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BitCoin, the Most Dangerous Project Ever?
Jamie found a followup to the bitcoin story we've been following awhile. The article talks about the untraceable, un-hackable nature of BitCoin. They can't be locked down like PayPal, and the article predicts that governments will start banning them in the next 18 months.
What a badly written sensationalist story. It's like something from the Daily Mail
"Bitcoin is a P2P currency that could topple governments, destabilize economies and create uncontrollable global bazaars for contraband."
I hate to tell you this, but this has already happened with regular-government issued legal tender.
Look at druglord Mexico, most 3rd-world countries, and the US with its billion-dollar Wall Street bailouts and ponzi schemes. Bitcoin would be a little late to the game.
He who knows best knows how little he knows. - Thomas Jefferson
I believe they mean it is peer-to-peer, so there is no middleman, unlike something like PayPal where PayPal is the middleman, so it can't be traced unless you are there. In addition, if it doesn't save the "from" source after the transaction, there is no way to tell where the money came from.
Seems like it would make money laundering and tax evasion easy. Of course, there is an easy way to fix that as far as drugs go - make all drugs legal and tax them, then spend the money that went into enforcement on education (like Portugal did).
This is not to say that all Libertarians are ignorant, but that Bitcoin appeals to Libertarian ideals and requires ignorance of how money works to be sold. Bitcoin has no in-built velocity. Taxing authorities won't accept them and having a fixed amount of them means that they don't have a debt-based life-cycle as does the money most of us claim ownership to. Also, even if Bitcoin were to take off, as demand for it increased, it would create its own valuation bubble where it becomes more valuable to hold the money than it does to invest it. Nobody would be able to borrow in Bitcoins at a reasonable rate of interest, real demand drops, then speculators are left holding a bunch of worthless digital currency. If you think that Bitcoin is a good idea, you are likely in need of an education in economics and accounting and need to lay off of the conspiracy theories.
Bartering is still taxed the same as income in every state I know of, and still counts as income for federal income tax purposes. E.g., if you give me a sheep for fixing your PC, I just had a taxable event at the prevailing market rate for one sheep. This is true whether it's goods or services that are exchanged. It does allow for some wiggle room in your valuation perhaps, but everything's negotiable anyway, so there's not much advantage over bartering. OTOH, it may be a bit easier to get your money back than to get your sheep back when you find out that the grain I exchanged was spoiled. Additionally, being left with a pot full of BitCoins when the music stops is like having a jug full of babysitter tokens -- absolutely worthless if nobody else wants them. The same is true of any fiat currency of course, or even backed currency if the underlying asset becomes worthless. The difference is that the full faith and credit of the US government probably carries a bit more weight than the full faith and credit of an anonymous internet startup. For now, anyway.
https://www.eff.org/https-everywhere