Thoughts on Bitcoin (part 2)

Here is a summary of things that have happened since I wrote the previous Bitcoin blog post.


  1. Mt. Gox, the biggest bitcoin exchanged failed, ~$500 million Bitcoins disappeared, despite months of speculation (some pointing to transaction malleability bug), hacking and leak of data, claim of fraud (backed by thorough analysis) and a Goxcoin proposal to find a solution, no progress has yet been made. What’s even worse, malware is being distributed in the name of Mt. Gox archive data leak.
  2. Flexcoin, a bitcoin exchange has been shut down since they failed to understand that financial transactions need strong consistency and eventual consistency is not sufficient (In this context: ” all services should have had the same view of the user’s Bitcoin balance, but they didn’t “). Poloniex suffered from the same issue but was able to fix it in time.
  3. Now, since Bitcoin has become real money, it has started to toll on real lives, whether Autumn Radtke committed suicide or not has not been resolved yet.
  4. Bitcoins from Brainwallet can be stolen via passphrase brute force – another demonstration of how crypto is never broken in theory, its almost always bad implementation or weak keys.
  5. Newsweek claimed that it found the creator of Bitcoin, Satoshi Nakamoto, he denied.
  6. IRS has ruled that Bitcoins are not currency but investment (favorable capital tax gains for those who are planning to hold them for at least one year)
  7. Ethereum uses the same underlying principle of Bitcoins and applies it to writing social contracts.
  8. CoinDesk published a nice report summarizing Q1 2014 of Bitcoins.


  1. Old white guy (Warren Buffet) said that Bitcoins are like checks is just another way of transmitting money and hence, has no intrinsic value. Young white guy (Marc Andreessen) replied with ad hominem that “Track record of old white men who don’t understand tech crapping on tech they don’t understand still at 100%.” This brown guy thinks that that while Buffet has a valid point that Bitcoins are just like checks, what Buffet missed out on is that unlike checks, Bitcoins are not tied to a particular set of banks (bank of the sender and receiver), this decentralization alone strongly diminishes the power of traditional financial institutions in the long run.
  2. Permanence of data in blockchain raises interesting questions, it is already being used as a prank but what if its used for harassment (by leaking someone’s info) or child porn.
  3. Sam Altman claimed that Bitcoin has a downward price pressure, I disagree, I think that’s just short-term fluctuations, as more companies adopt Bitcoin (and I believe that will happen) the price pressure would be upward in the longer run.
  4. Alex Daley (from Casey Research) wrote multiple thorough and bearish posts on Bitcoins, he agreed on the premise of technology but referred current status as hype. He raises a subtle point that because all Bitcoin transactions are tracked publicly, a legally earned Bitcoin which at some point in past as acquired illegally can be returned to the original owner. I disagree with his conclusion that Bitcoin will not go beyond speculations.

Technical readings

  1. Minimum viable blockchain – an amazing reading on the underlying concept of the distributed ledger and preventing double spending
  2. Using raw Bitcoins – gory technical implementation details of Bitcoin protocol in python

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