Easy. It's open source. You can download and review the source code.

Instead of answering your technical questions until my hands are purple, I'll let this video explain it. :)

https://youtube.com/watch?v=XQPSwA2Itbs

(Starts at 0:42:00, explained by Steve Gibson from grc.com)

Thanks for the video link. :thumbsup

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. :winkwink:
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. :2 cents:

Please read: http://www.bitcoin.org/wiki/doku.php?id=transaction_fee

Thanks. Very interesting. :thumbsup:winkwink:

After reading this I no longer think the system integrity will get worse over time.

Then it is only the single-point-of-failures which could cause trouble later on.
If someone blocks port 8333, takes over those the IRC chat rooms, replaces the DNS records for bitcoin.org, or the actual server, etc.

A chargeback free payment system like this could be interesting :)

Which system will win, the old banking system backed by weapons, or this new one backed by cryptography? Time will show..

If you cant trust it, just compile the binary file yourself from the source.

Why does it matter if bitcoin.org uses privacy for the domains? The source is out and the application doesn't need bitcoin.org to run.
You got the source, cant you just change the port?
If there would be a problem with ISPs blocking 8333, I dont think it would require much work before it used port 80 or some other port that they cant block.

Bitcoin doesn't need IRC. It *can* use it to seed its list of peers. I run my clients with IRC switched off. I personally think it is a stupid way to seed the client.

Also, with one click you can make Bitcoin run on top of Tor so blocking port 8333 does nothing.

Bitcoin.

The Bitcoin price has skyrocketed, due to it being in the news.

The current rate is 1 Bitcoin = $1.39 :)

Some of the news exposure includes Forbes, and a few other places. Links are below:

http://techliberation.com/2011/04/20...ation-control/

http://www.forbes.com/forbes/2011/05...-currency.html

http://www.techdirt.com/articles/201...ong-term.shtml

http://digitalmedia.strategyeye.com/...form_ flattr/

http://unqualified-reservations.blog...rdization.html

Update: 1 Bitcoin is now $1.65 USD each now. Bitcoin is in the news almost daily now.

sent to IRs tipline

http://thsrv.com/p/bitcoinbitchin.png

Saw this on Bing just before.

Bitchin'!

Oh noes! IRS will take down the decentralized network by DDOSing every fucking computer in the network worldwide.. Right.

very cool concept and wish you luck. going to need it.

$1.9 now, this is crazy.

Peaked past $4 now...

I was going to buy $100 worth a couple of days ago to get my feet wet. Could have doubled my investment without doing a thing. FFFFFFFFFFFFFUUUUUUUUUUUUUU....

anyone considering investing into bitcoin should consider this: current bitcoin price is bubble economy, completely related to bitcoin's news exposure.

real value (GPU power + electricity bill) is somewhere around $0.75 per BTC. this value will be always based on the current difficulty (essentialy the more people are generating coins, the more valuable it is).

so the only viable way to make money is to get few ati's and generate bitcoins away.
then sell it ot mtgox to speculating fools for quadruple its price.

generating is far from geeks niche anymore, you just need to invest few grand into the hardware.

as far as the security of the system goes for payments, its pretty tight and well thought out. in regards to speculation, mtgox is currently under massive DDOS, either by slashdot effect or more likely someone probably wanting to delay the bubble until he generates more coins.

secure P2P based bitcoin currency exchange is needed for speculation to be safe.

Would be cool if bitcoin mining involved practical use of a CPU/GPU, ie someone is actually paying real $ for crunching numbers and getting back a result. I guess that would be difficult to achieve without some sort of central authority confirming that work and releasing the value, which would go against the whole idea...

given the fact that solving the blocks is used to ensure security of the the system, that would be the only practical use :) and considering you're paid 4x more than the power consumed it aint that bad either.

note that computing power at current difficulty lies at about 3.5 petaflops (5TFlop/5970 gives 1Ghash, the network is currently about 700ghash strong). incredible computing power is completely "wasted" for little e-currency already....

Yeah, I regret that I didn't bought some when it was down at $0.70.
I wonder why I didn't see it coming, Bitcoin was getting more and more exposure. Of course it would rise. :(

Yes, too bad it couldn't be used for something useful like http://www.worldcommunitygrid.org .

https://mtgox.com/ - Check out the price! Nearly $8 now! Wasn't it like $0.70 a couple of weeks ago? Daaaammmnnnn....

Stability?????
 

Value has bounced from $6 USD to $8 USD and back to to $6 then to $8. That's stable??? I's a game of Musical Chairs. True, I kick myself for not buying at $.08 USD, but in Musical Chairs, you never know when the game will end. Also with so few market makers, are you sure it's not a few manipulating a market??

Tomorrow may have come
 

BitCoins in the last 48 hours have dropped from $7 to $6 and during that time had been at $5.50. Great stability.

http://img52.imageshack.us/img52/6897/picture4dy.png
The best salesmen always wear Black T Shirts:winkwink:

Yeah till something fucking happens and there is no such thing as your money existing.

bitcoin bubble :)

It have been up to $9.2.. It's about $8.6 now.
No, it isn't stable but it's very interesting to see where this goes. Bitcoin gain more popularity all the time and since the mining is becoming slow I guess the value will continue to raise on a very bouncy path.

How do you feel now? :1orglaugh

one fitty Anonymous accounts:2 cents:

Hindsight is a wonderful thing. :thumbsup

Question is whether it has reached its peak or will climb further still. Will I be kicking myself in another month when it's gone to $12 or $15? :error

Feel free to buy my coin$ loading my epassporte account [email protected]

This guy reckons it's going to literally explode. If you compare the value now when compared to its introduction it has increased more than 1000X.

http://falkvinge.net/2011/05/29/why-...-into-bitcoin/

I can understand speculation and its value growing, but I still can't get my head around what you do if you have $$$$ worth of bitcoin but actually need to use it in the real world. If everyone starts converting back, does that reduce its value? Or will it stabilise as more people accept it as an actual currency used to purchase goods and services, rather than just a way to make some money on the way up?

Looking at it another way... if you put in $USD1000 14 months ago and it's now worth $USD1m+ could you even have enough people to buy that in order to get back the full amount in USD?

Anyway... noticed that mtgox accepts AUD funds... I'm going to speculate. :pimp

I don`t get it

$18!!!!!!!!!!!

God damn, I'm getting old.

anyone selling Bitcoins? i need 10-20

got paypal/paxum

How many miners is out there?