Sunday, March 25, 2012

Bitcoin – Hacking Digital Currency

Jon Callas identifies a potential weaknesses in a digital currency system such as bitcoin – [cryptography] Bitcoin observation:

I was sitting around the other weekend with some friends and we were talking about Bitcoin, and gossiping furiously about it. While we were doing so, an interesting property came up.

Did you know that if a Bitcoin is destroyed, then the value of all the other Bitcoins goes up slightly? That's incredible. It's amazing and leads to some emergent properties.

If you have a bunch of Bitcoins and you want to increase your worth, you can do this by one of three ways:

  1. Create more Bitcoins.
  2. Buy up more Bitcoins, with the end state of that strategy being that you've cornered the market.
  3. Destroy other people's Bitcoins. The end state of that is also that you've cornered the market.

(Via Bruce Schneier)



Anonymous said...

LOL this is true of all monies and currencies and goods of any type. If some are destroyed, others are more valuable. If some are created, others are less valuable. This is supply and demand. It's not at all unique to nor a special property of Bitcoin.

Anonymous said...

Same could be said for any commodity. If I simply destroy the global gold reserves, my gold will skyrocket in value. It's a pretty stupid "weakness".

Michael Qaissaunee said...

Great comments, but the digital nature of bitcoins does make for a unique weakness not shared with physical goods.


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