Zyber

Thanks for the video link.

I have watched it through and Steve Gibson explains this technically complicated system very well. It looks like a beautifully designed system - but not perfect.

Further I read the white-paper. Interesting reading.
http://www.bitcoin.org/sites/default/files/bitcoin.pdf

However, I did spot some weaknesses in the system design:

1. Partially centralized system. It depends on an IRC chat room.
   
   Quote:

   When you download the program it connects to a IRC chat room and that is how it learns about all the other nodes, or many of the other nodes https://youtube.com/watch?v=XQPSwA2Itbs&t=61m08s (1:01:08)

2. Trusting the integrity of bitcoin.org - a domain with contact privacy.
3. Trusting that the compiled .exe binaries match the open source code.
4. Single point of failure. Easy to block. The system uses port 8333. Remember the .xxx debate?
   
   Quote:

   you'd get much better connectivity if you do port-forwarding of port 8333 https://youtube.com/watch?v=XQPSwA2Itbs&t=79m09s (1:19:09)

5. System integrity gets worse over time. Depends on incentive for peers to "donate" CPU power.
   
   Quote:

   the way you make money is by processing transactions within the BitCoin system https://youtube.com/watch?v=XQPSwA2Itbs&t=49m01s (0:49:01)

   Quote:

   here's the deal. There will never, ever, ever be more than 21 million BitCoins created. https://youtube.com/watch?v=XQPSwA2Itbs&t=72m30s (1:12:30)

   Quote:

   For the first 210.000 blocks the value is 50 BitCoins per block. The next 210.000 blocks it is cut to half, to 25 BitCoins per block. Etc. https://youtube.com/watch?v=XQPSwA2Itbs&t=80m25s (1:20:25)

   Quote:

   creating coinage out of thin air by doing the work that makes the whole network go ... It is the work which needs to be done, the difficulty of the work that keeps bad guys from being able to spoof the system. https://youtube.com/watch?v=XQPSwA2Itbs&t=84m0s (1:24:00)

To sum it up. This system appears to be a bubble designed to have a limited lifespan.

The system will become more and more unstable as it matures, and once when all 21 million BitCoins have been created, people will stop mining for more coins as there are no more rewards. Without all the CPU power previously provided by the honest nodes - the integrity of the system will fail apart and anarchy will rise.

As the system bases its trust on which ever group has the most CPU power it is vulnerable for criminals using their enormous botnets (1 million+ zombies), governments using their super computers to sabotage the network, or giants such as Google using their immense computing muscles.

As this looks like a bubble it is a question of when people will start to cash out (converting their BitCoins to real currency). Maybe that is already what is happening right now?

The original idea of this system is beautiful but I wouldn't place my savings in it.