations for that time period.<br />
<br />
== Like Flooz and e-gold, bitcoins serve as opportunities for criminals and will be shut down ==<br />
<br />
* Visa, MasterCard, PayPal, and cash all serve as opportunities for criminals as well, but society keeps them around due to their recognized net benefit.<br />
* Hopefully Bitcoin will grow to the point where no single organization can disrupt the network, or would be better served by helping it.<br />
* Terrorists fly aircraft into buildings, but the governments have not yet abolished consumer air travel. Obviously the public good outweighs the possible bad in their opinion.<br />
* Criminal law differs between jurisdictions.<br />
<br />
== Bitcoins will be shut down by the government just like Liberty Dollars were ==<br />
<br />
Liberty Dollars started as a commercial venture to establish an alternative US currency, including physical banknotes and coins, backed by precious metals. This, in and of itself, is not illegal. They were prosecuted under counterfeiting laws because the silver coins allegedly resembled US currency.<br />
<br />
Bitcoins do not resemble the currency of the US or of any other nation in any way, shape, or form. The word "dollar" is not attached to them in any way. The "$" symbol is not used in any way.<br />
<br />
Bitcoins have no representational similarity whatsoever to US dollars. <br />
<br />
Of course, actually 'shutting down' Liberty Dollars was as easy as arresting the head of the company and seizing the offices and the precious metals used as backing. The decentralized Bitcoin, with no leader, no servers, no office, and no tangible asset backing, does not have the same vulnerability.<br />
<br />
== Bitcoin is not decentralized because the developers can dictate the software's behavior ==<br />
<br />
The Bitcoin protocol was originally defined by Bitcoin's inventor, [[Satoshi Nakamoto]], and this protocol has now been widely accepted as the standard by the community of miners and users. <br />
<br />
Though the developers of the original Bitcoin client still exert influence over the Bitcoin community, their power to arbitrarily modify the protocol is very limited. Since the release of Bitcoin v0.3, changes to the protocol have been minor and always in agreement with community consensus.<br />
<br />
Protocol modifications, such as increasing the block award from 25 to 50 BTC, are not compatible with clients already running in the network. If the developers were to release a new client that the majority of miners perceives as corrupt, or in violation of the project’s aims, that client would simply not catch on, and the few users who do try to use it would find that their transactions get rejected by the network.<br />
<br />
There are also other [[:Category:Clients|Bitcoin clients made by other developers]] that adhere to the Bitcoin protocol. As more developers create alternative clients, less power will lie with the developers of the original Bitcoin client. <br />
<br />
== Bitcoin is a pyramid scheme ==<br />
<br />
Bitcoin is nearly opposite of a pyramid scheme in a mathematical sense. Because Bitcoins are algorithmically made scarce, no exponential benefit is derived from introducing new users to use of it. There is a quantitative benefit in having additional interest or demand, but this is in no way exponential.<br />
<br />
== Bitcoin was hacked ==<br />
<br />
In the history of Bitcoin, there has never been an attack on the [[block chain]] that resulted in stolen money from a confirmed output. Neither has there ever been a reported theft resulting directly from a vulnerability in the [[Original Bitcoin client|original Bitcoin client]], or a vulnerability in the protocol. Bitcoin is secured by standard cryptographic functions. These functions have been peer reviewed by cryptography experts and are considered unlikely to be breakable in the foreseeable future.<br />
<br />
It is safe to say that the currency itself has never been 'hacked'. However, several major ''websites'' using the currency have been hacked, often resulting in high profile Bitcoin heists. These heists are misreported in some media as hacks on Bitcoin itself. An analogy: Just because someone stole US dollars from a supermarket till, doesn’t mean that the US dollar as a currency has been 'hacked'.<br />
<br />
Most bitcoin thefts are the result of inadequate [[Securing your wallet|wallet security]]. In response to the wave of thefts in 2011 and 2012, the community has developed risk-mitigating measures such as [[Wallet_encryption|wallet encryption]], support for [[BIP_0011|multiple signatures]], [[How_to_set_up_a_secure_offline_savings_wallet|offline wallets]], [[Paper_wallet|paper wallets]], and [[Hardware_wallet|hardware wallets]]. As these measures gain adoption by merchants and users, it is expected that the number of thefts will drop.<br />
<br />
==References==<br />
<references/><br />
<br />
[[de:Mythen]]<br />
[[ru:Мифы о биткоине]]</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Myths&diff=43498Myths2013-12-29T09:39:18Z<p>Gidgreen: /* Bitcoins have no intrinsic value (unlike some other things) */</p>
<hr />
<div>Let's clear up some common Bitcoin misconceptions.<br />
<br />
== Bitcoin is just like all other digital currencies; nothing new ==<br />
<br />
Nearly all other digital currencies are centrally controlled. This means that:<br />
* They can be printed at the subjective whims of the controllers<br />
* They can be destroyed by attacking the central point of control<br />
* Arbitrary rules can be imposed upon their users by the controllers<br />
<br />
Being decentralized, Bitcoin solves all of these problems.<br />
<br />
== Bitcoins don't solve any problems that fiat currency and/or gold doesn't solve ==<br />
<br />
Unlike gold, bitcoins are:<br />
* Easy to transfer<br />
* Easy to secure<br />
* Easy to verify<br />
* Easy to granulate<br />
<br />
Unlike fiat currencies, bitcoins are:<br />
* Predictable and limited in [[Controlled_Currency_Supply|supply]]<br />
* Not controlled by a central authority (such as [http://en.wikipedia.org/wiki/Federal_Reserve The United States Federal Reserve])<br />
* Not debt-based<br />
<br />
Unlike electronic fiat currency systems, bitcoins are:<br />
* Potentially anonymous<br />
* Freeze-proof<br />
* Faster to transfer<br />
* Cheaper to transfer<br />
<br />
== Bitcoin is backed by processing power ==<br />
<br />
It is not correct to say that Bitcoin is "backed by" processing power. A currency being "backed" means that it is pegged to something else via a central party at a certain exchange rate yet you cannot exchange bitcoins for the computing power that was used to create them. Bitcoin is in this sense not backed by anything. It is a currency in its own right. Just as gold is not backed by anything, the same applies to Bitcoin. <br />
<br />
The Bitcoin currency is ''created'' via processing power, and the integrity of the block chain is ''protected'' by the existence of a network of powerful computing nodes from certain [[Weaknesses#Attacker_has_a_lot_of_computing_power|attacks]].<br />
<br />
== Bitcoins are worthless because they aren't backed by anything ==<br />
<br />
One could argue that gold isn't backed by anything either. Bitcoins have properties resulting from the system's design that allows them to be subjectively valued by individuals. This valuation is demonstrated when individuals freely exchange for or with bitcoins. Please refer to the [http://en.wikipedia.org/wiki/Subjective_theory_of_value Subjective Theory of Value].<br />
<br />
See also: the "[[#Bitcoin_is_backed_by_processing_power|Bitcoin is backed by processing power]]" myth.<br />
<br />
== The value of bitcoins are based on how much electricity and computing power it takes to mine them ==<br />
<br />
This statement is an attempt to apply to Bitcoin the [http://en.wikipedia.org/wiki/Labor_theory_of_value labor theory of value], which is generally accepted as false. Just because something takes X resources to create does not mean that the resulting product will be worth X. It can be worth more, or less, depending on the utility thereof to its users.<br />
<br />
In fact the causality is the reverse of that (this applies to the labor theory of value in general). The cost to mine bitcoins is based on how much they are worth. If bitcoins go up in value, more people will mine (because [[Mining|mining]] is profitable), thus [[difficulty]] will go up, thus the cost of mining will go up. The inverse happens if bitcoins go down in value. These effects balance out to cause mining to always cost an amount proportional to the value of bitcoins it produces.<br />
<br />
== Bitcoins have no intrinsic value (unlike some other things) ==<br />
<br />
This is simply not true. Each bitcoin gives the holder the ability to embed a large number of short in-transaction messages in a globally distributed and timestamped permanent data store, namely the bitcoin blockchain. There is no other similar datastore which is so widely distributed. There is a tradeoff between the exact number of messages and how quickly they can be embedded. But as of December 2013, it's fair to say that one bitcoin allows around 1000 such messages to be embedded, each within about 10 minutes of being sent, since a fee of 0.001 BTC is enough to get transactions confirmed quickly. This message embedding certainly has intrinsic value since it can be used to prove ownership of a document at a certain time, by embedding a one-way hash of that document in the blockchain. Considering that electronic notarization services charge something like $10/document, this would give an intrinsic value of around $10,000 per bitcoin.<br />
<br />
While some other tangible commodities do have intrinsic value, that value is generally much less than its trading price. Consider for example that gold, if it were not used as an inflation-proof store of value, but rather only for its industrial uses, would certainly not be worth what it is today, since the industrial requirements for gold are far smaller than the available supply thereof.<br />
<br />
In any event, while historically intrinsic value, as well as other attributes like divisibility, fungibility, scarcity, durability, helped establish certain commodities as mediums of exchange, it is certainly not a prerequisite. While bitcoins are accused of lacking 'intrinsic value' in this sense, they make up for it in spades by possessing the other qualities necessary to make it a good medium of exchange, equal to or better than [http://en.wikipedia.org/wiki/Commodity_money commodity money].<br />
<br />
Another way to think about this is to consider the value of bitcoin the global network, rather than each bitcoin in isolation. The value of an individual telephone is derived from the network it is connected to. If there was no phone network, a telephone would be useless. Similarly the value of an individual bitcoin derives from the global network of bitcoin-enabled merchants, exchanges, wallets, etc... Just like a phone is necessary to transmit vocal information through the network, a bitcoin is necessary to transmit economic information through the network.<br />
<br />
Value is ultimately determined by what people are willing to trade for - by supply and demand.<br />
<br />
== Bitcoins are illegal because they're not legal tender ==<br />
In March 2013, the U.S. [http://en.wikipedia.org/wiki/Financial_Crimes_Enforcement_Network Financial Crimes Enforcement Network] issues a new set of guidelines on "de-centralized virtual currency", clearly targeting Bitcoin. Under the new guidelines, "a user of virtual currency is not a Money Services Businesses (MSB) under FinCEN's regulations and therefore is not subject to MSB registration, reporting, and record keeping regulations." [[Mining|Miners]] on the other hand, might need to register, if they sell bitcoins for "real currency or its equivalent".<ref>[http://arstechnica.com/tech-policy/2013/03/us-regulator-bitcoin-exchanges-must-comply-with-money-laundering-laws/ US regulator: Bitcoin exchanges must comply with money-laundering laws | Ars Technica]</ref><br />
<br />
In general, there are a [http://en.wikipedia.org/wiki/Local_currency number of currencies] in existence that are not official government-backed currencies. A currency is, after all, nothing more than a convenient unit of account. While national laws may vary from country to country, and you should certainly check the laws of your jurisdiction, in general trading in any commodity, including digital currency like Bitcoin, [http://en.wikipedia.org/wiki/BerkShares BerkShares], game currencies like WoW gold, or Linden dollars, is not illegal.<br />
<br />
== Bitcoin is a form of domestic terrorism because it only harms the economic stability of the USA and its currency ==<br />
<br />
According to [http://en.wikipedia.org/wiki/Definitions_of_terrorism#United_States the definition of terrorism in the United States], you need to do violent activities to be considered a terrorist for legal purposes. Recent off-the-cuff remarks by politicians have no basis in law or fact.<br />
<br />
Also, Bitcoin isn't domestic to the US or any other country. It's a worldwide community, as can be seen in this [https://bitcointalk.org/?topic=2346.0 map of Bitcoin nodes].<br />
<br />
== Bitcoin will only enable tax evaders which will lead to the eventual downfall of civilization ==<br />
<br />
Cash transactions hold the same level of anonymity but are still taxed successfully. It is up to you to follow the applicable state laws in your home country, or face the consequences.<br />
<br />
While it may be easy to transfer bitcoins anonymously, ''spending'' them anonymously on tangibles is just as hard as spending any other kind of money anonymously. Tax evaders are often caught because their lifestyle and assets are inconsistent with their reported income, and not necessarily because government is able to follow their money.<br />
<br />
== Bitcoins can be printed/minted by anyone and are therefore worthless ==<br />
<br />
Bitcoins are not printed/minted. Instead, [[Blocks]] are computed by miners and for their efforts they are awarded a specific amount of bitcoins and transaction fees paid by others. See [[Mining]] for more information on how this process works.<br />
<br />
== Bitcoins are worthless because they're based on unproven cryptography ==<br />
<br />
SHA256 and ECDSA which are used in Bitcoin are well-known industry standard algorithms. SHA256 is endorsed and used by the US Government and is standardized (FIPS180-3 Secure Hash Standard). If you believe that these algorithms are untrustworthy then you should not trust Bitcoin, credit card transactions or any type of electronic bank transfer. Bitcoin has a sound basis in well understood cryptography.<br />
<br />
== Early adopters are unfairly rewarded ==<br />
<br />
Early adopters are rewarded for taking the higher risk with their time and money. The capital invested in bitcoin at each stage of its life invigorated the community and helped the currency to reach subsequent milestones. Arguing that early adopters do not deserve to profit from this is akin to saying that early investors in a company, or people who buy stock at a company IPO (Initial Public Offering), are unfairly rewarded.<br />
<br />
This argument also depends on bitcoin early adopters using bitcoins to store rather than transfer value. The daily trade on the exchanges (as of Jan 2012) indicates that smaller transactions are becoming the norm, indicating trade rather than investment. In more pragmatic terms, "fairness" is an arbitrary concept that is improbable to be agreed upon by a large population. Establishing "fairness" is no goal of Bitcoin, as this would be impossible.<br />
<br />
Looking forwards, considering the amount of publicity bitcoin received as of April 2013, there can be no reasonable grounds for complaint for people who did not invest at that time, and then see the value (possibly) rising drastically higher.<br />
<br />
By starting to mine or acquire bitcoins today, you too can become an early adopter.<br />
<br />
== 21 million coins isn't enough; doesn't scale ==<br />
<br />
One Bitcoin is divisible down to eight decimal places. There are really 2,099,999,997,690,000 (just over 2 quadrillion) maximum possible atomic units in the bitcoin system.<br />
<br />
The value of "1 BTC" represents 100,000,000 of these. In other words, each is divisible by up to 10^8. <br />
<br />
As the value of the unit of 1 BTC grows too large to be useful for day to day transactions, people can start dealing in smaller [[Units|units]], such as milli-bitcoins (mBTC) or micro-bitcoins (μBTC).<br />
<br />
== Bitcoins are stored in wallet files, just copy the wallet file to get more coins! ==<br />
<br />
No, your wallet contains your secret keys, giving you the rights to spend your bitcoins. Think of it like having bank details stored in a file. If you give your bank details (or bitcoin wallet) to someone else, that doesn't double the amount of money in your account. You can spend your money or they can spend your money, but not both.<br />
<br />
== Lost coins can't be replaced and this is bad ==<br />
<br />
Bitcoins are divisible to 0.00000001, so there being fewer bitcoins remaining is not a problem for the currency itself. If you lose your coins, all other coins will go up in value a little. Consider it a donation to all other bitcoin users.<br />
<br />
A related question is: Why don't we have a mechanism to replace lost coins? The answer is that it is impossible to distinguish between a 'lost' coin and one that is simply sitting unused in someone's wallet.<br />
<br />
== It's a giant ponzi scheme ==<br />
In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.<br />
<br />
A ponzi scheme is a zero sum game. In a ponzi scheme, early adopters can only profit at the expense of late adopters, and the late adopters always lose. Bitcoin has an expected win-win outcome. Early and present adopters profit from the rise in value as Bitcoins become better understood and in turn demanded by the public at large. All adopters benefit from the usefulness of a reliable and widely-accepted decentralized peer-to-peer currency.<br />
<br />
== Finite coins plus lost coins means deflationary spiral ==<br />
As deflationary forces may apply, economic factors such as hoarding are offset by human factors that may lessen the chances that a [[Deflationary spiral]] will occur.<br />
<br />
== Bitcoin can't work because there is no way to control inflation ==<br />
<br />
Inflation is simply a rise of prices over time, which is generally the result of the devaluing of a currency. This is a function of supply and demand. Given the fact that the supply of bitcoins is fixed at a certain amount, unlike fiat money, the only way for inflation to get out of control is for demand to disappear. Temporary inflation is possible with a rapid adoption of Fractional Reserve Banking but will stabilize once a substantial number of the 21 million "hard" bitcoins are stored as reserves by banks.<br />
<br />
Given the fact that Bitcoin is a distributed system of currency, if demand were to decrease to almost nothing, the currency would be doomed anyway.<br />
<br />
The key point here is that Bitcoin as a currency can't be inflated by any single person or entity, like a government, as there's no way to increase supply past a certain amount.<br />
<br />
Indeed, the most likely scenario, as Bitcoin becomes more popular and demand increases, is for the currency to increase in value, or deflate, until demand stabilizes.<br />
<br />
== Alternative Currencies are useless, Bitcoin is the only important cryptocurrency ==<br />
Bitcoin is the biggest and most popular crypto currency, but other currencies like Litecoins shouldn't be neglected. Obviously, minor currencies with prices of $0.06 per coin aren't very interesting, but maybe worth an investment. Alternative cryptocurrencies will be especially important when the capacicty of all BTC has been reached.<br />
<br />
== The Bitcoin community consists of anarchist/conspiracy theorist/gold standard 'weenies' ==<br />
<br />
The members of the community vary in their ideological stances. While it may have been started by ideological enthusiasts, Bitcoin now speaks to a large number of regular pragmatic folk, who simply see its potential for reducing the costs and friction of global e-commerce.<br />
<br />
== Anyone with enough computing power can take over the network ==<br />
<br />
CONFIRMED, see [[Weaknesses]].<br />
<br />
That said, as the network grows, it becomes harder and harder for a single entity to do so. Already the Bitcoin network's computing power is quite ahead of the world's fastest supercomputers, together.<br />
<br />
What an attacker can do once the network is taken over is quite limited. Under no circumstances could an attacker create counterfeit coins, fake transactions, or take anybody else's money. An attacker's capabilities are limited to taking back their own money that they very recently spent, and preventing other people's transactions from receiving confirmations. Such an attack would be very costly in resources, and for such meager benefits there is little rational economic incentive to do such a thing.<br />
<br />
Furthermore, this attack scenario would only be feasible for as long as it was actively underway. As soon as the attack stopped, the network would resume normal operation.<br />
<br />
== Bitcoin violates governmental regulations ==<br />
<br />
There is no known governmental regulation which disallows the use of Bitcoin.<br />
<br />
See also: the "[[#Bitcoins_are_illegal_because_they.27re_not_legal_tender|Bitcoins are illegal because they're not legal tender]]" myth.<br />
<br />
== Fractional reserve banking is not possible ==<br />
<br />
It is possible. See the main article, [[Fractional Reserve Banking and Bitcoin]]<br />
<br />
== Point of sale with bitcoins isn't possible because of the 10 minute wait for confirmation ==<br />
<br />
It is true that transactions [[FAQ#Why_do_I_have_to_wait_10_minutes_before_I_can_spend_money_I_received.3F|can]] sometimes take tens of minutes to become ''confirmed''. Despite this, retailers can accept unconfirmed transactions with very little risk by simply 'listening' on the network for a double-spend transaction, or partnering with a company that provides this service. After a head start of merely several seconds, the original transaction would reach so much of the Bitcoin network that a fraudulent double-spend transaction would almost certainly be fruitless. An attacker would have to commit easily-detectable fraud, in person, several hundred or several thousand times, before one of these low-value double-spend attempts would likely succeed.<br />
<br />
An attacker could work around the necessity of sending out a second fraudulent transaction to the Bitcoin network by attempting to [[Mining|solo-mine]] an attack block containing the attack transaction himself - temporarily withholding the block with the rest of the network - and then execute the fraudulent purchase within seconds, or minutes at most, of mining the attack block, before broadcasting the attack block. However, the cost of such an activity would dramatically outweigh the value of anything typically offered without a confirmation wait for several reasons.<br />
<br />
First, mining a block (attack or otherwise) entitles the miner to a valuable block reward, and because the attack involves temporarily withholding the block from the network, the attacker would put himself in the likely position of his block becoming [[Stale block|stale]], which would result in forfeiture of the entire reward. Most solo miners solve less than one block per month, so this would represent the loss of proceeds of potentially several weeks of mining.<br />
<br />
Second, it is not possible for a solo miner to know exactly when his mining activity will yield a block, and because the attack must be carried out within seconds or minutes of successfully mining a block, the attacker will not be able to know or plan in advance the brief window when the attack would be likely to succeed. While it may be easy for a determined attacker to get low-value items that are sold and delivered online instantly without waiting for confirmations (such as downloads), this unpredictability and the briefness of the opportunity would make it extremely difficult to commit any kind of fraud where real-life interaction is required, such as visiting a merchant or taking possession of goods. Petty shoplifting would be far simpler. Even if an attacker went forward with this attack, the retailer would be notified of the fraud the moment the attack block is released seconds later.<br />
<br />
In short, the 10-minute wait for confirmation is only practically necessary when delivering goods of value that significantly exceed the block reward an attacker would have to risk to perform an attack and where recourse after delivery is practically nonexistent, such as money transfers.<br />
<br />
== After 21 million coins are mined, no one will generate new blocks ==<br />
<br />
When operating costs can't be covered by the block creation bounty, which will happen some time before the total amount of BTC is reached, miners will earn some profit from [[transaction fees]]. However unlike the block reward, there is [http://bitcoin.stackexchange.com/questions/876/how-much-will-transaction-fees-eventually-be/895#895 no coupling between transaction fees and the need for security], so there is less of a guarantee that the amount of [[Mining|mining]] being performed will be sufficient to maintain the network's security.<br />
<br />
== Bitcoin has no built-in chargeback mechanism, and this isn't good ==<br />
<br />
'''Why some people think this is bad''': Chargebacks are useful for limiting fraud. The person handling your money has a responsibility to prevent fraud. If you buy something on eBay and the seller never ships it, PayPal takes funds from the seller's account and gives you back the money. This strengthens the eBay economy, because people recognize that their risk is limited and are more willing to purchase items from risky sellers.<br />
<br />
'''Why it's actually a good thing''': Bitcoin is designed such that your money is yours and yours alone. Allowing chargebacks implies that it is possible for another entity to take your money from you. You can have either total ownership rights of your money, or fraud protection, but not both. That said, nothing inherent in the dollar or euro or any other currency is necessary for chargebacks to be possible, and likewise, nothing prevents the creation of PayPal-like services denominated in Bitcoin that provide chargebacks or fraud protection.<br />
<br />
The statement "The person handling your money has a responsibility to prevent fraud" is still true; the power has been shifted into your own hands. Fraud will always exist. It's up to you to only send bitcoins to trusted entities. It is possible to trust an online identity without ever knowing their physical identity; see the [http://wiki.bitcoin-otc.com/wiki/OTC_Rating_System OTC Web of Trust].<br />
<br />
== Quantum computers would break Bitcoin's security ==<br />
<br />
While ECDSA is indeed not secure under quantum computing, quantum computers don't yet exist and probably won't for a while.<br />
The DWAVE system often written about in the press is, even if all their claims are true, not a quantum computer of a kind that could be used for cryptography.<br />
Bitcoin's security, when used properly with a new address on each transaction, depends on more than just ECDSA: Cryptographic hashes are much stronger than ECDSA under QC.<br />
Bitcoin's security was designed to be upgraded in a forward compatible way and could be [http://en.wikipedia.org/wiki/Post-quantum_cryptography upgraded] if this were considered an imminent threat.<br />
<br />
See the implications of quantum computers on public key cryptography here http://en.wikipedia.org/wiki/Quantum_computer#Potential<br />
<br />
The ''risk'' of quantum computers is also there for financial institutions, like banks, because they heavily rely on cryptography when doing transactions.<br />
<br />
== Bitcoin makes self-sufficient artificial intelligence possible, which will in turn become self-aware and decide to exterminate humanity ==<br />
An artificial intelligence powerful enough to be threatening to mankind wouldn't depend on mankind to make Bitcoin, it would just invent something like Bitcoin itself and design it to be so attractive to us that we couldn't resist using it.<br />
<br />
== [[Mining|Bitcoin mining]] is a waste of energy and harmful for ecology ==<br />
No more so than the wastefulness of mining gold out of the ground, melting it down and shaping it into bars, and then putting it back underground again. Not to mention the building of big fancy buildings, the waste of energy printing and minting all the various fiat currencies, the transportation thereof in armored cars by no less than two security guards for each who could probably be doing something more productive, etc. <br />
<br />
As far as mediums of exchange go, Bitcoin is actually quite economical of resources, compared to others.<br />
<br />
'''Economic Argument 1'''<br />
<br />
[[Mining|Bitcoin mining]] is a highly competitive, dynamic, almost [http://en.wikipedia.org/wiki/Perfect_market perfect], market. Mining rigs can be set up and dismantled almost anywhere in the world with relative ease. Thus, market forces are constantly pushing mining activity to ''places'' and ''times'' where the marginal price of electricity is low or zero. These electricity products are cheap for a reason. Often it’s because the electricity is difficult (and wasteful) to transport, difficult to store, or because there is low demand and high supply. Using electricity in this way is a lot less wasteful than simply plugging a mining rig into the mains indiscriminately. <br />
<br />
For example, Iceland produces an excess of cheap electricity from renewable sources, but it has no way of exporting electricity because of its remote location. It is conceivable that at some point in future Bitcoin mining will only be profitable in places like Iceland, and unprofitable in places like central Europe, where electricity comes mostly from nuclear and fossil sources. <br />
<br />
Market forces could even push mining into innovative solutions that have an effective electricity consumption of ''zero''. Mining always produces heat equivalent to the energy consumed - for example, 1000 watts of mining equipment produces the same amount of heat as a 1000 watt heating element used in an electric space heater, hot tub, water heater, or similar appliance. Someone already in a willing position to incur the cost of electricity for its heat value alone could run mining equipment specially designed to mine bitcoins while capturing and utilizing the heat produced, without incurring any energy costs beyond what they already intended to spend on heating.<br />
<br />
'''Economic Argument 2'''<br />
<br />
When the environmental costs of mining are considered, they need to be weighed up against the benefits. If you question Bitcoin on the grounds that it consumes electricity, then you should also ask questions like this: Will Bitcoin promote economic growth by freeing up trade? Will this speed up the rate of technological innovation? Will this lead to faster development of green technologies? Will Bitcoin enable new, border crossing [http://en.wikipedia.org/wiki/Smart_grid smart grid] technologies? …<br />
<br />
Dismissal of Bitcoin because of its costs, while ignoring its benefits, is a dishonest argument. In fact, any environmental argument of this type is dishonest, not just pertaining to Bitcoin. Along similar lines, it could be argued that wind turbines are bad for the environment because making the steel structure consumes energy.<br />
<br />
'''Ratio of Capital Costs versus Electrical Costs'''<br />
<br />
The BFL Jalapeno hashes at 5.5 Gh/s using 30W. That device consumes about $40 per year in electricity (using U.S. residential average of about $0.15 per kWh.) But the device costs over $300 including shipping. Thus just about a quarter of all costs over a two-year useful life goes to electricity. This compares to GPUs where more than 90% of costs over a two-year life went to electricity. Even more efficient designs can be expected in the future.<br />
<br />
== Shopkeepers can't seriously set prices in bitcoins because of the volatile exchange rate ==<br />
<br />
The assumption is that bitcoins must be sold immediately to cover operating expenses. If the shopkeeper's back-end expenses were transacted in bitcoins as well, then the exchange rate would be irrelevant. Larger adoption of Bitcoin would make prices [http://en.wikipedia.org/wiki/Sticky_%28economics%29 sticky]. Future volatility is expected to decrease, as the size and depth of the market grows. <br />
<br />
In the meantime, many merchants simply regularly pull the latest market rates from the exchanges and automatically update the prices on their websites. Also you might be able to buy a put option in order to sell at a fixed rate for a given amount of time. This would protect you from drops in price and simplify your operations for that time period.<br />
<br />
== Like Flooz and e-gold, bitcoins serve as opportunities for criminals and will be shut down ==<br />
<br />
* Visa, MasterCard, PayPal, and cash all serve as opportunities for criminals as well, but society keeps them around due to their recognized net benefit.<br />
* Hopefully Bitcoin will grow to the point where no single organization can disrupt the network, or would be better served by helping it.<br />
* Terrorists fly aircraft into buildings, but the governments have not yet abolished consumer air travel. Obviously the public good outweighs the possible bad in their opinion.<br />
* Criminal law differs between jurisdictions.<br />
<br />
== Bitcoins will be shut down by the government just like Liberty Dollars were ==<br />
<br />
Liberty Dollars started as a commercial venture to establish an alternative US currency, including physical banknotes and coins, backed by precious metals. This, in and of itself, is not illegal. They were prosecuted under counterfeiting laws because the silver coins allegedly resembled US currency.<br />
<br />
Bitcoins do not resemble the currency of the US or of any other nation in any way, shape, or form. The word "dollar" is not attached to them in any way. The "$" symbol is not used in any way.<br />
<br />
Bitcoins have no representational similarity whatsoever to US dollars. <br />
<br />
Of course, actually 'shutting down' Liberty Dollars was as easy as arresting the head of the company and seizing the offices and the precious metals used as backing. The decentralized Bitcoin, with no leader, no servers, no office, and no tangible asset backing, does not have the same vulnerability.<br />
<br />
== Bitcoin is not decentralized because the developers can dictate the software's behavior ==<br />
<br />
The Bitcoin protocol was originally defined by Bitcoin's inventor, [[Satoshi Nakamoto]], and this protocol has now been widely accepted as the standard by the community of miners and users. <br />
<br />
Though the developers of the original Bitcoin client still exert influence over the Bitcoin community, their power to arbitrarily modify the protocol is very limited. Since the release of Bitcoin v0.3, changes to the protocol have been minor and always in agreement with community consensus.<br />
<br />
Protocol modifications, such as increasing the block award from 25 to 50 BTC, are not compatible with clients already running in the network. If the developers were to release a new client that the majority of miners perceives as corrupt, or in violation of the project’s aims, that client would simply not catch on, and the few users who do try to use it would find that their transactions get rejected by the network.<br />
<br />
There are also other [[:Category:Clients|Bitcoin clients made by other developers]] that adhere to the Bitcoin protocol. As more developers create alternative clients, less power will lie with the developers of the original Bitcoin client. <br />
<br />
== Bitcoin is a pyramid scheme ==<br />
<br />
Bitcoin is nearly opposite of a pyramid scheme in a mathematical sense. Because Bitcoins are algorithmically made scarce, no exponential benefit is derived from introducing new users to use of it. There is a quantitative benefit in having additional interest or demand, but this is in no way exponential.<br />
<br />
== Bitcoin was hacked ==<br />
<br />
In the history of Bitcoin, there has never been an attack on the [[block chain]] that resulted in stolen money from a confirmed output. Neither has there ever been a reported theft resulting directly from a vulnerability in the [[Original Bitcoin client|original Bitcoin client]], or a vulnerability in the protocol. Bitcoin is secured by standard cryptographic functions. These functions have been peer reviewed by cryptography experts and are considered unlikely to be breakable in the foreseeable future.<br />
<br />
It is safe to say that the currency itself has never been 'hacked'. However, several major ''websites'' using the currency have been hacked, often resulting in high profile Bitcoin heists. These heists are misreported in some media as hacks on Bitcoin itself. An analogy: Just because someone stole US dollars from a supermarket till, doesn’t mean that the US dollar as a currency has been 'hacked'.<br />
<br />
Most bitcoin thefts are the result of inadequate [[Securing your wallet|wallet security]]. In response to the wave of thefts in 2011 and 2012, the community has developed risk-mitigating measures such as [[Wallet_encryption|wallet encryption]], support for [[BIP_0011|multiple signatures]], [[How_to_set_up_a_secure_offline_savings_wallet|offline wallets]], [[Paper_wallet|paper wallets]], and [[Hardware_wallet|hardware wallets]]. As these measures gain adoption by merchants and users, it is expected that the number of thefts will drop.<br />
<br />
==References==<br />
<references/><br />
<br />
[[de:Mythen]]<br />
[[ru:Мифы о биткоине]]</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Myths&diff=43497Myths2013-12-29T09:38:42Z<p>Gidgreen: /* Bitcoins have no intrinsic value (unlike some other things) */</p>
<hr />
<div>Let's clear up some common Bitcoin misconceptions.<br />
<br />
== Bitcoin is just like all other digital currencies; nothing new ==<br />
<br />
Nearly all other digital currencies are centrally controlled. This means that:<br />
* They can be printed at the subjective whims of the controllers<br />
* They can be destroyed by attacking the central point of control<br />
* Arbitrary rules can be imposed upon their users by the controllers<br />
<br />
Being decentralized, Bitcoin solves all of these problems.<br />
<br />
== Bitcoins don't solve any problems that fiat currency and/or gold doesn't solve ==<br />
<br />
Unlike gold, bitcoins are:<br />
* Easy to transfer<br />
* Easy to secure<br />
* Easy to verify<br />
* Easy to granulate<br />
<br />
Unlike fiat currencies, bitcoins are:<br />
* Predictable and limited in [[Controlled_Currency_Supply|supply]]<br />
* Not controlled by a central authority (such as [http://en.wikipedia.org/wiki/Federal_Reserve The United States Federal Reserve])<br />
* Not debt-based<br />
<br />
Unlike electronic fiat currency systems, bitcoins are:<br />
* Potentially anonymous<br />
* Freeze-proof<br />
* Faster to transfer<br />
* Cheaper to transfer<br />
<br />
== Bitcoin is backed by processing power ==<br />
<br />
It is not correct to say that Bitcoin is "backed by" processing power. A currency being "backed" means that it is pegged to something else via a central party at a certain exchange rate yet you cannot exchange bitcoins for the computing power that was used to create them. Bitcoin is in this sense not backed by anything. It is a currency in its own right. Just as gold is not backed by anything, the same applies to Bitcoin. <br />
<br />
The Bitcoin currency is ''created'' via processing power, and the integrity of the block chain is ''protected'' by the existence of a network of powerful computing nodes from certain [[Weaknesses#Attacker_has_a_lot_of_computing_power|attacks]].<br />
<br />
== Bitcoins are worthless because they aren't backed by anything ==<br />
<br />
One could argue that gold isn't backed by anything either. Bitcoins have properties resulting from the system's design that allows them to be subjectively valued by individuals. This valuation is demonstrated when individuals freely exchange for or with bitcoins. Please refer to the [http://en.wikipedia.org/wiki/Subjective_theory_of_value Subjective Theory of Value].<br />
<br />
See also: the "[[#Bitcoin_is_backed_by_processing_power|Bitcoin is backed by processing power]]" myth.<br />
<br />
== The value of bitcoins are based on how much electricity and computing power it takes to mine them ==<br />
<br />
This statement is an attempt to apply to Bitcoin the [http://en.wikipedia.org/wiki/Labor_theory_of_value labor theory of value], which is generally accepted as false. Just because something takes X resources to create does not mean that the resulting product will be worth X. It can be worth more, or less, depending on the utility thereof to its users.<br />
<br />
In fact the causality is the reverse of that (this applies to the labor theory of value in general). The cost to mine bitcoins is based on how much they are worth. If bitcoins go up in value, more people will mine (because [[Mining|mining]] is profitable), thus [[difficulty]] will go up, thus the cost of mining will go up. The inverse happens if bitcoins go down in value. These effects balance out to cause mining to always cost an amount proportional to the value of bitcoins it produces.<br />
<br />
== Bitcoins have no intrinsic value (unlike some other things) ==<br />
<br />
This is simply not true. Each bitcoin gives the holder the ability to embed a large number of short in-transaction messages in a globally distributed and timestamped permanent data store, namely the bitcoin blockchain. There is no other similar datastore which is so widely distributed. There is a tradeoff between the exact number of messages and how quickly they can be embedded. But as of December 2013, it's fair to say that one bitcoin allows around 1000 such messages to be embedded, each within about 10 minutes of being sent, since a fee of 0.001 BTC is enough to get transactions confirmed quickly. This message embedding certainly has intrinsic value since it can be used to prove ownership of a document at a certain time, by embedding a one-way hash of that document in the blockchain. Considering that electronic notarization services charge something like $10/document, this would give an intrinsic value of something like $10,000 per bitcoin.<br />
<br />
While some other tangible commodities do have intrinsic value, that value is generally much less than its trading price. Consider for example that gold, if it were not used as an inflation-proof store of value, but rather only for its industrial uses, would certainly not be worth what it is today, since the industrial requirements for gold are far smaller than the available supply thereof.<br />
<br />
In any event, while historically intrinsic value, as well as other attributes like divisibility, fungibility, scarcity, durability, helped establish certain commodities as mediums of exchange, it is certainly not a prerequisite. While bitcoins are accused of lacking 'intrinsic value' in this sense, they make up for it in spades by possessing the other qualities necessary to make it a good medium of exchange, equal to or better than [http://en.wikipedia.org/wiki/Commodity_money commodity money].<br />
<br />
Another way to think about this is to consider the value of bitcoin the global network, rather than each bitcoin in isolation. The value of an individual telephone is derived from the network it is connected to. If there was no phone network, a telephone would be useless. Similarly the value of an individual bitcoin derives from the global network of bitcoin-enabled merchants, exchanges, wallets, etc... Just like a phone is necessary to transmit vocal information through the network, a bitcoin is necessary to transmit economic information through the network.<br />
<br />
Value is ultimately determined by what people are willing to trade for - by supply and demand.<br />
<br />
== Bitcoins are illegal because they're not legal tender ==<br />
In March 2013, the U.S. [http://en.wikipedia.org/wiki/Financial_Crimes_Enforcement_Network Financial Crimes Enforcement Network] issues a new set of guidelines on "de-centralized virtual currency", clearly targeting Bitcoin. Under the new guidelines, "a user of virtual currency is not a Money Services Businesses (MSB) under FinCEN's regulations and therefore is not subject to MSB registration, reporting, and record keeping regulations." [[Mining|Miners]] on the other hand, might need to register, if they sell bitcoins for "real currency or its equivalent".<ref>[http://arstechnica.com/tech-policy/2013/03/us-regulator-bitcoin-exchanges-must-comply-with-money-laundering-laws/ US regulator: Bitcoin exchanges must comply with money-laundering laws | Ars Technica]</ref><br />
<br />
In general, there are a [http://en.wikipedia.org/wiki/Local_currency number of currencies] in existence that are not official government-backed currencies. A currency is, after all, nothing more than a convenient unit of account. While national laws may vary from country to country, and you should certainly check the laws of your jurisdiction, in general trading in any commodity, including digital currency like Bitcoin, [http://en.wikipedia.org/wiki/BerkShares BerkShares], game currencies like WoW gold, or Linden dollars, is not illegal.<br />
<br />
== Bitcoin is a form of domestic terrorism because it only harms the economic stability of the USA and its currency ==<br />
<br />
According to [http://en.wikipedia.org/wiki/Definitions_of_terrorism#United_States the definition of terrorism in the United States], you need to do violent activities to be considered a terrorist for legal purposes. Recent off-the-cuff remarks by politicians have no basis in law or fact.<br />
<br />
Also, Bitcoin isn't domestic to the US or any other country. It's a worldwide community, as can be seen in this [https://bitcointalk.org/?topic=2346.0 map of Bitcoin nodes].<br />
<br />
== Bitcoin will only enable tax evaders which will lead to the eventual downfall of civilization ==<br />
<br />
Cash transactions hold the same level of anonymity but are still taxed successfully. It is up to you to follow the applicable state laws in your home country, or face the consequences.<br />
<br />
While it may be easy to transfer bitcoins anonymously, ''spending'' them anonymously on tangibles is just as hard as spending any other kind of money anonymously. Tax evaders are often caught because their lifestyle and assets are inconsistent with their reported income, and not necessarily because government is able to follow their money.<br />
<br />
== Bitcoins can be printed/minted by anyone and are therefore worthless ==<br />
<br />
Bitcoins are not printed/minted. Instead, [[Blocks]] are computed by miners and for their efforts they are awarded a specific amount of bitcoins and transaction fees paid by others. See [[Mining]] for more information on how this process works.<br />
<br />
== Bitcoins are worthless because they're based on unproven cryptography ==<br />
<br />
SHA256 and ECDSA which are used in Bitcoin are well-known industry standard algorithms. SHA256 is endorsed and used by the US Government and is standardized (FIPS180-3 Secure Hash Standard). If you believe that these algorithms are untrustworthy then you should not trust Bitcoin, credit card transactions or any type of electronic bank transfer. Bitcoin has a sound basis in well understood cryptography.<br />
<br />
== Early adopters are unfairly rewarded ==<br />
<br />
Early adopters are rewarded for taking the higher risk with their time and money. The capital invested in bitcoin at each stage of its life invigorated the community and helped the currency to reach subsequent milestones. Arguing that early adopters do not deserve to profit from this is akin to saying that early investors in a company, or people who buy stock at a company IPO (Initial Public Offering), are unfairly rewarded.<br />
<br />
This argument also depends on bitcoin early adopters using bitcoins to store rather than transfer value. The daily trade on the exchanges (as of Jan 2012) indicates that smaller transactions are becoming the norm, indicating trade rather than investment. In more pragmatic terms, "fairness" is an arbitrary concept that is improbable to be agreed upon by a large population. Establishing "fairness" is no goal of Bitcoin, as this would be impossible.<br />
<br />
Looking forwards, considering the amount of publicity bitcoin received as of April 2013, there can be no reasonable grounds for complaint for people who did not invest at that time, and then see the value (possibly) rising drastically higher.<br />
<br />
By starting to mine or acquire bitcoins today, you too can become an early adopter.<br />
<br />
== 21 million coins isn't enough; doesn't scale ==<br />
<br />
One Bitcoin is divisible down to eight decimal places. There are really 2,099,999,997,690,000 (just over 2 quadrillion) maximum possible atomic units in the bitcoin system.<br />
<br />
The value of "1 BTC" represents 100,000,000 of these. In other words, each is divisible by up to 10^8. <br />
<br />
As the value of the unit of 1 BTC grows too large to be useful for day to day transactions, people can start dealing in smaller [[Units|units]], such as milli-bitcoins (mBTC) or micro-bitcoins (μBTC).<br />
<br />
== Bitcoins are stored in wallet files, just copy the wallet file to get more coins! ==<br />
<br />
No, your wallet contains your secret keys, giving you the rights to spend your bitcoins. Think of it like having bank details stored in a file. If you give your bank details (or bitcoin wallet) to someone else, that doesn't double the amount of money in your account. You can spend your money or they can spend your money, but not both.<br />
<br />
== Lost coins can't be replaced and this is bad ==<br />
<br />
Bitcoins are divisible to 0.00000001, so there being fewer bitcoins remaining is not a problem for the currency itself. If you lose your coins, all other coins will go up in value a little. Consider it a donation to all other bitcoin users.<br />
<br />
A related question is: Why don't we have a mechanism to replace lost coins? The answer is that it is impossible to distinguish between a 'lost' coin and one that is simply sitting unused in someone's wallet.<br />
<br />
== It's a giant ponzi scheme ==<br />
In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.<br />
<br />
A ponzi scheme is a zero sum game. In a ponzi scheme, early adopters can only profit at the expense of late adopters, and the late adopters always lose. Bitcoin has an expected win-win outcome. Early and present adopters profit from the rise in value as Bitcoins become better understood and in turn demanded by the public at large. All adopters benefit from the usefulness of a reliable and widely-accepted decentralized peer-to-peer currency.<br />
<br />
== Finite coins plus lost coins means deflationary spiral ==<br />
As deflationary forces may apply, economic factors such as hoarding are offset by human factors that may lessen the chances that a [[Deflationary spiral]] will occur.<br />
<br />
== Bitcoin can't work because there is no way to control inflation ==<br />
<br />
Inflation is simply a rise of prices over time, which is generally the result of the devaluing of a currency. This is a function of supply and demand. Given the fact that the supply of bitcoins is fixed at a certain amount, unlike fiat money, the only way for inflation to get out of control is for demand to disappear. Temporary inflation is possible with a rapid adoption of Fractional Reserve Banking but will stabilize once a substantial number of the 21 million "hard" bitcoins are stored as reserves by banks.<br />
<br />
Given the fact that Bitcoin is a distributed system of currency, if demand were to decrease to almost nothing, the currency would be doomed anyway.<br />
<br />
The key point here is that Bitcoin as a currency can't be inflated by any single person or entity, like a government, as there's no way to increase supply past a certain amount.<br />
<br />
Indeed, the most likely scenario, as Bitcoin becomes more popular and demand increases, is for the currency to increase in value, or deflate, until demand stabilizes.<br />
<br />
== Alternative Currencies are useless, Bitcoin is the only important cryptocurrency ==<br />
Bitcoin is the biggest and most popular crypto currency, but other currencies like Litecoins shouldn't be neglected. Obviously, minor currencies with prices of $0.06 per coin aren't very interesting, but maybe worth an investment. Alternative cryptocurrencies will be especially important when the capacicty of all BTC has been reached.<br />
<br />
== The Bitcoin community consists of anarchist/conspiracy theorist/gold standard 'weenies' ==<br />
<br />
The members of the community vary in their ideological stances. While it may have been started by ideological enthusiasts, Bitcoin now speaks to a large number of regular pragmatic folk, who simply see its potential for reducing the costs and friction of global e-commerce.<br />
<br />
== Anyone with enough computing power can take over the network ==<br />
<br />
CONFIRMED, see [[Weaknesses]].<br />
<br />
That said, as the network grows, it becomes harder and harder for a single entity to do so. Already the Bitcoin network's computing power is quite ahead of the world's fastest supercomputers, together.<br />
<br />
What an attacker can do once the network is taken over is quite limited. Under no circumstances could an attacker create counterfeit coins, fake transactions, or take anybody else's money. An attacker's capabilities are limited to taking back their own money that they very recently spent, and preventing other people's transactions from receiving confirmations. Such an attack would be very costly in resources, and for such meager benefits there is little rational economic incentive to do such a thing.<br />
<br />
Furthermore, this attack scenario would only be feasible for as long as it was actively underway. As soon as the attack stopped, the network would resume normal operation.<br />
<br />
== Bitcoin violates governmental regulations ==<br />
<br />
There is no known governmental regulation which disallows the use of Bitcoin.<br />
<br />
See also: the "[[#Bitcoins_are_illegal_because_they.27re_not_legal_tender|Bitcoins are illegal because they're not legal tender]]" myth.<br />
<br />
== Fractional reserve banking is not possible ==<br />
<br />
It is possible. See the main article, [[Fractional Reserve Banking and Bitcoin]]<br />
<br />
== Point of sale with bitcoins isn't possible because of the 10 minute wait for confirmation ==<br />
<br />
It is true that transactions [[FAQ#Why_do_I_have_to_wait_10_minutes_before_I_can_spend_money_I_received.3F|can]] sometimes take tens of minutes to become ''confirmed''. Despite this, retailers can accept unconfirmed transactions with very little risk by simply 'listening' on the network for a double-spend transaction, or partnering with a company that provides this service. After a head start of merely several seconds, the original transaction would reach so much of the Bitcoin network that a fraudulent double-spend transaction would almost certainly be fruitless. An attacker would have to commit easily-detectable fraud, in person, several hundred or several thousand times, before one of these low-value double-spend attempts would likely succeed.<br />
<br />
An attacker could work around the necessity of sending out a second fraudulent transaction to the Bitcoin network by attempting to [[Mining|solo-mine]] an attack block containing the attack transaction himself - temporarily withholding the block with the rest of the network - and then execute the fraudulent purchase within seconds, or minutes at most, of mining the attack block, before broadcasting the attack block. However, the cost of such an activity would dramatically outweigh the value of anything typically offered without a confirmation wait for several reasons.<br />
<br />
First, mining a block (attack or otherwise) entitles the miner to a valuable block reward, and because the attack involves temporarily withholding the block from the network, the attacker would put himself in the likely position of his block becoming [[Stale block|stale]], which would result in forfeiture of the entire reward. Most solo miners solve less than one block per month, so this would represent the loss of proceeds of potentially several weeks of mining.<br />
<br />
Second, it is not possible for a solo miner to know exactly when his mining activity will yield a block, and because the attack must be carried out within seconds or minutes of successfully mining a block, the attacker will not be able to know or plan in advance the brief window when the attack would be likely to succeed. While it may be easy for a determined attacker to get low-value items that are sold and delivered online instantly without waiting for confirmations (such as downloads), this unpredictability and the briefness of the opportunity would make it extremely difficult to commit any kind of fraud where real-life interaction is required, such as visiting a merchant or taking possession of goods. Petty shoplifting would be far simpler. Even if an attacker went forward with this attack, the retailer would be notified of the fraud the moment the attack block is released seconds later.<br />
<br />
In short, the 10-minute wait for confirmation is only practically necessary when delivering goods of value that significantly exceed the block reward an attacker would have to risk to perform an attack and where recourse after delivery is practically nonexistent, such as money transfers.<br />
<br />
== After 21 million coins are mined, no one will generate new blocks ==<br />
<br />
When operating costs can't be covered by the block creation bounty, which will happen some time before the total amount of BTC is reached, miners will earn some profit from [[transaction fees]]. However unlike the block reward, there is [http://bitcoin.stackexchange.com/questions/876/how-much-will-transaction-fees-eventually-be/895#895 no coupling between transaction fees and the need for security], so there is less of a guarantee that the amount of [[Mining|mining]] being performed will be sufficient to maintain the network's security.<br />
<br />
== Bitcoin has no built-in chargeback mechanism, and this isn't good ==<br />
<br />
'''Why some people think this is bad''': Chargebacks are useful for limiting fraud. The person handling your money has a responsibility to prevent fraud. If you buy something on eBay and the seller never ships it, PayPal takes funds from the seller's account and gives you back the money. This strengthens the eBay economy, because people recognize that their risk is limited and are more willing to purchase items from risky sellers.<br />
<br />
'''Why it's actually a good thing''': Bitcoin is designed such that your money is yours and yours alone. Allowing chargebacks implies that it is possible for another entity to take your money from you. You can have either total ownership rights of your money, or fraud protection, but not both. That said, nothing inherent in the dollar or euro or any other currency is necessary for chargebacks to be possible, and likewise, nothing prevents the creation of PayPal-like services denominated in Bitcoin that provide chargebacks or fraud protection.<br />
<br />
The statement "The person handling your money has a responsibility to prevent fraud" is still true; the power has been shifted into your own hands. Fraud will always exist. It's up to you to only send bitcoins to trusted entities. It is possible to trust an online identity without ever knowing their physical identity; see the [http://wiki.bitcoin-otc.com/wiki/OTC_Rating_System OTC Web of Trust].<br />
<br />
== Quantum computers would break Bitcoin's security ==<br />
<br />
While ECDSA is indeed not secure under quantum computing, quantum computers don't yet exist and probably won't for a while.<br />
The DWAVE system often written about in the press is, even if all their claims are true, not a quantum computer of a kind that could be used for cryptography.<br />
Bitcoin's security, when used properly with a new address on each transaction, depends on more than just ECDSA: Cryptographic hashes are much stronger than ECDSA under QC.<br />
Bitcoin's security was designed to be upgraded in a forward compatible way and could be [http://en.wikipedia.org/wiki/Post-quantum_cryptography upgraded] if this were considered an imminent threat.<br />
<br />
See the implications of quantum computers on public key cryptography here http://en.wikipedia.org/wiki/Quantum_computer#Potential<br />
<br />
The ''risk'' of quantum computers is also there for financial institutions, like banks, because they heavily rely on cryptography when doing transactions.<br />
<br />
== Bitcoin makes self-sufficient artificial intelligence possible, which will in turn become self-aware and decide to exterminate humanity ==<br />
An artificial intelligence powerful enough to be threatening to mankind wouldn't depend on mankind to make Bitcoin, it would just invent something like Bitcoin itself and design it to be so attractive to us that we couldn't resist using it.<br />
<br />
== [[Mining|Bitcoin mining]] is a waste of energy and harmful for ecology ==<br />
No more so than the wastefulness of mining gold out of the ground, melting it down and shaping it into bars, and then putting it back underground again. Not to mention the building of big fancy buildings, the waste of energy printing and minting all the various fiat currencies, the transportation thereof in armored cars by no less than two security guards for each who could probably be doing something more productive, etc. <br />
<br />
As far as mediums of exchange go, Bitcoin is actually quite economical of resources, compared to others.<br />
<br />
'''Economic Argument 1'''<br />
<br />
[[Mining|Bitcoin mining]] is a highly competitive, dynamic, almost [http://en.wikipedia.org/wiki/Perfect_market perfect], market. Mining rigs can be set up and dismantled almost anywhere in the world with relative ease. Thus, market forces are constantly pushing mining activity to ''places'' and ''times'' where the marginal price of electricity is low or zero. These electricity products are cheap for a reason. Often it’s because the electricity is difficult (and wasteful) to transport, difficult to store, or because there is low demand and high supply. Using electricity in this way is a lot less wasteful than simply plugging a mining rig into the mains indiscriminately. <br />
<br />
For example, Iceland produces an excess of cheap electricity from renewable sources, but it has no way of exporting electricity because of its remote location. It is conceivable that at some point in future Bitcoin mining will only be profitable in places like Iceland, and unprofitable in places like central Europe, where electricity comes mostly from nuclear and fossil sources. <br />
<br />
Market forces could even push mining into innovative solutions that have an effective electricity consumption of ''zero''. Mining always produces heat equivalent to the energy consumed - for example, 1000 watts of mining equipment produces the same amount of heat as a 1000 watt heating element used in an electric space heater, hot tub, water heater, or similar appliance. Someone already in a willing position to incur the cost of electricity for its heat value alone could run mining equipment specially designed to mine bitcoins while capturing and utilizing the heat produced, without incurring any energy costs beyond what they already intended to spend on heating.<br />
<br />
'''Economic Argument 2'''<br />
<br />
When the environmental costs of mining are considered, they need to be weighed up against the benefits. If you question Bitcoin on the grounds that it consumes electricity, then you should also ask questions like this: Will Bitcoin promote economic growth by freeing up trade? Will this speed up the rate of technological innovation? Will this lead to faster development of green technologies? Will Bitcoin enable new, border crossing [http://en.wikipedia.org/wiki/Smart_grid smart grid] technologies? …<br />
<br />
Dismissal of Bitcoin because of its costs, while ignoring its benefits, is a dishonest argument. In fact, any environmental argument of this type is dishonest, not just pertaining to Bitcoin. Along similar lines, it could be argued that wind turbines are bad for the environment because making the steel structure consumes energy.<br />
<br />
'''Ratio of Capital Costs versus Electrical Costs'''<br />
<br />
The BFL Jalapeno hashes at 5.5 Gh/s using 30W. That device consumes about $40 per year in electricity (using U.S. residential average of about $0.15 per kWh.) But the device costs over $300 including shipping. Thus just about a quarter of all costs over a two-year useful life goes to electricity. This compares to GPUs where more than 90% of costs over a two-year life went to electricity. Even more efficient designs can be expected in the future.<br />
<br />
== Shopkeepers can't seriously set prices in bitcoins because of the volatile exchange rate ==<br />
<br />
The assumption is that bitcoins must be sold immediately to cover operating expenses. If the shopkeeper's back-end expenses were transacted in bitcoins as well, then the exchange rate would be irrelevant. Larger adoption of Bitcoin would make prices [http://en.wikipedia.org/wiki/Sticky_%28economics%29 sticky]. Future volatility is expected to decrease, as the size and depth of the market grows. <br />
<br />
In the meantime, many merchants simply regularly pull the latest market rates from the exchanges and automatically update the prices on their websites. Also you might be able to buy a put option in order to sell at a fixed rate for a given amount of time. This would protect you from drops in price and simplify your operations for that time period.<br />
<br />
== Like Flooz and e-gold, bitcoins serve as opportunities for criminals and will be shut down ==<br />
<br />
* Visa, MasterCard, PayPal, and cash all serve as opportunities for criminals as well, but society keeps them around due to their recognized net benefit.<br />
* Hopefully Bitcoin will grow to the point where no single organization can disrupt the network, or would be better served by helping it.<br />
* Terrorists fly aircraft into buildings, but the governments have not yet abolished consumer air travel. Obviously the public good outweighs the possible bad in their opinion.<br />
* Criminal law differs between jurisdictions.<br />
<br />
== Bitcoins will be shut down by the government just like Liberty Dollars were ==<br />
<br />
Liberty Dollars started as a commercial venture to establish an alternative US currency, including physical banknotes and coins, backed by precious metals. This, in and of itself, is not illegal. They were prosecuted under counterfeiting laws because the silver coins allegedly resembled US currency.<br />
<br />
Bitcoins do not resemble the currency of the US or of any other nation in any way, shape, or form. The word "dollar" is not attached to them in any way. The "$" symbol is not used in any way.<br />
<br />
Bitcoins have no representational similarity whatsoever to US dollars. <br />
<br />
Of course, actually 'shutting down' Liberty Dollars was as easy as arresting the head of the company and seizing the offices and the precious metals used as backing. The decentralized Bitcoin, with no leader, no servers, no office, and no tangible asset backing, does not have the same vulnerability.<br />
<br />
== Bitcoin is not decentralized because the developers can dictate the software's behavior ==<br />
<br />
The Bitcoin protocol was originally defined by Bitcoin's inventor, [[Satoshi Nakamoto]], and this protocol has now been widely accepted as the standard by the community of miners and users. <br />
<br />
Though the developers of the original Bitcoin client still exert influence over the Bitcoin community, their power to arbitrarily modify the protocol is very limited. Since the release of Bitcoin v0.3, changes to the protocol have been minor and always in agreement with community consensus.<br />
<br />
Protocol modifications, such as increasing the block award from 25 to 50 BTC, are not compatible with clients already running in the network. If the developers were to release a new client that the majority of miners perceives as corrupt, or in violation of the project’s aims, that client would simply not catch on, and the few users who do try to use it would find that their transactions get rejected by the network.<br />
<br />
There are also other [[:Category:Clients|Bitcoin clients made by other developers]] that adhere to the Bitcoin protocol. As more developers create alternative clients, less power will lie with the developers of the original Bitcoin client. <br />
<br />
== Bitcoin is a pyramid scheme ==<br />
<br />
Bitcoin is nearly opposite of a pyramid scheme in a mathematical sense. Because Bitcoins are algorithmically made scarce, no exponential benefit is derived from introducing new users to use of it. There is a quantitative benefit in having additional interest or demand, but this is in no way exponential.<br />
<br />
== Bitcoin was hacked ==<br />
<br />
In the history of Bitcoin, there has never been an attack on the [[block chain]] that resulted in stolen money from a confirmed output. Neither has there ever been a reported theft resulting directly from a vulnerability in the [[Original Bitcoin client|original Bitcoin client]], or a vulnerability in the protocol. Bitcoin is secured by standard cryptographic functions. These functions have been peer reviewed by cryptography experts and are considered unlikely to be breakable in the foreseeable future.<br />
<br />
It is safe to say that the currency itself has never been 'hacked'. However, several major ''websites'' using the currency have been hacked, often resulting in high profile Bitcoin heists. These heists are misreported in some media as hacks on Bitcoin itself. An analogy: Just because someone stole US dollars from a supermarket till, doesn’t mean that the US dollar as a currency has been 'hacked'.<br />
<br />
Most bitcoin thefts are the result of inadequate [[Securing your wallet|wallet security]]. In response to the wave of thefts in 2011 and 2012, the community has developed risk-mitigating measures such as [[Wallet_encryption|wallet encryption]], support for [[BIP_0011|multiple signatures]], [[How_to_set_up_a_secure_offline_savings_wallet|offline wallets]], [[Paper_wallet|paper wallets]], and [[Hardware_wallet|hardware wallets]]. As these measures gain adoption by merchants and users, it is expected that the number of thefts will drop.<br />
<br />
==References==<br />
<references/><br />
<br />
[[de:Mythen]]<br />
[[ru:Мифы о биткоине]]</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Myths&diff=43496Myths2013-12-29T09:38:12Z<p>Gidgreen: /* Bitcoins have no intrinsic value (unlike some other things) */</p>
<hr />
<div>Let's clear up some common Bitcoin misconceptions.<br />
<br />
== Bitcoin is just like all other digital currencies; nothing new ==<br />
<br />
Nearly all other digital currencies are centrally controlled. This means that:<br />
* They can be printed at the subjective whims of the controllers<br />
* They can be destroyed by attacking the central point of control<br />
* Arbitrary rules can be imposed upon their users by the controllers<br />
<br />
Being decentralized, Bitcoin solves all of these problems.<br />
<br />
== Bitcoins don't solve any problems that fiat currency and/or gold doesn't solve ==<br />
<br />
Unlike gold, bitcoins are:<br />
* Easy to transfer<br />
* Easy to secure<br />
* Easy to verify<br />
* Easy to granulate<br />
<br />
Unlike fiat currencies, bitcoins are:<br />
* Predictable and limited in [[Controlled_Currency_Supply|supply]]<br />
* Not controlled by a central authority (such as [http://en.wikipedia.org/wiki/Federal_Reserve The United States Federal Reserve])<br />
* Not debt-based<br />
<br />
Unlike electronic fiat currency systems, bitcoins are:<br />
* Potentially anonymous<br />
* Freeze-proof<br />
* Faster to transfer<br />
* Cheaper to transfer<br />
<br />
== Bitcoin is backed by processing power ==<br />
<br />
It is not correct to say that Bitcoin is "backed by" processing power. A currency being "backed" means that it is pegged to something else via a central party at a certain exchange rate yet you cannot exchange bitcoins for the computing power that was used to create them. Bitcoin is in this sense not backed by anything. It is a currency in its own right. Just as gold is not backed by anything, the same applies to Bitcoin. <br />
<br />
The Bitcoin currency is ''created'' via processing power, and the integrity of the block chain is ''protected'' by the existence of a network of powerful computing nodes from certain [[Weaknesses#Attacker_has_a_lot_of_computing_power|attacks]].<br />
<br />
== Bitcoins are worthless because they aren't backed by anything ==<br />
<br />
One could argue that gold isn't backed by anything either. Bitcoins have properties resulting from the system's design that allows them to be subjectively valued by individuals. This valuation is demonstrated when individuals freely exchange for or with bitcoins. Please refer to the [http://en.wikipedia.org/wiki/Subjective_theory_of_value Subjective Theory of Value].<br />
<br />
See also: the "[[#Bitcoin_is_backed_by_processing_power|Bitcoin is backed by processing power]]" myth.<br />
<br />
== The value of bitcoins are based on how much electricity and computing power it takes to mine them ==<br />
<br />
This statement is an attempt to apply to Bitcoin the [http://en.wikipedia.org/wiki/Labor_theory_of_value labor theory of value], which is generally accepted as false. Just because something takes X resources to create does not mean that the resulting product will be worth X. It can be worth more, or less, depending on the utility thereof to its users.<br />
<br />
In fact the causality is the reverse of that (this applies to the labor theory of value in general). The cost to mine bitcoins is based on how much they are worth. If bitcoins go up in value, more people will mine (because [[Mining|mining]] is profitable), thus [[difficulty]] will go up, thus the cost of mining will go up. The inverse happens if bitcoins go down in value. These effects balance out to cause mining to always cost an amount proportional to the value of bitcoins it produces.<br />
<br />
== Bitcoins have no intrinsic value (unlike some other things) ==<br />
<br />
This is simply not true. Each bitcoin gives the holder the ability to embed a large number of short in-transaction messages in a globally distributed and timestamped permanent data store, namely the bitcoin blockchain. There is no other similar datastore which is so widely distributed. There is a tradeoff between the exact number of messages and how quickly they can be embedded. But as of December 2013, it's fair to say that one bitcoin allows around 1000 such messages to be embedded, each within about 10 minutes of being sent, since a transaction fee of 0.001 BTC is enough to get transactions confirmed quickly. This message embedding certainly has intrinsic value since it can be used to prove ownership of a document at a certain time, by embedding a one-way hash of that document in the blockchain. Considering that electronic notarization services charge something like $10/document, this would give an intrinsic value of something like $10,000 per bitcoin.<br />
<br />
While some other tangible commodities do have intrinsic value, that value is generally much less than its trading price. Consider for example that gold, if it were not used as an inflation-proof store of value, but rather only for its industrial uses, would certainly not be worth what it is today, since the industrial requirements for gold are far smaller than the available supply thereof.<br />
<br />
In any event, while historically intrinsic value, as well as other attributes like divisibility, fungibility, scarcity, durability, helped establish certain commodities as mediums of exchange, it is certainly not a prerequisite. While bitcoins are accused of lacking 'intrinsic value' in this sense, they make up for it in spades by possessing the other qualities necessary to make it a good medium of exchange, equal to or better than [http://en.wikipedia.org/wiki/Commodity_money commodity money].<br />
<br />
Another way to think about this is to consider the value of bitcoin the global network, rather than each bitcoin in isolation. The value of an individual telephone is derived from the network it is connected to. If there was no phone network, a telephone would be useless. Similarly the value of an individual bitcoin derives from the global network of bitcoin-enabled merchants, exchanges, wallets, etc... Just like a phone is necessary to transmit vocal information through the network, a bitcoin is necessary to transmit economic information through the network.<br />
<br />
Value is ultimately determined by what people are willing to trade for - by supply and demand.<br />
<br />
== Bitcoins are illegal because they're not legal tender ==<br />
In March 2013, the U.S. [http://en.wikipedia.org/wiki/Financial_Crimes_Enforcement_Network Financial Crimes Enforcement Network] issues a new set of guidelines on "de-centralized virtual currency", clearly targeting Bitcoin. Under the new guidelines, "a user of virtual currency is not a Money Services Businesses (MSB) under FinCEN's regulations and therefore is not subject to MSB registration, reporting, and record keeping regulations." [[Mining|Miners]] on the other hand, might need to register, if they sell bitcoins for "real currency or its equivalent".<ref>[http://arstechnica.com/tech-policy/2013/03/us-regulator-bitcoin-exchanges-must-comply-with-money-laundering-laws/ US regulator: Bitcoin exchanges must comply with money-laundering laws | Ars Technica]</ref><br />
<br />
In general, there are a [http://en.wikipedia.org/wiki/Local_currency number of currencies] in existence that are not official government-backed currencies. A currency is, after all, nothing more than a convenient unit of account. While national laws may vary from country to country, and you should certainly check the laws of your jurisdiction, in general trading in any commodity, including digital currency like Bitcoin, [http://en.wikipedia.org/wiki/BerkShares BerkShares], game currencies like WoW gold, or Linden dollars, is not illegal.<br />
<br />
== Bitcoin is a form of domestic terrorism because it only harms the economic stability of the USA and its currency ==<br />
<br />
According to [http://en.wikipedia.org/wiki/Definitions_of_terrorism#United_States the definition of terrorism in the United States], you need to do violent activities to be considered a terrorist for legal purposes. Recent off-the-cuff remarks by politicians have no basis in law or fact.<br />
<br />
Also, Bitcoin isn't domestic to the US or any other country. It's a worldwide community, as can be seen in this [https://bitcointalk.org/?topic=2346.0 map of Bitcoin nodes].<br />
<br />
== Bitcoin will only enable tax evaders which will lead to the eventual downfall of civilization ==<br />
<br />
Cash transactions hold the same level of anonymity but are still taxed successfully. It is up to you to follow the applicable state laws in your home country, or face the consequences.<br />
<br />
While it may be easy to transfer bitcoins anonymously, ''spending'' them anonymously on tangibles is just as hard as spending any other kind of money anonymously. Tax evaders are often caught because their lifestyle and assets are inconsistent with their reported income, and not necessarily because government is able to follow their money.<br />
<br />
== Bitcoins can be printed/minted by anyone and are therefore worthless ==<br />
<br />
Bitcoins are not printed/minted. Instead, [[Blocks]] are computed by miners and for their efforts they are awarded a specific amount of bitcoins and transaction fees paid by others. See [[Mining]] for more information on how this process works.<br />
<br />
== Bitcoins are worthless because they're based on unproven cryptography ==<br />
<br />
SHA256 and ECDSA which are used in Bitcoin are well-known industry standard algorithms. SHA256 is endorsed and used by the US Government and is standardized (FIPS180-3 Secure Hash Standard). If you believe that these algorithms are untrustworthy then you should not trust Bitcoin, credit card transactions or any type of electronic bank transfer. Bitcoin has a sound basis in well understood cryptography.<br />
<br />
== Early adopters are unfairly rewarded ==<br />
<br />
Early adopters are rewarded for taking the higher risk with their time and money. The capital invested in bitcoin at each stage of its life invigorated the community and helped the currency to reach subsequent milestones. Arguing that early adopters do not deserve to profit from this is akin to saying that early investors in a company, or people who buy stock at a company IPO (Initial Public Offering), are unfairly rewarded.<br />
<br />
This argument also depends on bitcoin early adopters using bitcoins to store rather than transfer value. The daily trade on the exchanges (as of Jan 2012) indicates that smaller transactions are becoming the norm, indicating trade rather than investment. In more pragmatic terms, "fairness" is an arbitrary concept that is improbable to be agreed upon by a large population. Establishing "fairness" is no goal of Bitcoin, as this would be impossible.<br />
<br />
Looking forwards, considering the amount of publicity bitcoin received as of April 2013, there can be no reasonable grounds for complaint for people who did not invest at that time, and then see the value (possibly) rising drastically higher.<br />
<br />
By starting to mine or acquire bitcoins today, you too can become an early adopter.<br />
<br />
== 21 million coins isn't enough; doesn't scale ==<br />
<br />
One Bitcoin is divisible down to eight decimal places. There are really 2,099,999,997,690,000 (just over 2 quadrillion) maximum possible atomic units in the bitcoin system.<br />
<br />
The value of "1 BTC" represents 100,000,000 of these. In other words, each is divisible by up to 10^8. <br />
<br />
As the value of the unit of 1 BTC grows too large to be useful for day to day transactions, people can start dealing in smaller [[Units|units]], such as milli-bitcoins (mBTC) or micro-bitcoins (μBTC).<br />
<br />
== Bitcoins are stored in wallet files, just copy the wallet file to get more coins! ==<br />
<br />
No, your wallet contains your secret keys, giving you the rights to spend your bitcoins. Think of it like having bank details stored in a file. If you give your bank details (or bitcoin wallet) to someone else, that doesn't double the amount of money in your account. You can spend your money or they can spend your money, but not both.<br />
<br />
== Lost coins can't be replaced and this is bad ==<br />
<br />
Bitcoins are divisible to 0.00000001, so there being fewer bitcoins remaining is not a problem for the currency itself. If you lose your coins, all other coins will go up in value a little. Consider it a donation to all other bitcoin users.<br />
<br />
A related question is: Why don't we have a mechanism to replace lost coins? The answer is that it is impossible to distinguish between a 'lost' coin and one that is simply sitting unused in someone's wallet.<br />
<br />
== It's a giant ponzi scheme ==<br />
In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.<br />
<br />
A ponzi scheme is a zero sum game. In a ponzi scheme, early adopters can only profit at the expense of late adopters, and the late adopters always lose. Bitcoin has an expected win-win outcome. Early and present adopters profit from the rise in value as Bitcoins become better understood and in turn demanded by the public at large. All adopters benefit from the usefulness of a reliable and widely-accepted decentralized peer-to-peer currency.<br />
<br />
== Finite coins plus lost coins means deflationary spiral ==<br />
As deflationary forces may apply, economic factors such as hoarding are offset by human factors that may lessen the chances that a [[Deflationary spiral]] will occur.<br />
<br />
== Bitcoin can't work because there is no way to control inflation ==<br />
<br />
Inflation is simply a rise of prices over time, which is generally the result of the devaluing of a currency. This is a function of supply and demand. Given the fact that the supply of bitcoins is fixed at a certain amount, unlike fiat money, the only way for inflation to get out of control is for demand to disappear. Temporary inflation is possible with a rapid adoption of Fractional Reserve Banking but will stabilize once a substantial number of the 21 million "hard" bitcoins are stored as reserves by banks.<br />
<br />
Given the fact that Bitcoin is a distributed system of currency, if demand were to decrease to almost nothing, the currency would be doomed anyway.<br />
<br />
The key point here is that Bitcoin as a currency can't be inflated by any single person or entity, like a government, as there's no way to increase supply past a certain amount.<br />
<br />
Indeed, the most likely scenario, as Bitcoin becomes more popular and demand increases, is for the currency to increase in value, or deflate, until demand stabilizes.<br />
<br />
== Alternative Currencies are useless, Bitcoin is the only important cryptocurrency ==<br />
Bitcoin is the biggest and most popular crypto currency, but other currencies like Litecoins shouldn't be neglected. Obviously, minor currencies with prices of $0.06 per coin aren't very interesting, but maybe worth an investment. Alternative cryptocurrencies will be especially important when the capacicty of all BTC has been reached.<br />
<br />
== The Bitcoin community consists of anarchist/conspiracy theorist/gold standard 'weenies' ==<br />
<br />
The members of the community vary in their ideological stances. While it may have been started by ideological enthusiasts, Bitcoin now speaks to a large number of regular pragmatic folk, who simply see its potential for reducing the costs and friction of global e-commerce.<br />
<br />
== Anyone with enough computing power can take over the network ==<br />
<br />
CONFIRMED, see [[Weaknesses]].<br />
<br />
That said, as the network grows, it becomes harder and harder for a single entity to do so. Already the Bitcoin network's computing power is quite ahead of the world's fastest supercomputers, together.<br />
<br />
What an attacker can do once the network is taken over is quite limited. Under no circumstances could an attacker create counterfeit coins, fake transactions, or take anybody else's money. An attacker's capabilities are limited to taking back their own money that they very recently spent, and preventing other people's transactions from receiving confirmations. Such an attack would be very costly in resources, and for such meager benefits there is little rational economic incentive to do such a thing.<br />
<br />
Furthermore, this attack scenario would only be feasible for as long as it was actively underway. As soon as the attack stopped, the network would resume normal operation.<br />
<br />
== Bitcoin violates governmental regulations ==<br />
<br />
There is no known governmental regulation which disallows the use of Bitcoin.<br />
<br />
See also: the "[[#Bitcoins_are_illegal_because_they.27re_not_legal_tender|Bitcoins are illegal because they're not legal tender]]" myth.<br />
<br />
== Fractional reserve banking is not possible ==<br />
<br />
It is possible. See the main article, [[Fractional Reserve Banking and Bitcoin]]<br />
<br />
== Point of sale with bitcoins isn't possible because of the 10 minute wait for confirmation ==<br />
<br />
It is true that transactions [[FAQ#Why_do_I_have_to_wait_10_minutes_before_I_can_spend_money_I_received.3F|can]] sometimes take tens of minutes to become ''confirmed''. Despite this, retailers can accept unconfirmed transactions with very little risk by simply 'listening' on the network for a double-spend transaction, or partnering with a company that provides this service. After a head start of merely several seconds, the original transaction would reach so much of the Bitcoin network that a fraudulent double-spend transaction would almost certainly be fruitless. An attacker would have to commit easily-detectable fraud, in person, several hundred or several thousand times, before one of these low-value double-spend attempts would likely succeed.<br />
<br />
An attacker could work around the necessity of sending out a second fraudulent transaction to the Bitcoin network by attempting to [[Mining|solo-mine]] an attack block containing the attack transaction himself - temporarily withholding the block with the rest of the network - and then execute the fraudulent purchase within seconds, or minutes at most, of mining the attack block, before broadcasting the attack block. However, the cost of such an activity would dramatically outweigh the value of anything typically offered without a confirmation wait for several reasons.<br />
<br />
First, mining a block (attack or otherwise) entitles the miner to a valuable block reward, and because the attack involves temporarily withholding the block from the network, the attacker would put himself in the likely position of his block becoming [[Stale block|stale]], which would result in forfeiture of the entire reward. Most solo miners solve less than one block per month, so this would represent the loss of proceeds of potentially several weeks of mining.<br />
<br />
Second, it is not possible for a solo miner to know exactly when his mining activity will yield a block, and because the attack must be carried out within seconds or minutes of successfully mining a block, the attacker will not be able to know or plan in advance the brief window when the attack would be likely to succeed. While it may be easy for a determined attacker to get low-value items that are sold and delivered online instantly without waiting for confirmations (such as downloads), this unpredictability and the briefness of the opportunity would make it extremely difficult to commit any kind of fraud where real-life interaction is required, such as visiting a merchant or taking possession of goods. Petty shoplifting would be far simpler. Even if an attacker went forward with this attack, the retailer would be notified of the fraud the moment the attack block is released seconds later.<br />
<br />
In short, the 10-minute wait for confirmation is only practically necessary when delivering goods of value that significantly exceed the block reward an attacker would have to risk to perform an attack and where recourse after delivery is practically nonexistent, such as money transfers.<br />
<br />
== After 21 million coins are mined, no one will generate new blocks ==<br />
<br />
When operating costs can't be covered by the block creation bounty, which will happen some time before the total amount of BTC is reached, miners will earn some profit from [[transaction fees]]. However unlike the block reward, there is [http://bitcoin.stackexchange.com/questions/876/how-much-will-transaction-fees-eventually-be/895#895 no coupling between transaction fees and the need for security], so there is less of a guarantee that the amount of [[Mining|mining]] being performed will be sufficient to maintain the network's security.<br />
<br />
== Bitcoin has no built-in chargeback mechanism, and this isn't good ==<br />
<br />
'''Why some people think this is bad''': Chargebacks are useful for limiting fraud. The person handling your money has a responsibility to prevent fraud. If you buy something on eBay and the seller never ships it, PayPal takes funds from the seller's account and gives you back the money. This strengthens the eBay economy, because people recognize that their risk is limited and are more willing to purchase items from risky sellers.<br />
<br />
'''Why it's actually a good thing''': Bitcoin is designed such that your money is yours and yours alone. Allowing chargebacks implies that it is possible for another entity to take your money from you. You can have either total ownership rights of your money, or fraud protection, but not both. That said, nothing inherent in the dollar or euro or any other currency is necessary for chargebacks to be possible, and likewise, nothing prevents the creation of PayPal-like services denominated in Bitcoin that provide chargebacks or fraud protection.<br />
<br />
The statement "The person handling your money has a responsibility to prevent fraud" is still true; the power has been shifted into your own hands. Fraud will always exist. It's up to you to only send bitcoins to trusted entities. It is possible to trust an online identity without ever knowing their physical identity; see the [http://wiki.bitcoin-otc.com/wiki/OTC_Rating_System OTC Web of Trust].<br />
<br />
== Quantum computers would break Bitcoin's security ==<br />
<br />
While ECDSA is indeed not secure under quantum computing, quantum computers don't yet exist and probably won't for a while.<br />
The DWAVE system often written about in the press is, even if all their claims are true, not a quantum computer of a kind that could be used for cryptography.<br />
Bitcoin's security, when used properly with a new address on each transaction, depends on more than just ECDSA: Cryptographic hashes are much stronger than ECDSA under QC.<br />
Bitcoin's security was designed to be upgraded in a forward compatible way and could be [http://en.wikipedia.org/wiki/Post-quantum_cryptography upgraded] if this were considered an imminent threat.<br />
<br />
See the implications of quantum computers on public key cryptography here http://en.wikipedia.org/wiki/Quantum_computer#Potential<br />
<br />
The ''risk'' of quantum computers is also there for financial institutions, like banks, because they heavily rely on cryptography when doing transactions.<br />
<br />
== Bitcoin makes self-sufficient artificial intelligence possible, which will in turn become self-aware and decide to exterminate humanity ==<br />
An artificial intelligence powerful enough to be threatening to mankind wouldn't depend on mankind to make Bitcoin, it would just invent something like Bitcoin itself and design it to be so attractive to us that we couldn't resist using it.<br />
<br />
== [[Mining|Bitcoin mining]] is a waste of energy and harmful for ecology ==<br />
No more so than the wastefulness of mining gold out of the ground, melting it down and shaping it into bars, and then putting it back underground again. Not to mention the building of big fancy buildings, the waste of energy printing and minting all the various fiat currencies, the transportation thereof in armored cars by no less than two security guards for each who could probably be doing something more productive, etc. <br />
<br />
As far as mediums of exchange go, Bitcoin is actually quite economical of resources, compared to others.<br />
<br />
'''Economic Argument 1'''<br />
<br />
[[Mining|Bitcoin mining]] is a highly competitive, dynamic, almost [http://en.wikipedia.org/wiki/Perfect_market perfect], market. Mining rigs can be set up and dismantled almost anywhere in the world with relative ease. Thus, market forces are constantly pushing mining activity to ''places'' and ''times'' where the marginal price of electricity is low or zero. These electricity products are cheap for a reason. Often it’s because the electricity is difficult (and wasteful) to transport, difficult to store, or because there is low demand and high supply. Using electricity in this way is a lot less wasteful than simply plugging a mining rig into the mains indiscriminately. <br />
<br />
For example, Iceland produces an excess of cheap electricity from renewable sources, but it has no way of exporting electricity because of its remote location. It is conceivable that at some point in future Bitcoin mining will only be profitable in places like Iceland, and unprofitable in places like central Europe, where electricity comes mostly from nuclear and fossil sources. <br />
<br />
Market forces could even push mining into innovative solutions that have an effective electricity consumption of ''zero''. Mining always produces heat equivalent to the energy consumed - for example, 1000 watts of mining equipment produces the same amount of heat as a 1000 watt heating element used in an electric space heater, hot tub, water heater, or similar appliance. Someone already in a willing position to incur the cost of electricity for its heat value alone could run mining equipment specially designed to mine bitcoins while capturing and utilizing the heat produced, without incurring any energy costs beyond what they already intended to spend on heating.<br />
<br />
'''Economic Argument 2'''<br />
<br />
When the environmental costs of mining are considered, they need to be weighed up against the benefits. If you question Bitcoin on the grounds that it consumes electricity, then you should also ask questions like this: Will Bitcoin promote economic growth by freeing up trade? Will this speed up the rate of technological innovation? Will this lead to faster development of green technologies? Will Bitcoin enable new, border crossing [http://en.wikipedia.org/wiki/Smart_grid smart grid] technologies? …<br />
<br />
Dismissal of Bitcoin because of its costs, while ignoring its benefits, is a dishonest argument. In fact, any environmental argument of this type is dishonest, not just pertaining to Bitcoin. Along similar lines, it could be argued that wind turbines are bad for the environment because making the steel structure consumes energy.<br />
<br />
'''Ratio of Capital Costs versus Electrical Costs'''<br />
<br />
The BFL Jalapeno hashes at 5.5 Gh/s using 30W. That device consumes about $40 per year in electricity (using U.S. residential average of about $0.15 per kWh.) But the device costs over $300 including shipping. Thus just about a quarter of all costs over a two-year useful life goes to electricity. This compares to GPUs where more than 90% of costs over a two-year life went to electricity. Even more efficient designs can be expected in the future.<br />
<br />
== Shopkeepers can't seriously set prices in bitcoins because of the volatile exchange rate ==<br />
<br />
The assumption is that bitcoins must be sold immediately to cover operating expenses. If the shopkeeper's back-end expenses were transacted in bitcoins as well, then the exchange rate would be irrelevant. Larger adoption of Bitcoin would make prices [http://en.wikipedia.org/wiki/Sticky_%28economics%29 sticky]. Future volatility is expected to decrease, as the size and depth of the market grows. <br />
<br />
In the meantime, many merchants simply regularly pull the latest market rates from the exchanges and automatically update the prices on their websites. Also you might be able to buy a put option in order to sell at a fixed rate for a given amount of time. This would protect you from drops in price and simplify your operations for that time period.<br />
<br />
== Like Flooz and e-gold, bitcoins serve as opportunities for criminals and will be shut down ==<br />
<br />
* Visa, MasterCard, PayPal, and cash all serve as opportunities for criminals as well, but society keeps them around due to their recognized net benefit.<br />
* Hopefully Bitcoin will grow to the point where no single organization can disrupt the network, or would be better served by helping it.<br />
* Terrorists fly aircraft into buildings, but the governments have not yet abolished consumer air travel. Obviously the public good outweighs the possible bad in their opinion.<br />
* Criminal law differs between jurisdictions.<br />
<br />
== Bitcoins will be shut down by the government just like Liberty Dollars were ==<br />
<br />
Liberty Dollars started as a commercial venture to establish an alternative US currency, including physical banknotes and coins, backed by precious metals. This, in and of itself, is not illegal. They were prosecuted under counterfeiting laws because the silver coins allegedly resembled US currency.<br />
<br />
Bitcoins do not resemble the currency of the US or of any other nation in any way, shape, or form. The word "dollar" is not attached to them in any way. The "$" symbol is not used in any way.<br />
<br />
Bitcoins have no representational similarity whatsoever to US dollars. <br />
<br />
Of course, actually 'shutting down' Liberty Dollars was as easy as arresting the head of the company and seizing the offices and the precious metals used as backing. The decentralized Bitcoin, with no leader, no servers, no office, and no tangible asset backing, does not have the same vulnerability.<br />
<br />
== Bitcoin is not decentralized because the developers can dictate the software's behavior ==<br />
<br />
The Bitcoin protocol was originally defined by Bitcoin's inventor, [[Satoshi Nakamoto]], and this protocol has now been widely accepted as the standard by the community of miners and users. <br />
<br />
Though the developers of the original Bitcoin client still exert influence over the Bitcoin community, their power to arbitrarily modify the protocol is very limited. Since the release of Bitcoin v0.3, changes to the protocol have been minor and always in agreement with community consensus.<br />
<br />
Protocol modifications, such as increasing the block award from 25 to 50 BTC, are not compatible with clients already running in the network. If the developers were to release a new client that the majority of miners perceives as corrupt, or in violation of the project’s aims, that client would simply not catch on, and the few users who do try to use it would find that their transactions get rejected by the network.<br />
<br />
There are also other [[:Category:Clients|Bitcoin clients made by other developers]] that adhere to the Bitcoin protocol. As more developers create alternative clients, less power will lie with the developers of the original Bitcoin client. <br />
<br />
== Bitcoin is a pyramid scheme ==<br />
<br />
Bitcoin is nearly opposite of a pyramid scheme in a mathematical sense. Because Bitcoins are algorithmically made scarce, no exponential benefit is derived from introducing new users to use of it. There is a quantitative benefit in having additional interest or demand, but this is in no way exponential.<br />
<br />
== Bitcoin was hacked ==<br />
<br />
In the history of Bitcoin, there has never been an attack on the [[block chain]] that resulted in stolen money from a confirmed output. Neither has there ever been a reported theft resulting directly from a vulnerability in the [[Original Bitcoin client|original Bitcoin client]], or a vulnerability in the protocol. Bitcoin is secured by standard cryptographic functions. These functions have been peer reviewed by cryptography experts and are considered unlikely to be breakable in the foreseeable future.<br />
<br />
It is safe to say that the currency itself has never been 'hacked'. However, several major ''websites'' using the currency have been hacked, often resulting in high profile Bitcoin heists. These heists are misreported in some media as hacks on Bitcoin itself. An analogy: Just because someone stole US dollars from a supermarket till, doesn’t mean that the US dollar as a currency has been 'hacked'.<br />
<br />
Most bitcoin thefts are the result of inadequate [[Securing your wallet|wallet security]]. In response to the wave of thefts in 2011 and 2012, the community has developed risk-mitigating measures such as [[Wallet_encryption|wallet encryption]], support for [[BIP_0011|multiple signatures]], [[How_to_set_up_a_secure_offline_savings_wallet|offline wallets]], [[Paper_wallet|paper wallets]], and [[Hardware_wallet|hardware wallets]]. As these measures gain adoption by merchants and users, it is expected that the number of thefts will drop.<br />
<br />
==References==<br />
<references/><br />
<br />
[[de:Mythen]]<br />
[[ru:Мифы о биткоине]]</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Myths&diff=43495Myths2013-12-29T09:30:04Z<p>Gidgreen: /* Bitcoins have no intrinsic value (unlike some other things) */</p>
<hr />
<div>Let's clear up some common Bitcoin misconceptions.<br />
<br />
== Bitcoin is just like all other digital currencies; nothing new ==<br />
<br />
Nearly all other digital currencies are centrally controlled. This means that:<br />
* They can be printed at the subjective whims of the controllers<br />
* They can be destroyed by attacking the central point of control<br />
* Arbitrary rules can be imposed upon their users by the controllers<br />
<br />
Being decentralized, Bitcoin solves all of these problems.<br />
<br />
== Bitcoins don't solve any problems that fiat currency and/or gold doesn't solve ==<br />
<br />
Unlike gold, bitcoins are:<br />
* Easy to transfer<br />
* Easy to secure<br />
* Easy to verify<br />
* Easy to granulate<br />
<br />
Unlike fiat currencies, bitcoins are:<br />
* Predictable and limited in [[Controlled_Currency_Supply|supply]]<br />
* Not controlled by a central authority (such as [http://en.wikipedia.org/wiki/Federal_Reserve The United States Federal Reserve])<br />
* Not debt-based<br />
<br />
Unlike electronic fiat currency systems, bitcoins are:<br />
* Potentially anonymous<br />
* Freeze-proof<br />
* Faster to transfer<br />
* Cheaper to transfer<br />
<br />
== Bitcoin is backed by processing power ==<br />
<br />
It is not correct to say that Bitcoin is "backed by" processing power. A currency being "backed" means that it is pegged to something else via a central party at a certain exchange rate yet you cannot exchange bitcoins for the computing power that was used to create them. Bitcoin is in this sense not backed by anything. It is a currency in its own right. Just as gold is not backed by anything, the same applies to Bitcoin. <br />
<br />
The Bitcoin currency is ''created'' via processing power, and the integrity of the block chain is ''protected'' by the existence of a network of powerful computing nodes from certain [[Weaknesses#Attacker_has_a_lot_of_computing_power|attacks]].<br />
<br />
== Bitcoins are worthless because they aren't backed by anything ==<br />
<br />
One could argue that gold isn't backed by anything either. Bitcoins have properties resulting from the system's design that allows them to be subjectively valued by individuals. This valuation is demonstrated when individuals freely exchange for or with bitcoins. Please refer to the [http://en.wikipedia.org/wiki/Subjective_theory_of_value Subjective Theory of Value].<br />
<br />
See also: the "[[#Bitcoin_is_backed_by_processing_power|Bitcoin is backed by processing power]]" myth.<br />
<br />
== The value of bitcoins are based on how much electricity and computing power it takes to mine them ==<br />
<br />
This statement is an attempt to apply to Bitcoin the [http://en.wikipedia.org/wiki/Labor_theory_of_value labor theory of value], which is generally accepted as false. Just because something takes X resources to create does not mean that the resulting product will be worth X. It can be worth more, or less, depending on the utility thereof to its users.<br />
<br />
In fact the causality is the reverse of that (this applies to the labor theory of value in general). The cost to mine bitcoins is based on how much they are worth. If bitcoins go up in value, more people will mine (because [[Mining|mining]] is profitable), thus [[difficulty]] will go up, thus the cost of mining will go up. The inverse happens if bitcoins go down in value. These effects balance out to cause mining to always cost an amount proportional to the value of bitcoins it produces.<br />
<br />
== Bitcoins have no intrinsic value (unlike some other things) ==<br />
<br />
This is simply not true. Each bitcoin gives the holder the ability to embed a large number of short messages in a globally distributed and timestamped data store, namely the bitcoin blockchain. There is a tradeoff between the exact number of messages and how quickly they can be embedded. But as of December 2013, it's fair to say that one bitcoin allows around 1000 such messages to be embedded, each within about 10 minutes of being sent, since a transaction fee of 0.001 BTC is enough to get transactions confirmed quickly. This message embedding certainly has intrinsic value since it can be used to prove ownership of a document at a certain time, by embedding a one-way hash of that document in the blockchain. Considering that electronic notarization services charge something like $10/document, this would give an intrinsic value of something like $10,000 per bitcoin.<br />
<br />
While some other tangible commodities do have intrinsic value, that value is generally much less than its trading price. Consider for example that gold, if it were not used as an inflation-proof store of value, but rather only for its industrial uses, would certainly not be worth what it is today, since the industrial requirements for gold are far smaller than the available supply thereof.<br />
<br />
In any event, while historically intrinsic value, as well as other attributes like divisibility, fungibility, scarcity, durability, helped establish certain commodities as mediums of exchange, it is certainly not a prerequisite. While bitcoins are accused of lacking 'intrinsic value' in this sense, they make up for it in spades by possessing the other qualities necessary to make it a good medium of exchange, equal to or better than [http://en.wikipedia.org/wiki/Commodity_money commodity money].<br />
<br />
Another way to think about this is to consider the value of bitcoin the global network, rather than each bitcoin in isolation. The value of an individual telephone is derived from the network it is connected to. If there was no phone network, a telephone would be useless. Similarly the value of an individual bitcoin derives from the global network of bitcoin-enabled merchants, exchanges, wallets, etc... Just like a phone is necessary to transmit vocal information through the network, a bitcoin is necessary to transmit economic information through the network.<br />
<br />
Value is ultimately determined by what people are willing to trade for - by supply and demand.<br />
<br />
== Bitcoins are illegal because they're not legal tender ==<br />
In March 2013, the U.S. [http://en.wikipedia.org/wiki/Financial_Crimes_Enforcement_Network Financial Crimes Enforcement Network] issues a new set of guidelines on "de-centralized virtual currency", clearly targeting Bitcoin. Under the new guidelines, "a user of virtual currency is not a Money Services Businesses (MSB) under FinCEN's regulations and therefore is not subject to MSB registration, reporting, and record keeping regulations." [[Mining|Miners]] on the other hand, might need to register, if they sell bitcoins for "real currency or its equivalent".<ref>[http://arstechnica.com/tech-policy/2013/03/us-regulator-bitcoin-exchanges-must-comply-with-money-laundering-laws/ US regulator: Bitcoin exchanges must comply with money-laundering laws | Ars Technica]</ref><br />
<br />
In general, there are a [http://en.wikipedia.org/wiki/Local_currency number of currencies] in existence that are not official government-backed currencies. A currency is, after all, nothing more than a convenient unit of account. While national laws may vary from country to country, and you should certainly check the laws of your jurisdiction, in general trading in any commodity, including digital currency like Bitcoin, [http://en.wikipedia.org/wiki/BerkShares BerkShares], game currencies like WoW gold, or Linden dollars, is not illegal.<br />
<br />
== Bitcoin is a form of domestic terrorism because it only harms the economic stability of the USA and its currency ==<br />
<br />
According to [http://en.wikipedia.org/wiki/Definitions_of_terrorism#United_States the definition of terrorism in the United States], you need to do violent activities to be considered a terrorist for legal purposes. Recent off-the-cuff remarks by politicians have no basis in law or fact.<br />
<br />
Also, Bitcoin isn't domestic to the US or any other country. It's a worldwide community, as can be seen in this [https://bitcointalk.org/?topic=2346.0 map of Bitcoin nodes].<br />
<br />
== Bitcoin will only enable tax evaders which will lead to the eventual downfall of civilization ==<br />
<br />
Cash transactions hold the same level of anonymity but are still taxed successfully. It is up to you to follow the applicable state laws in your home country, or face the consequences.<br />
<br />
While it may be easy to transfer bitcoins anonymously, ''spending'' them anonymously on tangibles is just as hard as spending any other kind of money anonymously. Tax evaders are often caught because their lifestyle and assets are inconsistent with their reported income, and not necessarily because government is able to follow their money.<br />
<br />
== Bitcoins can be printed/minted by anyone and are therefore worthless ==<br />
<br />
Bitcoins are not printed/minted. Instead, [[Blocks]] are computed by miners and for their efforts they are awarded a specific amount of bitcoins and transaction fees paid by others. See [[Mining]] for more information on how this process works.<br />
<br />
== Bitcoins are worthless because they're based on unproven cryptography ==<br />
<br />
SHA256 and ECDSA which are used in Bitcoin are well-known industry standard algorithms. SHA256 is endorsed and used by the US Government and is standardized (FIPS180-3 Secure Hash Standard). If you believe that these algorithms are untrustworthy then you should not trust Bitcoin, credit card transactions or any type of electronic bank transfer. Bitcoin has a sound basis in well understood cryptography.<br />
<br />
== Early adopters are unfairly rewarded ==<br />
<br />
Early adopters are rewarded for taking the higher risk with their time and money. The capital invested in bitcoin at each stage of its life invigorated the community and helped the currency to reach subsequent milestones. Arguing that early adopters do not deserve to profit from this is akin to saying that early investors in a company, or people who buy stock at a company IPO (Initial Public Offering), are unfairly rewarded.<br />
<br />
This argument also depends on bitcoin early adopters using bitcoins to store rather than transfer value. The daily trade on the exchanges (as of Jan 2012) indicates that smaller transactions are becoming the norm, indicating trade rather than investment. In more pragmatic terms, "fairness" is an arbitrary concept that is improbable to be agreed upon by a large population. Establishing "fairness" is no goal of Bitcoin, as this would be impossible.<br />
<br />
Looking forwards, considering the amount of publicity bitcoin received as of April 2013, there can be no reasonable grounds for complaint for people who did not invest at that time, and then see the value (possibly) rising drastically higher.<br />
<br />
By starting to mine or acquire bitcoins today, you too can become an early adopter.<br />
<br />
== 21 million coins isn't enough; doesn't scale ==<br />
<br />
One Bitcoin is divisible down to eight decimal places. There are really 2,099,999,997,690,000 (just over 2 quadrillion) maximum possible atomic units in the bitcoin system.<br />
<br />
The value of "1 BTC" represents 100,000,000 of these. In other words, each is divisible by up to 10^8. <br />
<br />
As the value of the unit of 1 BTC grows too large to be useful for day to day transactions, people can start dealing in smaller [[Units|units]], such as milli-bitcoins (mBTC) or micro-bitcoins (μBTC).<br />
<br />
== Bitcoins are stored in wallet files, just copy the wallet file to get more coins! ==<br />
<br />
No, your wallet contains your secret keys, giving you the rights to spend your bitcoins. Think of it like having bank details stored in a file. If you give your bank details (or bitcoin wallet) to someone else, that doesn't double the amount of money in your account. You can spend your money or they can spend your money, but not both.<br />
<br />
== Lost coins can't be replaced and this is bad ==<br />
<br />
Bitcoins are divisible to 0.00000001, so there being fewer bitcoins remaining is not a problem for the currency itself. If you lose your coins, all other coins will go up in value a little. Consider it a donation to all other bitcoin users.<br />
<br />
A related question is: Why don't we have a mechanism to replace lost coins? The answer is that it is impossible to distinguish between a 'lost' coin and one that is simply sitting unused in someone's wallet.<br />
<br />
== It's a giant ponzi scheme ==<br />
In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.<br />
<br />
A ponzi scheme is a zero sum game. In a ponzi scheme, early adopters can only profit at the expense of late adopters, and the late adopters always lose. Bitcoin has an expected win-win outcome. Early and present adopters profit from the rise in value as Bitcoins become better understood and in turn demanded by the public at large. All adopters benefit from the usefulness of a reliable and widely-accepted decentralized peer-to-peer currency.<br />
<br />
== Finite coins plus lost coins means deflationary spiral ==<br />
As deflationary forces may apply, economic factors such as hoarding are offset by human factors that may lessen the chances that a [[Deflationary spiral]] will occur.<br />
<br />
== Bitcoin can't work because there is no way to control inflation ==<br />
<br />
Inflation is simply a rise of prices over time, which is generally the result of the devaluing of a currency. This is a function of supply and demand. Given the fact that the supply of bitcoins is fixed at a certain amount, unlike fiat money, the only way for inflation to get out of control is for demand to disappear. Temporary inflation is possible with a rapid adoption of Fractional Reserve Banking but will stabilize once a substantial number of the 21 million "hard" bitcoins are stored as reserves by banks.<br />
<br />
Given the fact that Bitcoin is a distributed system of currency, if demand were to decrease to almost nothing, the currency would be doomed anyway.<br />
<br />
The key point here is that Bitcoin as a currency can't be inflated by any single person or entity, like a government, as there's no way to increase supply past a certain amount.<br />
<br />
Indeed, the most likely scenario, as Bitcoin becomes more popular and demand increases, is for the currency to increase in value, or deflate, until demand stabilizes.<br />
<br />
== Alternative Currencies are useless, Bitcoin is the only important cryptocurrency ==<br />
Bitcoin is the biggest and most popular crypto currency, but other currencies like Litecoins shouldn't be neglected. Obviously, minor currencies with prices of $0.06 per coin aren't very interesting, but maybe worth an investment. Alternative cryptocurrencies will be especially important when the capacicty of all BTC has been reached.<br />
<br />
== The Bitcoin community consists of anarchist/conspiracy theorist/gold standard 'weenies' ==<br />
<br />
The members of the community vary in their ideological stances. While it may have been started by ideological enthusiasts, Bitcoin now speaks to a large number of regular pragmatic folk, who simply see its potential for reducing the costs and friction of global e-commerce.<br />
<br />
== Anyone with enough computing power can take over the network ==<br />
<br />
CONFIRMED, see [[Weaknesses]].<br />
<br />
That said, as the network grows, it becomes harder and harder for a single entity to do so. Already the Bitcoin network's computing power is quite ahead of the world's fastest supercomputers, together.<br />
<br />
What an attacker can do once the network is taken over is quite limited. Under no circumstances could an attacker create counterfeit coins, fake transactions, or take anybody else's money. An attacker's capabilities are limited to taking back their own money that they very recently spent, and preventing other people's transactions from receiving confirmations. Such an attack would be very costly in resources, and for such meager benefits there is little rational economic incentive to do such a thing.<br />
<br />
Furthermore, this attack scenario would only be feasible for as long as it was actively underway. As soon as the attack stopped, the network would resume normal operation.<br />
<br />
== Bitcoin violates governmental regulations ==<br />
<br />
There is no known governmental regulation which disallows the use of Bitcoin.<br />
<br />
See also: the "[[#Bitcoins_are_illegal_because_they.27re_not_legal_tender|Bitcoins are illegal because they're not legal tender]]" myth.<br />
<br />
== Fractional reserve banking is not possible ==<br />
<br />
It is possible. See the main article, [[Fractional Reserve Banking and Bitcoin]]<br />
<br />
== Point of sale with bitcoins isn't possible because of the 10 minute wait for confirmation ==<br />
<br />
It is true that transactions [[FAQ#Why_do_I_have_to_wait_10_minutes_before_I_can_spend_money_I_received.3F|can]] sometimes take tens of minutes to become ''confirmed''. Despite this, retailers can accept unconfirmed transactions with very little risk by simply 'listening' on the network for a double-spend transaction, or partnering with a company that provides this service. After a head start of merely several seconds, the original transaction would reach so much of the Bitcoin network that a fraudulent double-spend transaction would almost certainly be fruitless. An attacker would have to commit easily-detectable fraud, in person, several hundred or several thousand times, before one of these low-value double-spend attempts would likely succeed.<br />
<br />
An attacker could work around the necessity of sending out a second fraudulent transaction to the Bitcoin network by attempting to [[Mining|solo-mine]] an attack block containing the attack transaction himself - temporarily withholding the block with the rest of the network - and then execute the fraudulent purchase within seconds, or minutes at most, of mining the attack block, before broadcasting the attack block. However, the cost of such an activity would dramatically outweigh the value of anything typically offered without a confirmation wait for several reasons.<br />
<br />
First, mining a block (attack or otherwise) entitles the miner to a valuable block reward, and because the attack involves temporarily withholding the block from the network, the attacker would put himself in the likely position of his block becoming [[Stale block|stale]], which would result in forfeiture of the entire reward. Most solo miners solve less than one block per month, so this would represent the loss of proceeds of potentially several weeks of mining.<br />
<br />
Second, it is not possible for a solo miner to know exactly when his mining activity will yield a block, and because the attack must be carried out within seconds or minutes of successfully mining a block, the attacker will not be able to know or plan in advance the brief window when the attack would be likely to succeed. While it may be easy for a determined attacker to get low-value items that are sold and delivered online instantly without waiting for confirmations (such as downloads), this unpredictability and the briefness of the opportunity would make it extremely difficult to commit any kind of fraud where real-life interaction is required, such as visiting a merchant or taking possession of goods. Petty shoplifting would be far simpler. Even if an attacker went forward with this attack, the retailer would be notified of the fraud the moment the attack block is released seconds later.<br />
<br />
In short, the 10-minute wait for confirmation is only practically necessary when delivering goods of value that significantly exceed the block reward an attacker would have to risk to perform an attack and where recourse after delivery is practically nonexistent, such as money transfers.<br />
<br />
== After 21 million coins are mined, no one will generate new blocks ==<br />
<br />
When operating costs can't be covered by the block creation bounty, which will happen some time before the total amount of BTC is reached, miners will earn some profit from [[transaction fees]]. However unlike the block reward, there is [http://bitcoin.stackexchange.com/questions/876/how-much-will-transaction-fees-eventually-be/895#895 no coupling between transaction fees and the need for security], so there is less of a guarantee that the amount of [[Mining|mining]] being performed will be sufficient to maintain the network's security.<br />
<br />
== Bitcoin has no built-in chargeback mechanism, and this isn't good ==<br />
<br />
'''Why some people think this is bad''': Chargebacks are useful for limiting fraud. The person handling your money has a responsibility to prevent fraud. If you buy something on eBay and the seller never ships it, PayPal takes funds from the seller's account and gives you back the money. This strengthens the eBay economy, because people recognize that their risk is limited and are more willing to purchase items from risky sellers.<br />
<br />
'''Why it's actually a good thing''': Bitcoin is designed such that your money is yours and yours alone. Allowing chargebacks implies that it is possible for another entity to take your money from you. You can have either total ownership rights of your money, or fraud protection, but not both. That said, nothing inherent in the dollar or euro or any other currency is necessary for chargebacks to be possible, and likewise, nothing prevents the creation of PayPal-like services denominated in Bitcoin that provide chargebacks or fraud protection.<br />
<br />
The statement "The person handling your money has a responsibility to prevent fraud" is still true; the power has been shifted into your own hands. Fraud will always exist. It's up to you to only send bitcoins to trusted entities. It is possible to trust an online identity without ever knowing their physical identity; see the [http://wiki.bitcoin-otc.com/wiki/OTC_Rating_System OTC Web of Trust].<br />
<br />
== Quantum computers would break Bitcoin's security ==<br />
<br />
While ECDSA is indeed not secure under quantum computing, quantum computers don't yet exist and probably won't for a while.<br />
The DWAVE system often written about in the press is, even if all their claims are true, not a quantum computer of a kind that could be used for cryptography.<br />
Bitcoin's security, when used properly with a new address on each transaction, depends on more than just ECDSA: Cryptographic hashes are much stronger than ECDSA under QC.<br />
Bitcoin's security was designed to be upgraded in a forward compatible way and could be [http://en.wikipedia.org/wiki/Post-quantum_cryptography upgraded] if this were considered an imminent threat.<br />
<br />
See the implications of quantum computers on public key cryptography here http://en.wikipedia.org/wiki/Quantum_computer#Potential<br />
<br />
The ''risk'' of quantum computers is also there for financial institutions, like banks, because they heavily rely on cryptography when doing transactions.<br />
<br />
== Bitcoin makes self-sufficient artificial intelligence possible, which will in turn become self-aware and decide to exterminate humanity ==<br />
An artificial intelligence powerful enough to be threatening to mankind wouldn't depend on mankind to make Bitcoin, it would just invent something like Bitcoin itself and design it to be so attractive to us that we couldn't resist using it.<br />
<br />
== [[Mining|Bitcoin mining]] is a waste of energy and harmful for ecology ==<br />
No more so than the wastefulness of mining gold out of the ground, melting it down and shaping it into bars, and then putting it back underground again. Not to mention the building of big fancy buildings, the waste of energy printing and minting all the various fiat currencies, the transportation thereof in armored cars by no less than two security guards for each who could probably be doing something more productive, etc. <br />
<br />
As far as mediums of exchange go, Bitcoin is actually quite economical of resources, compared to others.<br />
<br />
'''Economic Argument 1'''<br />
<br />
[[Mining|Bitcoin mining]] is a highly competitive, dynamic, almost [http://en.wikipedia.org/wiki/Perfect_market perfect], market. Mining rigs can be set up and dismantled almost anywhere in the world with relative ease. Thus, market forces are constantly pushing mining activity to ''places'' and ''times'' where the marginal price of electricity is low or zero. These electricity products are cheap for a reason. Often it’s because the electricity is difficult (and wasteful) to transport, difficult to store, or because there is low demand and high supply. Using electricity in this way is a lot less wasteful than simply plugging a mining rig into the mains indiscriminately. <br />
<br />
For example, Iceland produces an excess of cheap electricity from renewable sources, but it has no way of exporting electricity because of its remote location. It is conceivable that at some point in future Bitcoin mining will only be profitable in places like Iceland, and unprofitable in places like central Europe, where electricity comes mostly from nuclear and fossil sources. <br />
<br />
Market forces could even push mining into innovative solutions that have an effective electricity consumption of ''zero''. Mining always produces heat equivalent to the energy consumed - for example, 1000 watts of mining equipment produces the same amount of heat as a 1000 watt heating element used in an electric space heater, hot tub, water heater, or similar appliance. Someone already in a willing position to incur the cost of electricity for its heat value alone could run mining equipment specially designed to mine bitcoins while capturing and utilizing the heat produced, without incurring any energy costs beyond what they already intended to spend on heating.<br />
<br />
'''Economic Argument 2'''<br />
<br />
When the environmental costs of mining are considered, they need to be weighed up against the benefits. If you question Bitcoin on the grounds that it consumes electricity, then you should also ask questions like this: Will Bitcoin promote economic growth by freeing up trade? Will this speed up the rate of technological innovation? Will this lead to faster development of green technologies? Will Bitcoin enable new, border crossing [http://en.wikipedia.org/wiki/Smart_grid smart grid] technologies? …<br />
<br />
Dismissal of Bitcoin because of its costs, while ignoring its benefits, is a dishonest argument. In fact, any environmental argument of this type is dishonest, not just pertaining to Bitcoin. Along similar lines, it could be argued that wind turbines are bad for the environment because making the steel structure consumes energy.<br />
<br />
'''Ratio of Capital Costs versus Electrical Costs'''<br />
<br />
The BFL Jalapeno hashes at 5.5 Gh/s using 30W. That device consumes about $40 per year in electricity (using U.S. residential average of about $0.15 per kWh.) But the device costs over $300 including shipping. Thus just about a quarter of all costs over a two-year useful life goes to electricity. This compares to GPUs where more than 90% of costs over a two-year life went to electricity. Even more efficient designs can be expected in the future.<br />
<br />
== Shopkeepers can't seriously set prices in bitcoins because of the volatile exchange rate ==<br />
<br />
The assumption is that bitcoins must be sold immediately to cover operating expenses. If the shopkeeper's back-end expenses were transacted in bitcoins as well, then the exchange rate would be irrelevant. Larger adoption of Bitcoin would make prices [http://en.wikipedia.org/wiki/Sticky_%28economics%29 sticky]. Future volatility is expected to decrease, as the size and depth of the market grows. <br />
<br />
In the meantime, many merchants simply regularly pull the latest market rates from the exchanges and automatically update the prices on their websites. Also you might be able to buy a put option in order to sell at a fixed rate for a given amount of time. This would protect you from drops in price and simplify your operations for that time period.<br />
<br />
== Like Flooz and e-gold, bitcoins serve as opportunities for criminals and will be shut down ==<br />
<br />
* Visa, MasterCard, PayPal, and cash all serve as opportunities for criminals as well, but society keeps them around due to their recognized net benefit.<br />
* Hopefully Bitcoin will grow to the point where no single organization can disrupt the network, or would be better served by helping it.<br />
* Terrorists fly aircraft into buildings, but the governments have not yet abolished consumer air travel. Obviously the public good outweighs the possible bad in their opinion.<br />
* Criminal law differs between jurisdictions.<br />
<br />
== Bitcoins will be shut down by the government just like Liberty Dollars were ==<br />
<br />
Liberty Dollars started as a commercial venture to establish an alternative US currency, including physical banknotes and coins, backed by precious metals. This, in and of itself, is not illegal. They were prosecuted under counterfeiting laws because the silver coins allegedly resembled US currency.<br />
<br />
Bitcoins do not resemble the currency of the US or of any other nation in any way, shape, or form. The word "dollar" is not attached to them in any way. The "$" symbol is not used in any way.<br />
<br />
Bitcoins have no representational similarity whatsoever to US dollars. <br />
<br />
Of course, actually 'shutting down' Liberty Dollars was as easy as arresting the head of the company and seizing the offices and the precious metals used as backing. The decentralized Bitcoin, with no leader, no servers, no office, and no tangible asset backing, does not have the same vulnerability.<br />
<br />
== Bitcoin is not decentralized because the developers can dictate the software's behavior ==<br />
<br />
The Bitcoin protocol was originally defined by Bitcoin's inventor, [[Satoshi Nakamoto]], and this protocol has now been widely accepted as the standard by the community of miners and users. <br />
<br />
Though the developers of the original Bitcoin client still exert influence over the Bitcoin community, their power to arbitrarily modify the protocol is very limited. Since the release of Bitcoin v0.3, changes to the protocol have been minor and always in agreement with community consensus.<br />
<br />
Protocol modifications, such as increasing the block award from 25 to 50 BTC, are not compatible with clients already running in the network. If the developers were to release a new client that the majority of miners perceives as corrupt, or in violation of the project’s aims, that client would simply not catch on, and the few users who do try to use it would find that their transactions get rejected by the network.<br />
<br />
There are also other [[:Category:Clients|Bitcoin clients made by other developers]] that adhere to the Bitcoin protocol. As more developers create alternative clients, less power will lie with the developers of the original Bitcoin client. <br />
<br />
== Bitcoin is a pyramid scheme ==<br />
<br />
Bitcoin is nearly opposite of a pyramid scheme in a mathematical sense. Because Bitcoins are algorithmically made scarce, no exponential benefit is derived from introducing new users to use of it. There is a quantitative benefit in having additional interest or demand, but this is in no way exponential.<br />
<br />
== Bitcoin was hacked ==<br />
<br />
In the history of Bitcoin, there has never been an attack on the [[block chain]] that resulted in stolen money from a confirmed output. Neither has there ever been a reported theft resulting directly from a vulnerability in the [[Original Bitcoin client|original Bitcoin client]], or a vulnerability in the protocol. Bitcoin is secured by standard cryptographic functions. These functions have been peer reviewed by cryptography experts and are considered unlikely to be breakable in the foreseeable future.<br />
<br />
It is safe to say that the currency itself has never been 'hacked'. However, several major ''websites'' using the currency have been hacked, often resulting in high profile Bitcoin heists. These heists are misreported in some media as hacks on Bitcoin itself. An analogy: Just because someone stole US dollars from a supermarket till, doesn’t mean that the US dollar as a currency has been 'hacked'.<br />
<br />
Most bitcoin thefts are the result of inadequate [[Securing your wallet|wallet security]]. In response to the wave of thefts in 2011 and 2012, the community has developed risk-mitigating measures such as [[Wallet_encryption|wallet encryption]], support for [[BIP_0011|multiple signatures]], [[How_to_set_up_a_secure_offline_savings_wallet|offline wallets]], [[Paper_wallet|paper wallets]], and [[Hardware_wallet|hardware wallets]]. As these measures gain adoption by merchants and users, it is expected that the number of thefts will drop.<br />
<br />
==References==<br />
<references/><br />
<br />
[[de:Mythen]]<br />
[[ru:Мифы о биткоине]]</div>Gidgreenhttps://tests.bitcoin.it/w/index.php?title=Myths&diff=43494Myths2013-12-29T09:29:27Z<p>Gidgreen: Bitcoins do have intrinsic value</p>
<hr />
<div>Let's clear up some common Bitcoin misconceptions.<br />
<br />
== Bitcoin is just like all other digital currencies; nothing new ==<br />
<br />
Nearly all other digital currencies are centrally controlled. This means that:<br />
* They can be printed at the subjective whims of the controllers<br />
* They can be destroyed by attacking the central point of control<br />
* Arbitrary rules can be imposed upon their users by the controllers<br />
<br />
Being decentralized, Bitcoin solves all of these problems.<br />
<br />
== Bitcoins don't solve any problems that fiat currency and/or gold doesn't solve ==<br />
<br />
Unlike gold, bitcoins are:<br />
* Easy to transfer<br />
* Easy to secure<br />
* Easy to verify<br />
* Easy to granulate<br />
<br />
Unlike fiat currencies, bitcoins are:<br />
* Predictable and limited in [[Controlled_Currency_Supply|supply]]<br />
* Not controlled by a central authority (such as [http://en.wikipedia.org/wiki/Federal_Reserve The United States Federal Reserve])<br />
* Not debt-based<br />
<br />
Unlike electronic fiat currency systems, bitcoins are:<br />
* Potentially anonymous<br />
* Freeze-proof<br />
* Faster to transfer<br />
* Cheaper to transfer<br />
<br />
== Bitcoin is backed by processing power ==<br />
<br />
It is not correct to say that Bitcoin is "backed by" processing power. A currency being "backed" means that it is pegged to something else via a central party at a certain exchange rate yet you cannot exchange bitcoins for the computing power that was used to create them. Bitcoin is in this sense not backed by anything. It is a currency in its own right. Just as gold is not backed by anything, the same applies to Bitcoin. <br />
<br />
The Bitcoin currency is ''created'' via processing power, and the integrity of the block chain is ''protected'' by the existence of a network of powerful computing nodes from certain [[Weaknesses#Attacker_has_a_lot_of_computing_power|attacks]].<br />
<br />
== Bitcoins are worthless because they aren't backed by anything ==<br />
<br />
One could argue that gold isn't backed by anything either. Bitcoins have properties resulting from the system's design that allows them to be subjectively valued by individuals. This valuation is demonstrated when individuals freely exchange for or with bitcoins. Please refer to the [http://en.wikipedia.org/wiki/Subjective_theory_of_value Subjective Theory of Value].<br />
<br />
See also: the "[[#Bitcoin_is_backed_by_processing_power|Bitcoin is backed by processing power]]" myth.<br />
<br />
== The value of bitcoins are based on how much electricity and computing power it takes to mine them ==<br />
<br />
This statement is an attempt to apply to Bitcoin the [http://en.wikipedia.org/wiki/Labor_theory_of_value labor theory of value], which is generally accepted as false. Just because something takes X resources to create does not mean that the resulting product will be worth X. It can be worth more, or less, depending on the utility thereof to its users.<br />
<br />
In fact the causality is the reverse of that (this applies to the labor theory of value in general). The cost to mine bitcoins is based on how much they are worth. If bitcoins go up in value, more people will mine (because [[Mining|mining]] is profitable), thus [[difficulty]] will go up, thus the cost of mining will go up. The inverse happens if bitcoins go down in value. These effects balance out to cause mining to always cost an amount proportional to the value of bitcoins it produces.<br />
<br />
== Bitcoins have no intrinsic value (unlike some other things) ==<br />
<br />
This is simply not true. Each bitcoin gives the holder the ability to embed a large number of short messages in a globally distributed and timestamped data store, namely the bitcoin blockchain. There is a tradeoff between the exact number of messages and how quickly they can be embedded. But as of December 2013, it's fair to say that one bitcoin allows around 1000 such messages to be embedded, each within about 10 minutes of being sent. This message embedding certainly has intrinsic value since it can be used to prove ownership of a document at a certain time, by embedding a one-way hash of that document in the blockchain. Considering that electronic notarization services charge something like $10/document, this would give an intrinsic value of something like $10,000 per bitcoin.<br />
<br />
While some other tangible commodities do have intrinsic value, that value is generally much less than its trading price. Consider for example that gold, if it were not used as an inflation-proof store of value, but rather only for its industrial uses, would certainly not be worth what it is today, since the industrial requirements for gold are far smaller than the available supply thereof.<br />
<br />
In any event, while historically intrinsic value, as well as other attributes like divisibility, fungibility, scarcity, durability, helped establish certain commodities as mediums of exchange, it is certainly not a prerequisite. While bitcoins are accused of lacking 'intrinsic value' in this sense, they make up for it in spades by possessing the other qualities necessary to make it a good medium of exchange, equal to or better than [http://en.wikipedia.org/wiki/Commodity_money commodity money].<br />
<br />
Another way to think about this is to consider the value of bitcoin the global network, rather than each bitcoin in isolation. The value of an individual telephone is derived from the network it is connected to. If there was no phone network, a telephone would be useless. Similarly the value of an individual bitcoin derives from the global network of bitcoin-enabled merchants, exchanges, wallets, etc... Just like a phone is necessary to transmit vocal information through the network, a bitcoin is necessary to transmit economic information through the network.<br />
<br />
Value is ultimately determined by what people are willing to trade for - by supply and demand.<br />
<br />
== Bitcoins are illegal because they're not legal tender ==<br />
In March 2013, the U.S. [http://en.wikipedia.org/wiki/Financial_Crimes_Enforcement_Network Financial Crimes Enforcement Network] issues a new set of guidelines on "de-centralized virtual currency", clearly targeting Bitcoin. Under the new guidelines, "a user of virtual currency is not a Money Services Businesses (MSB) under FinCEN's regulations and therefore is not subject to MSB registration, reporting, and record keeping regulations." [[Mining|Miners]] on the other hand, might need to register, if they sell bitcoins for "real currency or its equivalent".<ref>[http://arstechnica.com/tech-policy/2013/03/us-regulator-bitcoin-exchanges-must-comply-with-money-laundering-laws/ US regulator: Bitcoin exchanges must comply with money-laundering laws | Ars Technica]</ref><br />
<br />
In general, there are a [http://en.wikipedia.org/wiki/Local_currency number of currencies] in existence that are not official government-backed currencies. A currency is, after all, nothing more than a convenient unit of account. While national laws may vary from country to country, and you should certainly check the laws of your jurisdiction, in general trading in any commodity, including digital currency like Bitcoin, [http://en.wikipedia.org/wiki/BerkShares BerkShares], game currencies like WoW gold, or Linden dollars, is not illegal.<br />
<br />
== Bitcoin is a form of domestic terrorism because it only harms the economic stability of the USA and its currency ==<br />
<br />
According to [http://en.wikipedia.org/wiki/Definitions_of_terrorism#United_States the definition of terrorism in the United States], you need to do violent activities to be considered a terrorist for legal purposes. Recent off-the-cuff remarks by politicians have no basis in law or fact.<br />
<br />
Also, Bitcoin isn't domestic to the US or any other country. It's a worldwide community, as can be seen in this [https://bitcointalk.org/?topic=2346.0 map of Bitcoin nodes].<br />
<br />
== Bitcoin will only enable tax evaders which will lead to the eventual downfall of civilization ==<br />
<br />
Cash transactions hold the same level of anonymity but are still taxed successfully. It is up to you to follow the applicable state laws in your home country, or face the consequences.<br />
<br />
While it may be easy to transfer bitcoins anonymously, ''spending'' them anonymously on tangibles is just as hard as spending any other kind of money anonymously. Tax evaders are often caught because their lifestyle and assets are inconsistent with their reported income, and not necessarily because government is able to follow their money.<br />
<br />
== Bitcoins can be printed/minted by anyone and are therefore worthless ==<br />
<br />
Bitcoins are not printed/minted. Instead, [[Blocks]] are computed by miners and for their efforts they are awarded a specific amount of bitcoins and transaction fees paid by others. See [[Mining]] for more information on how this process works.<br />
<br />
== Bitcoins are worthless because they're based on unproven cryptography ==<br />
<br />
SHA256 and ECDSA which are used in Bitcoin are well-known industry standard algorithms. SHA256 is endorsed and used by the US Government and is standardized (FIPS180-3 Secure Hash Standard). If you believe that these algorithms are untrustworthy then you should not trust Bitcoin, credit card transactions or any type of electronic bank transfer. Bitcoin has a sound basis in well understood cryptography.<br />
<br />
== Early adopters are unfairly rewarded ==<br />
<br />
Early adopters are rewarded for taking the higher risk with their time and money. The capital invested in bitcoin at each stage of its life invigorated the community and helped the currency to reach subsequent milestones. Arguing that early adopters do not deserve to profit from this is akin to saying that early investors in a company, or people who buy stock at a company IPO (Initial Public Offering), are unfairly rewarded.<br />
<br />
This argument also depends on bitcoin early adopters using bitcoins to store rather than transfer value. The daily trade on the exchanges (as of Jan 2012) indicates that smaller transactions are becoming the norm, indicating trade rather than investment. In more pragmatic terms, "fairness" is an arbitrary concept that is improbable to be agreed upon by a large population. Establishing "fairness" is no goal of Bitcoin, as this would be impossible.<br />
<br />
Looking forwards, considering the amount of publicity bitcoin received as of April 2013, there can be no reasonable grounds for complaint for people who did not invest at that time, and then see the value (possibly) rising drastically higher.<br />
<br />
By starting to mine or acquire bitcoins today, you too can become an early adopter.<br />
<br />
== 21 million coins isn't enough; doesn't scale ==<br />
<br />
One Bitcoin is divisible down to eight decimal places. There are really 2,099,999,997,690,000 (just over 2 quadrillion) maximum possible atomic units in the bitcoin system.<br />
<br />
The value of "1 BTC" represents 100,000,000 of these. In other words, each is divisible by up to 10^8. <br />
<br />
As the value of the unit of 1 BTC grows too large to be useful for day to day transactions, people can start dealing in smaller [[Units|units]], such as milli-bitcoins (mBTC) or micro-bitcoins (μBTC).<br />
<br />
== Bitcoins are stored in wallet files, just copy the wallet file to get more coins! ==<br />
<br />
No, your wallet contains your secret keys, giving you the rights to spend your bitcoins. Think of it like having bank details stored in a file. If you give your bank details (or bitcoin wallet) to someone else, that doesn't double the amount of money in your account. You can spend your money or they can spend your money, but not both.<br />
<br />
== Lost coins can't be replaced and this is bad ==<br />
<br />
Bitcoins are divisible to 0.00000001, so there being fewer bitcoins remaining is not a problem for the currency itself. If you lose your coins, all other coins will go up in value a little. Consider it a donation to all other bitcoin users.<br />
<br />
A related question is: Why don't we have a mechanism to replace lost coins? The answer is that it is impossible to distinguish between a 'lost' coin and one that is simply sitting unused in someone's wallet.<br />
<br />
== It's a giant ponzi scheme ==<br />
In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.<br />
<br />
A ponzi scheme is a zero sum game. In a ponzi scheme, early adopters can only profit at the expense of late adopters, and the late adopters always lose. Bitcoin has an expected win-win outcome. Early and present adopters profit from the rise in value as Bitcoins become better understood and in turn demanded by the public at large. All adopters benefit from the usefulness of a reliable and widely-accepted decentralized peer-to-peer currency.<br />
<br />
== Finite coins plus lost coins means deflationary spiral ==<br />
As deflationary forces may apply, economic factors such as hoarding are offset by human factors that may lessen the chances that a [[Deflationary spiral]] will occur.<br />
<br />
== Bitcoin can't work because there is no way to control inflation ==<br />
<br />
Inflation is simply a rise of prices over time, which is generally the result of the devaluing of a currency. This is a function of supply and demand. Given the fact that the supply of bitcoins is fixed at a certain amount, unlike fiat money, the only way for inflation to get out of control is for demand to disappear. Temporary inflation is possible with a rapid adoption of Fractional Reserve Banking but will stabilize once a substantial number of the 21 million "hard" bitcoins are stored as reserves by banks.<br />
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Given the fact that Bitcoin is a distributed system of currency, if demand were to decrease to almost nothing, the currency would be doomed anyway.<br />
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The key point here is that Bitcoin as a currency can't be inflated by any single person or entity, like a government, as there's no way to increase supply past a certain amount.<br />
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Indeed, the most likely scenario, as Bitcoin becomes more popular and demand increases, is for the currency to increase in value, or deflate, until demand stabilizes.<br />
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== Alternative Currencies are useless, Bitcoin is the only important cryptocurrency ==<br />
Bitcoin is the biggest and most popular crypto currency, but other currencies like Litecoins shouldn't be neglected. Obviously, minor currencies with prices of $0.06 per coin aren't very interesting, but maybe worth an investment. Alternative cryptocurrencies will be especially important when the capacicty of all BTC has been reached.<br />
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== The Bitcoin community consists of anarchist/conspiracy theorist/gold standard 'weenies' ==<br />
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The members of the community vary in their ideological stances. While it may have been started by ideological enthusiasts, Bitcoin now speaks to a large number of regular pragmatic folk, who simply see its potential for reducing the costs and friction of global e-commerce.<br />
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== Anyone with enough computing power can take over the network ==<br />
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CONFIRMED, see [[Weaknesses]].<br />
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That said, as the network grows, it becomes harder and harder for a single entity to do so. Already the Bitcoin network's computing power is quite ahead of the world's fastest supercomputers, together.<br />
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What an attacker can do once the network is taken over is quite limited. Under no circumstances could an attacker create counterfeit coins, fake transactions, or take anybody else's money. An attacker's capabilities are limited to taking back their own money that they very recently spent, and preventing other people's transactions from receiving confirmations. Such an attack would be very costly in resources, and for such meager benefits there is little rational economic incentive to do such a thing.<br />
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Furthermore, this attack scenario would only be feasible for as long as it was actively underway. As soon as the attack stopped, the network would resume normal operation.<br />
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== Bitcoin violates governmental regulations ==<br />
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There is no known governmental regulation which disallows the use of Bitcoin.<br />
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See also: the "[[#Bitcoins_are_illegal_because_they.27re_not_legal_tender|Bitcoins are illegal because they're not legal tender]]" myth.<br />
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== Fractional reserve banking is not possible ==<br />
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It is possible. See the main article, [[Fractional Reserve Banking and Bitcoin]]<br />
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== Point of sale with bitcoins isn't possible because of the 10 minute wait for confirmation ==<br />
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It is true that transactions [[FAQ#Why_do_I_have_to_wait_10_minutes_before_I_can_spend_money_I_received.3F|can]] sometimes take tens of minutes to become ''confirmed''. Despite this, retailers can accept unconfirmed transactions with very little risk by simply 'listening' on the network for a double-spend transaction, or partnering with a company that provides this service. After a head start of merely several seconds, the original transaction would reach so much of the Bitcoin network that a fraudulent double-spend transaction would almost certainly be fruitless. An attacker would have to commit easily-detectable fraud, in person, several hundred or several thousand times, before one of these low-value double-spend attempts would likely succeed.<br />
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An attacker could work around the necessity of sending out a second fraudulent transaction to the Bitcoin network by attempting to [[Mining|solo-mine]] an attack block containing the attack transaction himself - temporarily withholding the block with the rest of the network - and then execute the fraudulent purchase within seconds, or minutes at most, of mining the attack block, before broadcasting the attack block. However, the cost of such an activity would dramatically outweigh the value of anything typically offered without a confirmation wait for several reasons.<br />
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First, mining a block (attack or otherwise) entitles the miner to a valuable block reward, and because the attack involves temporarily withholding the block from the network, the attacker would put himself in the likely position of his block becoming [[Stale block|stale]], which would result in forfeiture of the entire reward. Most solo miners solve less than one block per month, so this would represent the loss of proceeds of potentially several weeks of mining.<br />
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Second, it is not possible for a solo miner to know exactly when his mining activity will yield a block, and because the attack must be carried out within seconds or minutes of successfully mining a block, the attacker will not be able to know or plan in advance the brief window when the attack would be likely to succeed. While it may be easy for a determined attacker to get low-value items that are sold and delivered online instantly without waiting for confirmations (such as downloads), this unpredictability and the briefness of the opportunity would make it extremely difficult to commit any kind of fraud where real-life interaction is required, such as visiting a merchant or taking possession of goods. Petty shoplifting would be far simpler. Even if an attacker went forward with this attack, the retailer would be notified of the fraud the moment the attack block is released seconds later.<br />
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In short, the 10-minute wait for confirmation is only practically necessary when delivering goods of value that significantly exceed the block reward an attacker would have to risk to perform an attack and where recourse after delivery is practically nonexistent, such as money transfers.<br />
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== After 21 million coins are mined, no one will generate new blocks ==<br />
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When operating costs can't be covered by the block creation bounty, which will happen some time before the total amount of BTC is reached, miners will earn some profit from [[transaction fees]]. However unlike the block reward, there is [http://bitcoin.stackexchange.com/questions/876/how-much-will-transaction-fees-eventually-be/895#895 no coupling between transaction fees and the need for security], so there is less of a guarantee that the amount of [[Mining|mining]] being performed will be sufficient to maintain the network's security.<br />
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== Bitcoin has no built-in chargeback mechanism, and this isn't good ==<br />
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'''Why some people think this is bad''': Chargebacks are useful for limiting fraud. The person handling your money has a responsibility to prevent fraud. If you buy something on eBay and the seller never ships it, PayPal takes funds from the seller's account and gives you back the money. This strengthens the eBay economy, because people recognize that their risk is limited and are more willing to purchase items from risky sellers.<br />
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'''Why it's actually a good thing''': Bitcoin is designed such that your money is yours and yours alone. Allowing chargebacks implies that it is possible for another entity to take your money from you. You can have either total ownership rights of your money, or fraud protection, but not both. That said, nothing inherent in the dollar or euro or any other currency is necessary for chargebacks to be possible, and likewise, nothing prevents the creation of PayPal-like services denominated in Bitcoin that provide chargebacks or fraud protection.<br />
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The statement "The person handling your money has a responsibility to prevent fraud" is still true; the power has been shifted into your own hands. Fraud will always exist. It's up to you to only send bitcoins to trusted entities. It is possible to trust an online identity without ever knowing their physical identity; see the [http://wiki.bitcoin-otc.com/wiki/OTC_Rating_System OTC Web of Trust].<br />
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== Quantum computers would break Bitcoin's security ==<br />
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While ECDSA is indeed not secure under quantum computing, quantum computers don't yet exist and probably won't for a while.<br />
The DWAVE system often written about in the press is, even if all their claims are true, not a quantum computer of a kind that could be used for cryptography.<br />
Bitcoin's security, when used properly with a new address on each transaction, depends on more than just ECDSA: Cryptographic hashes are much stronger than ECDSA under QC.<br />
Bitcoin's security was designed to be upgraded in a forward compatible way and could be [http://en.wikipedia.org/wiki/Post-quantum_cryptography upgraded] if this were considered an imminent threat.<br />
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See the implications of quantum computers on public key cryptography here http://en.wikipedia.org/wiki/Quantum_computer#Potential<br />
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The ''risk'' of quantum computers is also there for financial institutions, like banks, because they heavily rely on cryptography when doing transactions.<br />
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== Bitcoin makes self-sufficient artificial intelligence possible, which will in turn become self-aware and decide to exterminate humanity ==<br />
An artificial intelligence powerful enough to be threatening to mankind wouldn't depend on mankind to make Bitcoin, it would just invent something like Bitcoin itself and design it to be so attractive to us that we couldn't resist using it.<br />
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== [[Mining|Bitcoin mining]] is a waste of energy and harmful for ecology ==<br />
No more so than the wastefulness of mining gold out of the ground, melting it down and shaping it into bars, and then putting it back underground again. Not to mention the building of big fancy buildings, the waste of energy printing and minting all the various fiat currencies, the transportation thereof in armored cars by no less than two security guards for each who could probably be doing something more productive, etc. <br />
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As far as mediums of exchange go, Bitcoin is actually quite economical of resources, compared to others.<br />
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'''Economic Argument 1'''<br />
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[[Mining|Bitcoin mining]] is a highly competitive, dynamic, almost [http://en.wikipedia.org/wiki/Perfect_market perfect], market. Mining rigs can be set up and dismantled almost anywhere in the world with relative ease. Thus, market forces are constantly pushing mining activity to ''places'' and ''times'' where the marginal price of electricity is low or zero. These electricity products are cheap for a reason. Often it’s because the electricity is difficult (and wasteful) to transport, difficult to store, or because there is low demand and high supply. Using electricity in this way is a lot less wasteful than simply plugging a mining rig into the mains indiscriminately. <br />
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For example, Iceland produces an excess of cheap electricity from renewable sources, but it has no way of exporting electricity because of its remote location. It is conceivable that at some point in future Bitcoin mining will only be profitable in places like Iceland, and unprofitable in places like central Europe, where electricity comes mostly from nuclear and fossil sources. <br />
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Market forces could even push mining into innovative solutions that have an effective electricity consumption of ''zero''. Mining always produces heat equivalent to the energy consumed - for example, 1000 watts of mining equipment produces the same amount of heat as a 1000 watt heating element used in an electric space heater, hot tub, water heater, or similar appliance. Someone already in a willing position to incur the cost of electricity for its heat value alone could run mining equipment specially designed to mine bitcoins while capturing and utilizing the heat produced, without incurring any energy costs beyond what they already intended to spend on heating.<br />
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'''Economic Argument 2'''<br />
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When the environmental costs of mining are considered, they need to be weighed up against the benefits. If you question Bitcoin on the grounds that it consumes electricity, then you should also ask questions like this: Will Bitcoin promote economic growth by freeing up trade? Will this speed up the rate of technological innovation? Will this lead to faster development of green technologies? Will Bitcoin enable new, border crossing [http://en.wikipedia.org/wiki/Smart_grid smart grid] technologies? …<br />
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Dismissal of Bitcoin because of its costs, while ignoring its benefits, is a dishonest argument. In fact, any environmental argument of this type is dishonest, not just pertaining to Bitcoin. Along similar lines, it could be argued that wind turbines are bad for the environment because making the steel structure consumes energy.<br />
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'''Ratio of Capital Costs versus Electrical Costs'''<br />
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The BFL Jalapeno hashes at 5.5 Gh/s using 30W. That device consumes about $40 per year in electricity (using U.S. residential average of about $0.15 per kWh.) But the device costs over $300 including shipping. Thus just about a quarter of all costs over a two-year useful life goes to electricity. This compares to GPUs where more than 90% of costs over a two-year life went to electricity. Even more efficient designs can be expected in the future.<br />
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== Shopkeepers can't seriously set prices in bitcoins because of the volatile exchange rate ==<br />
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The assumption is that bitcoins must be sold immediately to cover operating expenses. If the shopkeeper's back-end expenses were transacted in bitcoins as well, then the exchange rate would be irrelevant. Larger adoption of Bitcoin would make prices [http://en.wikipedia.org/wiki/Sticky_%28economics%29 sticky]. Future volatility is expected to decrease, as the size and depth of the market grows. <br />
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In the meantime, many merchants simply regularly pull the latest market rates from the exchanges and automatically update the prices on their websites. Also you might be able to buy a put option in order to sell at a fixed rate for a given amount of time. This would protect you from drops in price and simplify your operations for that time period.<br />
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== Like Flooz and e-gold, bitcoins serve as opportunities for criminals and will be shut down ==<br />
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* Visa, MasterCard, PayPal, and cash all serve as opportunities for criminals as well, but society keeps them around due to their recognized net benefit.<br />
* Hopefully Bitcoin will grow to the point where no single organization can disrupt the network, or would be better served by helping it.<br />
* Terrorists fly aircraft into buildings, but the governments have not yet abolished consumer air travel. Obviously the public good outweighs the possible bad in their opinion.<br />
* Criminal law differs between jurisdictions.<br />
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== Bitcoins will be shut down by the government just like Liberty Dollars were ==<br />
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Liberty Dollars started as a commercial venture to establish an alternative US currency, including physical banknotes and coins, backed by precious metals. This, in and of itself, is not illegal. They were prosecuted under counterfeiting laws because the silver coins allegedly resembled US currency.<br />
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Bitcoins do not resemble the currency of the US or of any other nation in any way, shape, or form. The word "dollar" is not attached to them in any way. The "$" symbol is not used in any way.<br />
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Bitcoins have no representational similarity whatsoever to US dollars. <br />
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Of course, actually 'shutting down' Liberty Dollars was as easy as arresting the head of the company and seizing the offices and the precious metals used as backing. The decentralized Bitcoin, with no leader, no servers, no office, and no tangible asset backing, does not have the same vulnerability.<br />
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== Bitcoin is not decentralized because the developers can dictate the software's behavior ==<br />
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The Bitcoin protocol was originally defined by Bitcoin's inventor, [[Satoshi Nakamoto]], and this protocol has now been widely accepted as the standard by the community of miners and users. <br />
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Though the developers of the original Bitcoin client still exert influence over the Bitcoin community, their power to arbitrarily modify the protocol is very limited. Since the release of Bitcoin v0.3, changes to the protocol have been minor and always in agreement with community consensus.<br />
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Protocol modifications, such as increasing the block award from 25 to 50 BTC, are not compatible with clients already running in the network. If the developers were to release a new client that the majority of miners perceives as corrupt, or in violation of the project’s aims, that client would simply not catch on, and the few users who do try to use it would find that their transactions get rejected by the network.<br />
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There are also other [[:Category:Clients|Bitcoin clients made by other developers]] that adhere to the Bitcoin protocol. As more developers create alternative clients, less power will lie with the developers of the original Bitcoin client. <br />
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== Bitcoin is a pyramid scheme ==<br />
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Bitcoin is nearly opposite of a pyramid scheme in a mathematical sense. Because Bitcoins are algorithmically made scarce, no exponential benefit is derived from introducing new users to use of it. There is a quantitative benefit in having additional interest or demand, but this is in no way exponential.<br />
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== Bitcoin was hacked ==<br />
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In the history of Bitcoin, there has never been an attack on the [[block chain]] that resulted in stolen money from a confirmed output. Neither has there ever been a reported theft resulting directly from a vulnerability in the [[Original Bitcoin client|original Bitcoin client]], or a vulnerability in the protocol. Bitcoin is secured by standard cryptographic functions. These functions have been peer reviewed by cryptography experts and are considered unlikely to be breakable in the foreseeable future.<br />
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It is safe to say that the currency itself has never been 'hacked'. However, several major ''websites'' using the currency have been hacked, often resulting in high profile Bitcoin heists. These heists are misreported in some media as hacks on Bitcoin itself. An analogy: Just because someone stole US dollars from a supermarket till, doesn’t mean that the US dollar as a currency has been 'hacked'.<br />
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Most bitcoin thefts are the result of inadequate [[Securing your wallet|wallet security]]. In response to the wave of thefts in 2011 and 2012, the community has developed risk-mitigating measures such as [[Wallet_encryption|wallet encryption]], support for [[BIP_0011|multiple signatures]], [[How_to_set_up_a_secure_offline_savings_wallet|offline wallets]], [[Paper_wallet|paper wallets]], and [[Hardware_wallet|hardware wallets]]. As these measures gain adoption by merchants and users, it is expected that the number of thefts will drop.<br />
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==References==<br />
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[[ru:Мифы о биткоине]]</div>Gidgreen