Friday's Big Swings, Mostly Down, Illustrate Bitcoin Value Volatility

An anonymous reader writes "As cool as Bitcoin is, it looks like it lost 1/3 of its value in the last 24 hours. Lots of big sells, complaints of liquidity, and pissed off nerds." The linked article goes on to explain that the value rose again, so the aggregate loss was considerably less. The author also helps defuse claims that Bitcoin is untraceable or otherwise especially well suited to nefarious activities.

Comments

Volatility

[burisch_research]

Just plummeted from $20 to $13 in about 5 minutes. Now, not 30 minutes later, it's back to $19.5. Go figure.

Re:Volatility

[drinkypoo]

Aren't there still relatively few bitcoins in existence? Shouldn't this particular problem become less severe with time?

Re:Volatility

[bondsbw]

I wanted to buy a few at $7 a couple of weeks ago. Any way you look at it, high price or low, I would have come out way ahead if I had.

Re:Volatility

[mmcuh]

You can transfer tiny fractions of a bitcoin, so the number of bitcoins in existance isn't that important for liquidity. It's not like a stock.

Re:Volatility

[timeOday]

I think the point is there aren't that many people who actually care what the value is so it isn't very strongly tied to anything real.

Re:Volatility

[Anonymous Coward]

Any way you look at it, high price or low, I would have come out way ahead if I had.

This is the fallacy that gets people into so much trouble participating in speculative bubbles. "If only I had bought low, I surely could have sold high!"

The nature of speculative bubbles means that most of those who buy low don't sell high. The collapse may happen too suddenly. Or your attempt to sell may even trigger a crash before you can find a buyer. They always have to pop, for the exact same reason that pyramid schemes can't make the whole world rich. It's a kind of gambling game, like playing chicken vs. an invisible wall.

If you had put your $7 in, you might well be thinking now, "It's only $7. I can afford to lose that. But what if it goes to $1000? It's worth hanging on just in case." or when the value dips under what you paid, "Surely it will recover. It was a good bet when I bought in before (I could easily have cashed in for several times my investment, if I had wanted), so I might as well put $100 in -- I might become a millionaire!"

You might call these stupid moves, but there's no move more stupid than buying into the game in the first place. Inflation and collapse of the bubble are entirely unpredictable, and the odds are stacked heavily in the favor of the initiators of this scam.

Re:Volatility

[osu-neko]

You can transfer tiny fractions of a bitcoin, so the number of bitcoins in existance isn't that important for liquidity. It's not like a stock.

Right. The important number is the number of bitcoin traders. Stable markets are relatively stable because they have a large number of buyers and sellers. Liquidity isn't a problem when there's always lots of people looking to buy. When there's relatively few people in the market, it's easy for someone trying to sell to quickly chew through all the buy offers at or near the current rate. If they still want to sell more, price begins dropping precipitously as they can now only sell to people who put in relatively low buy offers, since they've exhausted everyone who wanted to buy near the market rate. Taken far enough, you can complete exhaust all the open buy offers, at which point your liquidity hits zero -- you can't sell if no one is buying. The problem is the size of the market...

Re:Volatility

[KingBenny]

pissed off nerds are nerds, nerds are pretty much plain human who got the wrong side of the ladder up their as$, that's why you should only go with geeks if you want a realistic appreciation of possibilities

Re:Volatility

[betterunixthanunix]

Right now, we are in a bitcoin speculative bubble. The bubble will burst eventually, and then bitcoins will be worthless, since there is no ultimate source of bitcoin value. Nobody can pay their taxes with bitcoins, and hence nobody needs bitcoin -- compare with the US Dollar, which America citizens need in order to pay their taxes, and which American bitcoin holders will likely try to trade their bitcoins for when tax season rolls around.

To put it another way, it is about demand, and the demand for bitcoins will not be very high in the long run (unless a government somewhere starts accepting bitcoins for tax purposes).

Re:Volatility

[Khyber]

This is known as the 'bull trap' period.

Re:Volatility

[fuzzyfuzzyfungus]

I just have to wonder why there would be "lots of pissed off nerds". Is there really still a supply of complete morons who think that dabbling in ForEx is risk free, much less highly-speculative quasi-currencies? Seriously?

Re:Volatility

[dachshund]

You can transfer tiny fractions of a bitcoin, so the number of bitcoins in existance isn't that important for liquidity. It's not like a stock.

There is a lower bound to the number of BTC you can transact. More importantly, the number of coins in existence is very important --- the value of 1 BTC is going to be determined, at least to some extent, by the number of BTC in existence. The worry is that people will hoard coins in the expectation that supply won't keep up with demand.

This throttles the market because (a) the value of BTC is now based on speculation, and (b) huge sums could be dumped at any moment, leading to currency instability.

I said this in another comment but I'll say it here too: BTC should have an expiration date, and be rolled back into the market when they're not used. Alternatively the limits on coin creation should be adjusted.

Re:Volatility

[betterunixthanunix]

Except that cars and units of work have economic value (diamonds do to some degree also, but nothing near what people pay for them; jewellery is a money sink, always has been). You can use a car to travel places, and "units of work" are valuable because the work creates something valuable. Aside from trying to play hot potato with bitcoins, what exactly makes bitcoins valuable? I can't take a bitcoin and turn it into energy, or use it to move things, or settle a tax debt.

Bitcoin has roughly the same real value as Chuck-e-cheese tokens do: you can take Bitcoins to a few stores that will accept them as payment, but for the most part they have no actual value. The only reason you can trade Bitcoin for other currencies is the speculation that surrounds Bitcoin. The only people who will profit from Bitcoin are the early investors; people who are getting into the game at this point will face significant long-term losses.

Re:Volatility

[erroneus]

Wonderful troll. There are problems with the argument.

Fat people are annoying. I have been fat myself, actually. (Some people might not have considered me fat unless I was wearing size 40+ pants which I never graduated to.) I know what it's like to be fat. I know what it's like to be odor conscious. And I know what it is like to want to like yourself while finding it difficult to do so.

There is a choice that fat people make continuously. That choice is in seeking a way to like one's self. Most attempt to ignore or even glorify their obesity, as the original troll points out, by supporting and following other obese people. There is a great deal they have to ignore, however. They have to ignore the space they take in public -- space designed for "standard sized" people... on buses, trains, planes, in line and so on. They ignore that their size is a kind of rudeness in and of itself. They seek to cover their odor problems which are caused not only by the foods they consume and store in their body fat, but also because of their inability to clean themselves properly. Their inability to decide what (or how much) to eat is the least of their rudeness, however as even now, while I am actually far less capable of eating the large quantities I once consumed, I still find myself pausing longer than I should in deciding what I want to eat while others wait. (I am quite conscious of the delay however and do try to hurry as much as I can.)

As the troll points out, there is comfort in seeking others of like mind (or body). But this is universally human behavior and not that of obese black women alone. We seek to validate ourselves and our identity through numbers. So it is no different than skinny white men in hoods and sheets banding together to hate others. They too seek to validate their own perspectives by banding together with like-minded individuals.

Generally, people would like to help obese people not to be obese. We don't know how to approach the problem effectively. The causes and sources are many and varied and so effective solutions are many and varied. Ignorance is a common component of the problem. Many formerly fat people such as myself have tried to share our accomplishments and acquired wisdom with others in hopes that they too can overcome their problems.

But I have to say it is not productive to merely attack fat people for being fat. We find the reason for this back in our common traits and so you should understand why already. When attacked, people are faced with two options: defend or flee. Neither of those two options productive. So rather than attack, offer kindness and knowledge. From there, they can either accept or reject your kindness and knowledge. Rejecting kindness and knowledge makes THEM the "bad people" in a way. And you will find that making them the bad people, you will win far better than if you become the bad person by attacking.

Re:Volatility

[datapharmer]

...who got the wrong side of the ladder up their as$...

Is there a right side of the ladder to get up your ass?

Re:Volatility

[theshowmecanuck]

diamonds do to some degree also, but nothing near what people pay for them

And there is the crux: things are only worth what people are willing to pay. If people are willing to pay a lot for diamonds or gold, then they are worth a lot. The same goes for bitcoins. Personally, I'm not sure what I think of bitcoins myself yet, but they are not free to make. As the article states, you need to pay hardware and electricity costs in order to generate a bitcoin, so they aren't free. At the moment, the article states that you can at best break even if you have the right hardware.

Sure diamonds are partly worth a lot because the mining company hoards most of them. But if they weren't shiny and pretty, it wouldn't matter how many they hoarded, people wouldn't value them. The bottom line is that things that people put a value on, will have value. You can work all day long making buggy whips, but go broke because not enough people value buggy whips any more (i.e. your units of work are worthless in this case). Or why is a Ferrari worth more than Kia? They are essentially the same mechanism. It is even likely that they will last the same number of miles/kilometres (assuming a Ferrari driver wants to drive the car into the ground). Sure the Ferrari has added features, but is it really worth $100,000.00 or more than a Kia, given that the parts aren't that different, the assembly time is not all that different, they both get you from point A to point B, etc. etc.? The Ferrari is worth more because people are willing to pay proportionally more for it than the sum of it parts and labour etc. So if people decide for the long term to put value in bitcoins they will. That's all there is to it.

What makes me wonder to some degree is that it all boils down to encryption. And I believe there are two main types of ciphers: those that have not been broken, and those that will be. Given gains in quantum computing and other technology, what means have they built in to manage things in case someone manages to break the encryption bitcoin relies on (and I am not a security expert so don't kill me if I don't get the terms right, as long as you understand my intent).

Re:Volatility

[DrXym]

Nobody can pay their taxes with diamonds, cars or units of work, either. But everyone can exchange those items for dollars and pay their taxes with those bills. You can trade bitcoins for other currency.

Yes, until there is a run on the exchanges and they shut themselves down. The sensible ones will be those who got in early, mined coins, sold them on and got the hell out for someone else to hold the bag when it all collapses. A bit like a pyramid scheme really.

Re:Volatility

[betterunixthanunix]

And I believe there are two main types of ciphers: those that have not been broken, and those that will be.

Essentially, this implies that you believe that P=NP, since there are ciphers that can be shown to be at least as hard to break as it would be to solve some NP-hard problem in the worst case. Some of those proofs are based on an assumption of quantum computing (that is, the cipher is secure against quantum computers under an assumption that is essentially the quantum equivalent of P =/= NP). If I were asked, I would put my money on P=/=NP, but that is still just a conjecture.

As for the value of diamonds and the value of bitcoins, there is nothing pretty looking about a bitcoin. Aside from being transferable, bitcoins have no real use, which raises even more questions about the value of bitcoins than that of diamonds (particularly since bitcoins are not legal tender for debts owed to any government).

Re:Volatility

[timeOday]

I said this in another comment but I'll say it here too: BTC should have an expiration date, and be rolled back into the market when they're not used.

Suddenly losing value all at once is senseless; it should follow a decay function. We'll call it "inflation."

Re:Volatility

[spiralx]

The way to make money (or more accurately, not lose money) is to have a strict rule of selling as soon as a stock drops a certain amount in value, say 5%. Sure, you may miss out on a subsequent rally and doubling in price, but you can never lose more than 5% of your initial stake, and over the long term you should come out ahead. This level of rationality is beyond most people though, they get emotionally invested in their position and/or subscribe to magical thinking (stock chart analysis etc).

Re:Volatility

[spiralx]

The 5% figure is just a starting point - adjust it to the point where you're missing every small fluctuation, but getting out before losing too much. You're not getting out in the middle of a drop, but hopefully at the start before panic selling and shorting has kicked in. As I said, technically this is a method for avoiding loss rather than making money, but all it takes is picking stocks that rise by more than 5% (or whatever) then you will make money.

Re:Volatility

[davester666]

Yes, most definitely.

You REALLY would prefer the side of the ladder without all the splinters to get up in there.

Re:Volatility

[FritzTheCat1030]

Sure the Ferrari has added features, but is it really worth $100,000.00 or more than a Kia, given that the parts aren't that different, the assembly time is not all that different

Actually, the assembly time is quite a lot different. Ferraris are built individually by hand. One of the reasons they are so expensive is that, even at such a high price, demand outstrips supply. They only make a couple of thousand cars a year.

Re:Volatility

[superwiz]

One of the requirement for liquidity is that no player can control a sizable part of the market. Since someone can still come in and buy up half the available asks without much of an investment, this is still not a liquid market.

Re:Volatility

[sploxx]

Disclaimer: I have a few BTC.

I am amazed! Is this slashdot? The slashdot I know?

Sure there is a speculative bubble! Maybe even the price of BTC drops below $1 again. There are lots of crazy get-rich-quick people on the bitcoin market now, it will continue to swing wildly. Bubbles will form and burst.

But noone really mentioned here yet, that there _is_ actually a value in certificates (what bitcoins basically are) which you can transmit free from any bank account with just a P2P client. Because it is just an agreement between users, the real value may be low. It may also be very low because there is no government backing. But there is a value in being able to transact numbers freely!

I would have expected a more thoughtful discussion here on slashdot. Actually it makes me kind of sad. I wonder whether most people here grew old and a bit too inflexible in their lines of thought?

Bitcoins may well become a completely failed experiment. But that's what they are right now. A new kind of economic _experiment_. Comparing it to a ponzi scheme (you didn't call it that, but others here did, quick and repeatedly) is just stupid. I have expected to see people around here at least being open to new ideas!

Re:Volatility

[marcosdumay]

So, business as usual. People that expected a market to work like a government gets anoyed, and life goes on.

Re:Volatility

[marcosdumay]

No government needed. If people keep trading in Bitcoin, it will have value, until people stop caring, then it will have no value. The later is what makes fiat money different, and may need days or centuries to happen, but is guaranteed to happen with any kind of fiat money.

Re:Volatility

[ultranova]

Suddenly losing value all at once is senseless; it should follow a decay function. We'll call it "inflation."

But how do you determine the optimal (or even sub-optimal) decay ramp to use, especially since it may vary from situation to situation? I don't think you can, in a system so dependent on human behaviour as economics. It would be nice if you could adjust this "inflation" rate as needed - which, obviously, rises the question of who should be able to adjust it, and for who's benefit? A government agency of some kind, perhaps?

This is starting to sound dangerously close to some darn communist talk where the government controls the economy, rather than the other way around!

Re:Volatility

[ultranova]

And there is the crux: things are only worth what people are willing to pay. If people are willing to pay a lot for diamonds or gold, then they are worth a lot.

That's only true in a perfectly efficient market, where everyone has access to all information and "processor time" to make the best possible use of it. In our imperfect market "a fool and his money are soon parted", so you can't determine worth solely based on what some fool paid.

Re:Volatility

[PC and Sony Fanboy]

I would have expected a more thoughtful discussion here on slashdot. Actually it makes me kind of sad. I wonder whether most people here grew old and a bit too inflexible in their lines of thought?

Actually, I think most of the low UUID folk no longer post here. They've moved onto more enlightened climes.

Re:Volatility

[ultranova]

The way to make money (or more accurately, not lose money) is to have a strict rule of selling as soon as a stock drops a certain amount in value, say 5%. Sure, you may miss out on a subsequent rally and doubling in price, but you can never lose more than 5% of your initial stake, and over the long term you should come out ahead.

Actually, you could easily lose your entire initial stake. You have to find a buyer, after all - and all potential buyers see the price falling.

Investing is gambling, and you should never gamble more than you can lose. And "investing" into a speculative bubble is gambling against the house, in a casino that cheats (millisecond traiders). Don't do it.

Re:Volatility

[SanityInAnarchy]

There is a lower bound to the number of BTC you can transact.

Not really. While the default client will insert transaction fees for transactions below a certain value, these are optional -- their only purpose is to serve as an incentive for a miner to include your transaction in a block, and not all miners will enforce that. So it may be more difficult to get your transaction confirmed, but it can go quite a ways down -- the more likely problem is with floating-point rounding, since (unfortunately) Bitcoin uses floating-point math, but the actual Bitcoin fractions are decimal.

I said this in another comment but I'll say it here too: BTC should have an expiration date, and be rolled back into the market when they're not used.

They really shouldn't. Can you imagine a more damaging thing for a currency than, "Oh by the way, if you don't spend this, we're going to take your money from you and distribute it to other people!" Forget about putting any sort of savings in Bitcoin, then. I mean, that's a bad idea at the moment because of how new and volatile it is, but why would you add a built-in disincentive to such a thing?

Alternatively the limits on coin creation should be adjusted.

The fact that it's fixed is another part of its credibility -- artificial scarcity. If the limits can just be adjusted, then it's no different than a fiat currency.

Re:Volatility

[zippthorne]

Wait.. what you described is the Federal Reserve system in the US, not the system they had in Soviet Ru...

Oh.. I see what you did there..

Re:Volatility

[palfreman]

There is no point in saving something you don't ever spend. All bitcoins now hoarded will come back on the market eventually. Same with any currency or trade-commodity.

Re:Volatility

[palfreman]

Yes, and this so called decay function really means the issuer giving themselves a continues pot of money to spend - with all the problems that causes. Not least, transferring real resources to someone lucky enough to have their hand in the money pot instead of making some useful good to sell. Undermines the division of labour and causes shortages.

Re:Volatility

[Z34107]

This is starting to sound dangerously close to some darn communist talk where the government controls the economy, rather than the other way around!

Perhaps we could call this the "Federal Reserve", although it's half private and famous for giving presidents and congress the finger.

Re:Volatility

[arevos]

I said this in another comment but I'll say it here too: BTC should have an expiration date, and be rolled back into the market when they're not used.

That wouldn't work. People would just swap coins between several accounts in order to reset the expiration date.

Re:Volatility

[arevos]

Aside from trying to play hot potato with bitcoins, what exactly makes bitcoins valuable? I can't take a bitcoin and turn it into energy, or use it to move things, or settle a tax debt.

No, but bitcoins can transfer wealth electronically and pseudonymously without the need for a centralised broker.

Bitcoins is to currency what the internet is to traditional media. It lowers the amount of initial capital needed to innovate with finances. Quite frankly the appreciation of bitcoins is relatively uninteresting to me; it's the sheer technical potential of a decentralised electronic currency that gets me excited.

Re:Volatility

[betterunixthanunix]

No, bitcoins are worthless outside of a speculative bubble. Unlike other currencies, the demand for bitcoin is flimsy and based solely on speculation; other currencies have demand created by the need of people to pay taxes. Bitcoin is not legal tender for debts owed to any government, and people are only willing to trade with it because they think they can eventually exchange it for a currency with real value.

I am actually a big fan of digital cash, because of its protection against fraudulent charges, but Bitcoin is the wrong thing. The right thing is to have digital cash tokens issued by banks, in exchange for currency, and for the value of those tokens to be fixed to the currency they were issued for. Offline transactions should be possible, and the ability to divide the digital cash should be possible. Anonymity should only be guaranteed to people who do not cheat; that is how you catch counterfeiters. At the end of the day, people should have a guarantee that their digital cash tokens can be exchanged for real cash, and there should be no mystery relating to the cash they will receive for their digital cash tokens.

Bitcoin is a poorly thought out approach to money, based on the common misconception that money gets its value by some magical agreement amongst people. Value comes from the relationship between supply and demand; the demand for money comes from its unique ability to be used to settle debts and other obligations with the government that issued it. Since Bitcoin lacks such a property, its value is about the same as the value of a Chuck-e-cheese token: worthless outside of a few shops that will let you exchange it for something.

Re:Volatility

[betterunixthanunix]

Scarcity does not create value. Case-in-point: the drawings I created in preschool are extremely rare, but nobody wants them and I doubt I could get a full penny for them.

Value is created by scarcity coupled with demand. The demand for money is ultimately created by people who need money to settle a debt with the government; for most people that is called "paying taxes." We used to use gold for this purpose because it is difficult to counterfeit, it is durable, and it is scarce enough to ensure that people would not just create money digging through their backyards. Now we use paper currency because we are good at fighting counterfeiting and know how to make durable paper currency, and paper money has an advantage over gold in that governments can issue it and destroy it as needed for an economic policy.

Bitcoin's value is flimsy at best: a few people will accept bitcoin as payment, mainly because they believe they can get their country's currency in exchange for bitcoins (and thus settle their own tax obligations). This is purely speculation, of course, and will ultimately spell doom for bitcoin.

Re:Volatility

[dachshund]

the more likely problem is with floating-point rounding, since (unfortunately) Bitcoin uses floating-point math, but the actual Bitcoin fractions are decimal.

Precisely. Of course you can modify the clients to deal with this, but it requires client modifications. Long before that happens the network will be dead or forked.

The fact that it's fixed is another part of its credibility -- artificial scarcity. If the limits can just be adjusted, then it's no different than a fiat currency.

You don't need a fixed number of coins, you need a fixed rate of coin creation, which is already part of the spec.

But the simple answer to this point is that fiat currencies work, and currencies with limited (and implicitly declining supplies) haven't.

Re:Volatility

[dachshund]

That wouldn't work. People would just swap coins between several accounts in order to reset the expiration date.

That's precisely the point. To give users an idea of how many BTC are actively being hoarded, rather than the permanently inaccessible ghosts of coins that were created when some user overwrote their wallet file.

Re:Volatility

[Skal Tura]

1 BTC is indefinitely divisable, so that will not be a problem.

Re:Volatility

[arevos]

That wouldn't work. People would just swap coins between several accounts in order to reset the expiration date.

That's precisely the point. To give users an idea of how many BTC are actively being hoarded, rather than the permanently inaccessible ghosts of coins that were created when some user overwrote their wallet file.

Why?

I mean sure, it gives people a little more information about the market, albeit at the cost of increasing the number of transactions, but what exactly would it change?

Re:Volatility

[m.dillon]

This doesn't work in practice because any investment entails a certain degree of risk for both the upside and the downside. If you cap your upside as you have described, then you are shifting most of the risk of your investment to the downside. In other-words, over time you will lose, and lose badly.

There's a secondary issue here in that you are making the assumption that the risk you carry is in that one investment but anyone who seriously invests knows that EVERYTHING in their brokerage account is an investment of one sort or another, even cash, and unless you leave most of your holdings in cash then most of your holdings at any given moment ARE going to be invested in something. It's all in managing the risk.

As an axillary point here the investment philosophy you are suggesting here is actually very similar to the covered-call options play, where you purchase an underlying stock and then write (sell) an option to someone to buy it from you for a slightly higher price in the future. There are even mutual funds that specialize in these sorts of plays but they don't have the gains you probably would expect. This sort of play works in a flat market but fails horribly in either a down market (where it doesn't mitigate enough of the damage) or an up market (where you lose out on a ton of profit potential due to the shifting of risk you undertook).

Remember that the whole point of investing in stocks is to make a better yield over a long period of time than 'safer' investments such as CDs would give you. If you invest in equities in a manner that has no chance of producing that better yield then you might as well not invest in equities at all because your other options (such as CDs) will be better deals.

-Matt

Re:Volatility

[m.dillon]

Oops, I apologize, I misread your idea. However, your idea is even worse than what I thought you were saying originally. If you only sell the losers then you only lose money in the long run.

The basic problem here is that even the best company's stocks have significant volatility. The more risk an investment has, the more volatility it tends to have (with leveraged investments having the worse volatility).

It is hard to tell the normal fluctuations of the market apart from longer term trends for your investments. So what will happen is that your stop-loss sale will hit a normal fluctuation, you will sell at a loss, then the stock will bounce back above your original sell point.

On top of that a stop-loss sale is a market order. If the market glitches the sale can wind up occurring at a much lower price than you might expect.

Stop-loss selling is virtually guaranteed to lose you money. It's a bad idea and no real investor EVER uses stop-loss orders. Not ever.

-Matt

Re:Volatility

[m.dillon]

This just doesn't work in practice. The stock market isn't that predictable. If it were then all investors would dive in with their algorithm that takes advantage of the predictability and BANG, suddenly the algorithm won't work any more because everyone's sentiment is the same.

When computer trading first really gained a foothold in the 80's and early 90's there was some low hanging fruit, for example people holding options forgetting to exercise them around an ex-date. New algorithms were created every month and made lots of money for a little while, then everyone else figured out the algorithm and worked their own algorithms and blew up the trend the original algorithm was working, meaning it stopped making a profit.

These days there are still these sorts of algorithms in play. All the obvious conditions (like idiots who place market orders on stocks with large spreads) are instantly gobbled by the computers to the investor's detriment. The algorithms do still work but they are immensely complex and, really, they can only skew the risk metrics just a tiny bit. Ultimately the money they make is based more on the leverage employed and less on the merits of the algorithm.

No retail investor can ever employ the amounts of leverage that companies like Goldman are able to employ. Even the leverage one can employ with margin or other borrowing is an order of magnitude too small. Retail investors have virtually no understanding of how to hedge a leveraged investment anyway and almost universally screw themselves even just using margin.

There is no magic bullet here. Thinking there is is one of the most fundamental mistakes an investor can make.

-Matt

Re:Volatility

[gmhowell]

Boy, Alex P. Keaton really likes you. I bet TomHudson is jealous.

Re:Volatility

[superwiz]

Case-in-point: the drawings I created in preschool are extremely rare,

Nope. Note a case in point. I said a scarce commodity. Not a scarce thing. If the drawings you made were commoditized (while remaining verifyably scarce), then they could serve as a token for enumerating exchange. Such tokens have tremendous value even in the situations when there are no coercive powers forcing their use. There was money long before there was government. Such tokens simply make enumeration of exchanges (for the purposes of keeping track) possible. Converting value that each individual puts on some possession into a uniform enumerable tokenized value enables solving the problem which arises fairly quickly in any attempt to have have a bartering economy.

Re:Volatility

[SanityInAnarchy]

But the simple answer to this point is that fiat currencies work, and currencies with limited (and implicitly declining supplies) haven't.

For some value of "work".

I'll admit my ignorance here, but it seems like one inherent advantage of a system like this is that there is no central authority. No one party can simply decide the government needs an additional billion bitcoins and produce them out of thin air -- they'd have to mine or trade, just like anyone else.

Re:Volatility

[dachshund]

I mean sure, it gives people a little more information about the market, albeit at the cost of increasing the number of transactions, but what exactly would it change?

I would characterize it as a lot more information. It doesn't solve the hoarding problem, but it gives you a much better idea how much risk there is.

Only a change to the coin creation limits will really fix the hoarding problem (my other suggestion, a couple of posts up).

Re:Volatility

[MimeticLie]

Keep in mind that the US dollar isn't just for settling debts with the US government. According to Title 31 of the US Code:

United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.

So even though the government can't mandate that people accept the US dollar in exchange for goods and services, they can mandate that any debt owed to a US based creditor can be paid in dollars.

Re:Volatility

[superwiz]

Actually it makes me kind of sad.

There, there...

http://slashdot.org/comments.pl?sid=2230966&cid=36412652

...there </shameless self-quoting>

Re:Volatility

[swalve]

other currencies have demand created by the need of people to pay taxes.

That is not how money works.

Re:Volatility

[swalve]

You don't make money by selling assets lower than you bought them.

Re:Volatility

[AlienIntelligence]

No, bitcoins are worthless outside of a speculative bubble.

Bitcoin is a poorly thought out approach to money, based on the common misconception that money gets its value by some magical agreement amongst people.

AC only cause I hate to waste my modding...

You do realize... or maybe have not had the proper
schooling to realize... we started out with a barter
system. When people started becoming useless
did money become an important factor, as someone
with no skills has nothing to barter.

So... common misconceptions abound.

-@|

Re:Volatility

[rtb61]

You can not in reality trade bitcoins for currency (countries reserve/federal banks what have to accept bitcoins for that to be true), what you trade is a belief in bitcoins.

Believe in the bitcoin, believe it has value, believe it is worth something, pray to the bitcoin God that you aren't throwing away real money on a marketing illusion and pyramid schemes are all about Pharaohs living for ever.

Re:Volatility

[Nursie]

Nope, roughly a third of the entire supply that there will ever be is out there already.

Re:Volatility

[Patch86]

Diamonds and cars both have stable, steady markets with high-demand. While completely possible that diamonds will suddenly become worthless with no demand for buyers, their value has held up more-or-less intact for thousands of years so it's a relatively fair bet that the diamond you buy today will still be worth something tomorrow.

The same can't be said of Bitcoin. As with diamonds, they only have value if people are willing to exchange them for something else (good and services, hard currency, etc.). They've only existed for a couple of years, and they could easily slip into obscurity before the decade is out. If you pay hard currency for some Bitcoins, there's a real possibility that you could suddenly find yourself owning something that can't be exchanged for anything.

Or not- only time will tell.

Re:Volatility

[silanea]

You do not trade dollars for euros or gold for dollars or pearls for glass beads, either. You trade a belief in something's value relative to some other thing's value.

[...] pray to the bitcoin God that you aren't throwing away real money on a marketing illusion [...]

What is "real" money?

Re:Volatility

[gizmonty]

This is known as the 'bull trap' period.

No it's not. A bull trap occurs in the initial down-phase of a bubble collapsing when the bulls rush in to buy 'while things are cheap'. A bear trap occurs in the initial runup phase of a bubble when the bears rush in to sell 'before prices fall'.

Re:Volatility

[Khyber]

Hi, if you bothered to take a look at a graph of the performance of Bitcoin since 2009, you would CLEARLY see this being the bull trap phase.

Re:Volatility

[drinkypoo]

It's amazing what happens when some people Slashdot and skip their meds at the same time.

Re:Volatility

[risom]

There is no point in saving something you don't ever spend. All bitcoins now hoarded will come back on the market eventually.

Why should they? As there can be no inflation by design, the value of a bitcoin can only increase. There is AFAICS zero incentive to not hoard them.

Re:Volatility

[palfreman]

Because something you hoard permanently has no use to you. At least gold and silver can be made into jewellery and silverware. Not so bitcoins. Can't see myself drinking a glass of wine out of one. Until you use a bitcoin for something it is dead

Re:Volatility

[risom]

I see what you mean, and I'm feeling the same. But by that reasoning deflation cannot happen, which, as history has shown, is not true. I'm not sure why, perhaps people always assume deflation will end soon, so they won't give away their coins until the end of deflation arrives.

Re:Volatility

[tbannist]

"[E]lectronically and pseudonymously" seems like code for drug trafficking, human smuggling and tax evasion. Of course those won't be the only things it's used for, but if it actually worked well that way, it would attract those users.

From my perspective, it's a matter of figuring out which group will destroy bitcoin first: hoarders, crackers, speculators, governments, or hardware failures. Bitcoin just seems like a pointless currency bubble. I mean why not just go back to Tulip bulbs?

Re:Volatility

[tbannist]

There was money long before there was government.

I'm pretty sure that's the opposite of true. There was government long before there was money. This is logically consistent because any sufficiently large group of people will form a government. I'd suggesting doing some more reading on the history of money.

Re:Volatility

[drinkypoo]

So, one third is not a small amount relative to one? It's a big piece of a pie but it's also less than half of the amount of the total currency. Now, I am clearly not an economist, but it seems to me that swings in the value of currency based on buying and selling must be based at least in part of the percentage of the total currency which is in motion...

Re:Volatility

[Unequivocal]

Some coins are presumably lost as with all currency. Picayune point, but hey I'm on /.

Re:Volatility

[Unequivocal]

Wait you think currency's value is based on its utility for paying taxes? I'm not economist but this sounds so upside down I have to write to question the assertion? Currency is a representation of work and/or barter. The US currency is currently not all that different from bitcoin, except it's backed by an army, nuclear missiles and a bunch of powerful corporations? Oh, and also backed by the belief that the currency has value in the minds of lots of people around the world (related to the former points).

If a major country adopted bitcoin as it's national digital currency it would probably have a lot of value. Whether the value of bitcoins today is related to its future along those lines. So I agree we're probably in a bubble, but it's hard to say how big the bubble can grow.

Re:Volatility

[Khyber]

Here, have a handy chart.

http://i.imgur.com/gDYbf.jpg

Re:Volatility

[arevos]

You could have made very similar arguments about the early Internet.

The things that differentiated the Internet from other networks that were arising at the time, was that it was decentralised, pseudononymous and had a low barrier to entry. These are the same attributes that differentiate Bitcoin from traditional fiat currencies.

At the time, many technically adept people, most famously Bill Gates, considered the Internet to be a dead end. With hindsight, it's clear that they underestimated the power of a decentralised network that was cheap to join and easy to add new services to.

It's far from certain that Bitcoin will become as successful as the Internet; but I'm not sure I'd write it off so quickly.

Finally, tulip bulbs are somewhat different to bitcoins. One is something you put into the ground and which turns into a flower. The other is a cryptographically signed transaction history wrapped in unit of work proofs, providing a pseudononymous and decentralised way of transferring wealth across an arbitrary communications channel. The only similarity is that they were invested in by speculators.

Re:Volatility

[Nursie]

No, one third is not "relatively few" where a currency is concerned. Especially one that is -

a) Currently a niche operator with views on major expansion
b) Allowing the remaining two thirds to be mined at an ever decreasing rate over the next hundred years

Re:Volatility

[DriedClexler]

Great thinking, retard, I'm sure no one will ever figure out they can just pass the coin to a new address they generate!

FFS, Bitcoin exists so that people can get away *away* from these bullshit inflationary tricks!

Re:Volatility

[tbannist]

I would say it far from certain that Bitcoin will be successful at all. I find it actually inconceivable that it would ever be considered as successful as the Internet. Time will tell if it can manage to be more successful than PayPal, but that's about as high as it can go even in theory.

Re:Volatility

[Thaelon]

then bitcoins will be worthless, since there is no ultimate source of bitcoin value

Untrue. The ultimate source of bitcoin value is the decentralized nature wherein your assets in BTC cannot be frozen by external entities, yet is electronically transmittable to anyone, immediately, without fees. Far though it may fall, this means that the value cannot be zero as there is value inherent in this ability. Requiring that you be able to pay your taxes in it is a red herring. If BTC is accepted as currency by any entity at all, then it has value. Governments and taxes don't enter into determining whether or not it has value, merely how much.

Re:Volatility

[arevos]

Of course Bitcoin's success is far from certain, but there's a chance that it will succeed. Even if it becomes only as popular as Paypal is today, I'd imagine many of its proponents would mark that as a distinct success. At least we'd be free of Paypal's tendency to freeze assets without notice.

However, I'm not sure why you consider that the most successful Bitcoin can be "even in theory". As it stands, the network could scale to 10,000 transactions per second (i.e. peak VISA-level) and a total economy size of around $10 trillion without any change to the protocol. Above that and one might have to start tweaking the design, but that's not going to be a problem for the foreseeable future.

Re:Volatility

[tbannist]

I meant even in theory it could be no more than a successful electronic transaction system. Sepcifically that it probably can't do much better than replacing PayPal (or similar services) as the method of choice for conducting transactions online.

Re:Volatility

[superwiz]

Only if you define heading a family (actual family associated through family ties) as a governance. Both money and government are abstractions. I am willing to admit that throughout the hunter-gathering period one would be able to find examples of either one without the other. But, while these two abstractions are often connected, the case that either one of them completely depends on the other is flawed.

Re:Volatility

[superwiz]

The point that there was money before there was government, by the way, was fairly tangential to the whole argument. The main thrust of the argument was the tokens used for enumerating exchange have to have certain utilitarian properties and at the same time they have to have certain properties which enable them. Bitcoin has both. Just as a full disclosure, I don't own any bitcoins. But then again, I don't own any Yen or any gold either.

Re:Volatility

[tbannist]

Except history tells us that the first actual money was created by early governments. This should not be a surprise, you needed to have a social agreement that the money has value before it actually is money and in groups small enough to not need government, it would have been easier to mentally track who owed whom what than to invent a currency.

I'm not saying that Bitcoin is useless or anything, just that according to historians, early governments created the first money. So while value may predate governments, money does not. Personally, I think it's important to at least get the basic facts right.

Re:Volatility

[superwiz]

I think it's a matter of definitions. If something valuable (ie, difficult to obtain) is fungible, then its use as a tool for enumeration of exchange makes it money. But if you define money as something that has some sort of approval from a group of people who have ultimate authority on life and death decisions (be that approval in the form of a stamp, a nod or whatever), then by your definition money would have to created by a government.

Fungibility, however, is a more important factor than some sort of official approval. Case in point is interchangeability of gold coins when gold coins were in use. You might be aware of the biblical story of whipping of the money changers (and I only bring up the story to demonstrate a point -- not to proselytize). The fact that during the time of the writing of the Bible the story communicated a meaningful metaphor indicated that gold and silver coins at that time were interchangeable regardless of the stamp they had on them. It was only for the official government purposes that specific coins had to be used. But coins were used and accepted despite the fact that governing authority would not accept them. Which pretty much meant that they had utility far exceeding the utility of being able to pay government debts.

Come to think of it, there are more obvious examples. There is no international government. Yet, international exchanges happen all the time. And most of the time they gravitate towards some universally accepted unit of enumeration. The same pattern of behavior emerges on the smaller scale (between individuals and small of individuals) as emerges on the larger scale. The fact remains that barter requires solving an NP problem. While trading with currency requires simple arithmetic. So the currency has emerges as a natural tool whether it is mandated or not.

I don believe in it.

[For a Free Internet]

I think it is weird and irrational that we should let our lives be determined by a totally imaginary thing, this "value," where all wants and needs are collapsed into one measure, "value" and its accumulation. Now if you ask me, I will stick to real value like dollars which is the natural measure of Man and all his works, not some silly thing on the internet that is really just an electron representing some fucked-up historically determined concept for which millions starve and a few prosper.

Re:I don believe in it.

[Jeff DeMaagd]

+1 - Beautiful sarcasm.

Re:I don believe in it.

[david.given]

Depressingly I've encountered people who would think he was being serious.

Re:I don believe in it.

[baldass_newbie]

I have some tulips for sale.

Re:I don believe in it.

[History's Coming To]

So if I buy some of your tulips for $10 there will be somebody else who will buy them from me for $100? Clever!

Think it'll work with houses too?

Re:I don believe in it.

[hey!]

Now if you ask me, I will stick to real value like dollars which is the natural measure of Man and all his works, not some silly thing...

Ha! Have you looked at the value of the USD in bitcoins? The dollar tanked yesterday, although it's starting to recover.

roller coaster ride

[molecular]

if you have bitcoins, just hold on for the ride

Re:roller coaster ride

[gclef]

If everyone's hoarding them, then there will be very few transactions, which will only increase the volatility. If you want to stabilize the economy, use them.

Re:roller coaster ride

[ka9dgx]

Wow... my $1.59 equivalent of bitcoin just became $1.00 equivalent.... if I can ever spend it for something.

On the other hand my US Dollar (The real kind, coined in 1901) is worth $28.00 in Federal Reserve "Notes"

I'll keep stacking both kinds, as they each have their appeal to me.

Re:roller coaster ride

[IamTheRealMike]

Indeed. There are lots more merchants these days, which is impressive because the software is still pretty rough. One I recommend is SpendBitcoins which allows you to purchase things from Amazon (the guy is an Amazon Affiliate). The process is a little odd, but the guy running it is super helpful.

Re:roller coaster ride

[mestar]

If everyone is hoarding bitcoins, there will be no volume on the exchanges. Right now, mtgox has about 100.000 bitcoins traded every day, which is about 1.5-2 million dollars.

I don't think hoarding will every became problem for bitcoin, unlike gold, bitcoin is easily transferable.

Re:roller coaster ride

[rasmusbr]

Why would I want to stabilize the economy? Call me a cynical asshole*, but I mined my 0.21 Bitcoin in the hopes that there would be an outrageous bubble and that I might be able to sell them or buy something for them somewhere close to the peak.

*I do realize that Bitcoin is fucked up and most likely illegal (at least on theory - nobody has been charged yet) in my country and I am prepared to hand over my 0.21 to the local authorities at their request.

Re:roller coaster ride

[Cederic]

Why would it be illegal? There are laws against providing goods or services in exchange for electronic signatures?

If those signatures have negotiable value then there are likely to be tax implications, but those are distinct from the use of an arcane currency.

Linden Dollars weren't illegal (in most jurisdictions), using gold in WoW to buy real goods/services isn't illegal, why would bitcoin?

Re:roller coaster ride

[econolog]

You lost 37% of the value in a day vs. 25.5% loss annually in the USD based on the numbers you provided. Also Bitcoin is pegged to USD currently which implies that it would be subject to some tertiary effects of USD inflation.

Re:roller coaster ride

[MightyYar]

On the other hand my US Dollar (The real kind, coined in 1901) is worth $28.00 in Federal Reserve "Notes"

Because it is made out of silver and has some collectable value. You could stack silver without all the nonsense about "condition" and still have a savings plan that, on balance, will match inflation. I'd use something a little more dense, like platinum or gold - but gold seems to be in some kind of bubble right now.

Making currency devalue over time has the advantage of discouraging people from holding it. It's supposed to replace barter, not be an investment in of itself. When it becomes an investment, it encourages hoarding and discourages economic activity. Even the little bit of silver that you have is sitting uselessly in a closet. At least with Bitcoins, there is nothing real being held back from the rest of humanity. If someone wants to hoard otherwise useless hash keys, it won't negatively effect industry in the same way that hoarding gold or other commodities does.

Re:roller coaster ride

[rasmusbr]

WoW gold is just game content. If people use them to buy real life stuff then that's interesting, but it's probably not going to be widespread enough to cause trouble. Linden dollars and Bitcoin are marketed as currencies. Bitcoin also has a fixed amount of money which means that the value of a Bitcoin will undergo cycles of rapid deflation and inflation. This means that Bitcoin comes with a Ponzi-ish scheme built in.

I don't know if it is illegal in most jurisdictions, but it seems unethical to me, unless I'm wrong about the deflation-inflation cycles. It seems that I'm a sucker for mining my 0.21 BTC and my only way out is to find a greater sucker, who in turn has to find a greater sucker, until the deflation stops and the value crashes and the last sucker loses his "investment" and potentially has to eat noodles the next few months, or sell his car, or his house depending on how bad the bubble gets. To be honest I kind of hope it burst before my 0.21 BTC becomes "valuable" enough to buy anything.

Just one exchange

[richie2000]

Even though MtGox is the largest BTC exchange, this dip in value seems to have affected only that one exchange. Tradehill for example was completely unaffected. Bitcoin is still a pretty small currency so these kind of events should be expected until more people buy into it to create stability. If nothing else, it may attract daytraders. :-)

Re:Just one exchange

[phantomcircuit]

The cause of this is actually extremely simple, dwolla withdrawals from mtgox were down on mtgox for a few days, so nobody had any reason to sell BTC.

As soon as it came back up the volume of asks exploded.

Re:Just one exchange

[syousef]

Even though MtGox is the largest BTC exchange, this dip in value seems to have affected only that one exchange. Tradehill for example was completely unaffected. Bitcoin is still a pretty small currency so these kind of events should be expected until more people buy into it to create stability. If nothing else, it may attract daytraders. :-)

More people buy into it? Ha! More people wake up to the fact that it's a failed experiment more likely.

Re:Just one exchange

[pla]

Even though MtGox is the largest BTC exchange, this dip in value seems to have affected only that one exchange. Tradehill for example was completely unaffected.

Wow, consider yourself my newest friend (no sarcasm intended)!

Ever heard the word "arbitrage"?

Re:Just one exchange

[richie2000]

Ever heard the word "arbitrage"?

Of course. But to be effective, I'd have to be able to move USD quickly between the markets, not just bitcoins. Or deposit them there beforehand. This time, I was way too late to benefit from the swings.

Bitcoin is imaginary

[dadioflex]

I keep waiting for someone to jump out and shout "April Fool!"

Yes, yes, all currency is imaginary. But there's imaginary and frigging deluded.

Re:Bitcoin is imaginary

[hedwards]

To varying degrees. US currency is legal tender for all debts public and private, well within the US, so as long as you have the bills to pay the debt they have to accept it no matter what the ultimate outcome might be, even if they would make more money requiring a different form of payment. But, you can still see massive inflation when the Fed decides that the rich aren't rich enough and starts printing money to give the rich interest free loans.

Re:Bitcoin is imaginary

[Kenja]

US currency is backed by the treasury department of the united states of america. What is bitcoin backed by?

Re:Bitcoin is imaginary

[Anonymous Coward]

US currency is backed by the treasury department of the united states of america. What is bitcoin backed by?

Handwaving, wishful thinking, and the infinite arrogance of a bunch of shortsighted nerds desperately hoping that throwing enough chaos at a situation will reshuffle the deck (so to speak) to put them on top. See? That's THREE whole things it's backed by! That's WAY more stable and worthy than the US dollar!

Re:Bitcoin is imaginary

[the eric conspiracy]

US currency is backed by the treasury department of the united states of america.

O RLY? It USED to be backed by the US Treasury but that ended when Nixon took us off the gold standard. Now its backed by the faith people place in the ability to exchange it for useful goods and services in the future.

Some people mistrust this and put their money into gold, land, stocks, other currencies etc. Of course this is really no different because they are evidencing faith in the idea that they will be able to exchange these things for useful goods and services in the future too.

Personally I think it's a good idea to diversify, and not have all your savings tied up in one type of asset. Shit happens as they say.

Re:Bitcoin is imaginary

[betterunixthanunix]

The US dollar is backed by the need American citizens have to pay their taxes, since the Treasury only accepts dollars for tax purposes.

Re:Bitcoin is imaginary

[betterunixthanunix]

Yes, yes, all currency is imaginary.

Not true; currency is a tool used by governments to manage the exchange of goods produced by citizens for services provided by the government. We pay for government services with taxes paid in currency (issued by the government), and the government pays for private sector goods and services will currency. Currency has value because citizens are required to pay taxes; you cannot opt out of paying for government services (one might argue that by virtue of being a citizen, you are receiving those services [e.g. the government is defending you from foreign enemies], and not paying would amount to theft).

Before currency, of course, taxes were collected by government agents taking goods directly from the citizens -- say, 2 head of cattle, or perhaps some fraction of the grain produced by your fields, etc. Currency is much more convenient, since government agents do not have to judge whether or not a piece of gold or some paper money or a check is healthy and disease-free (they would have to do this with cattle, of course). Currency also allows the government to provide a much broader array of services, because it simplifies the system of paying the cost of those services -- salaries paid in currency are a lot easier to compute than salaries paid in physical goods.

I know, in high school we are all told that currency gets its value because everyone in society agrees to it, as if some magical process occurred. The agreement is simply an part of the broader agreement to be governed; there is no magic here, just politics and economics.

Re:Bitcoin is imaginary

[BrokenHalo]

That's nice, but what does your treasury department have to back any "value" they ascribe to those boring bits of green paper that they print? It's not as if those notes have any defined worth in terms of (say) mangoes, bananas or lumps of gold which are of intrinsic value to someone who has the munchies or who makes shiny bits of jewellery.

Re:Bitcoin is imaginary

[bill_mcgonigle]

so as long as you have the bills to pay the debt they have to accept it

That's true, but the prices will rise to match actual value.

Re:Bitcoin is imaginary

[rmstar]

US currency is backed by the treasury department of the united states of america. What is bitcoin backed by?

Libertarian stupidity. That's something pretty durable.

Re:Bitcoin is imaginary

[TheRaven64]

It means that they will accept it in payment for debts. Bank notes are backed by the bank that issued them, for example. In the UK, that's actually written on the notes: the Bank of England (or Scotland, depending on the note) promises to pay the bearer, on demand, the sum on the note. The US treasury department will accept the US dollar in payment for all debts, most especially for taxes. This means that there is a demand for dollars, because there are lots of people who owe the US government money (i.e. all US citizens and companies that don't have really good accountants). These people need US dollars, so I can be sure of being able to trade something I want for any dollars that I might have, unless the US society collapses completely and people stop paying taxes, or the US economy collapses completely and people stop owing taxes.

If I have BitCoin, what is the equivalent? Where is the guarantee that someone will accept them in the future? Without that guarantee, they are a very high-risk investment.

Re:Bitcoin is imaginary

[angel'o'sphere]

US currency is backed by the treasury department of the united states of america. What is bitcoin backed by?

Strictly speaking the US currency is not backed at all, just like all other common currencies. However as about 40% of the worlds oil is sold only for dollars you could argue the US currency is backed by oil. (Thanx to Nixon)

Re:Bitcoin is imaginary

[Anonymous Coward]

Currency has value because citizens are required to pay taxes; you cannot opt out of paying for government services (one might argue that by virtue of being a citizen, you are receiving those services [e.g. the government is defending you from foreign enemies], and not paying would amount to theft).

The issue at hand, is that you do not have the choice to be governed. if you don't agree with government as an idea you have one option: stop living.

That's not much of a choice, IMHO. Until that choice comes along, there will always be people that agree that money is only worth what people think it's worth. If every single person in a country stopped paying their taxes, the government would be required to print money to pay for law enforcement to attempt to start the economy rolling again. If merchants refused to accept that issued money and decided to all agree to use a new form of currency: the people that enforce the law would quickly realize that the money they were making for supporting the Government was worthless.

IMHO: you should have the right to refuse to pay your taxes. If there were a place I could go and not be governed by my Gov't, I would happily do so. No gov't services, no "protection", let it all go and live. (side note: I am not american.)

Re:Bitcoin is imaginary

[h4rr4r]

The fact that you need them to pay taxes as they are the only form of currency the Treasury accepts. They will not take mangoes, nor bananas, nor lumps of shiny metals.

This means they hold value for those who enjoy not having their property seized and living outside of prison.

Re:Bitcoin is imaginary

[superwiz]

And what is the treasury backed by?

Re:Bitcoin is imaginary

[ShakaUVM]

>>The issue at hand, is that you do not have the choice to be governed.

You can certainly by a boat, renounce your citizenship, and live on the ocean. Let me know how well that works out for you.

Personally, I think having police, fire services, roads, and a military are generally worth the price of admission to living in a country. This works out to about $3000 per person per year in America.

Re:Bitcoin is imaginary

[lyml]

Ah yes, if you are being a moral relativist there is no difference between a democratic government and the mafia. There is also no problem with killing and eating babies.

If you want a libertarian reasoning for why the government is legitimate replace government with corporation, taxes with income dependent rent and ownership with lease. The legitimacy of the government comes from the willingness of the people being governed trying to fit everything into a tiny model is just mental masturbation.

Hope that clears everything up for you. HTH HAND.

Re:Bitcoin is imaginary

[westlake]

Currency is much more convenient, since government agents do not have to judge whether or not a piece of gold or some paper money or a check is healthy and disease-free. Currency also allows the government to provide a much broader array of services, because it simplifies the system of paying the cost of those services -- salaries paid in currency are a lot easier to compute than salaries paid in physical goods.

You do understand that payment in wheat, chickens or cattle would be no less an inconvenience for the drugstore or the supermarket? That you don't need the government to tell you that barter does not scale well to a country of four million square miles and 310 million people?

Re:Bitcoin is imaginary

[lyml]

No, my argument is that since the very principle of property ownership is a state sponsored right, the difference between a government and no government is just a layer of abstraction.

Abolishment of the government in favor of voluntary contracts, http://en.wikipedia.org/wiki/agorism, http://en.wikipedia.org/wiki/Night_watchman_state or any other hardcore libertarian solution would just create a private corporation that takes on every and all aspects of the government (including forced "taxation" for all its members). Making it a de facto government.

By not doing that and actually leveraging the principles by which our governments (since we are probably not sharing our governments) work we can use a democratic institution where we actually have a say.

Wouldn't you prefer that to having to live on the whim of your local mafia^W feudal^W corporate overlord paying them taxes^W fees to live on their tithe^W property with their protection?

And if the answer to that is no, then I suppose that for you, there would be no difference between the government and the mafia.

Re:Bitcoin is imaginary

[TheSync]

US currency is backed by the fact the Federal government will put you in jail if you don't pay your taxes in dollars.

Re:Bitcoin is imaginary

[zippthorne]

Eh.. That doesn't say what a dollar is worth though. Is it a loaf of bread? 3 minutes of your time? More? Less?

What a dollar will get you is in no way related to the fact that 30% of them have to go to the federal government....

Re:Bitcoin is imaginary

[palfreman]

Nah. It doesn't matter what currency a commodity is traded in. They are all substitutes for one another at current exchange rates. A lot of prices are quoted in US dollars out of convention, but that doesn't mean people are really keeping a bit stock for real use. I've seen that in the Middle East a lot - businesses quoting in dollars but settling in the local currency.

Re:Bitcoin is imaginary

[palfreman]

But if they make enough new dollars it will be very easy to pay any amount of tax and still not have transferred any real value to the government. Currencies are used because they are a medium of exchange in business. Not because you have to pay taxes in a particular one. That follows from their use as a medium of exchange - if the government couldn't exchange them for real goods, the money would be no use to them.

Re:Bitcoin is imaginary

[palfreman]

That is called chartellism and it is unfortunately a fallacy. If the government creates enough money to make it valueless but demanded tax payments in it, then all a government would succeed in doing is abolishing all taxes. The use of a currency for tax collection follows from its use as a means of exchange, rather than causing it.

Re:Bitcoin is imaginary

[angel'o'sphere]

You missed the point that Nixon forced more or less *all the worlds oil selling countries* to sell for Dollar only. Most conflicts in the middle east come from that. Iran was the first country around 1955 bluntly refusing to sell for dollars only. Meanwhile roughly 60% of the oil countries sell for anything, but still about 40% only sell for dollars. That is the reason for the dollar value drop in the last 20 years (fewer and fewer only selling for dollar).

Re:Bitcoin is imaginary

[betterunixthanunix]

It is not just demand; supply matters too. Demand comes from taxes; not just on income, but on things like property, certain industries, importing certain goods, etc. Supply is controlled by the government, and is determined by the interaction between the government and banks, and of course how much money the government mints and destroys.

Both are needed, but the ultimate value of currency comes from the demand for it, which is the need to settle a tax debt. There are plenty of fixed tariffs out there (for example, a $200 tax on sound suppressors for firearms), which helps establish a baseline of sorts (relative to the demand for whatever the tariff is on). The supply the second in determining what money can get you, in the sense that supply is make irrelevant if there is no demand.

Re:Bitcoin is imaginary

[betterunixthanunix]

I must have missed something; did the currency issued by now-defunct governments lose its properties that made it useful as a means of exchange? No, it would be just as easy to hand someone a worthless bank note as it would be to hand them a dollar bill.

It is not a fallacy; even under extreme inflation, the government could adjust taxes to match the low value of a single unit of currency. It would be absurd to speak of paying trillions of dollars in taxes, but it would work out economically (although there would be damaging inflationary effects). The United States periodically updates its tax code to keep pace with inflation. Currencies only become worthless when they are no longer backed by a government, or essentially when nobody can use the currency to settle their debts with the government.

Re:Bitcoin is imaginary

[Lehk228]

bitcoin is backed by math and cryptography, the USD is backed by the US government, which due to the failure to raise the debt cap will likely be engaging in inflationary money printing soon enough.

Re:Bitcoin is imaginary

[Risen888]

So this paper that is printed by the Treasury is ultimately good for...returning to the Treasury? That's funnier than hell.

Re:Bitcoin is imaginary

[adavies42]

AKA the (hot) lead standard.

Re:Bitcoin is imaginary

[glwtta]

Hmm, an entity that sells protection services that you can't opt out of and then demands payment against your consent.

Who says you can't opt out?

You're absolutely free to renounce your citizenship and move out of the country, and you will no longer be burdened with any services you didn't consent to. In fact, if you feel so put upon, I highly recommend that option.

If, on the other hand, you would like to stay: that's the deal, so shut up and pay your goddamn taxes. You aren't actually required to shut up, of course, I would just take it as a courtesy.

Re:Bitcoin is imaginary

[JimFive]

Men with guns.
--
JimFive

Dollars... real dollars

[ka9dgx]

What years were your dollars coined in? ;-)

Don't you just love that silvery ring when you hold them in the center, and tap the outer rim?

Re:Dollars... real dollars

[For a Free Internet]

Yeah exactly! Heavy, shiny metals were made by God to count and represent our worth to society and ourselves. It is so obvious that it requires no proof. Whereas wood pulp, that is fake value, it only exists in your head, I don't care WHOSE picture they print on it, even if it was Jesus giving George Washington a handjob while Abraham Lincoln and Adam Smith watched from behind a peephole!

Re:Dollars... real dollars

[fuzzyfuzzyfungus]

But what if it was the Maries(Virgin and Magdalene, respectively) performing a sapphic poledance on the cross for an appreciative crowd of early american revolutionary notables? Surely that would give even the hollowest of hyperinflated fiat currencies some value?

Re:Dollars... real dollars

[marcosdumay]

I don't care about any of that. I do all my transactions on carts of salt, and never looked back! (Or forward, whatever fits better.)

Re:Dollars... real dollars

[shutdown -p now]

Yeah exactly! Heavy, shiny metals were made by God to count and represent our worth to society and ourselves. It is so obvious that it requires no proof.

You joke, but it's actually right there in the Bible, what with various commandments specifying costs in silver shekels, with a specific predetermined amount of silver per shekel. In fact, Israel still mints silver coins just for such occasions.

Re:Dollars... real dollars

[Thaelon]

For some reason this has me thinking of the one ring...

Not untraceable?

[countertrolling]

Then what's the point?

Re:Not untraceable?

[hedwards]

It's great for money laundering.

Re:Not untraceable?

[Anonymous Coward]

What's the point of other in-early-out-rich schemes?

Re:Not untraceable?

[TheRaven64]

The point is to make a lot of money for the people who got in early, mined 70% of the possible BitCoins, and then hyped the hell out of it.

Re:Not untraceable?

[FutureDomain]

The point is that while it's not untraceable, it can be anonymous, given the correct precautions.

Pick your poison.

[bahface]

The US dollar has lost over 95 percent of its purchasing power since its inception. No one seems to notice. Pick your poison.

Re:Pick your poison.

[hedwards]

It's because nobody is that old, the original ones being issued near the end of the 18th century. So, unless you're very long lived, the actual loss of purchasing power over that period isn't a big deal. Up until relatively recently wages would go up by a similar figure, and typically somewhat more than inflation as increases to productivity would take effect. The dollar itself is just a place holder, the only reason to care about inflation at all is if you're the type of person that's in the position to hold onto dollars.

The bigger problem lately has been the inflation created to cut no interest loans to corporations that are then subsidized to create jobs over seas via IRS loopholes. Inflation or deflation of a currency, what matters a lot more is whether the ecomony is growing, shrinking or remaining relatively static. You can create an inflationary or deflationary period trivially by printing or destroying currency in massive quantities.

Re:Pick your poison.

[Fnkmaster]

Inflation at a modest rate (2-3%) is actually a good thing for the economy. It encourages present consumption, lending, or investment over currency hoarding. Noticeable changes in currency's purchasing power over a time scale of minutes, days, or weeks, however, is a bad thing because it causes major economic distortions and lots of wasted activity trying to avoid the negative consequences of these changes in value.

Re:Pick your poison.

[TheRaven64]

Except that most people don't hoard money, they invest it. People who don't have very much delegate the investment to a bank. They get paid an interest rate slightly greater than the inflation rate, because the bank puts the money into companies that actually produce things and increase in value, or things for which the demand is increasing (such as land). Inflation (although not at current rates) is an important property of a currency, because it makes people invest it rather than hoard it. Without inflation, there's less incentive for investment and so it becomes difficult for businesses to expand, or for new ones to start.

Re:Pick your poison.

[hedwards]

I used to buy into that fairytale as well, but it's not true. There is no correlation between inflation and economic health beyond the number being relatively stable. Modest inflation or deflation is a tolerable evil, but one is not better than the other and certainly neither is more desirable than being rid of both completely. You're not going to do that with a fiat currency ever, a fiat currency will tend towards a small amount of inflation.

Inflation itself has been the means of stealing from the poor to give to the rich. In the US we've had insufferably low interest rates on the types of accounts that the poor can afford to have, whereas we've had insufferably low taxes on capital gains for the rich. Leading to a perverse situation where the banks are taking the money from the poor and paying it out as dividends and capital gains to the rich.

If you really want to encourage investment or savings in savings accounts over currency hoarding, then there are better ways to do that. Such as preventing the federal reserve from giving low interest loans during boom times. People are going to spend when interest rates are lower than inflation and they haven't got enough money to properly invest. I'm not sure what other result one would expect. If you want interest rates to be low, then you pretty much have to eliminate inflation, and possibly even start destroying currency to bring yourself into a situation where that interest rate is somewhat higher than inflation.

Re:Pick your poison.

[Vaphell]

i don't buy it
incentive is always there - if you invest, you will be able to afford more in future than if you spend all on your current consumption. It's always true, be it stable deflation, 0, stable inflation.
Inflation biased policy is not an incentive, it's a blackmail: 'Put your savings in the bank or you will get wiped out and will eat from garbage bins once you get older'
And what about wages lagging behind prices? If you don't get a raise in few years, it's an equivalent of a substantial pay cut. Inflation causes that every Joe Average has to work his ass off and micromanage to break even and Joe Average has no fucking time and knowledge to do that. Only rich have the access to expertise necessary and can successfully hedge against the inflation. Why can't there be a system that preserves value of savings and wages without hassle? That would benefit everybody not top 10%.

One of the biggest byproducts of inflation biased policies is that in the last few decades the financial sector grew like a fucking cancer, became more important that the industries that produce actual wealth (how fucked up is that?) and now it's a huge point of failure that can bring down whole nations to their knees. Tell me again why it's a good thing, given the events of 2008.

Another thing - governments have every incentive to underreport the CPI. They can lower fixed payments in real terms, borrow more and spend more to bribe voters because liabilities are eaten by inflation. When you put the money in the bank and it gives you +1% over the reported inflation you lose anyway because reality is that true value of CPI is 2-5% higher, just go to grocery store and look.
Inflation fucks over the prudent and responsible in every way possible, end of story. People hope that inflation induced spending will produce more gdp and return on that will offset the decay of purchasing power - the problem is that it can't work reliably when people and countries are in debt to their eyeballs and we are witnessing the failure of such policies.

Re:Pick your poison.

[angel'o'sphere]

While your posting is quite insightful this here: Modest inflation or deflation is a tolerable evil is not really correct.
A modest inflation is easy to handle and control by the federal banks (usually). The goal is to keep it at a low rate, getting it high is bad for the poorer people, getting ti to low opens the chance for deflation. Deflation is very very very bad for current economies/currencies. Say you have a contract to buy flour every month for your bakery chain. The contract is running out in 3 months. You are supposed to make a new one. But ... for what price? As your money (due to inflation) is increasing in value, the longer you wait with your contract, and the more short term your contract is, so more value you get for your money. In other words money is hoarded in deflation scenarios and trade is declining.

Re:Pick your poison.

[angel'o'sphere]

Investing is the same as hoarding.
It is invested in non tangible goods ... so it is out of the "real" market, it is hoarded.
The difference would be to make a "true investment" that means to build a new power plant and be a shareholder of it. But you only invest in existing power plants hoping they magically sell more power and earn more money. Thats not an "investment" that is speculation.

Re:Pick your poison.

[phantomfive]

No one seems to notice? Are you kidding? You can't open a financial newspaper these days without at least some part talking about inflation. How many old people have you talked to that didn't know how much more the dollar was worth in the 'old days?' (ask 'em how much you could buy for a penny). Just because people don't want to talk about it all the time, like you seem to want, doesn't mean people don't notice. We all notice, and are aware.

Re:Pick your poison.

[superwiz]

Your argument suffers from not listing the cons. You only list the pros. Inflationary policy also causes easy credit. And easy credit causes irresponsible borrowing. It also decreases productivity by enabling carry trade. I am not saying that these cons outweigh the pros, but I think it would be very short sighted to claim that the pros necessarily outweigh the cons. Most of the time it is a matter of how much weight each particular trend ends up having.

Re:Pick your poison.

[m.dillon]

That's a very misleading statement, you talk about the dollar as if it were a physical asset. All world currencies are trading mediums, not physical assets. All of them. Hard, soft, whatever you want to call them. The value of the trading medium itself is almost irrelevant, but at least a degree short-term stability is always desirable.

An easy way to understand this concept is to understand the term 'cash equivalence'. The term comes up all the time in financials and even the person on the street almost universally works in a cash equivalent form and not in actual dollar bills. Cash sitting in a bank account is in a cash equivalent form. Cash invested in short-term treasury bonds is in a cash equivalent form. Cash invested in a money market is in a cash equivalent form. These forms earn interest, and interest is why the 'lost 95% of its value' statement is extremely deceptive.

Now, I am not implying that the interest earned is able to make up for inflation. The interest earned from holding a cash equivalent form is usually somewhere near par, with bank savings accounts below par, money markets slightly better, treasuries slightly better, and then taking on risk to get better yields to get above the inflation rate (bonds, equities, etc).

However, cash taken out for daily activities is essentially not going to be subject to inflation because it only stays in a pure non-earning cash state for ~1-2 days. You are free to calculate the cost of ~1-2 days worth of inflation. In most economies it isn't an issue. Take Germany after world war 1 and it can become a big issue. Other economies over the years have had hyperinflation as well but it really isn't likely in the U.S. High inflation, sure (80's again). Hyperinflation, not likely.

So... you really have to think about cash as a trading medium and not a measure of absolute value. This isn't just a concept for investors... every single person needs to understand this.

How you invest your cash, whether it be in a cash equivalent form or in the form of an equity (a piece of a company), a bond, or other form, is entirely up to you. Nobody is holding a gun to people's heads and forcing them to keep their cash in bank savings accounts and money markets which (today) yield 0%. I haven't had a single penny in a savings account for 20 years and only a small percentage of my portfolio is ever in the most liquid of cash equivalent forms (a money market).

I have 1-2 months worth of cash in a cash equivalent form, sitting in my checking account ready to go out in bill-pay, and it's staged there, well, just 1-2 months at most. One can calculate 1-2 months worth of inflation and count it as the cost of doing business. Again, cash as a trading medium.

Gold is a trading medium too, by the way, as are many other commodities. There is nothing really special about trading mediums except to those people who insist to think of them as investments instead of trading mediums. On the risk scale gold is no safer than, say, throwing your money into a basket of medium-yielding stocks, and in fact gold can be considerably more volatile (remember the late 80's crash anyone?). Ditto on silver.

Ditto on ANY investment. Everything has a risk, including cash. The risk for holding cash is that '95% since...', for anyone who just stuffs it under their pillow or leaves it in a stupid savings account (though, hey, that 1927 dollar bill is probably worth something to a coin dealer!).

So what does this mean? This means when it comes to bitcoin you really have to think of it as no more than a trading medium. Inflation or deflation is irrelevant... bitcoin is not superior in any way to dollars or any other currency. What IS relevant is volatility, and I would say that single-day fluctuations in the double digit percentages makes bitcoin a non-starter for any serious investor not only as an investment but also as a trading medium.

Similarly to those folks worried about dollar devaluation, consider the fact that for your every day

Re:Pick your poison.

[marcosdumay]

In practice people don't hoard that much. It is easy to see why, people give a very hight value to trading, as they need the resulting stuff to eat, move from one place to the other, and other such things. People may (and do) hoard a bit more at the durables market, but even there it isn't as big a problem as your argument makes it sound.

The problem with deflation is that people are used to inflation. Thus we don't accept reduction on payments (any kind, salaries, renting, etc) well.

Re:Pick your poison.

[glodime]

Inflation itself has been the means of stealing from the poor to give to the rich.

You don't seem to be accounting for debt. Deflation increases the real value of debts owed. Most debt is owed by the poor. All net debtors are by definition poor. Inflation helps debtors pay there debts. The current distribution of assets and liabilities in the USA makes deflation a much greater hardship than inflation for the poor and a significant benefit to the wealthiest.

In the US we've had insufferably low interest rates on the types of accounts that the poor can afford to have, whereas we've had insufferably low taxes on capital gains for the rich. Leading to a perverse situation where the banks are taking the money from the poor and paying it out as dividends and capital gains to the rich.

Are the poor unable to get accounts at a credit union or bank mutually owned by depositors? Capital gains taxes and monetary policy are independent decisions and one should not judge the appropriateness and efficacy of monetary policy goals and tactics based on tax policies alone.

Re:Pick your poison.

[m.dillon]

This just isn't true. Joe average anyone can open up a brokerage account and start investing. Learning how to invest is not something that only 'The Rich' have time to do... it isn't rocket science. In the simplest terms it's the same old vice and greed lesson that every single person has to learn, just with a lot more dangling carrots to avoid. If you can discipline yourself against the vice you'll do just fine.

What you need to have is a dedication to saving some of your cash flow, not just for a vacation, not just for that occasional restaurant meal, but permanently. You can rationalize what to do with the dividends/interest/gains but if you don't save any money in the first place then you can't take advantage of the markets.

Anyone can do this, but it takes several years to really learn and understand the risks and rewards (no matter how little or how much money you have, the learning curve is the same). You don't have to trade every day or even every week... successful investors might make a few dozen trades in an entire year. Getting started rules are simple: (1) Real investors don't ever carry a credit card balance. (2) Avoid leverage like the plague. (3) Don't day-trade, and (4) Diversify. Patience is also key. Despite what you hear on T.V. the day-to-day moves of the market are irrelevant to most good investors.

(Leverage here is using things like margin, options, leveraged ETFs, highly leveraged mutual funds, and so forth. Use of margin is the #1 killer of investment portfolios).

There, I summarized how to start investing in two paragraphs. NOT rocket science.

-Matt

Re:Pick your poison.

[glodime]

Well articulated. Thank you for a sane commentary on the USD and inflation.

Re:Pick your poison.

[angel'o'sphere]

Well, I don't know how dangerous deflation is, as we did not have one since ages. However a few years ago in germany and other parts of europe we where close to one and the media was full with panic.
Why should I buy a car now, when I get it in 6 months significantly cheaper?
And why should the wages change? Ofc they don't. It is not america here where you simply can fire one or tell him to accept less payment. If you have a contract you have to stick to it and you can't simply go and change it "just because of a deflation"

Re:Pick your poison.

[palfreman]

It's because nobody is that old, the original ones being issued near the end of the 18th century.

Just to be pedantic: the Thaler was first minted in Joachimsthal, Bohemia, in 1518. A Thaler is called a dollar in Spanish, and the Spanish version of this coin, minted in the Spanish empire's silver mining colonies in America, were the first American currency. A US dollar was a Spanish dollar of the same size and weight minted in the US much later - 1858 I think.I guess there might have been a few US ones minted before that, but the Spanish one was the "real" one for a very long time and was in main circulation. Arguable what is called a US dollar today is not, from the point when they went onto the gold standard with $5 quarter ounce gold coins, and the paper dollar since 1934. Dollars are supposed to be silver.

Re:Pick your poison.

[palfreman]

It is still a substantial transfer of wealth from the real economy to holders of new money who have not had to make anything in exchange for it. It also discourages real savings, which are necessary for real investments. For example, look at the greatest phase of American growth. All of it under either a silver standard or a gold standard. All of it with falling prices. Same with the industrial revolution in Britain, with gold guineas and silver shillings. Same with Rome and silver denarii. History is also littered with examples of empires that have declined as they debased their currency - Rome later on 20th Century Britain, and America today. Only really the Russians managed to build a great empire while having nonsense money under communism.

Re:Pick your poison.

[palfreman]

Hmm. So post civil-war US, with a long period of deflation, was very bad for the US economy? No, that is what got America from being a backwards third-world land of hill farmers to the great industrial power it became by 1900. Did hard money do Britain any harm? No, the industrial revolution started there, with gold and silver in circulation as money and two centuries of prices trending down. Small amounts of inflation are harmful too, just not as much as big inflation.

Re:Pick your poison.

[palfreman]

I think they might if they were being paid in gold or silver. I know in gold terms I am making the same now as I made when I left collage, but I have a much higher skill level.

Re:Pick your poison.

[angel'o'sphere]

I don't know what you refer to. However "some prices" trending down is not deflation. Deflation is when your money in general gets more valuable.
The reason why states dropped gold and silver as currency is pretty simple. There is not enough gold and silver available to base a currency on it (in our days). Why should be small amounts of inflation be harmfull? Everyone has learned to live with it, so there is no harm. It is only distracting to realize that you got a small bread roll for 2.5cent (5 german pennies) in 1970 and that you now pay 65cent for one. (As I'm trying to read up what you ment with post civil war deflation, I figure right now that it was only a normalization of prices which where much to high during the war - and there also was a shortage on money itself - ... that is not the kind of deflation we talked about here.)

Re:Pick your poison.

[Miamicanes]

> Inflation itself has been the means of stealing from the poor to give to the rich.

I'd argue it's the exact opposite. Poor people spend money within days of getting it out of necessity, so they have no savings to lose value. Extremely wealthy people, on the other hand, potentially stand to lose staggering amounts of money when inflation diminishes its buying power. It could be argued that inflation is what forces extremely wealthy individuals to put their money to work by lending it out and investing it, instead of simply locking it in a safe and forgetting about it for 40 years.

The biggest problem with deflation is the fact that it absolutely destroys the economic viability of anything with a supply chain measured in years, or possibly even months. If currency deflates by more in 12 months than you could earn by purchasing raw materials and labor now, and making products that will be sold 12 months from now, you're better off not investing it and manufacturing those products at all. That's why inflation in moderation is a tolerable evil, but deflation to just about any significant degree is absolutely deadly. When putting money in a mattress and forgetting about it for a year becomes more profitable than just about any alternative, you no longer have an economy.

Re:Pick your poison.

[marcosdumay]

"Why should I buy a car now, when I get it in 6 months significantly cheaper?"

Because you need one? Why do people take loans to pay for cars and houses, instead of just waiting a bit and paying much less?

"And why should the wages change?"

On a deflation there is less money to pay wages (and lower prices too), so all the people can't keep getting the same wage. It being that hard for our wage (not just wage, but all kinds of payments) go down is exactly what makes deflation hard to deal with.

Re:Pick your poison.

[angel'o'sphere]

Sorry,

I don't want to argue. But half of the stuff you say is simply wrong. I don't need a new car when I already have an old one. During deflation wages dont sink, they stay the same. You have a contract with your employer about your wage, don't you have it? So why do you think it could/should change suddenly?

Just go and read up about the problems deflations are causing. I lack the wording to explain it ... as I'm not an english native speaker.

The idea that due to deflation all payments would go down is idiotic. If you have a loan forcing you to pay 500$ each month you don't suddenly have to pay only 450$.

If you have a long term contract, like a bakery, causing you to buy grain every month for the next 12 months for 1500$ a month, that payment is not reduced. Even if the actual price for that grain would only be 1000$ right now.

And so it goes on. The VALUE of your money changes, prices on the market only change very very slowly. After all everyone doing real business has long term contracts and needs the money coming in right now to fulfill them. Ofc it perhaps would be smarter to reduce prices immediately to get any money at all, but most of the time business is to slow. The result is: no business, no money and bankruptcy.

Anyway, ask someone who can explain it much better than I can. Your assumptions are naive. Sorry to say that so bluntly.

Re:Pick your poison.

[marcosdumay]

So, you agree that payments not going down is a problem. Ok. If you read up there on the thread you may notice that you were arguing that the problem of deflation was that people would hoard money. People just don't do that to a very important degree, and proof of that is that they even pay interest to get things earlier.

Now, payments don't going down is a problem. Surely. That was just my point.

Re:Pick your poison.

[angel'o'sphere]

Well,

I only repeated what is taught in school here.

If you think deflation is no problem then think about it. why do all the feds around the world do everything to avoid it since more than 50 years?

Re:Pick your poison.

[marcosdumay]

It is a problem. You are missreading it. But it isn't people hoarding money that causes it to be a problem.

Also, it seems that the central banks around the world were indeed acting on foolish goals for the last 50 years. That is getting quite clear now, that the consequences are appearing. But fighting deflation isn't one of those foolish goals. Maybe helping organize the economy in a way where deflation is a huge problem was foolish, but that I can't be sure.

Silk Road

[msobkow]

This "Silk Road" website seems to be the crux of the problem, but I can't even verify it's existence. No search engines turn up links for anything other than a Silk Road videogame, a forum, and a few other innocuous venues. As far as I can tell, the senators complaining about it must be smoking product from this mythological website.

Re:Silk Road

[Anonymous Coward]

Go here: http://www.silkroadmarket.org/

And use your brain to get the rest of the way there

Re:Silk Road

[Anonymous Coward]

It's here:
http://ianxz6zefk72ulzz.onion/

You will need Tor.

Re:Silk Road

[demonlapin]

There's just one problem I can see with the anonymous website where you buy drugs: sooner or later, at least some of these guys will get busted (either for online or offline activities). And when they do, your address (hey, they had to ship it to you) is going to be on their computer. Hell, maybe some of these guys are setting themselves up to blackmail people who think they can get off easy by buying drugs online.

Traditional drug dealers may be harder to find, but you're just another anonymous face passing them cash.

Still an ad

[Jiro]

The gst of the article is "Bitcoin is important. It's just like real money. See, it even has a market like real money, but the problems of the market aren't too bad." Despite the Slashdot headlne mentioning the volatility, the article goes out of its way to say to say that the problems aren't all that bad and goes on to emphasize how much it is like real money. It then goes for four sections (out of five total) explaining exactly what Bitcoin is, why people might want to have it, how it's being attacked for no fault of its own, and how some people don't like it but it's just paranoia.

It's a disguised ad It's like having an article whose headline says that a popular diet doesn't always work, then reading the text and finding that the reason it doesn't work is because it's too natural and some people refuse to obey the diet because they don't like natural things. Then followed by paragraphs of details about the diet, where to buy a book about it, and complaining about how the media doesn't like the diet.

Re:Still an ad

[NeutronCowboy]

You mean an article explains what some esoteric new thing is that not everyone might have heard of? It even puts the explanation after the description of the covered event, so that seasoned readers can skip that part without missing anything? You mean, it's like a real article written by a real journalist?

I mean, yes, there's always a risk of astroturfing. But at least understand what you complain about. The alternative is articles that never mention what that new thingamajigg is they are talking about... oh, like most Slashdot articles. I suggest you go out more.

Re:Still an ad

[Jiro]

Actually writing an article about Bitcoin problems would require maybe 4 lines describing what Bitcoin is, and *no* lines referring to "misconceptions" that people have about how bad Bitcoin is, nothing referring to "unfunded paranoia", and no market-speak.

It's stil young

[Qatz]

Bitcoin is still a young "currency" and there are relatively few buyers and sellers. This level of volatility is to be expected. Chances are good it will stabilize, and climb back up in value. Then this will happen all over again. Eventually that will stop happening but it's going to be awhile.

Re:It's stil young

[betterunixthanunix]

I imagine that around April, the value of bitcoin will plummet, as a bunch of American bitcoin holders try to dump their bitcoins for dollars in order to pay their taxes. How exactly will bitcoin regain that value, other than speculation (which is not going to last much longer)?

Not a currency yet

[Phoenix Dreamscape]

These swings are fairly meaningless since Bitcoin hasn't achieved its goal of becoming a currency yet.

The markets have turned it into a volatile foreign exchange game, and people are just trying to make a quick buck playing the market. There currently isn't any 'currency' aspect to it, since there's damn near nothing you can buy with bitcoins.

Since they failed to achieve any intrinsic value of their own, they are currently just bad, unreliable representations of legal tender. As long as that is true, nobody will ever accept them as payment for real goods or services.

Re:Not a currency yet

[hedwards]

Which it won't. The main purposes of Bitcoins at the moment are scamming and money laundering. I'd be surprised if there weren't already a few governments investigating the legality of the whole thing as I type. Especially given the utility it has in buying illegal goods and or services.

Re:Not a currency yet

[makubesu]

Kind of reminds me of Twitter.

Is Geeknet desperate for money that much?

[Anonymous Coward]

One would think so, since they seem to shamelessly advertise such scam/pyramid scheme every week or so here.

Poocoin

[goombah99]

I Now if you ask me, I will stick to real value like dollars which is the natural measure of Man and all his works.

I'm now selling my poo as a currency. Like bit coin it can only be mined at a steady rate so it can't be manipulated. My Poo is marked with my DNA so it can't be forged for less than it costs to make. It's Natural, and a work of Man.

Now rather than transport it to you in all it's glory, I have established a Poo Reserve. The Poo holding company issues signed electronic Goombah Poo Reserve Demand notes ("poocoin") backed, as gold once backed the dollar, with Poo, redeemable on demand of actual Poo.

I am also setting up the first Poo National Bank. The bank will accept deposits of your electronic Poo Demand notes. It even pays interest on your deposits.

The Bank will also manke loans against it's deposits. So you can take out a loan at a very modest interest rate, all payable in Poo Demand Notes.

What happens next is easy to anticipate. People will Borrow Poocoin and pay off their debts for goods and services. The people paid off, will naturally want to earn some interest so they will pretty much all deposit the poocoin back in the bank to get that interest rate until they need to spend it on something. IN the mean time, with all those fresh deposits, the bank can now make new loans.

After a time T, the total poocoin deposited in the bank has now doubled. The total amount of Poo has not doubled. But what has happened is there are the Liabilities (Deposited Poocoin) and the Assets (borrowed poo coin), that cancel allowing the effective amount of Poocoin in circulation to have doubled.

And pretty much every time T after that the assets and liabilities both grow by the same amount. forever. the BM2 money supply grows without bound even the BM1 amount of the intiall Poocoin the bank had has not changed.

Everything is fine unless of course too many of the people want to withdraw their deposits at the same time. Then unless all the loans can both be called and people can pay them instantly, there is a collapse.

Just like bitcoin but more natural and actually backed by something real and tangible, not "electronic work". You can redeem poocoin for manure but you can't redeem bitcoin for anything.

Re:Poocoin

[ColdWetDog]

What a shitty idea.

Re:Poocoin

[Arbition]

Seems more like you are comparing bitcoin to the gold standard than to most usual currencies. Of course the statement that bitcoins doesn't really get you goods (well you can, but those are usually indexed against the USD, so that is effectively meaningless) is still a fair one.

Re:Poocoin

[NoNonAlphaCharsHere]

You can redeem poocoin for manure but you can't redeem bitcoin for anything.

So you're saying bitcoins aren't worth shit?

Re:Poocoin

[inKubus]

Yeah, it stinks. No one is going to fall for that crap.

Re:Poocoin

[rmstar]

Actually they are backed by the printing press. If the two people retrieve their $100, the bank lends itself $100 from the fed, which is "printed" money. Otherwise, a full $100 would disappear (that of the second chap). In this way, money printing can keep the amount of money constant (I'm simplifying a bit).

That "deleveraging of the economy" you hear about sometimes is in fact a huge destruction of money. The fed is printing copiously to compensate and avoid deflation. As you can see if you care about these things, inflation has been rather moderate.

This cannot be done with a gold-standard based currency, which is why it is unstable and can lead to disaster.

Re:Poocoin

[fritsd]

Piero Manzoni, is that you? Please use a better canning process this time, thank you.

Re:Poocoin

[platykurtic]

A much better name would be "Buttcoin"

Re:Poocoin

[vandelais]

It's been watered down.

Re:Poocoin

[interkin3tic]

I don't want to be around when THAT bubble bursts.

Re:Poocoin

[sploxx]

Notify me when:

- checking your DNA is as cheap as checking the validity of a bitcoin
- you can actually transfer poocoin through the internet

Re:Poocoin

[Risen888]

I can tell you think you're really clever, but you just invented money. It's all equally ridiculous.

Re:Poocoin

[WWWWolf]

I'm now selling my poo as a currency. Like bit coin it can only be mined at a steady rate so it can't be manipulated. My Poo is marked with my DNA so it can't be forged for less than it costs to make. It's Natural, and a work of Man. Now rather than transport it to you in all it's glory, I have established a Poo Reserve.

But your system assumes that you will be personally present at the Poo Reserve at all times. It hinges on our trust that the Poo will always be either collected by the Reserve or destroyed according to a secure standard operating procedure. As the brilliant Chinese strategist Sun Tzu said, "a man's gotta go when a man's gotta go". The Poo deposits may occur at weird, unpredictable times. What assurances do we get that there are absolutely no out-of-record deposits and all deposits occur at exactly specified manner? What if 100% genuine, DNA-verified Poo, which is not used for backing poocoin and shouldn't officially even exist, ends up in a place where it can be collected by the black market? Or the terrorists? Or the terrorists who run the black market?

Now, you may be thinking, "surely everyone can collect Poo! You don't need to be a specialist! We all handle Poo every day!", but secure collection of Poo is a surprisingly complicated matter, which is best left to the experts. What passes for everyday handling may not be enough when there's money in the line. Just goes to show that you shouldn't design a new currency if even a non-expert like me can see big fatal flaws in the system!

Re:Poocoin

[sjames]

It's perfect! Our economists and banks have been full of shit for years, we might as well make it undeniable and literal.

Any small market will be volatile

[Colin Smith]

But Bitcoins? Who gives a fuck?

Go buy some silver coins, at least when the US government and Federal Reserve are done fucking the dollar over you'll be able to spend them.
 

Re:Any small market will be volatile

[h4rr4r]

No you won't. Who will take them?
Who will be testing to see if they are real?

If the economy collapses that far foreign currency will be used long before gold or silver. Even then, expect prices to be very high as demand for good will be much higher than demand for stores of value.

Re:Any small market will be volatile

[NoNonAlphaCharsHere]

My wife keeps saying this, but at ~35 dollars an ounce, I think it's already a bubble price. Serious question: what's the real price of silver, in say, movie tickets or bags of groceries, and what's it going to be 18-24 months from now?

Re:Any small market will be volatile

[hsmith]

Ugh, the point isn't that you trade with silver, the point is that silver is a medium you can use to obtain other currencies.

Re:Any small market will be volatile

[LibRT]

Interestingly, Utah passed the Legal Tender Act of 2011, which recognizes gold as legal tender http://www.ibtimes.com/articles/154459/20110530/utah-gold-legal-tender-gold-standard.htm

"Utah just became the first US state to recognize gold as legal tender. Its Legal Tender Act of 2011 allows U.S. minted gold and silver coins to be recognized as legal tender in the value that reflects the market price for gold and silver.

“If the federal government isn’t going to do it, then we here in Utah ought to be able to establish a monetary system that would survive a crash if and when that happens,” Lowell Nelson, interim coordinator for the Campaign for Liberty in Utah, told NYTimes.

Craig Franco, a coin dealer south of Salt Lake City, said he’s preparing to create a Visa credit card based on gold depositories that would allow people to more conveniently use gold as tender."

Re:Any small market will be volatile

[bill_mcgonigle]

My wife keeps saying this, but at ~35 dollars an ounce, I think it's already a bubble price. Serious question: what's the real price of silver, in say, movie tickets or bags of groceries, and what's it going to be 18-24 months from now?

In 1964 a silver quarter bought a gallon of gas. Today it buys not quite two gallons of gas. Given all the advancement in exploration and production technology, this is about right. Just like computers get cheaper with better technology and higher production, all commodities follow the same trends, only computers are advancing at such a rate that their improvement (and thus prices) can outpace the rate of inflation.

Interestingly, average wages are only 10x of what they were in 1964 while commodities, like silver are up 25x or so. If the currency had been kept sound, today's wages would be seen to have decreased by about 60%. This is the erosion of the middle class that the Federal Reserve helps hide by inflating the Dollar.

Re:Any small market will be volatile

[h4rr4r]

So how many troy oz does a wife cost?

So other than salt and child brides, what can you buy with gold?

Re:Any small market will be volatile

[Gorobei]

>Interestingly, average wages are only 10x of what they were in 1964 while commodities, like silver are up 25x or so. If the currency had been kept sound, today's wages would be seen to have decreased by about 60%. This is the erosion of the middle class that the Federal Reserve helps hide by inflating the Dollar.

That is absurd. Do you really think ounces of silver is a good measure of prosperity or capital? How much did an iPhone cost in 1964?

What did an ounce of silver buy in 1964 in terms of food, clothes, TV, cancer treatments, etc? Is the median person in 2011 really 60% worse off than the median person in 1964?

And you think this is due to the Fed?

Re:Any small market will be volatile

[Shark]

Very valid point, though I wouldn't use movie tickets to measure value as those prices aren't as closely tied to production costs and demand. Go for other commodities when trying to evaluate such things.

Actually, I think that's a very big part of the problem with the US economy lately. Production of real, tangible value is going down in the US. You still produce food, which is pretty good, some cars and a few other things but nowhere near as much as what you import. A country's currency is only worth something so long as other countries need it in order to buy stuff they want/need. Its only saving grace has been that people still need US dollars to buy oil but how long will that last? You can only spread yourself so thin waging wars on countries that attempt to move away from US dollar oil trades.

Silver has real industrial value, it's used in the manufacture of several things. I do not think it really has gained that much in *real* value, though the production/demand ratio is somewhat favourable to it lately. I don't think $35/oz is bubble price in dollars. He historical ratio has been 16:1 silver to gold (I read this, but didn't verify it). Now is gold in a bubble too? Probably, but even then you get a pretty high margin before you hit 16:1.

Bottom line, you have to do your research and answer that question for yourself. Markets are always a gamble. Doing your homework will improve your odds but unless you're Goldman Sachs, there are no bailouts for the risk of you buying stuff that is worth less than you'll be able to sell it.

Also, as someone else pointed out... It could be a mistake to look at silver as *currency* in some settings. The fact that it has value doesn't mean that it'll have value to the person you want to trade it with. If you're both hungry, your silver isn't going to be worth diddly squat compared to his tuna can :)

Re:Any small market will be volatile

[seanadams.com]

As the other commenter says, you'll be able to the exchange your silver for another currency. However for trade, US pre-1965 coinage is ideal and easy to authenticate.

100 oz bars have been counterfeited but would fail even the most casual test - just weigh and measure to check density, or compare to photos available online. Better to use an ultrasonic tester which is something a silver dealer should be expected to have.

Re:Any small market will be volatile

[bill_mcgonigle]

That is absurd. Do you really think ounces of silver is a good measure of prosperity or capital?

Yes, it's very constant over time. Much more reliable than most other measures for smooth data. Certainly there are short-term variations but these average.

How much did an iPhone cost in 1964? ... , cancer treatments, etc?

I think what you're getting at is that technology constantly increases which improves living conditions. There can be no argument against that. That doesn't mean that earnings are irrelevant - nobody in 1964 had to budget for a smartphone either.

What did an ounce of silver buy in 1964 in terms of food

A loaf of bread was about 5 grams of silver in 1964. Today it's about 2.5 grams. This is consistent with the improvement in farm and factory technology.

clothes

This is the textbook example. A fine men's suit has been, with short-term averaging, an ounce of gold for thousands of years. A nice belt has been an ounce of silver for the same period of time.

TV

An average TV was about $100. Today that's about $600 - much cheaper today - win for technology.

Is the median person in 2011 really 60% worse off than the median person in 1964?

Nominal home prices are about 10x, rents are about 10x, food is about 10x, stamps are about 10x, and income is about 10x. But, if we look at the areas where technology has had a prices impact, those are down, inflation adjusted, about 60%. So, without the inflation factor, prices ought to be down about 60% across the board (or people should be able to work 60% less due to technological improvements) - see, we've yielded no real improvements from technology, including computerizing everything, jacking productivity through the roof, etc. except to transfer the wealth away from the middle class. It's not that we're 60% worse off, it's that we should be 60% better off, and we aren't.

And you think this is due to the Fed?

By definition, they're the only ones who can inflate the currency. If inflation has a negative impact on lifestyle, it has to be the Fed.

Re:Any small market will be volatile

[angel'o'sphere]

100grams silver, depending if it is raw bubbles or already a bar: 100â + 19% VAT (raw industrial silver) to 133â including 7% VAT (luxury VAT or something, no idea why it differs) in germany right now.

Re:Any small market will be volatile

[angel'o'sphere]

while commodities, like silver are up 25x or so.

Silver is not a commodity, but computers are. Everything cheap available for the masses is a commodity, not something that is shifting in price every day according to market demands or exploration findings.

Re:Any small market will be volatile

[bill_mcgonigle]

Silver is not a commodity, but computers are. Everything cheap available for the masses is a commodity, not something that is shifting in price every day according to market demands or exploration findings.

You're welcome to use that definition, but just be aware that most everybody else uses a different one:

http://money.cnn.com/data/commodities/
http://en.wikipedia.org/wiki/New_York_Mercantile_Exchange
http://en.wikipedia.org/wiki/Commodity

Re:Any small market will be volatile

[DrXym]

As ludicrous as schemes like liberty dollar are (basically an MLM scam), at least there is a precious metal to back it. So I suppose if you are going to be suckered by some alternate currency scheme, silver or gold at least provides a safety net of some sort. Of course, if a bunch of people did try to sell their silver all at once the base metal price would collapse so it's not necessarily a good investment. Look at the price of gold at the moment - it's a bubble waiting to burst.

Re:Any small market will be volatile

[Gorobei]

That is absurd. Do you really think ounces of silver is a good measure of prosperity or capital?

Yes, it's very constant over time. Much more reliable than most other measures for smooth data. Certainly there are short-term variations but these average.

Well, most commodity prices are very constant over time. That doesn't help you if you are trying to use them as a currency, though. Silver prices are all over the place, even long-term, e.g. the Hunt Brothers fiasco, the transition from film to digital photography.

The price of gold is all over the place too: the old canard about a man's suit just doesn't stand up to scrutiny (these was no middle class and thus no generic fine suit for most of history.) A simple USD, discounted by interest rates, matches suit prices much better than gold.

I agreed that wealth has been transferred away from the middle class. They got screwed in the USA, but don't blame the Fed, blame the Reagan revolution.

Re:Any small market will be volatile

[h4rr4r]

Good point.
Besides a fine suit is too vague to be useful. Some might consider a fine suit to be only $1,500 others $150,000.

Re:Any small market will be volatile

[timeOday]

Then why not just invest in a foreign currency fund? (Hey, look, it even includes 8.5% gold).

Re:Any small market will be volatile

[timeOday]

see, we've yielded no real improvements from technology, including computerizing everything, jacking productivity through the roof, etc. except to transfer the wealth away from the middle class.

Don't forget, resource exhaustion drains off some of the technology/productivity increase that would otherwise go to improving the standard of living, too. Instead of a half acre in Southern California 60 years ago, you get a half acre in Texas now (and a huge energy bill for air conditioning). Instead of just farming the best land, you support the growing population by developing technology to farm some marginal land, too. To keep the air breathable with 5x as many cars, you invent smog-reducing mechanisms that cost money and decrease performance. Instead of solid wood and leather furniture you get particle board held together with staples. Instead of just pumping all the energy you want out of the ground almost for free, you... well... we haven't quite invented our way out of that one yet.

We have reached a point where we must greatly improve how we do things simply to avoid a *decreasing* standard of life.

Re:Any small market will be volatile

[KDR_11k]

Isn't one reason for the value of silver vs the dollar that the economy represented by the dollar is growing while the silver supply is not? As economic activity increases you need a money pool that's large enough to contain it all (even the multi-lending banks do is capped at a certain percentage). If the money pool does not grow that means the money values of everything in the economy have to decrease which makes it a good idea to keep money instead of buying something with it.

So fixed size of the money pool, growth of the economy or wages, something has to give.

Re:Any small market will be volatile

[bill_mcgonigle]

Well, most commodity prices are very constant over time.

Relative to each other, sure, but not to a fiat currency. Look at the USD prices of gold, silver, wheat, oil, corn, sugar soy, coffee, etc. over the past couple years. 2.5x multiplier on the non-metal commodities, 1.5x on the metals. 5% used to be considered a big move for a year, now we're talking over 100%.

Store your wealth in USD if you want, but I'm sure not.

Re:Any small market will be volatile

[Surt]

I'd guess that yes, the median person is worse off now than in 1964. What's depressing is that it's a tough call.

Re:Any small market will be volatile

[palfreman]

It is not that difficult to tell if a high-purity silver coin is real. They have certain wear characteristic you get to know when you deal with them enough. It is the low-purity ones that are difficult to prove - like 50% silver English coins 1920-46. They go grey and they aren't very heavy. Anything 90% or over is easy to tell simply by colour and weight. If things get that bad, they will be taking anything of value; foreign notes, silver coins, grand pianos, sacks of potatoes. Silver coins are a very convenient size for every day transactions - who wants to go buy food and expect them to make change from a $1550 krugerrand? A $35 one ounce coin like a silver eagle is much easier, and at 99.9% pure they may scratch easily but are also easy to cut into halves and quarters, or to cut a quarter into two bits.

Re:Any small market will be volatile

[palfreman]

Because it is another paper obligation, and similarly unreliable in the long term.

Re:Any small market will be volatile

[palfreman]

If you need paper dollars you can just sell your gold or silver. Gradually people will start accepting gold and silver directly though. It is the way these things always go.

Re:Any small market will be volatile

[m.dillon]

There is no real price for any commodity (including any currency). That is, there is no 'standard' by which you can base all the worlds commodities and currencies that gives you a measure of value that matches your lifestyle, because everyone has a different lifestyle and it is the mix of expenses each person incurs that governs the basis upon which they feel that things are getting more costly or less costly. The value society places on commodities (and currencies) fluctuates all the time.

If you never own gold you aren't going to care what the price of gold is. If you commute a lot then the price of gas will matter a lot to you (but nevertheless you might decide to stay in a car and not buy as motorcycle to reduce your gas costs). If you don't commute then gas could be $10/gallon and you probably won't care. If you rent its one thing, if you own a home its another. And so on and so forth. Supply and demand not only dictates relative value but it also causes populations to shift usage. If gas becomes ultra expensive more people will ride public transit or buy motorcycles and fewer will buy cars. And so on.

A currency does not have to have any intrinsic value to work as a trading medium but it does have to have universal acceptance. Come on folks, doesn't anyone remember history 101? The early united states, the civil war? Every state had its own currency back then, some of which worked about as well as bitcoin does. Trust is a key component. The problem with bitcoin in a modern setting, however, is that it is competing with plenty of currencies which are highly trustworthy as a trading medium too. I really doubt bitcoin will ever gain much traction.

I suppose one could try to pay things with piles of manure instead of cash but except for the occasional farmer the volume of barter you are able to do with manure is going to be several orders of magnitude less than the volume of barter you are able to do with cash. Similarly for any commodity, even exchange traded commodities. Hey, you could hold up your phone at the store and transfer 4 shares of GLD as payment, and that's already going to be a far better currency than bitcoin will ever be, but I really doubt stores are going to fall head over heals to accommodate payments in gold.

-Matt

Re:Any small market will be volatile

[m.dillon]

The law is pointless. You don't need to carry around actual coinage. In fact, carrying around actual coinage (or keeping gold coins in your home) carries a significant risk that it will get stolen.

What you can already do (what ANYONE can already do) is simply invest in a commodity ETF like GLD... something that tracks the price of gold and is backed (by a reasonable percentage) of gold. You don't have to hold the actual stuff in your hands. You then simply sell (convert to dollars) enough to cover your monthly cash flow needs. Even more to the point you can just pay for stuff with your credit card and then settle the card (in USD) once a month by selling enough GLD to pay it off.

Problem solved. Why do people think they are chained to the U.S. Dollar? It just isn't true.

You can do this right now. It's even possible with only a modest savings (no point doing this if you don't have any savings to do it with, BTW)... to reduce transaction costs to reasonable levels.

But, you know, I think people trying to do this will find out very quickly that keeping all ones assets in a metals-backed play, particularly gold and silver, is no panacea. Value fluctuations for metals are extremely volatile relative to cash. It's a fool's errand, really. A diversified investment portfolio has much better odds of not blowing up in your face. Gold (and Silver) is subject to bubbles just like everything else, such as has occurred on multiple occasions for both metals.

-Matt

Re:Any small market will be volatile

[bill_mcgonigle]

So fixed size of the money pool, growth of the economy or wages, something has to give.

This would just increase the price of silver (or the 'deflation' Keynesians so fear). It's like property in Manhattan - there's only so much of it so the price keeps going up. But it's not destroyed (typically...), so it's a fairly good store of value.

With silver, more of it does come out of the ground, but generally not faster than population increases. The more in demand silver becomes (as its value rises) the more incentive there is for further mining, which brings the price down. This gets to an approximate equilibrium.

Re:Any small market will be volatile

[swalve]

Yeah, of course that guy loves the idea of a Visa card based on the price of gold, because he knows it is in a bubble. Just like people loved selling their houses in 2006.

Re:Any small market will be volatile

[swalve]

But it is at an all time high! Surely, this means all the rules have changed.

Re:Any small market will be volatile

[swalve]

And then what, eat it? Trade one of those quarters for a rotten egg? Silliness...

Re:Any small market will be volatile

[swalve]

Currency isn't a long term store of value. It isn't meant to be. If there was no (mild) inflation, the economy would collapse.

Re:Any small market will be volatile

[bill_mcgonigle]

Yeah, really good point, but I don't think it's because we're running out of wood and leather so much but that if somebody needs a cabinet they can't afford to buy a nice one like they used to.

Re:Any small market will be volatile

[timeOday]

If they were plentiful they would be affordable. It has only been a couple hundred years in the US since the time that if somebody wanted to build a barn, they would just go out and cut down old growth hardwood to build it. But obviously 300 million people cannot all do that.

Re:Any small market will be volatile

[palfreman]

Trade it for about a dozen fresh eggs, more like. Why the assumption that only rotten eggs would be available if the currency itself had rotted? Two different things.

Re:I need drugs, weapons and hookers

[ColdWetDog]

Where do I sign up?

Here.

Bitcoin is worthless in the long run

[betterunixthanunix]

There is a reason for the volatility: bitcoins have no real value. The only reason you can get dollars (or other currency) for bitcoins is that we are currently in a speculative bubble. At the end of the day, bitcoins do not have any real economic value, because unlike other currencies, nobody needs bitcoins. Unlike, say, the US Dollar, you cannot use a bitcoin to pay your taxes.

When someone can point me to the source of value for bitcoins, and demonstrate why bitcoin holders won't start dumping their bitcoins when tax season rolls around, I might adopt a more positive attitude about the project.

Re:Bitcoin is worthless in the long run

[TheRaven64]

Exactly. Currencies of any kind have value for one reason and one reason only: people have confidence that they can trade them for something that they value. If I sell you something in exchange for some dollars, euros, yen, or little lumps of precious metal, then I'm confident that I can later exchange these tokens for something of approximately equal value later. If I took some kind of commodity in exchange (gold and silver are popular, but almost any commodity works equally well - the earliest recorded currency was based on wheat) then I'm confident that I can trade them later because people have a real need for these commodities. If I take some government-backed currency in exchange, then I'm confident that I can trade it later because the government accepts it in payment for taxes. If I take shares in a company in payment, then I'm confident that I can trade them because they company produces goods or services that people need, so has value. If I take bitcoins... I have no reason to believe that I'll be able to trade them.

The only reason people buy them now is that they believe that they can convince someone to pay more for them later. That's probably a good gamble in the short run, given how much press attention bitcoin is getting recently, but in the long run there's no reason to hang on to bitcoins. As soon as the speculators leave the market, the investors are going to find that they are left with something that has a value reflecting what backs it: nothing.

Re:Bitcoin is worthless in the long run

[NoOneInParticular]

So, if I manage to exclusively work to earn bitcoins, and exclusively pay with bitcoins, never touching a dollar, the US government will very kindly not tax me?

Re:Bitcoin is worthless in the long run

[betterunixthanunix]

So, if I manage to exclusively work to earn bitcoins, and exclusively pay with bitcoins, never touching a dollar, the US government will very kindly not tax me?

Sure, if you also own no property, run no services that are taxable by the government, produce no goods that require tax payments, etc. Taxes on not just on income.

Essentially, to live without paying taxes of any kind, you would need to be a homeless beggar who buys nothing and lives only on the charity of others.

Re:Bitcoin is worthless in the long run

[DalDei]

Barter is considered income by the US Tax code. You will be liable for income tax on the perceived value of your work, and you'll have to pay with US Dollars. Of course the IRS will have to find out somehow. If you don't report the income then they later find out you'll be liable for a felony of tax evasion.

Re:Bitcoin is worthless in the long run

[EdZ]

I do not pay US taxes, but the US dollar still has value for me: because I can both pay for things using it (when ordering overseas), or exchange it for a more immediately exchangeable local currency. I can do the exact same thing with bitcoins: exchange them for objects, or exchange them for another currency I can exchange for objects.

Re:Bitcoin is worthless in the long run

[betterunixthanunix]

The ultimate value of the US Dollar is that the US government will accept it for tax purposes (and other debts). You may not pay taxes to the US government, but there are plenty of other people who do, and they create the demand for dollars. If there were no demand for dollars, you would not be able to buy anything with dollars anywhere.

The ultimate value of Bitcoin does not seem to exist; Bitcoin is only worth something right now because of speculation about its future value. Eventually, either Bitcoin will never get big and the speculative bubble will burst, or it will become big and people will start dumping bitcoins for the currencies they need to settle their debts with their respective governments, and Bitcoin will decline in value as demand is eroded.

Re:Bitcoin is worthless in the long run

[FutureDomain]

That's probably a good gamble in the short run, given how much press attention bitcoin is getting recently, but in the long run there's no reason to hang on to bitcoins. As soon as the speculators leave the market, the investors are going to find that they are left with something that has a value reflecting what backs it: nothing.

I'd agree with you except for one thing: the Silk Road. Like oil and dollars, it only accepts bitcoins for payment. There will always be some value in bitcoins as long as you can use them to trade for drugs. There will always be people willing to trade dollars for your bitcoins so that they can use them to buy drugs, even if you don't want drugs. For a while bitcoins have been just another small medium of exchange like e-gold, but with the Silk Road they are becoming more like another currency.

Re:Bitcoin is worthless in the long run

[seanadams.com]

Sorry, citizen. This counts as barter which is taxable at its market value in US dollars.

Re:Bitcoin is worthless in the long run

[betterunixthanunix]

Why would drug dealers continue to accept Bitcoins, if they cannot trade Bitcoins for other currencies?

Re:Bitcoin is worthless in the long run

[NoOneInParticular]

So, if I get someone crazy enough to sell them their house to me in bitcoins, sell services in bitocoins, produce goods sold in bitcoins, the US government will very nicely not tax me? I think bitcoins will have a wonderful future as everyone will exclusively start using it :)

Really, if bitcoins are useful enought to run a life, the US government will effectively recognize them in order to tax me. .

Re:Bitcoin is worthless in the long run

[betterunixthanunix]

No, if you buy a house using Bitcoins, then you own the house and are obligated to pay taxes on it -- not much different than your obligation to pay taxes on a house you were given for free. No, the US government would not accept Bitcoin for property tax -- you would be obligated to pay taxes with US Dollars, and you would need to find a way to get those dollars.

Owning a home but lacking the dollars needed to pay tax on that home will result in you losing your home. It makes no difference how you came to own the property.

Re:Bitcoin is worthless in the long run

[NoOneInParticular]

Practically, if I perform services for bitcoins, the IRS will value my services based on the current exchange rate of bitcoins, not on any 'perceived value' that can be challenged in court. This because, if I do my normal IT consultancy, it will be very hard for the IRS to figure out that I'm doing it for $300 bucks an hour rather than $30. Both extremes are common.

My point is that the moment I can do my work in bitcoins, and live using that, the US government will link bitcoins, like any commodity, to dollars, and tax it. Therefore, the taxation argument against bitcoins of the OP is bogus.

Re:Bitcoin is worthless in the long run

[TheLink]

They might be on drugs too ;).

Re:Bitcoin is worthless in the long run

[Yaur]

because as long as there are drug buyers they will be able to exchange them for real currency.

Re:Bitcoin is worthless in the long run

[Yaur]

the charity of others is taxable income.

Re:Bitcoin is worthless in the long run

[NoOneInParticular]

Fine, so houses, like gold, silver, and bitcoins, have an exchange rate in dollars associated with them that the government can use to get tax on. The true value of bitcoins, like the true value of gold, silver and houses, is not intrinsic, but merely speculative.

So, to bounce the original question back: if you can point me to the intrinsic value of gold, and demonstrate why gold holders will not massively dump gold when tax season comes, I might consider a more positive value to gold.

And yes, gold and silver have 'some' intrinsic value, but that value is nothing compared to its price. Likewise, bitcoin has some value (transactions, limited supply), yet that's nothing compared to its price. Both are speculative.

Re:Bitcoin is worthless in the long run

[Surt]

The property tax is universally based on the estimated value of the property and improvements. So unless you buy a house in a no-property-tax location (and the few places like that ... you don't really want to live there), you are out of luck.

Re:Bitcoin is worthless in the long run

[Rockoon]

The property tax is universally based on the estimated value of the property and improvements.

..and here I thought it was based on the budgetary concerns of the local government, which are the folks that pay the appraisers that "estimate" the "value" of your property and will almost exclusively alter that "value" only to your detriment.

Sometimes they change the mill rate, while other times they change the value of your property. In no case is the actual value of your property (what you can sell it for) a concern of theirs.

Re:Bitcoin is worthless in the long run

[arevos]

The ultimate value of Bitcoin does not seem to exist

It allows you to transfer wealth electronically and pseudononymously without the need for a centralised broker.

One might as well claim that the Internet has no ultimate value, as there's nothing apart from being electronic, pseudononymous and decentralised that sets it apart from traditional means of disseminating information.

Re:Bitcoin is worthless in the long run

[swalve]

Incorrect. The tax code is pretty clear about that: dollars are simply what the values of things are denominated in. You get taxed on the *value* exchanged, not the number printed on it. Otherwise, my boss would be able to pay me in $25 gold coins and I'd have an annual taxable income of $1000 or so.

Re:Bitcoin is worthless in the long run

[mbkennel]

No.

You're taxed on any compensation for labor, regardless of the monetary form of the compensation. It's an obvious loophole if it were otherwise.

If you got german bonds in return for your labor you get taxed even though you never personally sold and converted them to dollars in your account.

Re:Bitcoin is worthless in the long run

[FutureDomain]

Mod parent up.
This is exactly my point. As long as there are drug buyers and sellers via Silk Road, there will also be bitcoin buyers and sellers.

Nefarious Activities?

[PPH]

The best currency is still Legislative votes. Untraceable and the people in charge of the tracing have a vested interest in keeping it that way.

Re:Nefarious Activities?

[GlenRaphael]

How about NYC taxi medallions? That's a currency that expands even *less* than bitcoins - there are fewer medallions now than in 1937 so the value of one is roughly $600,000 USD. If only you could spend fractions of one...

Re:Holy Crap

[goombah99]

Send me your paypal address and I'll invoice you for a baggie. I'm going to toss in a free bag of mucous for the first 1000 customers, so don't delay.

Re:Good advice...

[BrokenHalo]

There is neither inherent nor legally-enforced value to it...

Well, for that matter, there is no inherent value to your greenback either, and any legally enforced value only holds good for the term of your government.

For this reason, Bitcoin made an interesting thought-experiment in what we are prepared to accept as a token for trade. The fact that it has succeeded (to whatever degree) in crossing into the physical world makes it all the more interesting.

I'm just waiting for Bitcoin to become useful for anything other than buying or selling illicit drugs, since I am now of an age where the consumption of (or trade in) such goods is no longer so enjoyable or part of my mindset.

Bitcoins teach us a lesson.

[mykos]

Even if bitcoins fail, it will be a success in that at least a few more people will think about what's wrong with the Federal Reserve.

Re:Bitcoins teach us a lesson.

[For a Free Internet]

Yeah exactly! Why should the government try to regulate the market of values? Everyone knows that the market knows best because commodity production for the accumulation of value is bound to make everyone happy in the long run. It's human nature, after all. I learned that from Robinson Crusoe, which proves it. If the government would just let me beggar my neighbor in peace then we would all become wealthier, or at least as wealthy as we deserve to be. But now you've got these socialists in power who are all about fixing the game to help the poor against the rich, when everyone knows that they are poor because they are lazy and don't contribute to society, probably because they are genetically inferior or something scientific like that.

Perhaps...

[wpiman]

Perhaps the value of the Bitcoins stayed the same just the US dollar swung wildly around it.

Re:Perhaps...

[h4rr4r]

That seems easy to check, did the value of the USD vs other currencies fluctuate that much in the same period?
How did the bitcoin do in the same period of time vs other currencies?

Re:A more rigorous look at bitcoin's fundamental v

[h4rr4r]

It does not matter that they could at one time be turned in for gold. What matters is that I can buy things I want or need with currency. Try actually doing that with gold. Go to your local gold-seller, get a real gold coin and try to buy groceries with it, or a computer or anything else. When that fails go back to the gold-seller, sell the coin to him and see how much value you just lost so you could get your currency back. It would literally be cheaper to buy foreign currency and exchange it when you need to pay for goods or services.

It's true, many things are unique and tradable

[rubypossum]

but still worth shit.

The value comes from whether or not someone accepts it as valuable, period. Dollars happen to have a lot of people convinced at the moment, but that will change, empires rise and fall, one day they will become worthless to everyone except collectors. So I for one salute you in attempting to sell your shit as currency. Good luck with that.

Bitcoins are more convenient than trading sacks of shit. And they happen to be more convenient than trading dollars too. So I really hope that Bitcoin can be given a chance as a currency. It would be great for my business (100% freelance online developer.)

Bitcoin is not worthwhile as a currency

[Fnkmaster]

I discussed this in my post from May 19th:
http://slashdot.org/comments.pl?sid=2167958&cid=36176946

Still applies. That chart isn't the chart of a proper currency pair (USD/Bitcoin), it's the chart of the price of a speculative asset in a bubble.

The people who set up Bitcoin had some good ideas, but they didn't think things through properly and they need to start over. The way they set up the allocation of a fixed amount of bitcoin per day was bound to create huge value distortions as more people started trying to create bitcoins and entered the market for buying and selling bitcoins.

The value of a bitcoin is therefore actually not a direct function of calculation work performed, but rather a function of the number of users/number of total computing cycles used to compute bitcoins (because the number of bitcoins issued per day is nearly constant as workload to find them increases - it's not actually constant, but rather a gradually decreasing series over time, but the amount of computing power dedicated to it has grown much faster than this function).

This is completely nonsensical. It is making the asset more and more scarce and driving up prices, but also making it less and less likely that anybody real would ever want to accept the asset as a currency replacement.

Good computer science, bad economics. Bitcoin has already failed because of this. Nobody looking at these charts would ever want to accept this stuff as currency.

Re:Bitcoin is not worthwhile as a currency

[Smidgin]

IANAE, nor have I even properly studied economics, but it does seem like bitcoins by design can't help but become a bubble. I may not know much about economics, but it's telling that on seeing how increasingly slowly new coins were generated I had to resist the urge to buy up a bunch before adoption became widespread and they became valuable. A quick inspection of the bitcoin system reveals that since the number of bitcoins in existence is in no way related to the number of people using them, their value should go up as adoption goes up, which in turn leads some investors noticing this trait to try and buy up a bunch before they get valuable, leading to a bubble.

Also the amount of processing that goes into them seems a massive waste of electricity/energy. I understand the need with this generation system to make it not worthwhile to forge bitcoins, but the result has been massive amounts of kWh going in to farming bitcoins, generally costing nearly as much in electric bills as the value of the bitcoins. It's just such a ridiculously wasteful way of 'minting' currency, it makes me very skeptical of the whole p2p currency idea.

I'm not sure how their system could've been changed to avoid those problems - I expect it's extremely difficult to create a new currency without having a government to just say "We're using X". Maybe bitcoin could have worked if it adjusted better for the number of users to avoid the deflation bubble, or maybe any new currency needs to be backed by something until it gets off the ground.

I expect bitcoins will eventually go down in flames once the bubble bursts, and may well prevent any future better thought out attempts at the p2p currency thing from succeeding.

Re:Bitcoin is not worthwhile as a currency

[superwiz]

Ah, but what if they mint in Alaska? Data houses are not usually hosted in Alaska because network costs are significantly higher than computational costs for datahousing. But that's not true for BT. So what if someone starts minting in Alaska (where natural cold air can used pretty much year-round as a coolant)?

Re:Bitcoin is not worthwhile as a currency

[complete loony]

The problems bitcoin solves, eg electronic transfer of value and prevention of double spending, I think it does solve well. Unfortunately currency exchange is a fundamental problem that bitcoin, by itself, does not solve. As you have rightly pointed out, any implementation of such a system *must* have a viable plan to exchange with existing local currencies to have any usefulness and to avoid becoming a ponzy scheme.

I would be very interested in trying to build a solution to this problem, as I think an open global micro-payment system would have tremendous potential. However without authorities that can be trusted to issue and destroy value tokens in exchange for local currency, I'm not certain that it can be done.

Don't feed the trolls

[rubypossum]

Seriously, how can something like this be modded insightful? All modern currencies are made by a bunch of guys with a printing press. Somehow that magically blesses them into being "valuable". I don't see why a bunch of open source computer programmers can't create some currency too. Why is that deluded, but some faceless bureaucrat with a printer any less deluded? I would take a currency "backed" by cryptography over a currency "backed" by the FBI any day.

Re:Don't feed the trolls

[betterunixthanunix]

There is no magic; currency is valuable because citizens of a country need that country's currency to settle their tax obligations and other debts to the government. The US Dollar is backed by the fact that most US citizens need to pay their taxes, and that the Treasury will not accept Bitcoins, Chuck-e-cheese tokens, hall passes, or 2 head of cattle as tax payments (but they will accept dollars).

Re:Don't feed the trolls

[palfreman]

If they can make it as scarce and unfalsifiable and liquid as silver or gold, they are in with a chance. But I doubt it. Use of something as a means of exchange normally follows from its use as a desirable commodity. It doesn't just become desirable by being in limited supply. False scarcity like this as a failure rate of 100% in the long term. Too tempting to fiddle it ultimately, whereas going and panning in the river or shovelling dirt for mining is really difficult and unfiddleable.

Re:Don't feed the trolls

[palfreman]

Not true. There is no point in collecting taxes in dollars unless the government can buy with them. If the US government has to chose between keeping to the current US legal tender laws or effectively abolishing all taxes in real terms, they will forget the US dollar overnight. That is what happened in Zimbabwe.

Re:Don't feed the trolls

[swalve]

You idiots realize that the government could print money all day long and it wouldn't put a dent in the total money supply, right? (look it up)

In fact, that's what the government has been doing. TRILLIONS of dollars of money disappeared (as in "poof", not as in "stolen") a few years ago, and the government is just about done refilling the money supply. Don't you remember how all the prices of everything dropped in late 2008? That's deflation. It is a bad thing. It almost caused a depression.

Re:Don't feed the trolls

[LordRobin]

Not true. There is no point in collecting taxes in dollars unless the government can buy with them.

But the government can always buy with dollars. Why? Because people will always want dollars. Why? Because people need dollars in order to pay their taxes.

If the US government has to chose between keeping to the current US legal tender laws or effectively abolishing all taxes in real terms, they will forget the US dollar overnight. That is what happened in Zimbabwe.

I think you're confusing two things here. The fact that a government's currency has a base value in the currency's use to pay taxes and other gov't obligations doesn't mean that runaway inflation can't make it worthless.

------RM

Re:Don't feed the trolls

[zippthorne]

Yes, but no one can steal the value of your cattle by borrowing cattle. Sure, they could raise cattle, but that is a time consuming, resource intensive process.

Re:A more rigorous look at bitcoin's fundamental v

[Khyber]

"No one out there is foolish enough to trade gold for bitcoins."

I'm surprised nobody's been buying those $100 American Platinum Eagle coins in bulk and then using them in Utah, which has just recently set up a weekly price quote per ounce of platinum to set the weekly value of that coin. $100 investment gets you a $1500-1800 token in Utah. Bullion coin is getting recognized in Utah, take advantage of it while you can!

shitcoin

[goombah99]

Bitcoins are more convenient than trading sacks of shit. And they happen to be more convenient than trading dollars too. So I really hope that Bitcoin can be given a chance as a currency. It would be great for my business (100% freelance online developer.)

How is bitvoin any less easily transacted than the electronically traded poocoin? Or Excahnge traded goldshares?

Re:shitcoin

[seanadams.com]

It's not so much a matter of being more easily transacted, as that it's peer to peer and does NOT use an issuing agency or reserve note / share model. Your poopcoins have counterparty risk, and the possibility for poopshares to be fraudulently issued in excess of actual holdings. This is really the central point of bitcoin which you've completely ignored in your analogy.

Re:I still don't understand

[TheRaven64]

Why anyone would pay real money for this fake virtual money? It's just not logical.

Easy: because people are not logical, and because they think that there will be a greater fool than them somewhere down the line. If you'd bought BitCoins yesterday at their $10 rate and sold them today at the $20 rate, you'd have made a profit. If you bought them at $10 and hold on to them until people realise that they've run out of suckers, then you will make a loss.

Of course Bitcoin can be manipulated

[Colin Smith]

"Like bit coin it can only be mined at a steady rate so it can't be manipulated."

Bollocks, you clearly have no idea what money is.

Anything used as currency can be manipulated in a fractional reserve manner. Why the fuck do you think we have bubbles and crashes?

Re:Of course Bitcoin can be manipulated

[Yaur]

there is no bank yet but there is no reason, as far as I know, that one couldn't be set up and start giving bitcoin loans.

Re:Of course Bitcoin can be manipulated

[Raenex]

I think you're right, in that traditional fractional reserve banking can be done with bitcoins, but there's something off about the way the modern banks create money. It's mentioned in the Wikipedia article on fractional reserve banking. Emphasis mine:

"Though not a mainstream economic belief, a number of central bankers, monetary economists, and text books, have said that banks create money by 'extending credit', where banks obligate themselves to borrowers, and then later manage whatever liabilities this creates for them, where if the central bank targets interest rates, it must supply base money on demand to meet the banks reserve requirements, after the banks have begun the lending process[10][11][12][13][14][15][16][17] and that rather than deposits leading to loans, causality is reversed, and loans lead to deposits.[18][19][20][21] (Howells P, Page 33)."

Bitcoin bubble

[Animats]

Look at the Bitcoin price chart . This is a price-only 90 day chart. The site normally displays the price on top of the volume, which obfuscates the trend. Displayed in this form, the chart just screams "bubble".

Yesterday's drop takes the price back to where it was on June 6. Which is twice the price of June 1. Which is twice the price of May 1. Which is three times the price of April 4. Yesterday just happened to be the first big drop.

Patterns like that in something that doesn't generate revenue are usually associated with "High Yield Investment Programs" and Ponzi scams. One wonders how many Bitcoins the people behind this bought early.

Re:Bitcoin bubble

[phantomcircuit]

Yesterday just happened to be the first big drop.

That is highly inaccurate, the price has dropped by order of magnitude more in the past relative to it's price at the time.

Re:Bitcoin bubble

[australopithecus]

Look at the Bitcoin price chart . This is a price-only 90 day chart. The site normally displays the price on top of the volume, which obfuscates the trend. Displayed in this form, the chart just screams "bubble".

I'm sorry, isnt this graph, until June 8, also a graph that could represent the ideal growth situation of ANY monetary economy?

The missing BTC

[dachshund]

One potential problem is that there are huge stores of Bitcoin floating around, and nobody knows who owns them. Some were created "back in the day" when the network was small and computation was easy. Others were probably picked up by curiosity seekers, who then lost interest.

Either way there are potentially plenty of Bitcoin that could come back on the market at any point, depressing the price and leading to a currency crash.

What the Bitcoin economy needs is an expiration date. Coins must see some transaction once every two years or they become invalid. Alternatively they could be rolled back to the community via through some new mechanism.

Re:The missing BTC

[dachshund]

there is a natural expiration date.
If some guy in his mom's basement made a billion bitcoin, forgot about it, and it sits there for 50 years, it's dead when his hard drive dies.
If he did it on a network server, it dies when he dies and the probate court has no idea what a bitcoin is so they junk it.

Yes, and this means that the supply of BTC is likely to be far below the 21M determined by the spec. And over time the number of BTC will inevitably decline, never increase.

This might be ok if you could determine how many coins were being destroyed, but in the existing network it's impossible. A specification-defined expiration date would make it quite easy to differentiate between hard-drive-crash BTC and the active ones.

Re:The missing BTC

[green1]

Do you know how many USD have been lost or destroyed? Does that make using the USD "not ok"?

Paper and coin currency don't have an expiration date, I don't really see how it's any different with Bitcoin.

Sure lost/destroyed coins can not be replaced, however as bitcoins can be subdivided in to very small fractions, it shouldn't really matter any more than people destroying their Cash USD in a house fire, laundry machine, or loosing coins in the couch.

Re:The missing BTC

[dachshund]

Do you know how many USD have been lost or destroyed? Does that make using the USD "not ok"?

There aren't 21 million USD, there's an ever increasing supply. The gov't constantly monitors the money supply --- through the imperfect proxy of monitoring prices --- and uses its powers to create more. The goal is to maintain stability plus some inflation.

Thus while it's possible that there are huge hoards of USD left over from the early days of the republic, it's quite unlikely that their sudden introduction would significantly affect the value of the dollar. Thanks to inflation the face value of the hoarded notes just couldn't be that high. Even if it was, the Fed would take steps in response to an influx of money.

With Bitcoin, on the other hand, things go the opposite direction. Coins were easy to create in the early days, and the reward for conducting a transaction was highest. So vast sums were created, either hoarded or lost, but with full knowledge that BTC are likely to get more 'valuable' due to a combination of demand and limited supply. At some future date where a cup of coffee costs 0.0002BTC, someone could flood the market with 10,000BTC. At very least, everyone has to expect that this could happen, and hedge against it.

Coin expiration is probably not the best way to deal with this. But there needs to be some way, otherwise it will be very, very difficult to maintain a predictable BTC value and thus make the currency useful for transactions.

Re:The missing BTC

[cos(0)]

Coins must see some transaction once every two years or they become invalid.

A nice gesture, but it wouldn't work. What would keep me from transacting with my other wallet just to preserve the value of my coins? There's no limit to how many wallets any individual can own.

I gag every time I read something about BitCoin

[debtmarkets]

I'll be more than happy to pay any one of you in Bitcoin to come work for me. In fact, I'll also pay you in Warcraft gold too! They're basically the same thing (minus the centralized role of Blizzard as steward of monetary policy). Don't all rush at once.

Re:I gag every time I read something about BitCoin

[m.dillon]

Now now, it is just unfair to bring up Warcraft gold since as we all know warcraft gold actually does have an intrinsic value in the amount of human labor required to mine it (read: Chinese prisoners forced to play the game).

Even so, there seems to be an overabundance of human labor to do this activity, which coupled with gold inflation in-game has led to an epidemic of carpal-tunnel syndrome in China and very low prices in the U.S. Just 2 years ago 1000G would cost you $100 USD. Now you can get 10000G for $100 USD.

If you were a warcraft gold farmer you might even think that the U.S. dollar had appreciated significantly against the Yen for the value placed on all the hard work required. But, alas, it wouldn't be so.

I'm not actually jesting here, but I am making a point. Warcraft gold has had a steady, known inflation rate over the years that is actually less volatile than bitcoin over the same period. Inflation and volatility are two different things, and for a trading medium volatility is the bigger problem. The typical Chinese gold farmer can place a real value on his work because despite the inflation the price is still stable enough for the transitory nature of the trading medium (warcraft gold). The gold is mined and is converted to cash less than 2 days later.

-Matt

Something for nothing

[p51d007]

More people trying to get something for nothing. Work for what you want and quit trying to get the fast buck.

Ob. Hitchhikers Guide quote

[itsdapead]

As ever, Douglas Adams saw this coming:

Since we decided a few weeks ago to adopt leaves as legal tender, we have of course all become immensely rich. But we have also run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three major deciduous forests buying one ship's peanut. So in order to obviate this problem and effectively revalue the leaf, we are about to embark on an extensive defoliation campaign and, er... burn down all the forests. I think that's a sensible move, don't you?

- The Hitchhiker's Guide to the Galaxy, Fit the Sixth

We're really, really needing that 3-Ark plan about now!

Bottom line, bitcoin is still rangebound

[argoff]

I don't know if bitcoin is a good store of value, but I do know that it is worth considering as a transaction currency, because it is unregulated and range-bound.

We all know bitcoins can't go to infinity, because there is a infinite amounts of goods out there, but we also should know that bitcoin will unlikely go to zero. In fact, I can guarantee that it will not go to zero, because I can take a few K of my own money and guarantee an exchange value for all the bitcoins in existence. Now, why would somebody do that? Well, because bitcoin can be useful as a private transaction currency. As long as it is useful for transactions, it will probably be worth it for somebody somewhere to back it, for something.

I don't know if it is in a bubble, or how volatile it will be, but as long as it's range bound, the market will be able to compensate for that and make it useful. Even if the nature of bitcoin makes it deflationary, and susceptible to wild fluctuation. As long as it's range-bound, and useful for transactions, I don't believe the market will fail. However, it may change its pricing structure. People may price their stuff dollars, euros, or gold, and then complete the transaction in bitcoins. Even if that's the best that bitcoin can do, its still a major improvement.

Another very important thing. When governments screw with the currency, they almost always accompany it with things like capital controls, legal tender laws, limited withdraws, forced exchange rates, and so on. Bitcoin has none of that getting in the way, meaning the market will probably be extremely flexable about bitcoin use.

Re:Bottom line, bitcoin is still rangebound

[argoff]

because there is a FINITE amounts of goods out there

Re:Gold is different.

[Frangible]

No, gold just stood out from the other elements because it didn't readily oxidize / form compounds, was relatively dense, and shiny. It was great for primitive cavemen collecting shiny rocks. It is not, however, a good study in practical value equaling its commodity value. Gold is less practical than iron or titanium, and less practical and less valuable than pretty much any concentrated radioisotope that isn't U-238. (synthetic isotopes are the most obscenely valuable things in existence) You can of course transmute lead into gold with the "alchemy" of physics but it's not even close to being worth the cost. And let's face it, in the zombie / post-nuclear apocalypse, lead is probably more valuable anyway. Especially when it's encased in brass and has a primer behind it.

Old goldbug Strawman

[Anonymous Coward]

Nobody hoards dollar bills in a mattress. They keep them in interest bearing accounts. There are transaction costs in acquiring gold and/or converting it to local currency to make a purchase.

This strawman is essentially a very long "tortoise vs. hare" scenario in which you start with two equivalent lump sums and tie a boat anchor around the dollar. Nobody, I mean NOBODY invests like that.

It's sad that this strawman is picked up and repeated by so many people to reassure themselves about their buy-and-hold investments in volatile commodities.

Mod parent up!

[denzacar]

If the economy collapses that far foreign currency will be used long before gold or silver. Even then, expect prices to be very high as demand for good will be much higher than demand for stores of value.

THIS.

When your economic system collapses you don't simply forget how modern economy works and turn to bartering raw goods.
Instead, you lean on the closest neighboring system that is still reliable.

Also, gold and silver would be almost worthless in such an economy. Just ask anyone who spent a year or two in a country where a war was going on at the time.
A dozen eggs gets traded for a solid gold ring with an emerald or two. Or for 20-40 units of preferred foreign currency if you have any.
And if there are any eggs to buy in the first place.

Re:Mod parent up!

[palfreman]

If you really believe gold and silver would be worthless in those circumstance you want your head examined. Just open a book about past inflationary collapse. Hell, even youtube as stuff from Zimbabwe from two years ago. http://www.youtube.com/watch?v=7ubJp6rmUYM

Re:I need drugs, weapons and hookers

[Nethead]

I couldn't find the "Buy Now!" button.

Re:A more rigorous look at bitcoin's fundamental v

[benjamindees]

I'm not sure whether you're being sarcastic or not, but the $100 value stamped on US coins is a relic from the time when Federal Reserve Notes could be exchanged for them, prior to the Nixon Shock. Not even the US Mint will sell you one for $100 in Federal Reserve Notes.

The catch

[roman_mir]

Currency only has any value as long as it is accepted by people for exchange for goods and services, it can be inflated (its supply can be increased) and it can be deflated (its supply can be decreased, usually by the issuer buying the currency back for whatever assets from people).

But there is one catch.

While currency is inflated, but people still do not feel that they are rapidly losing purchasing power in it (feeling is different from reality btw), the currency will still be in circulation, used for exchange.

But once the people decide en mass that the currency is actually worthless, at that point it is impossible to give the currency ANY value back by just the issuer buying it back. At that point it absolutely will not matter if most of that currency is removed from the market, nobody will want it regardless if even just 1 unit of it is left in the market. If its perceived as worthless, it stays worthless.

Re:The catch

[roman_mir]

Saying that it is "by law only" is somewhat misleading, as dealings with a powerful government have their value.

- it stops being valuable once populations of other countries decide they don't see the currency of that country as worth anything, regardless of their governments' relations.

Lots of gold is bought with borrowed money, so when shit hits the fan lots of people will have to sell,

- no doubt that large amounts of ETFs are leveraged, but the fact about gold and silver is that their actual physical trade is strong, and whatever the current spot price is (whether the value of paper gold goes up or down) this does not affect the physical market by much at all, and I am only interested in physical delivery, as I see gold as currency, not as a commodity or way to speculate.

$2MM+ worth of nerds just got played

[CPE1704TKS]

Someone just cashed out a large deposit of bitcoins, and these nerds and bitcoin miners just got played. 3 months ago, this thing was less than $1. Now it was $30? lolz Someone made some good money, and waited for there to be enough liquidity for them to be able to cash out and raped the order book. This is a classic accumulation/distribution (a.k.a pump and dump) pattern where a few buyers suck in a multitude of retail fools by slowing raising the price through accumulation, and then once retail fervor hits, they dump it and get out. It's so stereotypical, it's a cliche, and I guess bitcoin just fell for it as well. I only wish I could short this thing, it's going back to below $1.

Re:$2MM+ worth of nerds just got played

[Yaur]

except the "dump" appears to be somewhere around $30k which suggests that one or two people shorting it could drive it into the ground.

Re:$2MM+ worth of nerds just got played

[Anonymous Coward]

You can short it. Join the forums and put your money where your mouth is. A lot of people will accept your short sell.

Re:$2MM+ worth of nerds just got played

[arevos]

I only wish I could short this thing, it's going back to below $1.

You can. You just need to convince people that if they loaned you some bitcoins, you'll repay them after a certain time frame.

Re:$2MM+ worth of nerds just got played

[Repossessed]

While I do think pump and dump was the source of the high prices, the pumpers weren't the dumpers in this case. The trigger was a miner who got a huge chunk of coins from early mining.

He forgot to use the black pools to prevent his large transaction from futzing up the market (or more likely, had no idea what a black pool is), and the pump and dumpers got screwed just as hard as everybody else (who was paying attention Friday, those who tried to sell today got totally boned courtesy of the market being open but the banks being closed aggravating the crash (its possible to sell but until Monday you can't buy in volume unless you already had money in mtgox, so there are sellers galore but the buyers have to wait, and some people with money in their mtgox accounts are expecting the low point in the market to be Sunday, which drags the buying power out more)).

Re:$2MM+ worth of nerds just got played

[91degrees]

or more likely, had no idea what a black pool is

Seems a reasonable guess... What is a black pool?

Re:$2MM+ worth of nerds just got played

[Repossessed]

Its a way to buy or sell very large chunks of bitcoins without the transaction showing up on the ticker. (I fI understand it right, you can only buy or sell other black pool offers, and normal offers that are actually larger than your black pool offer, but its possible to do both black pool and normal offers at the same time).

For bonus hilarity: The price went from 11$ to 18$ at 3am on a Sunday. This has to be the last currency in the world a professional investor should touch, though the new generation of meth addled bitcoin traders who are desperately trying to find the non existent Silk Road to get a fix will be hilarious to watch).

Re:drinkypoo the troll exposes himself as a troll?

[drinkypoo]

Don't feed the troll who is attempting to undermine my credibility; it only gives him more credibility. On the other hand, countertrolling the trolls is one of Slashdot's great pleasures. If this MMORPG had classes I would like mine to be countertroll. (It has score and achievements, why not classes?) So if you can make one or two comments which cause him to waste his time making dozens, then you get points. But if you attempt to engage him directly, he rubs his hands together and cackles with glee over how much more clever he is than you are.

Re:Trolling is trolling and drinkypoo ran

[erroneus]

I guess you illustrated my point. You are attacking me now instead of my point.

And perhaps the definition of "troll" itself is not fully understood. To "troll" is to make comments that are intended to cause a negative reaction from others. My comment was intended to call attention to the negative and to push in favor of the positive. It seems clear you believe "troll" means "against my point of view" which would be incorrect by most anyone's definition.

I see you as futile as you have been in the past. You might characterize it as "running away" but I can demonstrate that the attempt was made and that it has failed and will continue to fail. It was my mistake even to try.

Bitcoin continues to drop

[Animats]

Opened today at $23.95, current price $16.75.

I'd worry about getting a real currency out of the system. After you've "sold" BitCoins, you have to get settlement in another currency. This is done through rather flakey outfits like Liberty Reserve, which requires arbitration in Costa Rica, or Dwolla, Inc, which gives no business address on their web site but is incorporated in Iowa with a business address of 1312 Locust St, Des Moines, IA 50309 - a boarded up building in Google StreetView.

Re:Bitcoin continues to drop

[Animats]

Update: 1312 Locust has been redeveloped since Google drove by. Dwolla may be located there, in the hacker space Foundry Co-Working.. But no hard confirmation of a physical location yet.

Re:Bitcoin continues to drop

[Animats]

Update: The main "BitCoin exchange", Mt. Gox, gives no information about the business entity behind the exchange, not even an address. The site has only "Tibanne Co. Ltd. (Japan)", which is an ISP in Tokyo.

Mt. Gox is a depository institution - you have to deposit BitCoins to sell them, and after the trade, you now have credit in some currency with Mt. Gox. Then you have to get the money out of Mt. Gox. The withdrawal process is slow. Also, on one forum, there's the comment from a Mt. Gox staffer (?) "If we have a lot of LR activity (like, about now), withdraws will be put on hold and executed later (ie. the next day) in the order they were received." That just screams "Ponzi scheme". They're an exchange; if they're honest, they should never have a cash flow problem.

The more I look at the BitCoin financial infrastructure, the more it looks like the High Yield Investment Program scams. Multiple offshore entities, withdrawal limits, unexpected delays in payouts, anonymous businesses. HYIP schemes are notable for being difficult to cash out of. They have to be, because they're Ponzi schemes.

Re:Bitcoin continues to drop

[qubezz]

Why does an exchange need a physical location, apart from some hosting or colocation? All they need is an electronic way to send and receive bitcoins (which hardly requires infrastructure), an electronic way to send and receive dollars, and a perception of trustworthiness so that buyers know they will get the currency they pay for when a trade between two exchange members is negotiated. Hey, I'll paypal you $1 per bitcoin you send me, and you paypal me $50 per bitcoin you want me to send you: there, I just set up an exchange.

Re:Bitcoin continues to drop

[JesseMcDonald]

Also, on one forum, there's the comment from a Mt. Gox staffer (?) "If we have a lot of LR activity (like, about now), withdraws will be put on hold and executed later (ie. the next day) in the order they were received." That just screams "Ponzi scheme". They're an exchange; if they're honest, they should never have a cash flow problem.

From the forum thread you cited, the reason for the delay appears to be daily API transfer limits imposed by Liberty Reserve, not cash-flow problems on the part of MtGox.

Re:Bitcoin continues to drop

[JesseMcDonald]

Dwolla is definitely associated with Foundry Co-Working, which provides mail services for a number of small businesses. As an all-electronic operation they would have little need for a unique office address.

Dwolla is a nationally registered payment processor, with backing from The Members Group, a subsidiary of the Iowa Credit Union League. This isn't some shady fly-by-night operation.

Re:Bitcoin continues to drop

[Animats]

From the forum thread you cited, the reason for the delay appears to be daily API transfer limits imposed by Liberty Reserve, not cash-flow problems on the part of MtGox.

That's a problem for Mt Gox to solve. They, not the end user, chose Liberty Reserve as a payment system. Then there's the problem of getting money out of Liberty Reserve, which requires a separate deal with a "money exchanger" (most of which seem to be in Russia or Nigeria) for which neither Mt. Gox nor Liberty Reserve takes responsibility.

Blaming other parties for delays in payment is typical of scam operations.

Re:Bitcoin continues to drop

[Animats]

Why does an exchange need a physical location, apart from some hosting or colocation?

Because you need someone with identifiable assets whom you can sue. A "perception of trustworthiness" is not enough. Ponzi schemes have happy customers right up to the crash. See Bernard Madoff.

Re:Bitcoin continues to drop

[JesseMcDonald]

The delay is, indeed, a problem for MtGox to solve, with cooperation from Liberty Reserve—there is nothing the MtGox can do about LR transfer policies on their own. However, you were accusing them of delaying the transfers to further a scam, which is a very serious statement for which you have offered no compelling evidence. Moreover, there are already other means of withdrawing money from MtGox accounts which do not involve Liberty Reserve or their API restrictions; in fact, the preferred withdrawal system is Dwolla, not Liberty Reserve, and direct deposit is also available to EU accounts in the SEPA zone. It is unreasonable to blame MtGox for forcing users to employ Liberty Reserve, with its attendant limitations, when there are other options available.

Re:Bitcoin continues to drop

[Animats]

Bitcoin now at $11.01, down from $28.92 at Friday's open. No further comment necessary.

I'll give you a billion bigsexyjoe nickels to stop

[bigsexyjoe]

posting bitcoin stories. Thank you.

No, they are not..

[way2trivial]

absent notices & contracts to the contrary, cash must be accepted.

cash is NOT required to be accepted for debts in the US, if the exlusion had been specified before the debt situation exists.
  when clearly posted notices are available (such as at some gas stations or hotels) or given as part of a signed business contract between an individual and a company or between two companies, cash can be rejected.

Re: No, they are not..

[wkcole]

With the caveat that US courts will not enforce specific performance of contracts where a payment is specified in non-US currency. Whether a court would enforce a barter contract for BTC is an interesting question, since BTC are not recognized as currency by much of anyone yet a contract requiring payment in BTC implies that the parties recognize them as such. My guess is that most judges would take one look at a BTC contract and take the easy way out of voiding it. Until someone with the dollars needed to push an appeals process has a suitable case, the big risk of BTC is not knowing whether any court ever will recognize them as the basis for an enforceable contract.

Re:drinkypoo the troll exposes himself as a troll?

[PC and Sony Fanboy]

Don't feed the troll who is attempting to undermine my credibility; it only gives him more credibility. On the other hand, countertrolling the trolls is one of Slashdot's great pleasures. If this MMORPG had classes I would like mine to be countertroll. (It has score and achievements, why not classes?) So if you can make one or two comments which cause him to waste his time making dozens, then you get points. But if you attempt to engage him directly, he rubs his hands together and cackles with glee over how much more clever he is than you are.

I no longer wonder why so many people say "Don't feed the trolls". Do you?

Phlem the next big thing!

[syousef]

Look around you some time. Nothing at all scarce about shit. The human race is drowning in it.

Now phlem, that's the next big thing!

It's Cryptonomicon

[witherstaff]

enlightened climes

So they turned off their internet connection?

I am surprised at the cynicism about Bitcoins. A P2P network that has all transactions signed with crypto is very cool. It's the plot point of Crytonomicon made real, without the hidden nazi gold behind it. Well and no central company making a fortune with the digital currency, but the concept is about as techy as you can be. For the average user the interface is still a bit overly techy. If it gets to the convenience of paypal without the 3% fees it could start to shake things up.

Re:It's Cryptonomicon

[petit_robert]

Hi,

You write :

>I am surprised at the cynicism about Bitcoins

and then

>Well and no central company making a fortune with the digital currency

Well, I'd say you answered yourself : the few people currently making a fortune are hellbent on keeping it that way. They don't want things to be shaken up at all.

Re:BTC is worth the Service of it's Issuer.

[Cederic]

Is it just coincidence that everybody that believes in linking currency to gold is also completely incapable of writing coherently?

The fact that people supporting gold-linked currency also support BitCoin actually puts me off the whole scheme. Frankly I'd trust a straight barter system more than this artificial and easily gamed currency.

Re:drinkypoo the troll exposes himself as a troll?

[gmhowell]

If there is one thing slashdot doesn't have a bit of, it is class.

Re:Gold is different.

[Lehk228]

Especially when it's encased in brass and has a primer behind it

bingo, copper jacketed lead is the only "currency" worth stockpiling vs. the USD, because if the USD crashes you can bet your ass that your shares in gold paper slips will be worthless and the guys who sold them to you will be unavailable (and likely dead)

people aren't going to wake up one day and say "well shit, the dollar crashed and is now worthless, i guess i am penniless and had better start working for someone who will pay me in gold"

Nice to see a seeing man who is blind...

[denzacar]

Sort of a reverse miracle.
I'm guessing THAT is the case since you are able to see that video, and yet you are blind to what is happening there.

Zimbabwe is the case of a catastrophic failure of government AND the economic system that has no access to a strong economic system (no foreign currency available to its citizens), no infrastructure to speak of, basically 0 accumulated personal wealth owned by its citizens - BUT with rather easy access to exploitable natural resources.
Like gold and people.

They are trading gold for bread cause that is the only valuable thing they can get their hands on - and there are no readily available banks or exchange offices for them to get their hands on dollars or Euros.
And the price is "what the market can bear" - i.e. or what one man can dig up in a day. Wanna know why?

Because their economic system got replaced by an exploitation system.
It's not even a barter system. Gold traders are just using them as basically free workforce in order to get to the natural resources of the land which are basically no longer under anyone's care.
You know what would happen if they were able to dig up gold for two breads? Price of the bread would go up.
They are simply slave labor, only without any visible chains or any particular "master" to claim them as his property.

THAT is the image of the "golden standard". Sifting earth the whole day long in order to buy a loaf of bread.
Cause gold ain't worth squat if you can't trade it to a fair trader for a fair price.

And I'm making a guess here, but I assume that you are not one of those people I mentioned in the post above - the ones who've actually seen an economic system collapse.
Cause I am one of those people. Seen it, lived it, made it to the other side.
Bosnia. '92, winter of '93 in particular, '94- '95 it was already looking up as trade and aid roads opened up.

First your money becomes worthless, but most people are not aware of it yet.
You can still buy locally produced food - like milk and other perishable items that must be sold anyway.
If you are living in an urban setting you might also get some stamps which you have to have along with your money in order to buy that milk.
That's if your local government has some level of social responsibility instead of just letting the "invisible hand of the market" fix everything.
Meanwhile, those with money, who are aware where things are going are bringing out bags full of old money and buying up foreign currency.

Pretty soon though, everyone catches on to the fact that your old money is worthless for anything with actual value - like clothing, home appliances, spare parts, luxury items, high-calorie food, medicines...
You must have strong currency to buy those. Like Dollars or Deutsche Marks - later being the preferred foreign currency even before the war.
But hold on... There can't be enough foreign currency going around, right? What do you use for change and stuff?
Simple. Take the biggest banknote you got in the bank vaults (the only one with any value left in it), take a large rubber stamp - and turn the former currency into scrip with new value, adjusted according to the current value of foreign currency.
You could print your own new currency too, but that makes sense only once trade routes between cities and with the "outside" are functional again.
Until then, scrip will do fine - and it's easily exchangeable for old "non-scripped" money.

Sure, you can sell your jewelery and buy things, but guess what? Price of gold goes down the drain.
Hear those gold traders in that video of yours asking for 0.1 gram of gold for a tin of grain? HA!

You could get a whole gold wedding ring for that much corn in '93.
Plus a "One can't eat gold. THIS... corn... is what one lives from".
That piece of wisdom from a peasant with maybe 4 years of elementary education but with plent

poopal.com

[goombah99]

Notify me when:

- 1 checking your DNA is as cheap as checking the validity of a bitcoin
- 2 you can actually transfer poocoin through the internet

1: you don't have to check it. That's what the Poo Reserve Holding company does. And since it's the same DNA it won't be hard to assay it for unique SNPs. It's not like sequencing it.

2: You trade it the signed electronic certs not poo. For that you just use PooPal.com

Re:poopal.com

[Nursie]

My kingdom for mod points!

I seldom laugh out loud at slashdot any more. Well done sir, well done.

Bitcoin will be monitored not stopped.

[elucido]

Bitcoin gives the feds every excuse to make use of those backdoors in every operating system.

Because bitcoin runs on top of an operating system, it should not be assumed to be anonymous at all. All the users of bitcoin are probably being monitored via backdoored software.

Legality?

[Sumtingwong]

I would think that the legality of establishing/creating any currency, online or not, would be illegal. Anybody have any details/insight on what laws Bitcoin is operating under that allow it to create this currency?

Re:Legality?

[Repossessed]

At the end of the day, its the same service Paypal offers. Just without the central control.

Re:I'm setting up BitCoin 2!

[DrXym]

And that's the funny thing. If Bitcoint becomes a success then someone is going to try a Bitcoin mk 2 so they can mine the coins in the new system before anyone else. Before you know it you have a sea of these stupid faux currencies with speculators jumping ship from one to the next.

Re:Trolling is trolling and drinkypoo ran

[drinkypoo]

To "troll" is to make comments that are intended to cause a negative reaction from others.

To be fair, trolling is saying things you don't believe in order to cause a given reaction. Saying things you do believe but know will cause a flamewar is flamebaiting. There is a subtle but real difference, and those of us who would like to see flames but not trolls or vice versa would appreciate it if people would moderate correctly :)