Let's say bitcoin is to last a century, over time, there will be gradual losses to all kinds of problems, like hardware failures, owner errors, etc that cause lost of wallets, and thus, coins, forever.

There's no way to replace these, so over time, the total number of coins it not only limited, but after the last bitcoin is mined, it must decrease.

This suggests to me that bitcoin is a marvelous experiment that finally proved that such a currency is possible on a wide scale, but as a foundational currency, it has serious flaws, and it sounds like it needs to ultimately be replaced by a Bitcoin 2.0.

However, creating a new Bitcoin that is incompatible with the old would massively destroy value in the old system, so it's an interesting proposition as to how you can 'version' the Bitcoin protocol over time while not causing great upheaval.

To switch to Bitcoin 2.0 all holders need to see no future in Bitcoin 1 and panic-sell into Bitcoin 2. If this happens, it's another huge bet (like going from USD to BTC), but the prerequisite is to Bitcoin 1 really be in trouble. Divisibility problem is not a fatal flaw, it can be patched, worked around, or counted in as an extra cost.

On the other hand, USD has tons of fatal flaws: it's being printed like crazy and it needs to be stored in banks that easily freeze, tax and censor accounts. Essentially, USD is not even an asset. It's always a chain of promises by bankers and presidents, who brake them constantly in various ways. Compared to USD, Bitcoin is infinitely better, so people are willing to make a bet that Bitcoin can replace USD. Imbalance like that is the requirement to start discussing a jump from BTC1 into BTC2.

Suppose that all bitcoins are lost except one.

Well, we just use fractions of the one remaining. While the protocol currently supports 8 decimals, there isn't any hard limit; we can continue dividing forever as needed.

sigh

I got myself 3 or 4 coins (I wasn't even in a pool at that point) but then the price crashed in late 2011 and I eventually forgot about it. Since then I've reformatted and I remember having that "Oh shit" moment as I was reformatting but after looking up the price I realized I was only out about $10. This was late 2011.

Now every time I see a HN post about a new price milestone I kick myself. Today I could have sold them for ~$1500-2000.

You shouldn't. You only lost $10 by reformatting that pc - your only loss is from not buying the bitcoins at that point, of which most of us are guilty.

If you aren't in a pool the only way to get coins is to solve the block and in that case you would have had 50.

Any economy built on a currency that fluctuates this wildly is going to be unpleasant.

I don't know how someone can genuinely believe that bitcoin is a currency with this kind of pricing turbulence. It is behaving like the focal point of rampant speculation.

You might be wrong ;) This week, Yi Gang (a very high-ranked chinese government official: no less than the Director of the State Administration of Foreign Exchange and Deputy Governor of the People's Bank of China), said he would personally adopt a long-term perspective on the currency! See https://news.ycombinator.com/item?id=6782870

But I imagine the person that deleted the wallet back then is pretty pissed with himself now-a-days.

1. Bitcoin third-pary services security will get better.

2. People are now more aware of security concerns.

3. You can divide a BitCoin to smaller units.

Obviously when RSA's end nears, assuming bitcoin is still around then, we'll see some sort of managed transition to a newer cryptosystem. I imagine the network will probably support announcing transactions saying something like, "Wallet X will now be known as wallet Y" where Y uses the new cryptosystem. And presumably only the first valid signed announcement will count and make its way into the block chain. It's at this point that I think people with enough compute power might be able to "steal" lost wallets.

I'd be surprised if 30 years into the future (probably earlier given the incentives we have to break crypto today are so much than those we had in '98) if these algorithms weren't broken.

There is actually no precedent of a cryptographic system relying on computational hardness surviving for more than a generation. And given that our fundamental theoretical understanding hasn't really evolved beyond, "we think a bunch of these problems are hard", things are likely to stay that way for a while.

>There is actually no precedent of a cryptographic system relying on computational hardness surviving for more than a generation.

That's because cryptosystems relying on computational hardness aren't that old.

>And given that our fundamental theoretical understanding hasn't really evolved beyond, "we think a bunch of these problems are hard", things are likely to stay that way for a while.

These assumptions haven't really broken though. You give an example of DES, but that doesn't rely on computational hardness assumptions. Asymmetric crypto with a trapdoor function does. There hasn't even been a big breakthrough in the original prime number factorization assumptions of RSA/DH.

Similarly, if you found had preimage attack for ripemd160(sha256(x)) (you can find a public key with the same hash as any other hash), how could you not steal people's money?

If you found pre-image for ripemd160(sha256(x)), you still need to find a private key for it.

In block B, I make a transaction h -> 1 BTC -> s. Where s is a securely generated public key that I own. I then sign this transaction with my forged public key, which hashes to h.

How does this not give me x's money?

http://bitcoinrichlist.com/address/1HtUGfbDcMzTeHWx2Dbgnhc6k...

I'm curious which of these might be intermediary wallets for Coinbase and the like.

You basically delete the private key and won't be able to sign a transaction with it ever.

See http://moneyfactory.gov/uscurrency/damagedcurrency.html There's also an article with some interesting stories: http://usatoday30.usatoday.com/news/nation/2001/06/2001-06-0...

[I'm not intending this as an argument about Bitcoin, but as something people might find interesting.]

(Or at least that's what I was told during a tour of a US Mint several years ago.) Money burned up in a fire is not replaceable.

And this is one of many reasons why it will become increasingly important to beef up the security and robustness of the Bitcoin network and ecosystem. It has some of the same failure modes as traditional bank/government-backed currency. But it also has a set of a different kind of failure modes that should also be minimized or mitigated.