Bitcoin Used For the Narcotics Trade

An anonymous reader writes "A story on Aljazeera tells how bitcoin is being used to pay for cocaine, marijuana and other drugs at various eBay style drug websites. From the article: 'Two US senators are asking federal authorities to crack down on an online narcotics market that accepts "virtual" currency. The "Dark Web," an anonymous and secretive online community that trades in heroin, cocaine and methamphetamines among other drugs, has been operating unhindered for months.' Who said bitcoin is not used in the real world?"

Comments

It's not just Bitcoin.

[FooAtWFU]

Most of these alternative-currencies (Bitcoin, e-gold, etc) find themselves on the shady side of things pretty quickly - especially money-laundering and the like. This is not at all surprising, really.

Re:It's not just Bitcoin.

[Anonymous Coward]

Most of these alternative-currencies (Bitcoin, e-gold, etc) find themselves on the shady side of things pretty quickly - especially money-laundering and the like. This is not at all surprising, really.

It's going to be that way until we finally repeal the idiotic War on Drugs and admit that in a so-called "free country" it is wrong to ever tell consenting adults what they may do with their own bodies in their own homes. War on Drugs is a total failure anyway. Anybody who wants drugs can get them. It has done nothing to stop them.

Re:It's not just Bitcoin.

[countertrolling]

BAH! Who needs bitcoin when the regular banks got your back?

The entire market in contraband is too big to punish without trashing the economy even more... They don't want to stop drugs, they want to control them... It's the controlled substances act

Re:It's not just Bitcoin.

[somersault]

Poker chips? Dirty laundry? TELL ME!

Re:It's not just Bitcoin.

[gad_zuki!]

Right, because its the currencies' issue. Its not like I've ever bought bags upon bags of pot with dollars and euros.

What would be surprising would be currency that wasn't ever used for illicit things. It doesn't and will never exist. Especially with conservative philosophies that don't let us decrim or legalize mostly safe things like pot or ecstasy.

Open your eyes, all these guys are doing is playing up "War on Drugs" bullshit so they can get larger budgets next year so that a SWAT team can no-knock your home and shoot you when you try to defend yourself thinking you're being robbed.

Re:It's not just Bitcoin.

[Hatta]

How does this work? Bitcoin is anonymous right until you receive the contraband. If you're making anonymous drug trades with someone on the internet, there's even less guarantee that they're not a cop than if you're working with someone you know. If you have to receive the drugs in person, the extra anonymity doesn't help you.

And at this point, why are drug dealers the first to get on board with Bitcoin? Bitcoins are only valuable if you can trade them for something useful. If you can buy drugs with Bitcoins, that makes them valuable to the cusomer. But what will the drug dealer do with the Bitcoins?

Re:It's not just Bitcoin.

[s73v3r]

Nobody's saying it's the currency's fault. Its just that such a setup as Bitcoin has is quite attractive to those who would like a little more discretion in their spending habits. Bitcoin provides that. So it's no surprise that it would be a target for money laundering and illicit sales.

Re:It's not just Bitcoin.

[PitaBred]

And the solution to that is to fight an unwinnable war that increases violence all over, drives the profit of making drugs higher, and spends billions of our tax dollars to make shit worse for us?

Why don't we treat drugs like the public health problem they are, rather than something to be "fought"? You can't protect everyone from themselves, but you can help them help themselves. And you'd have a lot fewer women and children beheaded because of attitudes like yours.

Re:It's not just Bitcoin.

[Bill_the_Engineer]

Have you ever seen a dude high on on some drug fighting? NO! they're all like peace bro! I think drugs might be a social service!:P but seriously drugs don't kill people, people kill people!

My brother-in-law was 16 when he was murdered by an acquaintance who was high on drugs at the time.

Re:It's not just Bitcoin.

[Anonymous Coward]

More importantly, bitcoin isn't that cool anymore. The initial wave of guys got in and generated hundreds of bitcoins an hour. Last week, I set up my work laptop crunching via one of the more popular co-ops. Over a week, I generated 1 bit CENT. That's about 7 cents real money. I tried to transfer that bit cent, and was told that I couldn't, because there's a one bit cent tariff for all transactions. I know GPU is much, much faster, but we're looking at sinking multiple real-world cents worth of electricity into every bit cent that's generated, and there's a finite quantity to mine, most of which is already in the hands of BC's founders. Why exactly is this a good thing? Count me out.

Re:It's not just Bitcoin.

[bhagwad]

Your brilliant insight of relating two things because their names sound similar has made me a huge fan of you :D . Now I look at Obama with new eyes!

Re:It's not just Bitcoin.

[icebraining]

Drug usage dropped here in Portugal when it was decriminalized.

Re:It's not just Bitcoin.

[blueg3]

Exchanges like Mt. Gox will trade dollars for bitcoins and vice versa.

There was an article recently on a popular drug-purchasing website that is hosted as a Tor service and uses bitcoins. The drugs are sent to you in the mail. This of course gives you no anonymity at all. Only the money and the website are anonymous.

Re:It's not just Bitcoin.

[moderatorrater]

They'll trade the bitcoin for actual currency. The extra step here is that there's an organization that buys and sells bitcoin that can give them anonymity. It's essentially like using baseball cards instead of cash: the baseball cards' value fluctuates, but it's stable enough to get you close to what you want and there's a third party willing to buy and sell the cards when they're not being used in a drug transaction.

Re:It's not just Bitcoin.

[quarkoid]

And my grandfather smoked 40 a day and lived till he was 97. That doesn't mean smoking's good for you.

Whilst I have every sympathy with your situation, there are exceptions to every rule and quoting one case as evidence against a general theory serves nobody well.

Re:It's not just Bitcoin.

[Nethemas the Great]

Actually I think you can. The point isn't whether or not the value of the currency is backed by something tangible and valuable. The point is the perceived need and usage of non-government issued currency. One of Bitcoin's motivators for instance was to hedge against the reckless, monetary policies that led to the most recent economic collapse of the western world. E-Gold was established for rather similar purposes. Certainly currency can be and is used for black market transactions, it doesn't really matter who issues it. That it is being used for such things suggests that the currency has utility and real world value. As far as we know this isn't true for ISK or any other game universe virtual currencies even though exchange between "real" currency and "virtual" currency is taking place.

Re:It's not just Bitcoin.

[Plugh]

"It's going to be that way until we finally repeal the idiotic War on Drugs and admit that in a so-called "free country" it is wrong to ever tell consenting adults what they may do with their own bodies in their own homes."
Amen, brother. If you're serious about wanting liberty in your lifetime, check my .sig... and join us. Drug policy is important to many of us.

Re:It's not just Bitcoin.

[joelmax]

Well now... you can't assume all drugs == pot... doesn't work that way.. go hang out with a methhead and see how mellow they are..

Re:It's not just Bitcoin.

[HogGeek]

"Even with the alcohol and prescription drugs being legal, we still have a large number of so-called consenting adults not hurting anybody but themselves actively hurting everyone and themselves."

FTFY

Re:It's not just Bitcoin.

[babblefrog]

But are there more messed up families due to drugs than there are due to drug prohibition? I doubt it.

Re:It's not just Bitcoin.

[Jane Q. Public]

"People are bad enough with alcohol and cigarettes. I'd hate to see what happened if you let people have unrestricted access to harder drugs. Most people can barely look after themselves as it is, let alone the children that those type of people tend to churn out, Idiocracy style."

Except that it doesn't happen that way. Places that have decriminalized some drugs (like the Netherlands) and even all drugs (Portugal et al.) have experienced NO significant rise in drug use! Further, there are a lot of societal benefits: lower crime rate, dramatically lowered costs for courts and incarceration, no need for as many police, etc.

Your comment reminds me of an elderly woman I know. She plays Bingo with friends regularly. She tells me that whenever she talks about decriminalization, she gets shocked reactions from all the other old ladies. Once, one of her friends said, "But if drugs are legal, everybody will start taking drugs!"

She looked at her friend calmly, and said "Really? Which ones would YOU take?"

Shut her right up.

Re:It's not just Bitcoin.

[corbettw]

Great, now we have to ban baseball cards to protect our kids!

Re:It's not just Bitcoin.

[MyFirstNameIsPaul]

Meanwhile, entire populations of foreign countries are buried in mass graves, if they're lucky, dissolved in a barrel if they're not.

A factory I work with has a customer in Monterrey, Mexico. They had advised the factory's sales director not to visit the city because the violent crime rate is so out of control. For all intents and purposes, Monterrey is a developed city, and it has gone backward very rapidly largely due to the funds and weapons flowing from the U.S. government. The nation is at war with itself and we feed the fire with our abolitionist laws.

Certainly the death of your brother-in-law is a tragedy in itself, but the fact that it occurred supports the argument that the drug laws don't work. It always has been and still is easier for young people to get illegal drugs than legal ones.

But on the flip side, what about the Iraq veteran who was recently killed by a swat team who thought he was a drug dealer, when in fact he was a working class husband trying to survive? That family is devastated and the kid is going to suffer terribly for the rest of his life. Without a doubt this is a family that would still be together, the father alive, the kid some semblance of normal, if we did not have a 'war on drugs'.

I know we want to believe that passing a law solves a problem, but in this case the drug laws create far more problems than they solve. The violence worldwide, the violence at home. I have a friend who went through college with a guy who ended up becoming a public defender. He tells these terrible stories of people hopelessly addicted to meth (he's in a rural area), with terrible health, no teeth; visibly, clearly in a state of helplessness, sentenced to 1 year or more for possession of a drug. This is solving problems? Making people's lives better? Improving our society? Even Pat Roberston is beginning to see the failure of these policies. Surely you can, too?

Re:It's not just Bitcoin.

[JWSmythe]

    You know, I was reading a news story about a "dry" county here in the US. Possession of alcohol was illegal.

    There were locals who were very insistent that alcohol would cause civilization to collapse. Worse yet, they were discussing plans Walmart had to open up a store there. It was to have a full grocery store and pharmacy. They were predicting that people would go into the store, buy prescription drugs and alcohol, and go back to the parking lot to consume both. Moments later, they warned, these same people would come in and go on a shooting rampage.

    People are generally afraid of the unknown. Oh my gosh, what happens if you don't limit people's access to the evil drug "alcohol"?

    People do fine. There aren't daily shootings at Walmart because people can buy beer and prescription drugs. The world hasn't ended because people can buy DXM laced cough syrup.

    I hate to break the bad news to anyone, but you can easily buy any drug you'd like in just about any city in the world. No prescription required. Just look around, or ask around, and you'll find it. And most people never buy it. Even when presented with drugs, they aren't interested. It's a free economy, without restrictions. If the demand was there, every house in America would be supplied. Just because you can't go down to Walmart, Walgreens, or 7-11, doesn't mean that the supply pipeline isn't already in place and operating normally. Street drugs don't require a prescription, or even a photo ID to prove you're over 21. There is open and unrestricted access to it.

    There is only two things that are broken in the hard drug sales and distribution system. First, the government loses out on the ability to collect billions of dollars per year in sales taxes. Second, the quality control, to ensure the drugs purchased are what was advertised. They can and will be cut down with fillers for profit. It's not like that doesn't happen in regular retail products though. Unless you think melamine laced food products are *good* for you, or that Taco Bell's 100% meat really should mean up to 30% meat and 70% filler.

Re:It's not just Bitcoin.

[cayenne8]

Even if the drug trade were legal, we'd still have a large number of so-called consenting adults not hurting anybody but themselves actively hurting everyone and themselves.

Sure you would, but at least if drugs weren't illegal, we could save the billions and billions spent on prisons, and enforcement and redirect some of it to helping those who do want help (and wouldn't be as fearful of coming out of the shadows for help), and also go towards paying off the US debt....not to mention, if you take that much profit out of criminal hands, violence should decrease accordingly.

Re:It's not just Bitcoin.

[X0563511]

Since when was PHP a drug? I know it should be restricted and all, but I don't think it fits!

Re:It's not just Bitcoin.

[gearsmithy]

I contest that the reason some addicts do "whatever they can to obtain the substance in question" is because the substance in question is cost-prohibitive precisely because of its legal status. Prohibition drives up prices significantly, that is not debatable. How many food addicts knocked over a liquor store last year to feed their twinkie addiction? How much violent crime is committed alcoholics specifically for the purpose of obtaining more alcohol? I don't have either of these numbers, but I would bet they agree.

Re:It's not just Bitcoin.

[PRMan]

Try taking $10,000+ US cash out of your account without the bank having to fill out FBI forms.

Try sending $10,000+ US worth of Bitcoins to Eastern Europe.

Just like cash, but much easier.

Re:It's not just Bitcoin.

[TheRaven64]

A few years ago, I went to a local casino (it was the only place where you could have a quiet drink cheaply in the evening), and it was highly entertaining to watch people there. One person was going around every roulette table placing a £50 bet on red. Someone else walked around after him and collected the winnings. A little while later, the first person ran out of money, and the second one cashed out. They both go home, and one can say 'I lost a pile of money at the casino' while the other can say 'I won a pile of money at the casino'. There's no paper trail between the two, unless the police happen to check the casino records and see that the amount that one won was the same as the amount the other lost. This is the attraction of virtual currencies: they allow exchanges that are difficult to trace, without requiring physical presence.

Re:It's not just Bitcoin.

[GooberToo]

Drug use is a family problem. Making it a criminal/family problem only makes it worse for everyone involved and does nothing to address the core problem.

Being pro-war on drugs is to be pro slavery, sex trade, murder, empowerment of the biggest pieces of shit the world can create, and actively encourages the militarization of our police forces. Absolutely nothing good comes from the war on drugs aside from eroding constitutional rights, wasting billions annually, discarding billions in taxable revenue, and training police to be as big, if not bigger thugs, than the thugs they are supposedly fighting.

Re:It's not just Bitcoin.

[quarkoid]

Percentage of State and Federal prison inmates who reported being under the influence of drugs at time of their offense, 1997

Not sure what you're saying here - looks to me like the majority of people said they weren't on drugs.

The logical conclusion to this data is that not being on drugs should be outlawed, no?

Re:It's not just Bitcoin.

[Bill_the_Engineer]

If you really cared about your brother in law you would NEVER use his passing as a tool in an argument...

Bullshit. So you're advocating that victims should remain silent?

First of all the parent post asked "Have you ever seen a dude high on on some drug fighting? NO! they're all like peace bro!"

So I answered yes by using my brother-in-law as an example. It's not like I mentioned his name or started a PSA featuring his image. People who use that bullshit argument are upset that they can't counter a real life example. As for caring for my brother-in-law, that's my business not yours. Technically speaking the parent asked a specific question and I gave a specific answer.

How dare you judge me? I didn't condemn the person that asked that question, nor am I attacking the people who disagree with my post except for you.

Sure I see a lot of typical armchair debating tactics being used: "Correlation vs. Causation", "Single case observed vs. peer review study", etc. Unfortunately for ALL of us, the answer is still "Yes I have experienced a loss due to violence directly contributed by the use of an illegal drug."

Re:It's not just Bitcoin.

[Stoutlimb]

"So we should imprison people for falling victim to basic human flaws?"

Get real. Just about every crime in the book is a variant of some basic human flaw. Greed, anger, jealousy, neglect, and even plain laziness are all outlawed in one form or another. Everything form killing someone in anger, to being too lazy to put on a seat belt, are all outlawed. Those are all social issues too, should we decriminalize them as well?

Look at it a different way. Some drugs are outlawed for very good reason, such as crystal meth. It's a horrible drug that destroys people, and should absolutely be kept out of the hands of anyone naive enough to try it. Meth heads don't just hurt themselves, they generally become a threat to everyone around them as well. Becoming a danger to oneself and others to that degree is already grounds under various mental health acts for incarceration and forced treatment. I think it would be great to forcibly lock up anyone even addicted to crystal meth and not let them out until they are no longer a threat to themselves or others. If the system were to ever be serious about this kind of treatment, we wouldn't need all those prisons and crime would be down as well. It should be illegal to even be a junkie.

This just goes for the hard drugs. Relatively harmless drugs such as marijuana should be legalized and regulated much like alcohol and tobacco are now. Though anyone with serious abuse problems, especially regarding alcohol, should still be tested with the "significant danger to self and others" rule, and possibly forced into rehab. We lock up people with schizophrenia all the time, and nobody thinks it's a bad idea, yet very often much more harmful alcoholics run free and terrorize their families and neighbourhoods. I think as a society we have gone beyond the need to wait for severely messed up people to commit a crime before we can lock them up and treat them for the betterment of everyone involved.

Re:It's not just Bitcoin.

[Omnifarious]

They'll trade the bitcoin for actual currency.

I object to your use of the word 'actual' here. Perhaps you might use 'a more commonly traded' instead. Bitcoin is as 'actual' as any other currency.

Re:It's not just Bitcoin.

[TheRaven64]

I'm not sure, but I think the casinos prefer the later approach because it means that they get their cut. With roulette, there is a one in 50 chance that the casino wins everything, so on average this means that they take a 2% commission for money laundering. In exchange, they turn a blind eye to it.

Re:It's not just Bitcoin.

[Bill_the_Engineer]

Careful! You may give some conservative blogger evidence that the war on drugs is actually working. You just admitted that the over whelming majority of people who have a tendency to commit crime were not using illegal drugs at the time. Also since the cause for the majority of incarcerations aren't drug related then the war of drugs isn't placing an undue burden on our prison system.

DISCLAIMER: For the humorless - this was a joke. I am not a blogger (well not at this very moment) and the conservatives won't invite me to their social gatherings. Also this was an evil use of logic that should only be done by professional politicians, lobbyists and bloggers. :P

Re:It's not just Bitcoin.

[rrossman2]

I don't. Just look at Alcohol (which is a drug don't forget). Leads to violence, money issues, domestic disputes, etc.

Re:It's not just Bitcoin.

[westlake]

But are there more messed up families due to drugs than there are due to drug prohibition? I doubt it.

But why do you doubt it?

Re:It's not just Bitcoin.

[Bill_the_Engineer]

Is "emotionally compromised" a derogatory term for having a life experience that makes it harder for you to convince me to agree with you?

Other than my post what evidence do you have to back up your claim?

Let's assume you supported the legalization of all drugs. Did I mention a position for or against the legalization of drugs? No.

I think it's ridiculous that people are quick to condemn me for answering the grandparent's question, yet take the premise that the use of drugs would miraculously keep people from committing violence. A fact that anybody who has been around drugs would find very hard to believe.

Now if we talked about legalizing drugs, what would you expect my opinion to be?

Do I think legalizing all drugs is a good idea? No. I think some drugs are more dangerous than others.

Do I think marijuana should be legalized? Yes but only if it was legal for someone to grow their own. Why? Because in my opinion legalizing marijuana without legalizing home growing can make matters worse. We would reward the drug lords by increasing their available market and we artificially make the weed scarce by allowing only licensed growers. There is a chance that we would spend as much money regulating the new market than we spent preventing it, since I don't expect the current drug lords to willingly give up their market share. Not to mention that the only way we can truly argue that legalizing marijuana would lower drug related crime is to devalue the commodity by making it readily available to those who want it. Also if California is any indication, regulations on marijuana use would be easily circumvented anyway. Is it possible to not get a prescription for marijuana?

So now that I veered completely off the original topic, does my life experience match your expectations of my position on drug legalization? Have I not demonstrated the ability to have a reasoned discussion about the topic at hand?

Re:It's not just Bitcoin.

[Hatta]

Because most of the negative effects of drugs are directly caused by prohibition. It's entirely possible for an opiate addict to hold down a job and raise a family. This is a proven result from heroin maintenance programs. The problem comes when addicts are stigmatized, and prices are artificially inflated. Then they can't get a job, and can't afford their fix, so they turn to petty crime. Entirely due to prohibition.

Similarly, it's easy to smoke a lot of pot in college and still do well. Happens all the time. But if you get caught smoking pot in college, prepare to lose your financial aid. This is clearly worse than anything pot will do to you.

Re:It's not just Bitcoin.

[Hatta]

MDMA is safer than most forms of entertainment. You are much more likely to die in the car on the way to a rave than dying from MDMA at the rave.

Also, "weeds" aren't necessarily safer than "research chemicals". Jimson weed, for instance is far more dangerous than that unapproved synthetic (but totally non-toxic) research chemical LSD.

I don't usually complain about moderation, but the above post needs to be modded down.

Re:It's not just Bitcoin.

[Anonymous Coward]

No ecstasy isn't perfectly safe. It's about as dangerous as horse riding though.

http://news.bbc.co.uk/1/hi/uk/7876425.stm

One is encouraged, celebrated even, the other can land you with jail time. Doesn't seem right to me.

Re:It's not just Bitcoin.

[g253]

How many people do you know that smoke? How many people do you know that do heroin?

That's not the point. You're comparing apples and oranges here. The point is that the "war on drugs" has cost a lot to society while failing to decrease (for example) heroin usage. Attempts at banning alcohol are usually unsuccessful and short-lived too. Banning cigarettes is probably impossible - that's because, to go back to your flawed comparison, nicotine is massively harmless compared to heroin, and people know that so most don't do heroin.

The also used cash to do this for many years

[Anonymous Coward]

Your government is responsible for aiding this trade!
 
I think we are going to see a lot of anti bitcoin smokescreen stories pushed down the pipe line at us. Until they tax bitcoin. Then you'll see "Baby heart transplant paid for with bitcoin" stories in the news.

Re:The also used cash to do this for many years

[Anrego]

The lack of tracability probably makes bitcoin more apt for this task, which I think is the real story.

Overall, bitcoin has that same "cool concept used by too many of the wrong people" feeling as freenet.

Great.

[fuzzyfuzzyfungus]

I, for one, do not want to have to explain to some thugtastic DEA jackboots that "hash-based currency" can be acquired by legitimately doing a bunch of math, as well as by other means...

Problem will solve itself

[ErikZ]

Also, at what point did it become a good idea to buy illegal drugs over the Internet? What exactly do you plan on doing when your 10k in Cocaine doesn't show up at your doorstep?

Re:Problem will solve itself

[mikael_j]

I believe the idea with Silk Road and similar sites is that they are reputation-based. So apart from just making sure that you and the seller are in the same country you can also check his/her reputation, someone with a very good or perfect reputation is unlikely to screw you over.

Also, from what I've seen from checking out Silk Road it appears to be mostly smaller amounts of drugs being sold, 5-10 grams of marijuana, a handful of MDMA pills and similar quantities. So not exactly $10k worth of cocaine. Besides, most sellers are doing this to make money and if they want to stay in business they are likely to want to keep their good reputation (there's always the risk of someone deciding to abuse their reputation to scam people out of larger amounts of bitcoins or the police creating a bunch of fake accounts but overall the risk should be fairly low if you buy from sellers with a solid reputation, sort of how the drug trade works in real life only you don't have to come face to face with the dealer)...

Re:Problem will solve itself

[countertrolling]

Finally! A privacy policy you can believe in...

Hash Based

[jeremiahstanley]

Nothing like using a hash to score some hash.

Bitcoin features

[sourcerror]

Bitcoin has the feature, that it can't be inflated (claimed by their proponents). However, that's very good reason, why government might want to outlaw it: you're avoiding a tax, the "inflation tax".

They just need some stories about some drug dealers, pedophiles, terrorists who use Bitcoin, and it will be pretty easy to crack it down.

Re:Bitcoin features

[bmo]

>Bitcoin has the feature, that it can't be inflated (claimed by their proponents).

More than that. If buttcoin actually becomes an actual alternative to paper currency, it has built-in hyperdeflation.

There are 21 million buttcoins (roughly) to be mined, and that's it. Over time you have fewer buttcoins (because they can be destroyed) chasing after more goods (because of economic growth).

This means that any leveraged purchases are a fools' errand - capital machinery, durable goods, houses, bought on credit, are the worst deals in the world because you pay with money that is worth more over time. Deflation serves only the hoarders and creates a braking effect on an economy, because why spend money today when it will be worth more tomorrow?

Buttcoin is a scam made to enrich the hoarding early adopters. It's a sort-of ponzi scheme.

And now it's being used for money laundering.

The sooner it's stomped out of existence the better.

--
BMO

Re:Bitcoin features

[MozeeToby]

Inflation at a controlled rate is good for the economy. Deflation, which is what bitcoins are designed from the ground up to produce, is much more dangerous. In a deflationary system, your money is worth more tomorrow than it is today. Why bother investing that money in anything when the money will be worth more tomorrow than it is today? And if the bitcoin economy is increasing fast enough, you'll reach a point where there is no conceivable investment that is better than just stashing bitcoins in a safe place. Which, of course, restricts the number of bitcoins in actual circulation even further, increasing demand, increasing the value, and making a mattress full of money an even better investment.

Obviously inflation beyond a certain point is also dangerous, but deflation it creates a positive feedback cycle of hoarding cash. No investment, no loans, bare minimum spending. One of the reasons for the Federal Reserve dropping and keeping interests rates to near 0% for the past 3 years was to prevent the US entering the deflation spiral, and it's still not entirely clear if they succeeded; prices on many commodities have dropped for months at a time and the measured inflation rate was negative in many areas of the country last year.

Re:Bitcoin features

[Anonymous Coward]

> This means that any leveraged purchases are a fools' errand - capital machinery, durable goods, houses, bought on credit, are the worst deals in the world because you pay with money that is worth more over time. Deflation serves only the hoarders and creates a braking effect on an economy.

Yeah, this is exactly why Apple (or any other computer makes) has not sold a single computer in the 30 years it's been in business. People aren't stupid and realize if they bought a computer today, they'd be wasting all their money, since they can always buy the same computer much cheaper two years from now.

Re:Bitcoin features

[Anonymous Coward]

>Deflation serves only the hoarders and creates a braking effect on an economy, because why spend money today when it will be worth more tomorrow?

BS. Deflation serves almost everyone. Deflation is the natural effect of technological progress and capital accumulation. Why spend money today? Because you want stuff. Take an industry with major deflation you may have knowledge of - computers. I see no one spends money today on a computer because they will be able to get a better one tomorrow - right. Fear of deflation and adoration of inflation are just nonsense promoted by the state and the status quo because it benefits *them*.

Re:Bitcoin features

[DerekLyons]

There are 21 million buttcoins (roughly) to be mined, and that's it. Over time you have fewer buttcoins (because they can be destroyed) chasing after more goods (because of economic growth).

And that's one of the reasons we've moved from a hard currency economy to a fiat one - because hard currency economies are highly limited and difficult to grow. And hard currency economies aren't, contrary to popular belief, any more stable than fiat currency economies. When you literally cannot physically (or virtually in the case of Bitcoins) obtain the currency you need to make purchases or pay debts - the whole economy comes to a screeching halt.

Re:Bitcoin features

[Akvum]

Yeah, but bitcoin is infinitely sub-dividable, so that argument is irrelevant. Everyone will always be able to get enough to transact. The instabilities in hard money economies are due to fractional reserves creating inflations, or centralized debasement (coin clipping, etc). In reality, all economies are difficult to grow. Inflationary economies just front-load the prosperity, which is popular, as we are impatient. The real weakness of bitcoin is that it is only as strong as SHA-256. When that is broken, your bitcoins become basically worthless.

Re:Bitcoin features

[synaptik]

There are different kinds of deflation. Monetary deflation-- which is what the GP was referring to -- can lead to markets seizing up.

Re:Bitcoin features

[blueg3]

I really hate to defend Bitcoin, but ...

Don't worry, this doesn't count as defending bitcoins.

How would you able to give more in loans, than what you've collected in debit accounts?

Oh, you can't. Well, you could, if people accepted promissory notes from your bank as acceptable payment. But let's assume they don't do that.

This is a ten-second lesson on how banks increase the money supply:
Alice deposits 100 bitcoins in the Bank. Alice has a 100-bc deposit receipt. The Bank has a 100 bc and a 100-bc liability to Alice.
Charlie loans 100 bitcoins from the Bank. Charlie has 100 bc and Alice has a 100-bc deposit receipt. The Bank has 0 bc, a 100-bc liability, and 100 bc owed to it.

While someone who is trying to track where the "real" currency is will say that only 100 bc exists between the three entities, by typical accounting methods, the three people combined now have 200 bc: Charlie's cash and Alice's promissory note.

A fair objection is that you can't spend this promissory note, but to handle this, you need a bigger example: a bank that has many deposits, makes a fair number of loans, and then keeps a fraction of the deposited currency in cash to cover withdrawals. Averaged over all the depositors, the course of a transaction goes: a person withdraws a small fraction of their total deposit for a purchase, the money is transferred to the other party in the transaction, the other party deposits it in their bank. The actual cash is outside of banks for a brief time. Now you just need a system where if too much cash accrues in one bank and too little in the other, the banks exchange cash reserves. Welcome to fractional-reserve banking, the modern method for increasing the money supply.

Re:Bitcoin features

[IamTheRealMike]

But Bitcoin does not deflate. It inflates until it reaches stability and then stops. There might be small amounts of erosion over time, but it's a huge pool of coins (not 21 million as each one is subdivisible into 8 decimal places). The "deflation" people talk about is assuming the Bitcoin economy grows. If the economy grows and the currency doesn't, the coins become worth more. It's a circular argument because if increasing value leads to hoarding, the economy will shrink and the currency will become worth less. And as pointed out, there are lots of examples where waiting gets you more, yet people still buy.

Re:Bitcoin features

[DerekLyons]

No, I'm correct - you're just utterly clueless.

Crashes of exactly the kind I described have happened multiple times throughout history. The US, with it's rapidly growing economy, was hit by them several times in the 19th century - despite multiple gold rushes and expanding gold mining activities.

Re:Bitcoin features

[DerekLyons]

Yeah, but bitcoin is infinitely sub-dividable, so that argument is irrelevant.

Right - being infinitely sub-divideable means you have an endless supply of them on demand. Oh, wait. It doesn't.
 

Everyone will always be able to get enough to transact.

Um, no. You can only get bitcoins if someone is willing to give you bitcoins (as charity, or in exhange for goods or services). But, the problem is, like other hard currencies, their built in deflation means their is an incentive to hoard and a disincentive to spend - which has, historically lead to exactly the kind of crash I described.
 
How divisible they are is irrelevant.

Re:Bitcoin features

[Vaphell]

Deflation serves only the hoarders and creates a braking effect on an economy, because why spend money today when it will be worth more tomorrow?

so what we have instead is economy greased with purchasing power stolen from savers and people on discretionary income, got it.

In theory it's a nice idea to have money pool and economy going hand in hand but in reality governments have every incentive to underestimate the inflation rate. That way they can tax people in almost unnoticed way for additional percent or two, borrow more to bribe voters with 'freebies' and repay less in terms of real purchasing power down the road. I don't trust politicians and central bankers so i'd take deflation any day. Deflation biased, 'natural' system with no central planners is simple, elegant, honest and it rewards responsible people, just like it should be. It may not produce nice GDP numbers which is the fixation of all inflation lovers, but i think we may all agree that last few years have proven that GDP is a horseshit, because it says nothing of value about fundamentals.

Besides, when you hold the dollar note (or whatever currency you have) you are like a shareholder of a company. Economy of your country gets bigger thanks to increased productivity and created wealth, your share is worth more. Pretty logical, i'd say.

Strangely worded

[xednieht]

The $US dollar is by far the most popular currency used in narcotics trade.

Next story

[guruevi]

Dealers sell drugs to users using local currency, Senators pass a law to outlaw the $100 bill.

Re:Next story

[StillNeedMoreCoffee]

Yes, the government has already required banks to report any cash transactions using a lot of 100 bills or transactions over I think it was $3000 that are unusual for a client to the government. I think the penalty was $250k for each unreported incident and they nailed one East Coast back as an example. I was working for a bank and had to write the reporting code when that first happened. That was about 8 or so years ago if I remember. So they have not outlawed the $100 bill but recognized its important role in drug traffic and other illegal activities and have the bank locked down for automatic snitching for them. So it appears that part of the world has started to adapt, but I suspect that regular currency is still by far the most used.

But then make weed legal and tax it. That would clear the cost of the people arrested and held in prisons which we pay for, not to mention the cost of the prosecutions and the profit of private prison companies. It would also cut out a lot of the financing for organized crime and help reduce the government defiicit an get more jobs for people, esp famers, and the byproduct of hemp are there as well. We went through this with alcohol and have been flirting with it with tobacco. With tabacco they have taken a mid road, allowing the sale, with warnings, and limiting the effect on other people.

Oh great

[MaxBooger]

Yet another bitcoin story posted by samzenpus. I smell a rat.

This is an ad

[Jiro]

Again.

Remember when we had the "mistaken pot busts" Bitcoin story where the first five paragraphs were just about Bitcoin, and the pot bust was not only buried in the article but attributed to an IRC chat?

This one is slightly better in that it's not mainly about Bitcoin, but it's obvious that Slashdot is being pumped full of Bitcoin articles by Bitcoin promoters.

Re:This is an ad

[Jeremi]

it's obvious that Slashdot is being pumped full of Bitcoin articles by Bitcoin promoters.

Well, duh. Slashdot is also pumped full of Linux articles by Linux fans, pumped full of video game articles by video game fans, and pumped full of science articles by science fans. News for Nerds, remember? Nerds are interested in BitCoin, because it's an interesting bit of software.

Another Bitcoin crap story

[Lieutenant_Dan]

Last week it was about an imaginary bust of a Bitcoiner "miner" who may be using too much electricity, making law enforcement potentially believe that it was a grow-op.

Today is a story about virtual currency that is barely used anywhere to be used on online drug trading. Not Bitcoin specifically. Paypal most likely ...

Honestly. Having a video "story" is bad enough. Having the story linked to Bitcoin on a vague premise is pretty bad.

Let's create a Bitcoin /. filter, so I can exlude these stories from my profile. Not sure how this relates to "Privacy". I'm thinking that there is a group of Bitcoin proponents working hard to get any publicity.

Slashdot as arbitrage tool

[Anonymous Coward]

https://mtgox.com/trade/history (click "all time")

In two months, the value per Bitcoin has increased from .5 USD to 20 USD, a 40 fold increase. Slashdot is being flooded by bitcoin speculators to increase prices. People are paying $20 for something worth 50 cents for no good reason. The price will collapse to less than $1 in the near future. People are throwing money away.

Re:Huh.

[Abstrackt]

Enough people that they keep making it.

Re:I don't believe it...

[chill]

There are bitcoin currency exchanges where you can trade for $US.

Money -- ALL money -- is only worth anything because people mutually agree it is. All of it is nothing more than a medium for exchange that is more convenient than barter.

Backed by government can mean zilch in a very short order if no one trusts that government any longer. See Wiemar Republic and Zimbabwe for example.

Re:Interesting.

[Beelzebud]

What would be interesting is if you can find an actual example of someone willing to sell drugs for bit-coin. This story offers no examples at all.

Re:I don't believe it...

[inviolet]

How is the dollar backed by the US government?

Can you go to the US government and have your dollars exchanged for gold or land?

Excellent reply. I was hoping somebody would point out the hilarious fallacy of "backed by a government".

Goes to show how effective the propaganda is: a dollar is, in reality, dysbacked by our government, in the sense that its value is continuously reduced by the fed via issuance of additional M3.

Re:my brother died that way too

[n1ywb]

Bullshit. I don't know what he smoked, and I'm awfully sorry for your loss, assuming you aren't a troll, which you probably are. But nevertheless it serves as a good opportunity to remind everybody that overdosing on THC via smoking is basically impossible.

"One estimate of THC's LD50 for humans indicates that about 1,500 pounds (680 kg) of cannabis would have to be smoked within 14 minutes." http://en.wikipedia.org/wiki/Tetrahydrocannabinol#Toxicity

That must have been one hell of a "pack of marijuana cigarettes"!