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Old 04-02-2013, 02:57 PM   #201
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The only bitcoins I own are mined, I've never invested a dime, and still don't plan to. With it's record growth, I don't know why anyone would be foolish enough to spend bitcoins that they have as opposed to letting them sit.

It's becoming increasingly accepted, but why would you spend it? Until the prices stabilize, it's a better bet to buy/mine and hold. Here is my current worst case scenario theory:

More and more businesses accept it as payment, hoping to have customers pay in a form of money that will continue to appreciate in value after they receive it. Intelligent consumers stop spending bitcoins and use them purely for investment. At some point something happens to make the price drop several percent (max 10%) in a short time (a few hours to a few days). People panic that their massively growing investment is suddenly in a downhill slide, and try to offload it on Exchanges and businesses that accept it. Businesses don't want to accept a currency in decline, so they stop accepting it, causing prices to drop further as there are less and less places to spend it. The bitcoin market crashes, and the cycle starts over again, but never reaching these heights because people are too wary from the first crash.

To those of us that have bitcoins: do you spend them? Why? If you don't, what is your plan for your coins? Are you holding them as a "safe haven" for your money? What is your plan if the price crashes?

Personally, the only investment I have is the electricity costs of when my computer was mining, so I'm unconcerned with losing all value of my coins. I would never spend any of them given the current price trends. I may start watching the value more closely though, and have myself ready to sell at a moment's notice.
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Old 04-02-2013, 03:07 PM   #202
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It's becoming increasingly accepted, but why would you spend it?
To get things you already need. Food, equipment, etc. Things you would've spent dollars on anyway.

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Businesses don't want to accept a currency in decline
The way Bitpay works for instance, the dollar conversion is locked in, so it's actually gain/loss neutral to them. Zero conversion risk.

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The bitcoin market crashes, and the cycle starts over again, but never reaching these heights because people are too wary from the first crash.
People said this after the 2011 crash and look where we are now.
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Old 04-02-2013, 04:40 PM   #203
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To get things you already need. Food, equipment, etc. Things you would've spent dollars on anyway.


The way Bitpay works for instance, the dollar conversion is locked in, so it's actually gain/loss neutral to them. Zero conversion risk.


People said this after the 2011 crash and look where we are now.
1) why would you buy anything with bitcoins unless the value of that item had the likelihood of appreciating as much as the coins themselves, was my point. Buying a $5 sandwich seems foolish if the same amount of bitcoins can buy a 2 $5 sandwiches in a week (slight exaggeration for effect).
Currently I only see bitcoin value as an investment tool, like a stock or bond, not as a currency. Until prices stabilize (not necessarily flat, but slower growth akin to inflation or other investment growths) or begin a fall, there's no logical reason to spend as opposed to hold.

2) Bitpay is hedging, but I fail to see how that would hold in a crash. If prices are spiraling downward, the ability of Bitpay to pay businesses the locked dollar amounts for increasingly falling bitcoins would drive them out of business, and the more businesses (and therefore more transactions) using Bitpay, the faster it would go bankrupt in a crash.

3) That was a crash from $13 to $7 (roughly). While proportionally the same, I think people would react very differently to a crash from $100 to $50, especially the layperson who are the very people bitcoin needs mass acceptance with for success.
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Old 04-02-2013, 04:54 PM   #204
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I'm sure you can also see the problem inherent in the sudden spike in prices. If the coins themselves price themselves out of the market of the average person, the only people who will still care are the miners (ie, people hoping to get free money) and at that point the price will start to crash.

Ask yourself... how many people do you know who own Apple stock? How many people can afford to buy into Apple stock at the current price of $429 a share? It won't be long until Bitcoin prices itself out of being something useful and without that demand you have to remember that there is nothing at all backing Bitcoin. It isn't a stock and it isn't a commodity. It's hot air for geeks.
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Old 04-02-2013, 07:17 PM   #205
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1) why would you buy anything with bitcoins unless the value of that item had the likelihood of appreciating as much as the coins themselves, was my point. Buying a $5 sandwich seems foolish if the same amount of bitcoins can buy a 2 $5 sandwiches in a week (slight exaggeration for effect).
Currently I only see bitcoin value as an investment tool, like a stock or bond, not as a currency. Until prices stabilize (not necessarily flat, but slower growth akin to inflation or other investment growths) or begin a fall, there's no logical reason to spend as opposed to hold.
The same logic applies to buying a cell phone. Why buy one now when you can get more for your money in six months? If you need an item now, whether you pay with cash or bitcoin is irrelevant... you will still have the same amount of wealth after the transaction. If you pay with bitcoin, the cash you would of spent can easily be put towards replacing the spent bitcoin. Generally, you will end up spending less by paying with bitcoin, and then replacing that bitcoin with USD.

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2) Bitpay is hedging, but I fail to see how that would hold in a crash. If prices are spiraling downward, the ability of Bitpay to pay businesses the locked dollar amounts for increasingly falling bitcoins would drive them out of business, and the more businesses (and therefore more transactions) using Bitpay, the faster it would go bankrupt in a crash.
We've already seen a couple crashes, and the bitcoin has rebounded each time. As I said in a previous post, the outcome of bitcoin is binary. Either it will end up being worthless, in which case everyone invested in it will be out, or it will continue to climb. There is no middle ground. There is no bubble that will cause bitcoin to drop down to $20 or whatever... at least for very long. It will either be zilch, or it will be through the roof.

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3) That was a crash from $13 to $7 (roughly). While proportionally the same, I think people would react very differently to a crash from $100 to $50, especially the layperson who are the very people bitcoin needs mass acceptance with for success.
See above.
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Old 04-02-2013, 07:21 PM   #206
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I'm sure you can also see the problem inherent in the sudden spike in prices. If the coins themselves price themselves out of the market of the average person, the only people who will still care are the miners (ie, people hoping to get free money) and at that point the price will start to crash.

Ask yourself... how many people do you know who own Apple stock? How many people can afford to buy into Apple stock at the current price of $429 a share? It won't be long until Bitcoin prices itself out of being something useful and without that demand you have to remember that there is nothing at all backing Bitcoin. It isn't a stock and it isn't a commodity. It's hot air for geeks.
How would bitcoins price themselves out of the market? You buy or earn bitcoin in whatever fractional amount you want/can afford, just like any other currency. If you buy gold, do you say 'well, the price of a whole bar of gold is too much for me, so I guess I can't buy any gold'? No... you buy an ounce or two or whatever you can afford, and gradually build up. The idea of buying whole bitcoins at a time is an idea that won't be common for long, at least not for the average person.
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Old 04-02-2013, 08:41 PM   #207
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Re: bitcoins as payment -

If you need an item now, and you have a choice between cash and bitcoin, the logical choice is cash. If you argue that you can buy in bitcoin and then purchase more bitcoin with the cash you would have spent, why have cash at all? Because bitcoin is not accepted everywhere, cash holdings must be maintained. Purchasing with bitcoin only makes logical sense if you do not have physical currency with which to make that purchase.

No one here has all of their wealth stored in bitcoins, and to me that says that at the very least, subconsciously, you see risk involved in them, regardless of how much it is debated here that they are the inevitable future of currency. If they are as low risk and inevitable, doesn't it make more sense to convert all your wealth into bitcoins, and only convert to cash on an as-needed basis to make purchases that cannot be made with bitcoin?

Again, bitcoins are currently an investment tool, akin to a stock or bond. They are less liquid than cash except in select locations. They have an inherent risk of devaluation that is currently higher than the US dollar and many other global currencies. I am not debating that they currently have value, just that the logical use of them at this point is limited to savings and investment.

Re: value of bitcoins -

the statement that they will be "sky high" or "valueless" has no meaning. There must be an upper bound, because it cannot have infinite value. Value is only worth what people will give for it. The question is if that inherent value is above or below existing prices. According to pure demand theory, the value of bitcoin should actually be dropping as more are mined, therefore increasing the supply.

If you go with the fact that there are a finite amount that can exist, their price will reach a maximum that will be set by the market. A finite currency by it's very nature should reach a value and then stay there. If all bitcoins are mined and in the hands of people who are actively spending them, there is no reason for an identical sandwich to cost a different price in bitcoins, ever.
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Old 04-02-2013, 10:35 PM   #208
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1) why would you buy anything with bitcoins unless the value of that item had the likelihood of appreciating as much as the coins themselves, was my point. Buying a $5 sandwich seems foolish if the same amount of bitcoins can buy a 2 $5 sandwiches in a week (slight exaggeration for effect).
But you still have to eat. Whether you pay in bitcoin is optional for now. But if you want to promote bitcoin you might take the fiat you'd otherwise pay for that sandwich with and buy bitcoin and use that instead, thus you've neither gained nor lost. You spent money you would've spent anyway, just through bitcoin.

Another important factor is that the current historic rate of valuation increase is certainly not going to last forever. When it levels off wherever it does eventually and only gains a few percent a year, this objection won't mean anything.

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Currently I only see bitcoin value as an investment tool, like a stock or bond, not as a currency. Until prices stabilize
It's attractiveness as an investment is high because it's gaining so much value, that's what you're really saying. It is plenty useful as a currency too, thus Bitpay's success, doing $5m worth of business this month.

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begin a fall, there's no logical reason to spend as opposed to hold.
Except, again, need, such as food or necessities.

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2) Bitpay is hedging, but I fail to see how that would hold in a crash. If prices are spiraling downward, the ability of Bitpay to pay businesses the locked dollar amounts for increasingly falling bitcoins would drive them out of business, and the more businesses (and therefore more transactions) using Bitpay, the faster it would go bankrupt in a crash.
Bitpay allows a retailer to price in dollars and accept the equivalent amount of bitcoin for that, in floating terms (so the dollar amount doesn't change but the bitcoin amount floats with the change in exchange rate). When the buyer pays bitcoin to Bitpay, they immediately sell the bitcoin for dollars and deposit these dollars, minus 0.99% fee, into retailer's account. Thus, price going up or down, it's immaterial to either the retailer or Bitpay. Unless the price movement were so drastic that it could be measured in percents per second it wouldn't change much for them.

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3) That was a crash from $13 to $7 (roughly). While proportionally the same, I think people would react very differently to a crash from $100 to $50, especially the layperson who are the very people bitcoin needs mass acceptance with for success.
It would be hard to imagine a crash of that proportion right now, given the standing buy orders all the way down to zero!

Part of the reason the first crash was so drastic was the Gox hack, the earliness of the currency which made confidence in it tenuous, and the fact that most coins were in the hands of very few miners back then. Today most coins for sale are rather widely distributed by comparison, and the higher the value goes the more widely they're spread, for more money buys increasingly smaller fractions of bitcoin.

On top of that are the increased use as an actual currency. At the first crash it was still just a dream. Today transactional use is considerable, and legit transactions have now exceeded black market ones on Silk Road.

I won't say a crash can't happen, but I'd be very surprised to see $50!
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Old 04-02-2013, 10:40 PM   #209
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I'm sure you can also see the problem inherent in the sudden spike in prices. If the coins themselves price themselves out of the market of the average person, the only people who will still care are the miners (ie, people hoping to get free money) and at that point the price will start to crash.
The actual price of the coins don't matter. It's not like you lose $100 by spending $100 on some bitcoin. If the price of 1 bitcoin were $1000, its purchasing power is also $1000. Price is actually immaterial to its use for transactions.

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Ask yourself... how many people do you know who own Apple stock? How many people can afford to buy into Apple stock at the current price of $429 a share?
Can you buy fractional Apple stock? Nope. Can you buy things with Apple stock? Nope. It's only use is investment value and the dividend if it comes. Plus its value is dependent on the company of Apple.

You're literally comparing apples and oranges bitcoin here.

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It won't be long until Bitcoin prices itself out of being something useful and without that demand you have to remember that there is nothing at all backing Bitcoin. It isn't a stock and it isn't a commodity. It's hot air for geeks.
Haha, you just don't understand the economics of it. It doesn't need to be backed, it just needs to be valued. Commodity value is only one kind of value. And while it's true that all previous hard currencies had commodity value that was true because they all had physical form also.

The fact that bitcoin enables the lowest possible transaction cost is why it will both continue to be valued and see complete adoption in all payment systems eventually. Because everybody likes cheaper.
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Old 04-03-2013, 12:21 AM   #210
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omfg


This... can only be explained by Europe waking up to bitcoin. There is a tooon of money moving into bitcoin continually.
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Old 04-03-2013, 12:22 AM   #211
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$140 now... I was just talking to someone a couple hours ago about how ridiculous it was reaching $120.
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Old 04-03-2013, 12:40 AM   #212
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Re: bitcoins as payment -

If you need an item now, and you have a choice between cash and bitcoin, the logical choice is cash.
Depends. A lot of places are offering steep discounts for paying in bitcoin. I've seen up to 10% off, even for things like hotel rooms. Why? Because firstly the price of bitcoin is going up, and retailers would rather have bitcoin than cash. Secondly because they can dispense with lots of costs revolving around payment provider. They don't need to insure the transaction, pay Visa/MC a couple %, nor charge extra to cover inevitable fraud and chargebacks. That turns into significant savings for any business!

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If you argue that you can buy in bitcoin and then purchase more bitcoin with the cash you would have spent, why have cash at all?
I think you've just discovered what people are going to ask themselves one day. It is this question that turns bitcoin from an alternative currency into what's known as the unit of account, and we're already seeing that process occur among bitcoin-related industries. Like people who work in bitcoin-related companies are preferring to be paid in bitcoin rather than fiat, and they're the first full-adopters. Why would you want to be paid in a currency that continually deflates when you could be paid in one that continually gains value?

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Because bitcoin is not accepted everywhere, cash holdings must be maintained.
Bitspend.com, buy anything online with bitcoin.

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Purchasing with bitcoin only makes logical sense if you do not have physical currency with which to make that purchase.
Or if you want things cheaper. Pretty sure everyone prefers to pay less.

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No one here has all of their wealth stored in bitcoins
...I do >_> but then, I don't have much wealth :P

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and to me that says that at the very least, subconsciously, you see risk involved in them, regardless of how much it is debated here that they are the inevitable future of currency. If they are as low risk and inevitable, doesn't it make more sense to convert all your wealth into bitcoins, and only convert to cash on an as-needed basis to make purchases that cannot be made with bitcoin?
I went all-in with all the money I had in February. You were saying?

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Again, bitcoins are currently an investment tool, akin to a stock or bond.
That's one use, clearly some people are using them to transact or else Bitpay would not be doing $5m in business a month, and they're only one payment provider. Smaller companies can just do it themselves with bitcoin on a case by case basis and pay no one.

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They are less liquid than cash except in select locations.
This is a huge problem, but largely it's due to the earliness of the market. As the price increases liquidity will improve dramatically. By the time the price is $10b it will be 10 times more liquid than today. By the time it's $100b, 100 times.

Btw, institutional investors are the most worried about needing liquidity, and they're just now jumping onto the train. The first bitcoin fund opened recently in Malta, and with Coinlab coming online Wall Street is getting interested.

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They have an inherent risk of devaluation that is currently higher than the US dollar and many other global currencies.
What do you mean by this? I think you're wrong here... If by devaluation you mean that a flaw might be discovered that allows people to create unmined bitcoin, then I'd say you're likely wrong. Cryptography assures that won't happen, and while it's hard to say what the future of crypto holds, I'll put my money on crypto before I trust a government not to inflate. I'd saying the risk of government inflating their currency is much higher than a flaw in bitcoin being found. A flaw which could be immediately patched, btw, whereas how to do you fix an out of control government?

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I am not debating that they currently have value, just that the logical use of them at this point is limited to savings and investment.
If true, why is bitpay doing big business? Furthermore there's Silk Road, bitcoin being used for ilicit-yet-ethical transaction, ie: drug purchases.

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Re: value of bitcoins -

the statement that they will be "sky high" or "valueless" has no meaning. There must be an upper bound, because it cannot have infinite value.
What he means is, either they will penetrate the market entirely, or fall flat on their face back to zero, there's not going to be a middle-ground.

If having the lowest-possible transaction costs is bitcoin's killer feature, as economist Peter Surda claims, then bitcoin will penetrate the entire online marketplace world and obtain it's true sky-high value, which some napkin calculations would quickly tell you is in excess of six-digits per bitcoin >_>

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Value is only worth what people will give for it.
Once a thing is considered to have value, price is determined by demand. We have in bitcoin a market-disruptive currency. That has never existed before. Because of the nature of a currency, it's market is everyone, the entire planet. Demand from the entire planet turns into a very, very large price per bitcoin given limited supply.

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The question is if that inherent value is above or below existing prices. According to pure demand theory, the value of bitcoin should actually be dropping as more are mined, therefore increasing the supply.
The question is whether demand is increasing faster than supply can fill it, and if so price will increase. So far that's turned out to be true, and it was the block-reward halving that set off the recent price-rise.

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If you go with the fact that there are a finite amount that can exist, their price will reach a maximum that will be set by the market. A finite currency by it's very nature should reach a value and then stay there. If all bitcoins are mined and in the hands of people who are actively spending them, there is no reason for an identical sandwich to cost a different price in bitcoins, ever.
Pretty much, but it's gonna take at least a decade or two for the tech to filter out to the world, just like say cellphones or computers. So the price will experience a continual rise during that time, most likely.

Most of the gains will be realized right now, when bitcoins were cheap.

If bitcoin took over just the US market, the price of one bitcoin should rise to about $55,600 per bitcoin.

If the world adopts it as well, all bets are off. I think we'll see oil priced in bitcoin one day soon, and that alone could push the price into five digits, because that translates into a lot of demand in huge chunks. But before that can happen bitcoin needs much higher marketcap which means much higher liquidity.

Gonna be an interesting next few years, and I intend to stay in the thick of it.
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Old 04-03-2013, 12:42 AM   #213
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Goddamn, look at the size of those transactions. 7,000 - 8,000 bitcoin purchases. That's gotta be millionaire-sized transactions, that's $100k easy. Someone is buying-in hardcore.

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Old 04-03-2013, 12:43 AM   #214
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$140 now... I was just talking to someone a couple hours ago about how ridiculous it was reaching $120.
I'm thinking Russians found a new Cyprus?
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Old 04-03-2013, 01:08 AM   #215
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I'm sticking with the Kindle. It prints money.
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Old 04-03-2013, 01:25 AM   #216
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$146.76...

And bam, correction to $141. Just like that.
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Old 04-03-2013, 02:16 AM   #217
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$131, now $133! Drama! Things are getting good! Rollllllercoaster!
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Old 04-03-2013, 09:01 AM   #218
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Cryptography assures that won't happen, and while it's hard to say what the future of crypto holds,
This is where I get fuzzy. Isn't the security of the currency at risk as technology gets better? What is impossible today could be trivial for a quantum computer 5 years from now, what protects Bitcoin in the face of progress?
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Old 04-03-2013, 09:53 AM   #219
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This is where I get fuzzy. Isn't the security of the currency at risk as technology gets better? What is impossible today could be trivial for a quantum computer 5 years from now, what protects Bitcoin in the face of progress?
A single entity would need to control 51% of the computer power of the bitcoin network. Right now, that network is the most powerful computing force in the world... more powerful than the 600 biggest supercomputers in the world. Unless a single person developed quantum computing, and used it solely to destroy bitcoin, I don't see anyone managing to grab 51%.
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Old 04-03-2013, 10:54 AM   #220
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A single entity would need to control 51% of the computer power of the bitcoin network. Right now, that network is the most powerful computing force in the world... more powerful than the 600 biggest supercomputers in the world. Unless a single person developed quantum computing, and used it solely to destroy bitcoin, I don't see anyone managing to grab 51%.
What's magic about 51%? Is that because, in the current framework 51%+ of the network has to confirm a valid transaction/transfer?

I wish I were hacker smart, but considering how vulnerable virtually any system has proven to be when it comes to the right mix of better technology and smarter hackers I'm interested to see how Bitcoin plans to stay ahead of them.
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