BitCoin is Fatally Flawed

BitCoin is a peer-to-peer virtual currency based on strong cryptography that is starting to gain some traction for use in transactions for real-world goods and services. It recalls plot devices from Neal Stephenson’s Cryptonomicon  or Daniel Suarez’s Freedom™ where major characters are involved in a nascent new economy based on some form of cryptographic cyberbucks. To a certain extent virtual currencies are not new. Edward Castronova has shown that virtual currencies in massively muliplayer online games (MMO) have virtual currencies that exchange into hard currencies and therefore the MMO worlds have GDPs that rival large nations. People will exchange hard currency for virtual goods. Consider that Zynga (Farmville, Mafia Wars) earned half a billion US Dollars selling virtual goods in 2010.

The thing that is different about BitCoin is that it is a peer-to-peer system and as such there is no central bank to control the money supply and no middle-man to mediate transactions. Transactions are anonymous, and secured through a public key cryptogrpahy system.The record of every transaction is stored on every BitCoin node. Ownership of BitCoins is established by possessing the private key used in transactions to acquire coinage.

Instead of a central bank, BitCoin uses a complex, brute-force mathematical function to generate currency. As nodes come online, the peers scale the difficulty of solving the problem such that over time the rate of currency creation will decline as it approaches a maximum of 21 million BitCoins in circulation.

My critique of BitCoin doesn’t depend on the cryptography. I’m willing to stipulate that the system is adequately secure for the purposes of this discussion.

The problem lies in the cap of 21 million BitCoins being created as well as inevitable loss of private keys which will cause coinage to permanently fall out of circulation. This is a deflationary system.

BitCoin is a Deflationary Currency System and That’s Bad

Let’s do a thought experiment. Suppose that the world lost confidence in US Dollars, UK Pounds and Euros and instead BitCoin became the standard transactional currency. Currently, a BitCoin trades can be exchanged for roughly one US Dollar, but if it were used widely by billions of people the exchange rate would have to change such that a single BitCoin is worth millions of Dollars. This is because the supply of BitCoins is capped at 21 million. Anyone who acquired BitCoins now at one-to-one exchange rate and held on to them would be a huge winner.

BitCoins can be traded in fractions up to 8 decimal places. If BitCoin were to ever to become a general currency used by billions, this precision would not be enough for minimum transactions to be small enough to buy consumable goods.

But wait, there’s more.

Suppose you are an appliance dealer. You buy appliances in BitCoin and sell them at a later time in BitCoin. But because the value of BitCoin is always increasing, you may well be forced to sell your appliances for fewer BitCoins than you paid for them. Loans have to be paid back with money that is more valuable than the money that was loaned. Even a 0% loan is unattractive if it must be paid back with currency that is worth 10% or 20% more than what was loaded. It becomes unprofitable to be in business. It becomes too risky to take a loan to start a new business. Money becomes more valuable but it goes out of circulation because everyone is terrified to spend it.

This scenario is call a deflationary spiral. BitCoin is designed to work like the Gold Standard in that it is a fixed pool of currency. But the fact is that having a fixed pool of currency is incredibly dangerous. The Gold Standard caused the Great Depression in the 20th Century and the Panic of 1837 in the 19th century. If you’re not convinced, I recommend listening to “Gold Standard, R.I.P” from NPR’s Planet Money podcast.

I don’t think BitCoin will ever come to this. Long before there is a Great BitCoin Depression, the world will have realized that it is a flawed monetary system. I think we’re much more likely to end up with in a future that conducts business in Facebook Credits than BitCoin.

Related Listening

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C# in Depth 2nd Edition for Kindle but not from Amazon

skeet2_cover150Jon Skeet blogged this morning that C# in Depth 2nd edition is now available on Kindle. The original C# in Depth is just about the best programming book I’ve ever read, so I will definitely check this out. Don’t look on the Amazon Kindle store, though. Manning is self-publishing eBooks through its own website in PDF, epub and mobi. Mobi is the un-DRMed proto-format of Kindle and is read by Kindle devices and the Kindle desktop software. Interesting.

petricek_cover150Before I get C# in Depth 2nd Edition, though, I think I’ll check out Real-World Functional Programming by Tomas Petricek and Jon Skeet. This book is about both F# and C# (surely mostly LINQ). I’ve been playing around with Haskell lately and while it is interesting, it doesn’t seem all that practical. F# seems like a more approachable language and it targets .NET/Mono so it can mix with C# code that already exists and generally seems likely to be more immediately practical for real-world projects.

Also, if you have never heard of Jon Skeet, he’s an over-achiever who knows more about C# than just anyone not on the compiler team at Microsoft and he has by far the highest score on Stack Overflow. I don’t know how he has time for all of this because his day job has him working at Google in Java on the Android Market. He was interviewed on This Devleoper’s Life 1.1.3. Give it a listen.

Replicating My Key Android App Features on iOS

PwnTunes-IconPwnTunes (€10) == Android Mass Storage USB Device

Android is mostly cloud-focused. You don’t sync it with a PIM or iTunes. If you want to put music on the Nexus One or get your pictures off you can just plug it into a computer. Android presents itself as a USB drive.  You can simply copy files back and forth between the device and the computer. Incidentally, this is exactly how the Kindle and my Nikon D200 work as well.

PwnTunes is a Cydia app which requires that your iPhone is jailbroken but it pretty much replicates the Android behavior. I was willing to pay €10 for this convenience because I’m an iTunes rebel. I buy my music from Amazon’s MP3 store and I don’t even have iTunes installed on my Windows partition where I spend the vast majority of my time.

PwnTunes Update

PwnTunes is horrible. It does not work well at all. Unfortunately, there is no substitute for iTunes for i-devices.

bria-iconBria iPhone App ($8) == SipDroid

I have a SIP account on Callcentric which allows me to make calls in the US without any international phone charges when I’m abroad. My SIP account is also tied to my Google Voice number so when I get a call on my main USA number it rings through to me anywhere in the world provided that my phone has data service. Bria is working really well for me so far. I’d say that the background service and notification features of Android  is more favorable to this sort of thing. It does seem that iOS will occasionally decide to kill Bria, I think. It’s hard to tell.

gvoice-iconGoogle Voice == Google Voice

Apple has approved the Google Voice app for iOS so it is now available on the iPhone. Incidentally, the iTunes store on iOS makes this much easier to install than the Android Market because if your SIM is not on one of the whitelisted carriers in Google Market, Google Voice doesn’t appear. The iTunes store has no such issue.

Podcaster ($2) == Google Listenpodcaster-icon

Google Listen is a podcatcher which downloads and caches podcasts over the air. It’s a little flaky but it mostly works. It’s another one of the apps that is hidden in Google Market for some carriers. Podcaster does the same thing for iOS and has a much nicer user interface than Google Listen. I really like Podcaster but my main complaint is that the scheduled polling of podcasts doesn’t seem to be reliable when Podcaster is running in the background.

kindle-iconKindle == Kindle

On the one hand this is essentially the same reading experience as the Android version. On the other hand, the Android version is more feature-ful because of the subscription content struggle between Amazon and Apple. The iOS version of Kindle cannot receive periodical subscriptions.

 

nytimes-iconNY Times == NY Times

Nothing to see here. The Android and iOS versions are nearly identical if you allow for the differences in standard interface widgets on the platforms.

 

gtranslate-icon

Google Translate == Google Translate

Again this is the same app on iOS as on Android. It’s very cool if a bit Eurocentric. Don’t expect it to hear and speak Arabic or Asanti Twi. On the other hand it is great at hearing and speaking French, Spanish, German and Dutch. It speaks Danish but can’t hear Danish and it hears Afrikaans but can’t speak it. Something interesting is going on there.

Bonus: Flickrflickr-icon

iOS has a cool Flickr app that will background upload photos to your Flickr stream and can also edit tags and sets in Flickr as well as browse your friends Flickr streams. Nicely done.

 

Bonus: OneNote

onenote-icon

I have OneNote and use it off and on. OneNote 2010 syncs with Microsoft’s cloud storage and this cool little iOS app also syncs with Microsoft’s cloud storage. If you take notes on an iDevice they show up in OneNote on Windows and vice-versa. My main complaint is that syncing a notebook for the first time is pretty slow over 3g. Jury is still out on this one but I’m giving it a whirl.

Nexus One Came Back to Life After a Soaking

I’ve had my Nexus One in a bag of rice for the last 5 days to draw the water out of it. I put the battery back in this morning and it booted up with a working touch screen and no evident ill effects except that it has decided to erase all my personal data and apps.

All of the data on it is synced onto cloud services and onto my iPhone and desktop so nothing is lost. It is a big hassle to get apps back on the Nexus One though because the Android Market store has some really unfortunate carrier blocking. Some apps such as GMail, Google Listen, Google Voice and Amazon Kindle do not appear in the store unless the carrier identified by your SIM is white-listed with Google. This is one thing that Apple seems to get really right. The iOS App Store seems to work regardless of locality or carrier.

I’ve decided to stick with iPhone for a while. iOS 4 is a significant improvement. It seems to achieve most of the key benefits that Android has while retaining a slicker GUI and avoiding the glitchy touch-screen registration issues and periodic hangs that I experience regularly with Android 2.2 on the Nexus One.

Drowned Nexus One

Last Thursday, I was caught out in a serious deluge of a storm and was thoroughly soaked to the skin. When I got home, I pulled my Nexus One out of my pocket and watched in horror as the screen flickered and died. I have the Nexus One in a bag of rice hoping it will dry out and revive but I can say this is one area where the iPhone design is better. My iPhone 3Gs was more water resistant. I was drenched in a similar way in a rain storm with my iPhone in my pocket and it survived without any water damage. I chalk this up to the don’t-open-me sealed design of the iPhone case vs the pop-open Nexus One with a removable battery. I do seem to manage to destroy phones at about the one-year mark with alarming predictability, though, regardless of manufacturer.

Time to get another phone and quickly. I’m willing to pay for an unlocked device rather than wasting my time futzing around rooting devices. That’s why I got the Nexus One in the first place. On the other hand, I’m really, really irritated that Gingerbread is still not out on the Nexus One. And the price at the Telefonika in the Accra Mall for a new Nexus One is roughly $900! At the current exchange rates, the price for a new unlocked iPhone in Ghana is nearly $1500! RIM BlackBerry phones carry a similar premium and are immensely popular here.

photo

As I’m unwilling to pay $1500 for a phone if I can avoid it, I find myself having to pull my pre-Nexus One iPhone 3Gs out of a shipping crate so that I can get it working here in Ghana. My wife has an AT&T BlackBerry which AT&T unlocked without comment but AT&T will not unlock an iPhone for any reason. (FWIW, I am still an AT&T customer. My company pays for a full monthly data plan with international roaming but I normally use Airtel in Ghana.)

These are not reasonable prices in my world. I have an iPhone locked to AT&T and running iPhone OS 3.2. What I wanted was iOS 4.2.1 but I wasn’t going to shell out $1500 to get it. So, despite my desire to be a good little consumer and my willingness to pay something of a premium to get an unlocked phone, I found myself researching how to jailbreak my iPhone 3Gs. It took me some time that I’ll never get back but this is what I came up with:

  1. I used Pwnage 4.1 to build a custom 4.2.1 iOS image without the baseband update from iOS 4.2.1. To do this you need the iOS image and you have to add a iPhone 3Gs 4.2.1 bundle to Pwnage. This is important because the baseband I had is unlockable using UltraSn0w but the baseband from iOS 4.2.1 is not and the solution to that problem is flashing a baseband firmware from the iPad which makes it impossible to go back to a stock iOS image.
  2. I kept getting an error from iTunes when I tried to flash the firmware onto my phone. It turns out that I needed to have iTunes 10.1 and I had whatever comes with Snow Leopard because I don’t actually use iTunes. But after doing the update to the latest iTunes 10.1.x, it worked.
  3. Then I used greenpois0n to jailbreak the phone because it seems to be the only jailbreak for iOS 4.2.1 that works without having to tether the phone to a computer for every reboot..This worked on the second try.
  4. Basically, what I had at this point was a stock 4.2.1 image with an older baseband and an extra green icon called “Loader”. What Loader does is install Cydia on the root partition and it failed because the partition was too small. Back to step 1, this time I created an image with a 1024MB root partition.
  5. Once the phone was jailbroken with Cydia on it, I was able to use Cydia to install UltraSn0w which unlocks the baseband for any SIM. Finally my phone was up and running on Airtel.

I’m not very happy about this state of affairs but there it is. I am happy to have a working phone again.

New NVidia Video Drivers Improve Graphics Subscore in Windows Experience on Boot Camp 3.2 and Windows 7 x64

nvidia-266.58-driverI have a late 2009 15” MacBook Pro Unibody (MacBookPro5,3) running Windows 7 x64 with Boot Camp 3.2. Because they are Apple, Apple doesn’t keep up to date with the video drivers for Windows. The versions that ship with Boot Camp are a couple of generations out of date.

A couple of weeks ago, NVidia released a new “Verde Notebook” driver which supports my MackBook Pro: GeForce 9600M GT Verde Notebook drivers release 265 v266.58 WHQL. The actual driver version reported by Device Manager is 8.17.12.6658 built 1/7/2011.

After creating a restore point, I went ahead and installed it although I did not elect to install PhysX or NVidia 3D Vision, neither of which have any use for me.

It just occurred to me to update the Windows Experience meter thingy. I didn’t expect any change but I was pleasantly surprised to find my Graphics and Gaming Graphics subscores increased slightly from 6.4 to 6.5 with no negative side-effects so far. This doesn’t make much if any difference at all in the real world but it feels nice.

graphics-score-nvidia-notebook-2066.58

Pin Netbeans 6.9 to Windows 7 x64 Taskbar

netbeans-x64-bugIf you try to pin Netbeans 6.9 to the Windows 7 x64 taskbar and have the x64 JDK running, you get a new icon every time Netbeans runs. This is Netbeans bug 178273. The gist is that the netbeans.exe and nbexec.dll which bootstrap netbeans startup are 32-bit native binaries. Netbeans.exe can’t host the 64-bit Java so it copes by launching a child javaw process with a huge list of arguments.

nb-daughter-javaw-process

A possible solution would be to create a shortcut to Javaw with all the arguments for Netbeans and pin that to the Taskbar. Unfortunately, the list of arguments is so large that it isn’t possible to create a shortcut directly to javaw passing everything in. The list gets truncated and the shortcut doesn’t work.

A workable solution is to install the 32-bit JDK and make that the default platform for Netbeans. This works but you have to override the installer which prefers to put Netbeans into the x64 Program Files tree and use the x64 JDK if it is detected.

netbeans-32-bit-sdk-override

This does solve the problem but it’s not that pretty. The downside here is you have to maintain a second 32-bit JDK. You can still build applications with the x64 JDK but you have to fiddle around with registering the extra x64 platform in Netbeans and you have to reference the correct platform in each project.

SevenBeans Plug-In Does it Better

Jump ListSevenBeans is a Netbeans plugin that improves Netbeans Windows 7 taskbar integration. It adds jumplists, icon overlays and taskbar progress bar for background processes in Netbeans such as updating plugins. It fixes the taskbar integration whether you use the x64 or the x86 JDK

SevenBeans uses a native J7Goodies native DLL for integrating with the Windows 7 taskbar which it extracts  J7G<random-number>.tmp in your Temp directory and dynamically loads. If you are using AppLocker DLL rules, you need to create a per-user white list for C:\Users\<username>\AppData\Local\Temp\J7G*.tmp

Once SevenBeans is installed, launch Netbeans and then pin icon you have after Netbeans is up and running to the taskbar.

SevenBeans is cool and it is much nicer than dealing with an extra JDK installation that I didn’t want.

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