Nutcoin: A great Cryptocurrency

Bill Bisco: Isometric Imp · Mon Jan 13, 2014 1:17 am

Dear all,

Take a look at Nutcoin!. There's been a lot of innovation after the release of Bitcoin. It's interesting to see this new cryptocurrency Nutcoin to come out. The idea of multiple competing cryptocurrencies in the future is very interesting.

Surgo · Post by **Surgo** » Mon Jan 13, 2014 1:29 am

That's okay, I'll stick to Dogecoin.

Username17 · Post by **Username17** » Mon Jan 13, 2014 1:20 pm

The problem here is that it's still a ponzi scheme, and anyone with any money in the system when the music stops loses all their money while people who get into the system early and then get out walk away with the money of the people who lose it when it comes crashing down. The reason that BTC "can't change the world" isn't because there aren't enough Bitcoins, it's because the entire concept is stupid.

Cryptocurrency isn't really currency. It's a way to transfer money long distances or across national borders by buying the bits, transferring the ownership to another person, and allowing them to sell their bits. It only works if the number of people who want to buy and sell in each currency type are sufficiently large and mostly equal. If everyone wants to buy in Yuan and sell in Dollars (or whatever), then it doesn't help. And it also requires the transactions to be very cheap and very fast - because it's three fucking exchanges to perform the simple operation of sending someone some money. And not to put too fine a point on it: both the sender and the receiver need to have an actual electronic account capable of handling transactions in real money and both need to successfully execute a transfer in their respective locations. It only makes any sense at all if there are restrictions on you sending money to the person you actually want to send money to that don't apply to sending money to the person you are buying intermediary bits from.

All three of the bit transactions have a computational and labor cost. The same inherent costs as the single direct currency transaction they are replacing. Higher in the real world, because doing things in a distributed and mathematically secure fashion is way more difficult than just changing the numbers in a central and physically secure location like the way banks do it. And these costs have to be paid for by something or someone. Cryptocurrency pays for this by giving newly minted bits to the "miners" who are using energy and processing power to verify the transactions and validate the bits. But those bits are only worth anything if the miners can sell them to new people.

It's a pyramid scheme, plain and simple. The "miners" are actually doing the work of the bank, and they are paid by new people putting money into the system. When the miners stop working, the system stops functioning and anyone left with any bits to their name can't cash out. Each person cashing out does so by trading their bits to a new person buying in, and when the music stops the last people with bits on their hands have nothing.

So you can fiddle with the coin code to make it less stupid - BitCoin has a lot of decisions that make no actual economic sense that are clearly just intended to appeal to libertarian idiots. But no matter how not stupid you make it, it's still fundamentally a pyramid scheme. If there isn't some banker of last resort who will continue "mining" after the system stops being profitable to run, it's just a game of "pass money to the left" on a table that is not round.

Fiat currencies that are issued by nation states are guaranteed by your ability to pay taxes with those currencies. Fiat currencies that are issued by shadowy cabals of programmers who understand math better than economics are just a ponzi scheme. You can get rich with them, but only by finding a bigger sucker than yourself to fleece.

-Username17

fectin · Post by **fectin** » Mon Jan 13, 2014 1:28 pm

It's not a Ponzi scheme. Those rely on new investors to pay out. This is a medium of exchange, which, like tulips, generally collapses when everyone stops and thinks for a moment. The same is true of every medium of exchange though, so it's hardly unique.

The thing with this one is that it looks like they plan to deliberately inflate their base beyond anything useful. That's rough on something that only has value through artificial / consensual scarcity to start with.

Lago PARANOIA · Post by **Lago PARANOIA** » Mon Jan 13, 2014 1:50 pm

fectin wrote:The same is true of every medium of exchange though, so it's hardly unique.

If a sovereign government demands taxes and only accepts payment in one kind of denomination, it doesn't matter whether the people obligated to pay taxes keep having these kinds of Whoopie Goldberg Randian Whoopie Goldberg epiphanies. As long as the government exists and keeps the nature of its demands the same there will always be some elementary level of demand, no matter how much the people do or don't 'believe' in it.

fectin · Post by **fectin** » Mon Jan 13, 2014 2:12 pm

Yes. See "Daxall Dollars" for the humorous version.

Username17 · Post by **Username17** » Mon Jan 13, 2014 3:06 pm

fectin wrote:It's not a Ponzi scheme. Those rely on new investors to pay out.

Yes. It is a Ponzi scheme and it requires new investors to pay out. BitCoins aren't worth anything as BitCoins, they are worth something because you can trade them for stuff, and you can trade them for stuff because the people you trade them to for stuff can trade them for dollars. But the only way you're trading any of them for dollars is if new people are buying into the system. New "investors" are giving their money to the people who are cashing out. If people stop buying the fucking things, no one can cash out and the value of all the held Bitcoins drops to zero.

There's no principal. It's 100% financed by selling the bits to new suckers. Which means that it is in fact a classic ponzi scheme. It's a ponzi scheme where the hook is the virtual currency medium of exchange / investment asset - but that's structurally unimportant. The people are assured that their investment into BTC is worth money because their BTCs are redeemable for piles of cash. But 100% of those piles of cash come from the other investors and 0% are backed by any actual asset or power.

-Username17

John Magnum · Post by **John Magnum** » Mon Jan 13, 2014 3:51 pm

One way of assessing it is trying to look at marginal qualities of bitcoins. What kinds of transactions does bitcoin enable that can't be performed with dollars? What are the marginal advantages of bitcoins over dollars?

It turns out that the libertarian boner for deregulation means that the former is almost exclusively blatantly illegal shit like drugs and child pornography, because even the websites like reddit that accept bitcoin as payment aren't letting you do anything that you couldn't do with dollars. The latter is nonexistent, and the alleged marginal advantages are either lies (fast transaction times, no transaction fees) or disadvantages that libertarian goldbugs are nevertheless committed to ideologically (fixed supply, no central authority, no regulation, no chargebacks).

None of this is really changed by making little tweaks to whether ASICs or GPUs mine best or switching to proof of stake mining models or increasing the rate at which the initial wad of cryptocoins is mined.

Starmaker · Post by **Starmaker** » Mon Jan 13, 2014 4:11 pm

The #1 problem with bitcoins is that they are NOT. FUCKING. ANONYMOUS.

You the hypothetical bitcoin nut have to trust the person with whom you're making a deal, no matter if you're trading cash/bitcoins or goods/bitcoins or services/bitcoins, and trust necessitates some sort of persistent identity and identity verification. If you want to exchange online, the exchange has your powerword forever, no exceptions. Otherwise you have to meet a dude in person at the bank in full view of security cameras so that one of you could check the cash for authenticity asap and the other could watch the transfer happening.

Did you know you can buy porn with your credit card and have the transaction show up as something else on the statement? That is a greater level of privacy than what bitcoin offers.

fectin · Post by **fectin** » Mon Jan 13, 2014 6:02 pm

Starmaker wrote:The #1 problem with bitcoins is that they are NOT. FUCKING. ANONYMOUS.

I don't think you understand how cryptography works.

Frank - the same applies to dollars, diamonds, copyrights, cars, etc. Nearly everything carries a substantial premium over its intrinsic value based on a higher demand than supply. Defining all demanded goods as "Ponzi Schemes" does nothing more than render that phrase useless.

You could (very reasonably IMHO) say that *Coins are all immensely overvalued, but the fact of the matter is that people are making, buying, selling a thing, and people who buy that thing are receiving it. That is different from buying shares of future profits. *Coins are also missing the element where you fraudulently claim to have assets that you actually don't. (Also, Ponzi schemes are centralized, and have one person or group making fraudulent claims. Pyramid schemes are the ones where the in-group all act to dupe the out-group. That distinction is nitpicking here though, because this is neither)

Starmaker · Post by **Starmaker** » Mon Jan 13, 2014 6:22 pm

fectin wrote:
Starmaker wrote:The #1 problem with bitcoins is that they are NOT. FUCKING. ANONYMOUS.
I don't think you understand how cryptography works.

Problem: You want to sell bitcoins for money without anyone knowing who you are. Please explain how you are going to do it.

John Magnum · Post by **John Magnum** » Mon Jan 13, 2014 6:33 pm

Obviously you arrange dead drops with other anonymous figures, where they toss duffel bags of cash into a gully and you leave a notepad with fourteen private keys in a locker.

DSMatticus · Post by **DSMatticus** » Mon Jan 13, 2014 6:57 pm

fectin wrote:
Starmaker wrote:The #1 problem with bitcoins is that they are NOT. FUCKING. ANONYMOUS.
I don't think you understand how cryptography works.

? Bitcoin is explicitly not anonymous. It was not designed to be an anonymous system. Every single bitcoin transaction is, by design, completely public. Bitcoin is peer-to-peer, and you can trace bitcoins through the system start to finish. There are people right now who have traced their stolen bitcoins to where they are today despite efforts to launder them. The only reason people can still do business with those coins/wallets without explaining themselves is because of how disorganized and already deeply illegitimate bitcoin is that dealing with stolen items/money is completely beneath its users' concerns.

The only anonymity bitcoin can offer is if every person you do transactions with (and every intermediary who facilitates those transactions) promises to keep your identity secret, which is about the weakest form of anonymity that could possibly exist. Remember: bitcoin does not have an authority for appealling disputes, so the burden of making sure that the party you are sending bitcoins to holds up their end of the bargain is on you, and the burden of making sure that you send the bitcoins at all once they've held up their end is on them, and every single transaction is a leap of faith for at least one involved party. Not only is anonymity mathematically not possible within the system, anonymity at the input/output stage involves gambling that a man you don't know and might never be able to find won't rip you off.

Not anonymous. Cannot stress that enough. It wasn't even designed to be, and the people who think it's anonymous are somewhat confused by the use of the name cryptocurrency.

name_here · Post by **name_here** » Mon Jan 13, 2014 7:14 pm

It's anonymous in the sense that the coins themselves cannot inherently be traced to you, but if you actually want to use them for anything besides moving them around you're going to have to give sufficient information to let the other party give you whatever you're buying and the coins are traceable as hell.

fectin · Post by **fectin** » Mon Jan 13, 2014 7:31 pm

Cash/gold/diamond is anonymous: you can hand it to people for a sandwich, and there is no point where you have to prove who you are for that transaction to take place, nor is there inherently any record of that transaction. Yes, a sandwich shop might have a video camera (or whatever), but that's a property of dealing with that sandwich shop, not of cash.

BitCoin is mostly the same. You can trace its path, but only through accounts, which do not tie back to people and do not have a 1:1 ratio with people. So I could transfer my vast BitCoin wealth (assuming I owned any) to a second wallet, yell "HAX", then go buy a deliciously anonymous sandwich, or whatever. BitCoin does not inherently inject any more identity in than the parties already knew. Of course, you could maintain a single wallet, just like you could go around signing every dollar you spend. That's on you though, not the medium.

(You could fairly call BitCoin pseudononymous instead. If that's what you meant, my bad.)

Username17 · Post by **Username17** » Mon Jan 13, 2014 7:31 pm

fectin wrote: Frank - the same applies to dollars, diamonds, copyrights, cars, etc. Nearly everything carries a substantial premium over its intrinsic value based on a higher demand than supply. Defining all demanded goods as "Ponzi Schemes" does nothing more than render that phrase useless.

No. It really doesn't. Diamonds are a thing with an agreed upon intrinsic value. They are a commodity that people would like to own over and above their use as a speculative commodity or medium of exchange. If the trade in diamonds stopped tomorrow, the people at the end of the chain of custody would still have something: they would diamonds and that would still have value. Dollars are a fiat currency, but they are also guaranteed to be accepted as taxes by the United States of America. Since three hundred and ten million people live in the United States of America and owe taxes to the government, the dollars have a value as a thing to have over and above your ability to trade them to new suckers.

Dollars and diamonds have a principal value. BitCoins do not. Dollars and diamonds are guaranteed and overseen by powerful organizations with soldiers who have guns. BitCoins are not.

-Username17

fectin · Post by **fectin** » Mon Jan 13, 2014 7:43 pm

Hokay, we can do this the long way instead:

Who (specifically) is making what fraudulent representation (exactly)?
If you claim this is a Ponzi scheme, that implies you have identified those two elements: without the first, it's not "Ponzi"; without the second it's not a "scheme".

name_here · Post by **name_here** » Mon Jan 13, 2014 7:48 pm

Frank has, in fact, already made this argument. Bitcoin is supposed to have three attributes:

1. It will have transactions processed and verified by miners, who will be paid in new Bitcoins
2. There will be no central authority and no transaction fees
3. The total supply of Bitcoins ever is fixed and finite (and will be entirely in circulation in the near future)

1 is not indefinitely sustainable when 3 is true, and without 1 you cannot sustain the currency infastructure when 2 is true.

Kaelik · Post by **Kaelik** » Mon Jan 13, 2014 7:49 pm

fectin wrote:Who (specifically) is making what fraudulent representation (exactly)?
If you claim this is a Ponzi scheme, that implies you have identified those two elements: without the first, it's not "Ponzi"; without the second it's not a "scheme".

I thought the distinction between Ponzi scheme and Pyramid scheme was minor and not worth our time.

Are you now admitting that Bitcoins are a Pyramid Scheme, or do you have anything even close to a defense against that allegation?

Maj · Post by **Maj** » Mon Jan 13, 2014 8:08 pm

name_here wrote:2. There will be no central authority and no transaction fees

Apparently, this isn't quite true... GHash.IO, a major Bitcoin mining pool, got close to reaching the dreaded 51% monopoly on Bitcoin transactions earlier this week. In response, GHash.IO said they would take steps to keep from getting too big, and miners diversified a bit. But really, the only thing stopping a takeover is the kindness in people's hearts (or fear that their investment will tank - you decide!).

fectin · Post by **fectin** » Mon Jan 13, 2014 8:20 pm

It is a minor distinction. Are you claiming that it's a pyramid scheme instead?
If so, what group, exactly, is conspiring to commit what fraud, exactly?

name_here - You might find it helpful to google "fraud" and check the definition, or persuade Kaelik or someone with a similar background to opine on whether those assertions, if true, would add up to fraud.

DSMatticus · Post by **DSMatticus** » Mon Jan 13, 2014 9:03 pm

fectin wrote:Cash/gold/diamond is anonymous: you can hand it to people for a sandwich, and there is no point where you have to prove who you are for that transaction to take place, nor is there inherently any record of that transaction.

There is a record of every single transaction that ever happens in bitcoin. That is how bitcoin functions. It's a peer-to-peer ledger. You cannot move bitcoins without creating a record that bitcoins have moved and then distributing that record to your peers. You cannot buy a sandwich using your bitcoin wallet without telling everyone that you are taking money out of your bitcoin wallet in order to put it into their's. You could not buy drugs off of silk road using your bitcoin wallet without telling everyone that you were taking money out of your bitcoin wallet in order to put it into their's. Bitcoin does not and can not have private transactions. That is a mathematical falsity. It is much worse than cash or a physical commodity in this regard.

fectin wrote:So I could transfer my vast BitCoin wealth (assuming I owned any) to a second wallet, yell "HAX", then go buy a deliciously anonymous sandwich, or whatever.

This is simply not true. Bitcoin transactions are built as reference chains, and the second wallet cannot verify that it contains any money at all without telling people the money came from the first wallet (which, in turn, must tell people where it got the money from, all the way back to the creation of those bitcoins). You cannot launder bitcoins by changing the wallet.

The closest you can get to laundering bitcoins is through a tumbling service. Tumbling services take your bitcoins and give them to someone else who wants to launder bitcoins, and gives you the bitcoins of someone else who did the same; yes, that means you are trading your suspicious bitcoins for someone else's suspicious bitcoins. They add as much useless noise as possible to the transactions (multiple transactions of random amounts, timing delays, and so on) in order to try and hide which output wallet corresponds to which input wallet, but if you analyze traffic over all of the wallets associated with a tumbling service it's still fairly easy to reassemble the big picture and discover which output wallet corresponds to which input wallet.

If the bitcoins in the first wallet are stolen, then deducing that the bitcoins in the second wallet are stolen is trivial. If the person you are doing business with cares about whether or not they are dealing in stolen bitcoins (say, because a legal authority has set a precedent that knowingly doing business in stolen bitcoins carries real consequences, as it does with anything else stolen), then they will not accept your bitcoins and you will have to go to some length to prove that those bitcoins were acquired in a good faith. Now, that hasn't happened because authorities don't really care about protecting the security/validity of bitcoin transactions. Neither do the merchants: virtually all non-speculative bitcoin traffic is the sale of illegal goods such as drugs or illegal online gambling services. They really do not give a fuck if they are dealing with stolen bitcoins.

Honestly, just google any of the many stolen bitcoin dramas. Case-studies in tracing bitcoins are abundant and compelling. The reason it does fuck all has nothing to do with anonymity, it has to do with the fact that bitcoin merchants don't actually give a fuck if the bitcoins are stolen. It doesn't give you anonymity so much as it gives you a lawless and ungoverned medium of exchange where merchants will readily take stolen goods.

name_here · Post by **name_here** » Mon Jan 13, 2014 9:21 pm

fectin wrote: name_here - You might find it helpful to google "fraud" and check the definition, or persuade Kaelik or someone with a similar background to opine on whether those assertions, if true, would add up to fraud.

Does it matter if it's legally fraud? The argument is that Bitcoin cannot sustain its stated model. Now, Frank's theory is that at least some of the founders and/or early adopters realized this going in and plan to convert their Bitcoins into USD before mining stops paying out Bitcoins fast enough to make it appear worthwhile, the blockchain collapses, and it becomes impossible to exchange Bitcoins, rendering them worthless. In this theory, the founders are conspiring to get people to pay a sustainable currency for Bitcoins that they know will become worthless.

It's alternately possible that they're incompetent, or that they planned all along to institute a central issuing authority, or to make people pay a percentage of each transaction to the people running the backbone.

Maj wrote: Apparently, this isn't quite true... GHash.IO, a major Bitcoin mining pool, got close to reaching the dreaded 51% monopoly on Bitcoin transactions earlier this week. In response, GHash.IO said they would take steps to keep from getting too big, and miners diversified a bit. But really, the only thing stopping a takeover is the kindness in people's hearts (or fear that their investment will tank - you decide!).

But as originally presented, there would be no central authority. The argument is that maintaining all three propositions is impossible. The founders either failed to predict that or saw it coming and lied.

fectin · Post by **fectin** » Mon Jan 13, 2014 9:28 pm

DSMatticus wrote:You cannot buy a sandwich using your bitcoin wallet without telling everyone that you are taking money out of your bitcoin wallet in order to put it into their's.

Actually, no. You have to tell everyone that a wallet's owner (keyholder? Some other term?) transferred money to a different wallet. That's the distinction. Nothing ties your identity to either wallet.

If you're instead arguing that pseudonymity isn't the same as anonymity, I think you're splitting hairs, but you are correct.

fectin · Post by **fectin** » Mon Jan 13, 2014 10:12 pm

name_here - Not every disease is AIDS, not everything that makes you sad on the Internet is libel, not everything wrong is fallacious, and not every overvalued investment is a Ponzi scheme. If you use specific terms, you are making specific claims. Ifthose claims are not credible, you may get called on them.

I am not a legal expert. I can't tell you exactly how fraud is defined. However, I'm reasonably confident that "here are some claims that I made up" does not meet that definition. That's true even if those claims were direct quotes, instead of your summary: a cursory googling says that fraud needs to be factual, known to be false, intend to deceive, justifiably relied on, and cause harm. Even if I stipulated elements 1,2, and 5 from that list, you would still have a long way to go to show fraud.

Besides which, your claims are not actually supported by anything I can see. The original paper directly contradicts your statements 1 and 2, (see sections 4 and 6) and only fails to contradict 3 because you didn't define "soon".

If even strawmen can't support a general claim, perhaps it's time to back off of a hyper-specific one?

If anyone wants to rebut, I'll read it, but I think I'm done arguing the merits of digital beanie babies.

(edit: misclick posted unfinished)