We're not "on the lookout" for double spends to sound the alarm and catch the cheater. We merely adjudicate which one of the spends is valid. Receivers of transactions must wait a few blocks to make sure that resolution has had time to complete. Would be cheaters can try and simultaneously double-spend all they want, and all they accomplish is that within a few blocks, one of the spends becomes valid and the others become invalid. Any later double-spends are immediately rejected once there's already a spend in the main chain.
The incentive can also be funded with transaction fees. If the output value of a transaction is less than its input value, the difference is a transaction fee that is added to the incentive value of the block containing the transaction. Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free.
The requirement is that the good guys collectively have more CPU power than any single attacker.
That would be nice at point-of-sale. The cash register displays a QR-code encoding a bitcoin address and amount on a screen and you photo it with your mobile.
It might make sense just to get some in case it catches on. If enough people think the same way, that becomes a self fulfilling prophecy. Once it gets bootstrapped, there are so many applications if you could effortlessly pay a few cents to a website as easily as dropping coins in a vending machine.
Writing a description for this thing for general audiences is bloody hard. There's nothing to relate it to.
Lost coins only make everyone else's coins worth slightly more. Think of it as a donation to everyone.
When you generate a new bitcoin address, it only takes disk space on your own computer (like 500 bytes). It's like generating a new PGP private key, but less CPU intensive because it's ECC. The address space is effectively unlimited. It doesn't hurt anyone, so generate all you want.
Writing a description for this thing for general audiences is bloody hard. There's nothing to relate it to.
The traditional banking model achieves a level of privacy by limiting access to information to the parties involved and the trusted third party. The necessity to announce all transactions publicly precludes this method, but privacy can still be maintained by breaking the flow of information in another place: by keeping public keys anonymous. The public can see that someone is sending an amount to someone else, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where the time and size of individual trades, the "tape", is made public, but without telling who the parties were.
Lost coins only make everyone else's coins worth slightly more. Think of it as a donation to everyone.
Bitcoin is still very new and has not been independently analysed. If you're serious about privacy, TOR is an advisable precaution.
With e-currency based on cryptographic proof, without the need to trust a third party middleman, money can be secure and transactions effortless.
The Bitcoin network might actually reduce spam by diverting zombie farms to generating bitcoins instead.
There will be transaction fees, so nodes will have an incentive to receive and include all the transactions they can. Nodes will eventually be compensated by transaction fees alone when the total coins created hits the pre-determined ceiling.
What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.
The current system where every user is a network node is not the intended configuration for large scale. That would be like every Usenet user runs their own NNTP server. The design supports letting users just be users. The more burden it is to run a node, the fewer nodes there will be. Those few nodes will be big server farms. The rest will be client nodes that only do transactions and don't generate.
You can get coins by getting someone to send you some, or turn on Options->Generate Coins to run a node and generate blocks. I made the proof-of-work difficulty ridiculously easy to start with, so for a little while in the beginning a typical PC will be able to generate coins in just a few hours. It'll get a lot harder when competition makes the automatic adjustment drive up the difficulty. Generated coins must wait 120 blocks to mature before they can be spent.
Right, nodes keep transactions in their working set until they get into a block. If a transaction reaches 90% of nodes, then each time a new block is found, it has a 90% chance of being in it.
When there are multiple double-spent versions of the same transaction, one and only one will become valid.
