Doesn't even have to be "from abroad" - if a buyer has a stack of bitcoins and I want a stack of bitcoins, going through an exchange is going to be expensive given the pretty broad spreads (if there's even the necessary liquidity).
I expect the Chinese to expand support of cryptocurrencies to strengthen their geo-political position through a peaceful strategy like this. All other financial strategies involve interfacing with legacy financial warehouses and inventory systems which limit their leverage.
Most people, for good reason, use an escrow agent when buying and selling real estate (at least here in the US). As a buyer, I would be doubly uncertain about directly transferring someone Bitcoin since it's at least as irreversible as a processed wire, and probably harder to have good legal recourse for. If you can find someone who would do escrow with Bitcoin, you'd probably have better luck.
Take a look at BitPremier: http://www.bitpremier.com/. They advertise your high-value good on their site, and then once they pair you up with a buyer they also serve as an escrow agency.
The Chinese property market/household market is a fickle thing -- a lot of it revolves around speculation. There is a suspicion that there will be a large migration of rural workers to urban regions.
And large is an understatement -- everybody is betting everything on it.
Xi Jinping's third plenum starts tomorrow, and many people believe that they will reform the hukou system, allowing people to sell their property in the country and buy property in the city. That could create a lot of urban homebuyers and encourage more migration to urban areas.
FWIW, China seems to be tacitly approving Bitcoin. State-controlled CCTV has been broadcasting more and more news segments about the currency that are all very favorable and positive(!)
We've pretty much seen that no other currency is going to undermine the US dollar. It is the de facto reserve currency for the World. This has only been further cemented by globalization since everyone is now so far in bed with the US via trade that everyone has no choice but to let the US keep racking up a national debt. Questioning that debt and forcing default would be tantamount to economic mutually assured destruction. For China, it knows the Yuan is never going to be a real competitor to the US dollar, since there is even less trust in China, since it has been so willing to manipulate exchange rates with its own currency.
AFAICT bitcoin presents the only real existential risk to the US dollar. It's a long long road to get there and it might fail spectacularly or simply become just another currency, but even if there is only 0.1% chance of it upsetting the US dollar, that is 0.1% chance more than any other currency out there.
Personally, if this does play out, I see the US to be one of the last countries to get on the Bitcoin wagon and lose out. Our currency is the most fit and we have the least amount to gain in the short term from adopting it. But this does not change the fact that many countries with far less stable currencies and governments that have proven themselves untrustworthy with their monetary policies, where the citizens would flock to a currency like bitcoin once security and usability issues are addressed. I'd say that every country where inflation is over 4% per annum is a candidate for wanting to acquire bitcoins.
It wouldn't take but a few thousand wafers of 65nm ASICs to overpower the rest of the network. With direct access to chip manufacturing facilities this can be pulled off fairly easily.
I think this is what makes me nervous about electronic currencies. A country, even just a person, could easily abuse it by throwing these huge machines at it.
The only thing analogous to this with real currencies are printing presses that people somehow get a hold of and are able to print themselves. The nice thing about real currency though is we have some ways of knowing whether they're real or not (like looking under a light), but you can't really determine whether someone's bitcoins came from abuse because technically it's legit. Only solution I could think of would be if there's a way for the networks to have throttling so miners could only make so many per day or per hour or some other metric.
> throw 10% of a datacenter at it whenever they feel like it and pull off a 51% attack
The rise of ASIC miners have made the BTC network essentially invulnerable to attacks from general-purpose devices. SHA is very amenable to being directly implemented in hardware, making general purpose computers useless for bitcoin.
Because of all the new hashing power coming from all the new asic miners, difficulty has risen to the point that you'd need more than four hundred million modern cpu cores to take over the network. Using top of the line GPUs, you'd need more than 5 million of them.
China could take over the BTC network, however, to do so they would have to attack it with ASIC miners. This would imply ~6 months of preparation, tens of millions in funding, and they'd have to make the decision to pull the trigger some 3-4 months in advance or the money would go to waste.
It would cost a lot more than $40 million to majority-attack Bitcoin. I estimate $3-4 billion or more. Mostly data center costs.
Let's assume an attacker is very good and needs only 6 months to design his own ASICs and build data centers to host the farm. The network is at 4 Phash/s today, so 6 months from now we should be around 4 * 2^6 = ~250 Phash/s (the network has been doubling in size every month for the past 10 months). The best ASICs, 28nm KncMiner, are approximately 100 ~Ghash/s and 100 Watt each. So an attacker would have to build 250 Phash/s of these to clearly outperform the network: that is 2.5 million chips at 250 megawatt total. And to plan for a potential delay of 30 days in his plan, an attacker would have to build not 250 Phash/s but 500 Phash/s of ASICs to attack the network. 5 million chips. 500 megawatt data center. For comparison, Facebook spent $210 million on their 28 megawatt Prineville data center. So a 500 megawatt data center would probably cost $3-4 billion. Even the well-funded NSA couldn't get their comparatively punny Utah data center to run correctly and it has been delayed by more than 1 year: http://www.pcworld.com/article/2052960/nsa-data-center-suffe...
Is China seeing Bitcoin as a threat? No. And even if it was, is it big enough for them to be willing to spend $3-4 billions to destroy it? I don't think so.
Governments cannot stop Bitcoin on a global scale for the same reason they cannot stop Internet on a global scale.
There is no cost-effective way to destroy a well-designed decentralized technology/protocol, plus it would require co-operation of most countries to destroy it.
Did I not demonstrate in a back-of-the-napkin way that it is out of reach of the NSA ($3-4 billion & deploying 500 megawatt within 6-7 months)? If the NSA cannot do it, no government can.
Trivial? Let's assume attacking the Bitcoin network would be a project falling in the hands of the most well-funded Chinese government agency: the military. (It would not, but let's assume it). This represents about 3-4% of their annual budget (~$100B), which is not quite insignificant.
In addition to Tuna-Fish's excellent reply, bpodgursky, you need to ask yourself: what would be China's motive to destroy Bitcoin via a majority ("51%") attack? They have no particular reason to do so. On the contrary, they can instead economically benefit from being a participant in the Bitcoin ASIC design and manufacturing industry. (And they already are: Avalon, Blackarrow, ASICMINER/BlockErupter, etc, all these companies are operating primarily out of China).
Also: China "locking up" coins would do nothing to stop or destroy it. It would just drive the value of the remaining coins higher and as we are seeing right now, an appreciation drive the interest in Bitcoin up, not down.
A lot of the current price is because of the Chinese market. If you follow the price surges, usually the exchange BTCChina is the one that starts rising first, followed by the US exchanges. The Genesis Block did a good analysis on the Chinese markets a few weeks ago [1]. I really like the bottom chart in that article, which graphs the price differential between Chinese and US exchanges.
From the article: "The current run-up in the price of Bitcoin is an indicator of the interest in the currency, but is likely largely due to speculation." Reporting by economically literate journalists familiar with the situation in China points out that China's housing market is a bubble.[1][2] The speculation in the current residential housing market in China is because middle-class investors cannot find a better investment vehicle, and because they are making unrealistic assumptions about future demand. What's unrealistic about the demand is that migrant workers moving legally to Chinese cities (as they already move illegally) will not possibly be able to afford current market prices for new housing units in China. There is a huge oversupply of housing that is too expensive for anyone to buy who is in the market for a place to live (as contrasted with being in the market for a speculative investment vehicle). The bubble will have to pop. When the China housing bubble pops, China's whole national economy will be severely stressed, and political instability may erupt. The ability to buy houses with Bitcoin reported in this thread is just one more sign of a bubble housing market in China.
Then it would have been clever and borderline perverse to use a Japanese disguise for the creation of bitcoin.
Anyway, I think the mystery around bitcoin I'd very captivating a story but probably the answer is more simple than these conspiracy theories, and I was surprised the day I read pg himself give credit to them.
One reason for Chinese government to dislike bitcoin, and it is probably the same reason for Chinese individuals to be interested in it: bitcoins make it very easy to hide cash in your pocket at the customs.
People may not realise it but the big issue for many Chinese or foreigner earning money in China is to get it out of the country. The contemporary art market is in fact fueled by this escaping money, because it is easy to under evaluate a piece of paper with two strikes on it, but recently there is a crackdown against that and experts are checking luggages. Bitcoin might be a much better alternative.
53 comments
[ 3.6 ms ] story [ 144 ms ] threadI expect the Chinese to expand support of cryptocurrencies to strengthen their geo-political position through a peaceful strategy like this. All other financial strategies involve interfacing with legacy financial warehouses and inventory systems which limit their leverage.
http://www.zerohedge.com/news/2013-09-10/money-laundering-ex...
That's coming up on prices in SF, and a little bit more expensive than Boston. I had no idea.
And large is an understatement -- everybody is betting everything on it.
Pretty much all of it. People in Shanghai, for example, use properties as a cash-storage mechanism, thinking it more secure than a CD.
This is all going to end badly.
A lot of chinese Bitcoin users have reported this stance, eg: https://bitcointalk.org/index.php?topic=320260.0
AFAICT bitcoin presents the only real existential risk to the US dollar. It's a long long road to get there and it might fail spectacularly or simply become just another currency, but even if there is only 0.1% chance of it upsetting the US dollar, that is 0.1% chance more than any other currency out there.
Personally, if this does play out, I see the US to be one of the last countries to get on the Bitcoin wagon and lose out. Our currency is the most fit and we have the least amount to gain in the short term from adopting it. But this does not change the fact that many countries with far less stable currencies and governments that have proven themselves untrustworthy with their monetary policies, where the citizens would flock to a currency like bitcoin once security and usability issues are addressed. I'd say that every country where inflation is over 4% per annum is a candidate for wanting to acquire bitcoins.
- track all financial transactions by all people to find dissidents and find NGO funding sources
- throw 10% of a datacenter at it whenever they feel like it and pull off a 51% attack
- lock up a huge number of bitcoins via the above point
The only thing analogous to this with real currencies are printing presses that people somehow get a hold of and are able to print themselves. The nice thing about real currency though is we have some ways of knowing whether they're real or not (like looking under a light), but you can't really determine whether someone's bitcoins came from abuse because technically it's legit. Only solution I could think of would be if there's a way for the networks to have throttling so miners could only make so many per day or per hour or some other metric.
The rise of ASIC miners have made the BTC network essentially invulnerable to attacks from general-purpose devices. SHA is very amenable to being directly implemented in hardware, making general purpose computers useless for bitcoin.
Because of all the new hashing power coming from all the new asic miners, difficulty has risen to the point that you'd need more than four hundred million modern cpu cores to take over the network. Using top of the line GPUs, you'd need more than 5 million of them.
China could take over the BTC network, however, to do so they would have to attack it with ASIC miners. This would imply ~6 months of preparation, tens of millions in funding, and they'd have to make the decision to pull the trigger some 3-4 months in advance or the money would go to waste.
Let's assume an attacker is very good and needs only 6 months to design his own ASICs and build data centers to host the farm. The network is at 4 Phash/s today, so 6 months from now we should be around 4 * 2^6 = ~250 Phash/s (the network has been doubling in size every month for the past 10 months). The best ASICs, 28nm KncMiner, are approximately 100 ~Ghash/s and 100 Watt each. So an attacker would have to build 250 Phash/s of these to clearly outperform the network: that is 2.5 million chips at 250 megawatt total. And to plan for a potential delay of 30 days in his plan, an attacker would have to build not 250 Phash/s but 500 Phash/s of ASICs to attack the network. 5 million chips. 500 megawatt data center. For comparison, Facebook spent $210 million on their 28 megawatt Prineville data center. So a 500 megawatt data center would probably cost $3-4 billion. Even the well-funded NSA couldn't get their comparatively punny Utah data center to run correctly and it has been delayed by more than 1 year: http://www.pcworld.com/article/2052960/nsa-data-center-suffe...
Is China seeing Bitcoin as a threat? No. And even if it was, is it big enough for them to be willing to spend $3-4 billions to destroy it? I don't think so.
There is no cost-effective way to destroy a well-designed decentralized technology/protocol, plus it would require co-operation of most countries to destroy it.
Besides, I bet they can cook up more efficient devices than commercially available asics.
Also: China "locking up" coins would do nothing to stop or destroy it. It would just drive the value of the remaining coins higher and as we are seeing right now, an appreciation drive the interest in Bitcoin up, not down.
Ah, the mystery of HN ratings...
[1] http://thegenesisblock.com/bitcoin-climbs-highest-price-sinc...
[1] http://finance.yahoo.com/news/uncomfortable-truth-chinas-pro...
[2] http://www.forbes.com/sites/realspin/2013/10/28/in-china-the...
Anyway, I think the mystery around bitcoin I'd very captivating a story but probably the answer is more simple than these conspiracy theories, and I was surprised the day I read pg himself give credit to them.
People may not realise it but the big issue for many Chinese or foreigner earning money in China is to get it out of the country. The contemporary art market is in fact fueled by this escaping money, because it is easy to under evaluate a piece of paper with two strikes on it, but recently there is a crackdown against that and experts are checking luggages. Bitcoin might be a much better alternative.