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Bitcoin Releases Version 0.3
Teppy writes "How's this for a disruptive technology? Bitcoin is a peer-to-peer, network-based digital currency with no central bank, and no transaction fees. Using a proof-of-work concept, nodes burn CPU cycles searching for bundles of coins, broadcasting their findings to the network. Analysis of energy usage indicates that the market value of Bitcoins is already above the value of the energy needed to generate them, indicating healthy demand. The community is hopeful the currency will remain outside the reach of any government." Here are the FAQ, a paper describing Bitcoin in more technical detail (PDF), and the Wikipedia article. Note: a commercial service called BitCoin Ltd., in pre-alpha at bitcoin.com, bears no relation to the open source digital currency.
The Wikipedia article (beyond the fact that the article is on the most unreliable data source outside of a Soviet propaganda factory) is sourced entirely to bitcoin.org. This /. article is sourced entirely to Wikipedia and to....bitcoin.org.
So it's slashvertising AND garbage. Three cheers for kdawson.
Given that the gold standard is gone, I'd like to see those guarantees too. Your paper money is virtual as well.
Don't forget, you can always use your paper money as toilet paper. That's why I keep a few American dollars in my wallet. You just never know when a washroom might run out of toilet paper.
I've been involved with the Bitcoin project for a while, and there are steps in place to prevent this. Essentially, the network tries to maintain block generation at a rate of six blocks per hour (one every 10 minutes) by checking every 2856 blocks (nominally 2 weeks) if the rate was too high or too low. At that point, all nodes adjust their hash target such that it gets more or less difficult to generate blocks. The net result is that more nodes or faster nodes can only really influence the market for 2856 blocks. There is discussion about reducing this number to lower that time, as well. If you'd like to discuss this with some Bitcoin participants, drop by the IRC channel: #bitcoin-dev on Freenode. I'm Lachesis on IRC.
So this system requires CPUs to burn scarce, real electricity in order to generate virtual electronic tokens whose only purpose is to simulate the scarcity of rare metals, so that we can continue to use the old 'exchange value' economic model in the realm of information where by definition, it does not apply.
This seems like basing an economy on burning one's food crops to prove wealth and using the ash to buy things. I'm sure it would 'work', for some definition of work, but it doesn't seem particularly... efficient. Or sensible. Granted, humans do indulge in self-destructive behaviour, but do we really have to port all our bad habits into the digital world?
Is there some actual upside to this system which I'm not getting?
You are not a brain: http://books.google.com/books?id=2oV61CeDx-YC
Since the site is down and the summary is light on information, let me try and summarise this a bit better, from what I've picked up, so I might be wrong on some of the details):
Nodes connect to each other in a P2P network.
The nodes perform hashing problems, attempting to find a number that hashes to a value with a certain number of 0's at the start (binary zero's, aka, the number has to be below a certain value)
The network assigns bitcoins to those nodes who have found solutions to the hashes.
After a certain amount of time the difficulty of finding the hashes increases(an extra 0 is added to the hash solution required)
This increase in difficulty continues until eventually there will be 21million bitcoins and no more can exist.
We are currently in the inflationary stage, so the supply of bitcoins is increasing. once all 21 million have been assigned, then it will become deflationary, as no new coins can ever be created and coins that are lost are lost forever.
bitcoins can be divided into 100 million pieces, so the limit of 21 million coins is not a major stumbling block.
Essentially it's a way to create a decentralised currency with a hard limit on how much is available, ensuring that it cannot be inflated by a central government simply printing more cash or adding some numbers to a computer system.
how do these big fat women always find the exact center of a doorway or an aisle so that no one can get around them
Practice. If they get too close to any wall their gravity might collapse it towards them.
Tying fiscal policy to the amount of shiny stuff we can dig out of the ground is far sillier.
If the amount is fixed, then as the economy expands the available value per coin increases and prices drop: instant, guaranteed deflation, getting worse as the rate of value growth increases. If you want to sell something new into a stable economy, everyone else has to drop their prices to make room for you.
Fiat currency may require us to appoint agents to keep the money supply and the value supply roughly in sync, but at least it provides the mechanism to do it. With the ooooh-pritty-shiny-stuff system, so appealing to people who can't think when there's pritty shiny stuff in sight, money and value are absolutely guaranteed to get out of sync, badly. very fast, with no remedy at all. Unless of course the economy is totally stagnant, with no new wealth being created. Yeah, that's what we want.
As always, all IMO. Insert "I think" everywhere grammatically possible.
Is by taking it out of circulation. Most of the gold we've mined isn't used for anything, it is simply inspected and then put back underground, only this time in a hole humans dug that we guard. It is artificial scarcity. The gold is there, it could be used, but it isn't because it is "backing" something. So it sits in a vault doing nobody any good.
Also, who says finite is good? What happens when the economy grows to the point that you need more gold, but none is to be had. Well then you start experiencing deflation and that is a very bad thing. Deflation is a wonderful way to get people to stop spending, stop lending, and as such to freeze the economy. Remember: Money is only good if you can spend it. Moreover, money is only good if you DO spend it. If everyone hordes money and doesn't spend it, well then what really is happening is people are refusing to trade. That means the economy stalls.
As you say, gold is only worth what it is because western cultures have an obsession with the shiny stuff and it is used as a hedge. It's real value, in terms of industrial use, is far lower. All those idiots who get gold in preparation for the collapse of society would be sorely disappointed if such a thing ever happened. Gold would be near worthless as it has few uses in a non-industrial society (basically only as decoration) and thus would be worth fuck-all as a currency in a survivalist world. More likely, Metro 2033 has the right answer and bullets would be the closest thing to currency out there (it would mostly just be direct barter).
For fifty years, the only valid currency has been crude oil. All national currencies trade against the cost of a barrel of oil. What makes you like gold? It's just soft yellow metal. You can't fill your gas tank with gold. Military might (which is the backing for most national currencies) is certainly more useful than your silly gold.