51% attacks are difficult to avoid
Many people think that 51% attacks are always intentional, but what I'm finding is that it is easy for a pool to unintentionally execute a 51% attack.
In my quest to make our pool as profitable as possible, I've discovered that the algorithm many pools use to compute profitability is often delayed in determining the most profitable coin. If you select to mine that coin and the other pools don't arrive until later, then you can be finding many blocks in a row and be executing a 51% attack without intending to do so.
And it's not as if you can be "good for the network" and stop doing this. Switching coins frequently is the only way to maintain profitability when there are so many altcoins available to mine. Most of these coins have such low hashrates that even a few miners joining in can result in blocks being found repeatedly until the next difficulty adjustment.
One of our challenges has been to figure out how to allocate hashpower such that we are profitable but don't destroy coins and lose the value in the blocks we have previously mined.
Bounties don't work
It seems that the latest trend in bitcoins is offering "bounties" to people to settle grudges: https://bitcointalk.org/index.php?topic=649176.0. To me, these seem pointless. If the guy at which this bounty is targeted had all of those bitcoins, he would have paid them already.
Bounties are good at getting a lot of people to do a little, such that nobody actually completes the job. When you are not guaranteed any payment, then there is little incentive to see the job through once it gets a little difficult. After all, you could do 99% of the work, and then find that someone else did 100% of the work a day earlier, which means you earn nothing. Therefore, the Nash equilibrium of this "game" is that nobody should play.
Someone offered sum of money (I believe it was $100k) to develop a software development project on /r/bitcoin recently, but one of his conditions was that the project had to be completed within 30 days. That was one of the worst examples of bounties I've ever seen. First, no resilient software can be developed within 30 days, no matter how many people or how much money you throw at it. Even if someone completes the task, the offerer will end up with garbage.
Second, such a bounty doesn't make sense economically. Since it is reasonable to assume that the most competent software developers are employed, they recognize they can't put in enough hours in 4 weekends to stand a shot at winning the bounty. Of the unemployed developers, those who are working on successful projects see more money in their own projects, so they won't be working on the bounty. That leaves the least competent, unemployed developers to compete for the bounty.
You should have a sell point for if the cycle breaks, too
The stable price is starting to nudge towards breaking out of the bubble cycle - but this also happened during the time bitcoins were worth near $450 as well. /u/moral_agent's bubble charts suggest that we would not expect significant rises to begin for another week, with prices nearing $1000 by July 1. Therefore, there is nothing out of the ordinary as of yet.
Breaking the bubble cycle would have serious consequences on the outlook for bitcoins, because it means that the assumptions that most of us hold about adoption and fundamentals are wrong. Given that the pattern has held for several bubbles, such an event would be extremely concerning and I would be looking to sell unless I could figure out what assumption was wrong. Buying or holding stocks that you don't understand is always a way to lose money.
While many people have correctly started to plan when to sell at the top of the next bubble, people should also have a signal for when to cut losses if the cycle breaks.
One clear signal would be if the price crosses the lower boundary before the next bubble, but it could be too late by the time that happens. In fact, if the price remains steady, the lower boundary won't be crossed until early August, by which time the smart investors will have long recognized that things have changed. I need to think about this idea some more and see what other indicators could provide a better lead time in the case of the bubble cycle breaking.
Be wary of "adoption" stories
There seem to be a lot of bitcoin adoption stories in /r/bitcoin lately, but most of them are about companies that have decided to accept bitcoins on a trial basis for small parts of their business in small geographical areas. I would imagine that many of the merchants in BitPay's and Coinbase's counts are not accepting bitcoins for all products as we imagine they are.
You also never read stories there about companies that discontinue accepting bitcoins. It's difficult to get a handle on how many companies do that.
Where are hardware wallets?
The most important hindrance to consumer adoption of bitcoins right now is the lack of hardware wallets. A wallet that looks like a credit card could sign transactions internally and broadcast them through a magnetic stripe. Such a device would be compatible with all existing POS hardware as long as those devices got a software upgrade.
Bitcoin adoption will surge once these wallets are available, because they are much simpler than using a phone with QR codes. Yet, it seems puzzling that there are companies with millions being thrown at them for payment processing, and not one well-funded company is developing a hardware wallet.
Hardware wallets have the potential to allow consumers to ignore public and private keys. They could simply display how much money a person has, and allow people to pay by swiping. Because they don't actually "hold" money, you can send people three copies of the wallet, and they keep the others off-site in safety deposit boxes for use if the first fails. A keypad or fingerprint scanner can enable two-factor authentication on these devices, which can permanently destroy themselves if too many invalid combinations are entered.
Other
- Days until July 24: 43