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Amir Taaki Answers Your Questions About Bitcoin
Is the gold rush over?
by curunir
With BitCoin limited to a pre-determined amount and the difficulty of mining new BitCoins, it seems that this gives a huge advantage to people who got into BitCoin early and have already amassed a considerable amount of BitCoins. Is this true and, if so, do you think this disincentive will undermine BitCoin's ability to become more popular since the majority of the population will have to work so much harder to obtain the currency?
Amir Taaki: It is certainly true that early adopters have been rewarded. I do not think these inequities will be more shocking than those in the real world. Any guesses as to how this will play out is pontification. However, I don't think anyone has proposed a working model for a decentralized secure digital currency where such a thing would not happen. Overall, I believe the properties of this currency will significantly add to the wealth of all peoples, especially those less well off.
Crypto-Anarchism?
by conner_bw
I argue that bitcoin is interesting because it's a locked currency, with a known maximum, and a timeline for that maximum based on contemporary crypto math and radical ideas. There is clearly well thought out timeline for adoption and disruption. It's not just "Cool, new money!" Are you a crypto anarchist, or similar?
A.T.: Yes, I myself am a crypto anarchist. However, not everyone on my team has the same political ideologies and we do not try to push our ideologies on each other. In fact, we have all seen our ideologies change over time with the awareness of new knowledge and information. Ideologies should not be a point of contention, especially when we all see the immense prolific value of a more efficient means of commerce.
If not, then is this another Tulip craze [wikipedia.org] and all these news stories and bitcoin currency exchange services being hyped heavily the last month machinations for profiteering?
A.T.: I do not advocate that people speculate on bitcoins. In fact I actively advocate against that because those who are new to bitcoin might see it as just that, a 'craze.' I do however think that the properties of bitcoin are clearly advantageous over the current means of commerce. Although bitcoin is still underdeveloped, everything visible in the modern world can be adapted using bitcoins as a backbone. This will result in all the services of today's world (clearing houses, security, fraud protection, interest bearing accounts...) continuing to be offered, but with far less overhead.
Austrian Acceptance
by MyFirstNameIsPaul
I have found that the Austrians have a hard time accepting the idea of a digital currency. The core of their argument seems to be that digital currencies are not made up of something that had value before being a medium of exchange, such as gold and silver. When I counter to them that BitCoin is made up of code and people pay money for things like video games, they argue that the video game would have to be the thing valued, not the computer code. How do you deal with these kinds of objections?
A.T.: Gold is not a currency in my mind. It is a store of value. I would not want to go to buy bread from my local store and shave off some gold from a bullion and take out a scale and wait for an acid test to be performed. Gold is backed by real world properties.
Bitcoin is backed by the fact that is has unique properties as well:
- Decentralized
- No bank holidays
- International
- No concept of borders
- Divisible
- True micro-transactions possible (new markets feasible)
- New privacy model
- Private identity yet transparent
- Secure
- You do not have to trust merchant sites (Sony - Playstation) to protect your data
- Fast Transactions
- No Charge backs
Useful Calculations?
by Bodhammer
Is there any way to make the calculations more useful (i.e. Boinc) and
still maintain the same level of difficulty in the computations? It just
seems so wasteful to run Bitcoin at this time.
A.T.: Our world's current infrastructure depends on paying employees, building
large buildings, paying for heat, electricity, transportation, lawyers,
courts, judges, policemen, government bureaucracies, armies and much
more. Doesn't it seem wasteful to rely on tedious and sometimes
ambiguous real world laws with a lot of overhead instead of mathematical
laws?
When merchants started accepting bitcoins, verifiers (because miners is
a misnomer) started to see that their generated coins were worth
something. They became competitive and found ways to do the same
calculations cheaper which provided security for the network and verified the
transactions. Verifiers found out that running these hashing algorithms
on one's GPU was far more energy efficient than running them on one's
CPU. Specialized software was later constructed for these purposes. Some
keep their machines under dry ice. In the not so distant future,
hardware FPGAs will be specially designed for this verification process.
The advantages of bitcoin exist because it is an inherently more
efficient and less wasteful system. The reward for minting a block, provides a
healthy competition that causes the energy cost to be driven down.
Additional privacy layers and smartphones?
by DriedClexler
Is there any serious development underway to make the privacy more
robust? There has been talk of "Bitcoin laundry," where large pools swap their
coins around between each other to make it harder to connect a coin/address
with an owner. But for this to seriously work, it needs a lot more people to be
involved in it, and it has to be integrated in a way that's secure (against
someone just keeping coins in the middle of a shuffle) and transparent to the user
(so they don't have to think about the new addresses they generate, or
which coins are optimal to send where for the maximum shuffle). How soon can
we expect something like this? Also, how soon will smartphones be able to handle this with the same
ease as desktops and notebooks?
A.T.: A bitcoin laundry already exists. The volume on it is very low, but if demand
increases in the future then such a service is trivial to setup.
A mixing service (as they're called) requires a large volume and therefore a
persistent demand.
Smartphones can already use bitcoin :) An Android version of the command line Bitcoin was
compiled. Additionally one can use an online wallet service (or a bitcoin exchange) to store their bitcoins.
Lost/forgotten bitcoins?
by algorimancer
One thing that concerns me is the fixed maximum number of bitcoins.
Lets say people acquire bitcoins, but the amount isn't enough to worry about,
so they never use them, or perhaps their computer crashes and they don't have
a backup. My understanding is that these bitcoins are permanently lost
from the economy of bitcoins. Over time, the total supply would begin to
dwindle, presumably pushing up the value of those that remain, until people
become frustrated at the small supply and are motivated to move to a new
system, then bitcoin is abandoned. In the real world this happens with dollar
bills, but the government can compensate for this by creating more. Is this
issue addressed in some fashion?
A.T.: The supply of bitcoins is 21 million. The supply of money is infinite. A
bitcoin can currently be divided to 8 decimal places. The loss of
bitcoins in the future may lead to some deflation however I expect it to
be insignificant. In the very long term, even if there was only 1
bitcoin theoretically in circulation, running the world economy would
not be a problem. There exists only 6 MBTC in circulation at this moment.
Extreme instability of Bitcoin vs. USD
by Limerent Oil
Why would any merchant IN THEIR RIGHT MIND want to deal
with Bitcoin? With the insane USD-to-Bitcoin exchange-rate gyrations
happening lately, why would any serious retailer even bother, when the value of Bitcoin vs. USD could change by 50% or more in just a few hours?
A.T.: As liquidity increases transaction costs decrease. If there was already
an appropriate clearing house in place, a merchant would be able to
automatically accept bitcoins and liquidate them to dollars. In the same
way that people who use the internet are not all cognizant of the
communication protocols they are using, I foresee the possibility of
merchants offering their products in USD, EUR, GBP, and customers
purchasing those products in their local currency. And the underlying
mechanism which facilitates this transfer is the bitcoin. Bitcoin would
provide these same services that payment services, credit cards or banks
do but with much less cost to the merchant and customer.
What about the lack of inflation?
by Cyberax
It's long known that economic growth is severely stunted without some measure of inflation. Adopting bitcoins for the global economy would
mean that policymakers lose control on money supply, and while there are advantages in this, disadvantages far outweigh them. Additionally,
adopting a global currency standard will deny governments ability to influence currency rates robbing them of yet another way to control the economy. Is there any plan to solve this? Maybe a system of independent bitcoin 'roots' operated by governments would help?
A.T.: Ben Friedman has released a lot of work on E money and how it will affect the future and how governments will adapt. The truth is
that the government will still have monopolies on much of the operations
of the economy such as fractional reserve banking and the issuing of
licenses which allow banks to lend money.
Aspirations
by slim
What are your aspirations for the currency? Do you hope for it to be near-ubiquitous — used by corner shops and mainstream merchants like Amazon? Or are you happy to see a parallel economy grow, as a niche
thing? Or something else?
A.T.: I have lofty dreams of a world where people can send money abroad
without having to pay 20+% in many cases to rip offs like western union.
Where people can raise funds through services like paypal but not have
their accounts arbitrarily frozen. Where citizens in developing nations
who already oppose their government do not have to pay for wars of
genocide out of their own pockets as was the case in ex-Yugoslavia where
authoritarian control over the money supply helped finance a terrible
war and bring about the worst hyper-inflation in Europe since WWII.
Bitcoin in some form is going to be adopted whether it is used as a unique currency, a payment system or as a clearing house. Our aspiration for bitcoin is to provide competition to the current system making everything cheaper for all. It's about cutting the middleman, democratising money and handing back power to people.
Will governments let it survive?
by merdaccia
We live in a world where the supply and movement of money are
controlled by governments, central banks, money laundering laws, and financial institutions. How can BitCoin survive in this world? Middle men like
banks stand to lose a fortune in fees and exchange rates, governments stand
to lose a fortune in taxes if they can't track money movement, and the
black market stands to gain a silent way to move value. For BitCoin to gain adoption, some major retailers need to start supporting it, but given
the above risks, what stops a government from telling companies in its jurisdiction that they can't accept it?
A.T.: The US is not the world. If their government forces everyone to continue
to use typewriters in lieu of computers and pay through the nose, they
can. New and better technology, especially when it is revolutionary,
does threaten archaic models and practices. Hopefully there will not be
contention. My team is already in contact with SWIFT which has operated
for 30 years and is the backbone of international money transfer for
over 9000 banks. Many forward thinkers see the advantages of bitcoins
but it is easy to understand how those perhaps well-intentioned but not
well-versed in what bitcoin is can promote FUD.
Regulatory compliance?
by molo
For those of us interested in developing financial services using
bitcoin, how have you dealt with regulatory issues? It seems like the SEC and
FINRA in the US would not be keen on unregistered broker-dealers and agents
and owners not having the legally required Series 7 and Series 24 certifications. Have you sought the UK equivalent certifications? The requirements of lawyers, accountants, certifications etc. seem to put
a very high capital cost on starting a legitimate business offering services
in this space.
A.T.: As well as being a developer, I own and operate www.Britcoin.co.uk (the
UK exchange site). My team has been in negotiations for a long time now
with lawyers and regulators. There is no regulatory process or
restrictions now on the running of such services. Non-regulated sectors
rarely seek out regulation. However, when it comes to bitcoins, I
believe the sooner they are regulated the better. If their regulation is
pushed by those who understand what bitcoins are then we may be able to
regulate them in the best way possible and show the world they were not
created for illegal practices. The sooner they are regulated, the sooner
users can have legal assurances that merchants are liable for their
operations. The negligence seen at MTGox would never have happened in a
regulated market.
Although the FSA have not made any official statement about bitcoins. We
at www.britcoin.co.uk are hoping that we can show to the proper
authorities that indeed we have recorded our history of transactions.
That all the money in our users accounts is accounted for. This process
would dispel the FUD surrounding bitcoins and allow the people of the
world to enjoy the freedoms and wealth of bitcoins that much sooner.
Tax avoidance and illicit trading
by slim
Some "benefits" of Bitcoin, from one perspective, appear to be that
its cash-like properties lend themselves to tax avoidance (making
transactions without declaring them), illicit trading (e.g. drugs or prostitution)
and money laundering. Do you view this as a positive, a negative, or neutral? If you view it
as a problem, how can the problem be mitigated?
A.T.: Most new technologies can be used for good and bad. Of course I do not
condone or agree with the use of Bitcoins for illegal purposes.
However, I really want people to understand one thing. The
criminalization of Bitcoin would not stop the illegal activity that
surrounds it. In fact, it would help those who use it as a means of
engaging in illegal activity by not regulating the purchasing and
selling of bitcoins. Criminalization would only stop people from
enjoying the tremendous and fruitful benefits of such a system, it would
hinder the social good. Regulation would allow the proper authorities to
find and charge those who use bitcoins for illegal activities.
Britcoin.co.uk has kept a clear record of the exchanges which have gone
on. Every single transaction is recorded and we are happy to open our
books to the proper authorities. We are aggressively advocating and
promoting the legalization and regulation of the exchanges.
Bitcoins offer massive potential for positive social change. It would be a sad thing to see Bitcoins outlawed due to ignorance or reactionary feelings. If you outlaw Bitcoin then the illicit trades will still continue, perhaps even proliferate, but the good would disappear.
Kings used to raise capital in order to wage wars. They required popular support before they were able to fund their wars. A common tool in modern day authoritarian regimes is currency manipulation in order to fund their wars of genocide (e.g Milosevic in the 90s). Bitcoin democratises governments.
Quantum Computing?
by SanityInAnarchy
Are there plans to deal with quantum computing, or with any of the algorithms used being compromised?
A.T.: If SHA256 or ECDSA was ever cracked, we'd have far bigger problems to worry about than bitcoin being destroyed. I suspect that there won't be any overnight switch, giving everybody enough time in order to adjust the current system to any changes.
The internet wasn't built perfect. But years of reshaping/patching/incremental design have shaped it into a workable network. Bitcoin will too undergo this transformation with time as it ages.
(More from the call for questions:)
is there ever going to be a bitcoin bank? ... The idea that if you lose or destroy or whatever your computer and lose all
your money isn't going to make the general public accept this.
A.T.: Bitcoin now stands at its early stages. It's the kernel of the software stack that will eventually exist for this financial system. Other services and software utilising Bitcoin will exist. A common view is where Bitcoin acts as an automated clearing house between all these user facing services in the future.
Bitcoin's protocol itself will need to be extended in order for it to grow. As the network expands, block sizes could become impossible large once it rivals the transaction volume of a comparable service like VISA or Paypal. To have lightweight clients that don't need to process these large GB sized blocks new protocol commands like a txmatch regex would need to be introduced in order that clients don't need to process the entire block data.
The point to Bitcoin is that you can choose your own level of trust in an external service. One of our group's members, Patrick Strateman, came up with a scheme whereby a wallet could be recovered algorithmically using an email and a password. In the future I expect savings accounts where retrieving the money is an arduous proccess. Then we can go further to where a person has all their funds in a trusted service like with email today- how many people run their own mail servers?
What markets do you think will be the first to most aggressively adopt bitcoins as their currency?
What insights can you offer as to why the US government is having a hostile
reaction to bitcoins?"
What kinds of competing P2P currencies are in development, and how will their
deployment affect the valuation of bitcoins?
A.T.: Immediately as liquidity improves in exchanges, the best use for Bitcoins will be individuals transferring funds between countries without fees. Our group has a lot of interest from mobile sectors because of the potential as a micropayment system. Currently now in Africa, people use mobile credit as a form of currency to transfer funds across borders, but that's usually less than ideal.
The US government isn't a homogenous entity, and one senator (possibly funded by bankers) made a false claim on Bitcoin- calling it a scheme for drug trafficking networks. It may simply be due to reactionary misunderstanding like the people in Yahoo Finance calling Bitcoin a Ponzi scheme invented by bankers. That's why our group is aggressively pursuing press in order to dispel these myths.
Terminology
If we eventually use Bitcoin in everyday life, say, in the supermarket, how will
we deal with prices in fractions of a Bitcoin? What terminology might we use for
something priced at 0.00000005 Bitcoins?
A.T.: The accepted 'standard' is to use SI prefixes. 0.005 BC would be 5 mBC.
Here come the regulators ...
How will your business change when countries regulate exchanges? How do you ensure your exchange isn't being used for illicit purposes (to avoid
being shut down by government authorities)?
A.T.: It is our goal (and has been for months) to get legal legitimisation. Our organisation has been aggressively seeking FSA regulation here in the UK for Britcoin. Our hope is that when governments do come to look at Bitcoin, they will see a long running, honest, legal exchange with open books. By having something in the law books about Bitcoin, it sets a positive legal precedent in the future and puts us as the policy makers rather than a bunch of old 60 year banker types.
Our exchange complies with the UK Know Your Customer laws which ensures it's not being used for illicit activity. We keep detailed transaction records and run regular audit logs to look for missing funds.
But eventually, one would want to use BitCoins to pay for legal services. My
question is; how do you get to that point? Why would a legitimate business
accept a currency that is used almost exclusively for illegal means? What is the
strategy to convince mainstream businesses that BitCoins have a purpose in the
main web, as well?
A.T.: The illicit markets are a very small part of Bitcoin yet the most sensationalist. I can see how one would think Bitcoin is purely for illegal trade if I didn't know better.
Check out the list of merchants.
Full and open disclosure: how many bitcoins do you currently own?
A.T.: 32 BC. At one point I had 6000, but I'm a bad hoarder. Everytime Bitcoins would double (and I'd have $2k), I'd donate half my wealth to other free software developers. Then recently I was going to wait until I had $4k, but the price went down and I'm very bad at holding onto cash :)
But that doesn't bother me at all. We have our group of free software developers developing Bitcoin itself and other related projects. Funds are coming in and we're growing. The goal is to this as a sustainable operation paying developers working on Bitcoin fulltime.
What are the advantages of bitcoin?
One problem I see with bitcoin is it offers very little over what we currently
have. If I want to perform an online transaction using my computer, unless I am
buying something illegal, then there are already companies which offer products
for me to use. If I want to make an anonymous purchase in person, I would easily
use cash.
Bitcoin seems to suffer from a lack of portability, which makes me wonder, what
"need" is bitcoin catering to? What do I do in my day-to-day life that bitcoin
will help me do such that as some point, bitcoin becomes irreplaceable and
achieves de facto permanency?
A.T.: Sending funds abroad is time consuming, expensive and difficult. Recently I tried sending funds to a Polish bank from the UK- the bank was closed and I waited until Monday. Requiring me to be in person at the bank, the woman was unable to enter the Polish L looking character into her terminal. I had to aquire an internet banking code to do it online. Waited 3 days, logged in and the internet banking form didn't work. In the end, I ended using a friend to aquire Bitcoins and use the Polish exchange bitomat (we never use Britcoin ourself).
I wanted to donate funds to the excellent Symphony of Science musician. I went to fill in the Paypal form, spent 10 mins signing up to an account, entering all my very personal details and my card was rejected. In the end I got him to accept Bitcoins and donated directly without paying fees to Paypal.
Sony recently was hacked. Millions of accounts were leaked. If they were using Bitcoins then the addresses people donated to would be known to the attacker. Not my private keys which enable said attacker to spend my cash.
With commerce, everything becomes cheaper. Bitcoin vastly reduces the overhead needed for fees. We no longer require staff sitting inside banks pressing numbers on a keyboard since the system is automatically backed by mathematics and cryptography, not laws and people.
How do I combat the shakes when 24 hours pass without a Bitcoin article on /.?
How have you managed to flood /. on a daily basis?
So in short, lots of rationalization for having spent lots of time working on this with nothing of real substance to get people to actually use it.
Your hair look like poop, Bob! - Wanker.
Bitcoin is a decentralised computer currency designed by self-righteous Ayn Rand-reading nerds who despise looters and parasites like, er, you. It is used to purchase Internet services, illegal drugs and pictures of naked women holding video cards.
Bitcoin works by an emergent synergy of cryptography, peer-to-peer, anonymity, anarchism, libertarianism, wasting stupendous quantities of electricity, the marketing department at NVidia, the enduring exchange value of tulip bulbs and doing all of this instead of Folding@Home.
Bitcoin successfully harnesses a hitherto-unexploited Internet resource: the vast reserves of unexamined privilege amongst computer programmers. Coins are "mined" by stealing them from people who are able to comprehend this level of computer science but still keep their Bitcoin wallet in plain text on a Windows machine.
The Bitcoin system is robustly designed to continue past the inevitable collapse of the US dollar and the world economy, as the Internet, fast computers and reliable electricity are all expected to be readily available when barbarian hordes are wandering the burnt-out post-apocalyptic remnants of civilisation.
It is completely incorrect to describe Bitcoin as a "pyramid scheme." Technically, it's a "pump-and-dump."
Many common products are still inexplicably not purchasable with Bitcoins. "It's like they don't understand the revolutionary wonder of Bitcoin," says Debian developer Hiram Nerdboy, 17. "I can't get chicks with Bitcoins either. Even with my slickest Pick-Up Artist techniques! It's as if my knowledge of economics, game theory and Bayesian epistemology didn't substitute for understanding anything about people. But that's impossible, of course. They're probably just theists. Hold on, I just gotta post to Slashdot about this."
Bitcoin was invented by Internet libertarians, in the spirit of freely-chosen individual interpersonal interactions that will bring about the utter collapse of the oppressive taint of the dead hand of government, in order to make money at your expense.
Photo: A typical Bitcoin advocate swimming through his Bitcoin bin, while his family look on, looking at him like he's insane.
http://rocknerd.co.uk
Bravo! Take a bow, gentle sir.
WOO-HOO!!!!! Launching BitCoin with an unsecured wallet.dat file format into the general non-savvy populace is a little bit like throwing a hundred pounds of sirloin into a den full of lions and locking the door for month - a few will wind up fat and happy, but most will be starving and dying.
The "why would anyone accept bitcoin given its instability" question was admittedly a bit inflammatory, but it would have been nice if he'd even made an attempt at answering it.
When the market doesn't have enough volume to smooth out wild gyrations like over the past few weeks it's completely unacceptable for real world use...
The bitcoin effort needs the involvement of some economists with experience studying and understanding currencies, not just techies. It could also use some PR and marketing people, with all the bad press they've been getting lately for their poorly crafted currency system.
It sounds like they have the technology stuff reasonably well figured out, but they have utterly failed on the economics and marketing side of things.
I suspect that bitcoin needs to be replaced with a new system that has the advantages of the current without the raging disadvantages, re-branded without the negative associations of bitcoin, and work to make sure they don't fuck up again.
However, I really want people to understand one thing. The criminalization of Bitcoin would not stop the illegal activity that surrounds it.
Well, I think you're jumping to conclusions if you thought that the idea is to halt the drug trade and prostitution rings by illegalizing BitCoins. I think the question was really asking how you feel about BitCoins enticing and extending illegal activities. Allow me to provide a real world example. A person I knew in a small town high school was making yearly trips to the nearest metropolis with his stash of cash, purchasing drugs from many sources and then driving back and dealing them. At some point this stash became $15,000 and on his last trip he made his first stop to pick up some mushrooms from a woman who had been compromised by police. As he pulled away, they picked him up and found some shrooms but also $14,000. Now, he went to jail for six months for drug possession but also the very large sum of money. They were able to prove that he was a dealer and was en route to make more purchases. If he had had BitCoins, he merely would have kept a wallet on his phone then transferred the cash to the woman and could have denied the whole transaction had taken place and was clueless about the shrooms in his car. Would they have been able to make anything stick?
Criminalization would only stop people from enjoying the tremendous and fruitful benefits of such a system, it would hinder the social good.
Not if the bad elements of society enjoy those "fruitful benefits" much more than the rest of society. All the old organized crime tactics like protection rackets suddenly become virtually untraceable when you can demand the money be sent to an anonymous BTC handle and then move it again. The flow of cash is a seriously important element in detecting and prosecuting crime and the anonymity of a currency destroys that. Corporate embezzlement becomes easier, drug dealing becomes easier, funding terrorism becomes easier, etc. Someone could steal my bank account information and pilfer money from me tomorrow but at least the bank would be able to trace it. Who traces the stolen wallet files? Sure the bank charges an overhead but they provide a service that is more secure than a mattress store.
You seemingly sweep the bad under the carpet and talk about only the good. This is a double edged sword and it's insulting for you to deny it.
We are aggressively advocating and promoting the legalization and regulation of the exchanges.
You keep saying this but you fail to provide any details on how this will be done. When transactions are anonymous, how in the hell does this happen?
Kings used to raise capital in order to wage wars. They required popular support before they were able to fund their wars. A common tool in modern day authoritarian regimes is currency manipulation in order to fund their wars of genocide (e.g Milosevic in the 90s). Bitcoin democratises governments.
That is so bizarre, you're all for the regulation and legalization of exchanges ... are you seriously that daft that you don't think the government is going to tax that which it regulates? You can't eat your cake and have it too. How will we fund schools and libraries and roads if everyone's going through BTC? How will we even know that everyone's going through BTC? I cannot fathom how you expect this to work!
I understand the good points of this experiment but I'm insulted by how quickly you try to pull the wool over everyone's eyes.
My work here is dung.
Parent is a one trick pony.
My favorite part was when he said "Gold is backed by real world properties", which is completely true, and then followed that up by saying BitCoin is backed by 12 random bullet points, with one of them being "No bank holidays". Seriously? The bottom line is BitCoin is a flat currency and I love when it's supporters can't just admit that. It's only value is that it's perceived to have value, it's not backed by anything. If everyone decided tomorrow that DerpCoins were the new cool thing and flooded away from BitCoins they'd be worthless, how does them being "backed by no bank holidays" help in that situation?
Considering the amount of bitcoin related articles on /. (almost daily now?) in relation to its real world importance (extremely low and unlikely to grow), I wonder if this is "stuff that matters" or a paid (or otherwise incentivized) advertisement on part of /.?
FWIW I looked at bitcoint - it's usefulness in my personal opinion is virtually nil, it's either a scam or a pipe dream, and likely both.
I get paid in US$, and expect to get paid in US$ for some time. If I get myself some bitcoin, I'm now involved in currency speculation whether I like it or not. I don't go out and buy a bunch of Euros so I'm ready to purchase things from France at some point - I wait until I (rarely) need to, and then convert at that moment. AT discourages speculation, but that is the only thing to see here!
Pretty much all of those advantages used to tout BTC are better achieved through a specie currency like gold.
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Glad I could help.
A.T.: The supply of bitcoins is 21 million. The supply of money is infinite. A bitcoin can currently be divided to 8 decimal places. The loss of bitcoins in the future may lead to some deflation however I expect it to be insignificant. In the very long term, even if there was only 1 bitcoin theoretically in circulation, running the world economy would not be a problem. There exists only 6 MBTC in circulation at this moment.
This is totally nonsensical. Can you please explain this more? If this is true, let's just put 1 bitcoin into circulation and run the world economy on it!
Comment removed based on user account deletion
Look at this graph of the mining activity and difficulty over time (log scale). Activity and difficulty have increased a millionfold from what they were throughout 2009; if we figure there are about 10 million miners now (that's probably an overestimate) that means there were just about 10 peoples back then, mining the 3 million bitcoins created in 2009. That's just 10 people owning half the bitcoins created so far, or 1/7 the amount that can ever be created.
Inequality in current real-world economies has gotten pretty extreme, but Bitcoin makes them look like socialist utopias by comparison.
If the main purpose is 'just' to allow easy money transfer over the internet, why did they not just do the following:
No mining. The only way to get bitcoins, is to by them at our bitcoin store. And a bitcoint is always bought AND sold for 1 US $.
Then setup multiple offices around the world, where people can deliver their bitcoins, and get their US $.
Then bitcoins could be used for normal trading, and for transfer of money over the internet, without all the troubles the current solution have.
This solution would require setting up a "Not for profit" organisation to handle the transfer to/from bitcoins to US $ but that could be paid for by requiring a small transaction fee, when transfering bitcoins to US $.
This would allow bitcoins to be used as a normal payment for the internet, because they can be transfered to "real" money if needed. So I can pay you in bitcoins, and you can accept that payment, because other would also accept bitcoint money, and even if you someday need to pay someone who don't accept bitcoins all you have to do is to go to the bitcoint/us $ exchange and convert your bitcoins to $.
This way US $ would be the backing of bitcoins, in the same way that gold was the backing of US $ when we started the money system.
There where many questions regarding the fact that it is an unregulated currency. Unless you are a pretty staunch Friedmanist, you acknowledge that governments have to regulate markets and manipulate currency to keep the economy running (and stop pump and dump schemes etc.).
Since bitcoin seems to be completely resistant to any manipulation, it seems that governments not only can't do nasty big-brother type things, but also can't do the kinds of things we need it to do to stop depressions. I am disappointed to these issues being completely skirted.
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The number of Bitcoins may be limited, but the number of digital currencies is not. If Bitcoin become a success, what is to prevent it from being forked any number of times by those who feel that money is too scarce? Judging from the populist support of inflation in US monetary history, this would seem nearly inevitable.
I was thankful that my question was selected despite it not having been modded up:
But then in his reply, he just repeats back what I just told him, and then said it "will be trivial". Well, no, they've tried, and it's not trivial now, because it needs a concerted effort, both for user involvement, and in new coding. Total blow-off answer! See for yourself:
If you're going to pick a question, actually answer it, "Amir". If I wanted to talk to a wall, there are four already around me.
Information theory is life. The rest is just the KL divergence.
you are very short sighted. Ask yourself, is this type of system inevitable? If not with Bitcoin, do you really, really think this is NOT going to happen in my lifetime? You are nuts not to express general interest.
CS majors know the time/space tradeoff, but they never get taught the 3rd, crucial, tradeoff of the set: comprehension!
When repetition is deliberate, value of message is unaffected.
History is littered with the detritus of "inevitable ideas whose time has come" that weren't inevitable, and whose time hadn't come.
Is this type of system inevitable? No, I don't think so. In fact I think it has a lot of things actively working against it, not the least of which is the simple fact that it'll be hard for the government to trace, tax, and control this new currency, and the government is the only one with the guns and laws to enforce adoption of a fiat currency, so you've just alienated the very organization whose support you desperately need to be able to break out of the small niche you're occupying.
Do I really, really think this is not going to happen in my lifetime? There will always be naive simpletons willing to buy into the delusion that this sort of thing will catch on "any day now." I don't think that means that this is going to happen in my lifetime.
A steady drumbeat of articles flogging this pyramid scam is not "expressing a general interest," it's beating a dead horse.
So let me get this straight - to pay people for doing productive things, like the physical labor to build and maintain the infrastructure bitcoins implicitly rely on - electrical power being among the most trivial when you think about it - is wasteful?
News flash dickhead - unless you've growing your own food with handmade tools and living in a hut you build yourself from materials you gathered yourself, you are sitting near the top of a MASSIVE pyramid of laborers, designers, artisans and technicians. All your "success" comes at a price of tens of thousands of other individuals doing their job. You just called all that wasteful.
Hell, the computer he's using probably has a hundred thousand sets of fingerprints on it - from the guy who dug the earth for the raw materials to the guy who dropped the box on his doorstep (because fuck knows he probably never leaves the house, which itself took a small army to make possible).
=Smidge=
Yeah, I thought when Slashdot announced that they were going to do a Q&A they were just taking questions. Who was actually expecting answers?
Except for ending slavery, the Nazis, communism, & securing American independence, war has never solved anything.
The responses are assertion after assertion without substantiation.
Overall, I believe the properties of this currency will significantly add to the wealth of all peoples, especially those less well off.
Why especially the less well off? Are they particularl known for having the sort of computing knowledge not to have a keylogger installed and their money stolen?
Ideologies should not be a point of contention, especially when we all see the immense prolific value of a more efficient means of commerce.
What is efficient about the way bitcoins are processed?
Although bitcoin is still underdeveloped, everything visible in the modern world can be adapted using bitcoins as a backbone.
What about government market regulation to prevent widespread pump-and-dump, plundering, etc.? Your argument is as complete as, "Everything in the world would be better if I were just promoted to benevolent dictator for life."
(clearing houses, security, fraud protection, interest bearing accounts...) continuing to be offered, but with far less overhead.
What overhead?
Gold is not a currency in my mind. It is a store of value.
In what sense is it not a currency? In what sense is currency not a store of value? Gold is not a yellow elephant; it is a blue dolphin.
Bitcoin is backed by the fact that is has unique properties as well:
Backed in what sense? And half the properties are wrong or meaningless:
Decentralized
How do I use bitcoin without a computer and a network? Who owns and regulates the hardware factories and the networks?
No bank holidays
Are you ill? I just gave 50p to someone last Sunday.
International
Unlike the Euro, I guess the bitcoin can be used (that's used, as in because everyone has electricity and a satellite dish and shit) in the middle of sub-Sarahan Africa, or something, yes?
No concept of borders
Aren't you asking for regulation?
Divisible
Who controls how divisible it is? Put another way, why can't I give you 0.0000000000000000000000000000000000001 of a bitcoin toward repayment of a debt?
True micro-transactions possible (new markets feasible)
As opposed to... fake ones?
New privacy model
That's certainly true. Everyone has to have the security knowledge of a bank.
Private identity yet transparent
Get your head out of the clouds a moment and examine what happens when you buy something over the Internet. How many ways can your identity be traced?
Secure
Stop it.
You do not have to trust merchant sites (Sony - Playstation) to protect your data
I don't anyway. If they are storing CC details in the clear and someone steals it, guess who isn't picking up the tab?
Fast Transactions
I think the computing power required in verifying a bitcoin transaction in an environment where the whole world uses bitcoins is going to just slightly exceed the current system.
No Charge backs
And here comes the libertarian caveat emptor bullshit we were all waiting for.
Oh, this is all too painful... maybe I'll read the rest if I can muster the energy.
His "solution" was that merchants should just instantly move into and out of BitCoins on currency exchanges so that the swings were not an issue. And somehow using these currency exchanges will magically be cheaper than Visa/MC/ACH.
Unanswered inevitable followup: Why would anybody go through that much trouble instead of just trading in their desired currency to begin with? And who pays to run these currency exchanges?
I do not advocate that people speculate on bitcoins.
Which matters not the tiniest bit. Speculation inevitably occurs with any and every commodity, including currencies. Speculation is inevitable.
As liquidity increases transaction costs decrease. If there was already an appropriate clearing house in place, a merchant would be able to automatically accept bitcoins and liquidate them to dollars.
There is more to transaction costs than mere liquidity. Furthermore he neatly avoids the problem of exchange rate risk.
Gold is not a currency in my mind. It is a store of value. I would not want to go to buy bread from my local store and shave off some gold from a bullion and take out a scale and wait for an acid test to be performed. Gold is backed by real world properties.
??? Talk about a strawman. I don't think anyone was claiming gold was a currency, and even if it was the ONLY thing that gives ANYTHING value is the belief by both parties in an exchange that it does have value. If people believe bitcoins or gold or US dollar have value then they do. If they do not believe they have value then they do not. Bitcoin is little different than any other secondary market commodity. I can conduct transactions using Magic The Gathering cards as currency if the other party will accept them.
Sending funds abroad is time consuming, expensive and difficult. Recently I tried sending funds to a Polish bank from the UK- the bank was closed and I waited until Monday. Requiring me to be in person at the bank, the woman was unable to enter the Polish L looking character into her terminal. I had to aquire an internet banking code to do it online. Waited 3 days, logged in and the internet banking form didn't work. In the end, I ended using a friend to aquire Bitcoins and use the Polish exchange bitomat (we never use Britcoin ourself).
Individuals almost never can exchange currencies more economically efficiently than a bank. Banks have transaction volume and can reap economies of scale. He made the transfer more efficient but made the currency exchanges much less efficient AND exposed the counter-party to significant exchange rate and liquidity risk. Whoever the counter-party was to this transaction was, they were an idiot.
Decentralized
Which can be a serious disadvantage when there are economic problems. I seriously doubt this fellow has any idea how bitcoin would escape a liquidity trap.
No bank holidays
No banks either which is most likely not actually a good thing. Despite their problems banks are invaluable for getting capital where and when it is needed. This is not to say that there aren't other mechanisms that can serve the function of a bank but bitcoin is in no way, shape or form an obvious improvement. There also is no lender of last resort if things go really wrong as they inevitably will.
International
Having traveled extensively internationally, I can assure you that there are lots of commodities including the US dollar that are accepted around the world.
No concept of borders
Borders have their advantages too. Doing away with them comes with some pretty significant problems.
Divisible
I can divide any other currency too. No improvement here.
True micro-transactions possible (new markets feasible)
Unproven. Any transaction has frictional costs and it bitcoin has not established a way it can avoid these. It might reduce some but they still exist and likely bitcoin would increase other costs.
New privacy model
New does not imply better or worse. There needs to be an actual advantage.
And hackers found a way to steal gobs of bitcoins in recent days. So, those bitcoin holders didn't get to spend their cash.
I use irony whenever I can, but my shirts are still wrinkled...
What exactly backs bitcoin besides "Some guy" in an IRC channel?
The only thing that backs ANY currency is the belief that it has value. While I think bitcoins are ridiculous, ill-concieved and overhyped concept, they have as much value as people believe they do in exactly the same way as the dollar or the euro. A currency is useful because we believe others will accept it as a proxy good that can be easily exchanged for other good. There are very good reasons to believe that the dollar or the euro will continue to be valued by others (including network effects and taxing authority among others) but at the end of the day any value they have comes down to confidence.
This reads like it was written before the peak, the first crash, the Mt.Gox break-in and shutdown, and the second crash.
A sizable fraction of the Bitcoins in existence are now trapped at Mt. Gox (formerly Magic, The Gathering Online Exchange) which turns out to be two guys in Tokyo who are in way over their heads. Mt. Gox is trying to re-establish who owns which account. Since the names, email addresses, and hashed passwords of their customers have been published, this is difficult. No date has been given when trapped funds will be available. One thing that's now clear: don't keep any significant funds in any of these "exchanges". They're not banks. They are unregulated non-bank depository institutions.
Meanwhile, another exchange in Chile has taken up some of the slack, and the price of a Bitcoin has settled down around $14-15. At the beginning of June, it was around $8, and last week it spiked up to $30.
It's worth bearing in mind that the entire Bitcoin economy has less volume than a typical US supermarket. There's not much you can actually buy. Unless the volatility drops below 1%/day, there won't be. Merchants can't set prices in Bitcoins yet without a big exchange rate risk.
Bitcoins are a reasonable idea, but the Bitcoin financial ecosystem is far too flaky to take seriously.
Screw an inflationary currency and all those pro/con arguments. I'd settle for one that was vaguely stable. I can tell you about how much [insert product or service here] 1USD will buy tomorrow. I haven't the least flipping clue how much a BitC is worth tomorrow because it's a niche, illiquid, broken-by-design, proof-of-concept. And as I've made a zillion posts on Slashdot pointing out, a "global currency" that must experience many orders of magnitude of deflation in order to be something other than a toy is worthless.
They screwed up the BitC expansion curve, and screwed it up badly. And it's fatal to the currency.
Step 1 - Look at everything you hate about credit card companies... now do the reverse of all of that.
Step 2 - Look at all the things you like about cash... now do all of that.
You now understand the goal of bitcoin. Even cash money systems have problems starting. Just look at confederate dollars.
Then again, you'd think the Secret Service would love a a counterfeit proof system and wish they could copy it somehow.
I8-D
You can pay tax in BTC the same way you can pay tax in euros... simple conversion... Anyone who tried to claim euros are worthless because form 1040 requires dollars would be laughed at.
Sure you can convert bitcoins. However you also are exposing yourself to significant exchange rate risk and probably liquidity risk. I can exchange any currency but not every currency is equally desirable. Just because I can use bitcoins doesn't necessarily make it a good idea. Euro's aren't worthless because they require exchanging but there is a very real cost and some very real risks to exchanging currencies.
I can already have an e-gold (silver,platinum) debit card.
It automatically converts near the current spot price (minus a fee). The financial authorities have already been all over them.
Deleted
This is rhetoric and deflection. Consider his answer to the "Tulip craze" question (question 2, part 2). He never addresses the issue! He merely says that he thinks that people shouldn't speculate, and that bitcoin is good. There is similar evasion in the other answers (along with some actual information). There are many obvious things wrong with bitcoin, and repeating crypto-anarchic ideology will not solve them. You can't simply say "bitcoin makes everything cheaper, and if you don't agree that means you don't understand and are spreading FUD."
You know, maybe I don't understand bitcoin. Maybe the Slashdot bitcoin evangelists are right, and the vast majority of people are ignorant, stupid slobs who are unable to understand bitcoin and will always fear it. If that is the case, then bitcoin is obviously doomed. But if you can explain -- in a detailed and specific way that both idiots and geniuses can understand -- how bitcoin will replace all worldwide currency, then by all means do it. So far, this has not been done. Now I will go back to reality, in which nobody cares about bitcoins, until such explanation is given.
good enough, we agree to disagree. I think you should consider, though, that most commerce is already digital. What you just said makes perfect sense for someone 100 year ago to say about credit cards versus cash -- "it'll never happen, they're just all numbers!". Sounds foolish to deny it will happen when I say it that way.
CS majors know the time/space tradeoff, but they never get taught the 3rd, crucial, tradeoff of the set: comprehension!
Doesn't it seem wasteful to rely on tedious and sometimes ambiguous real world laws with a lot of overhead instead of mathematical laws?
Is this some sort of religious revelation? Like there is One True Way which mathematics can find? Because that philosophy's as old as Plato - and even Plato applied it to management of the real world better than you (Republic's a cool read, really!). Then observational science came along and the attempt to mould the world to some branch of mathematics turned into the rational use of mathematics as a tool to help model the thoroughly complex and ambiguous real world.
tl;dr Your beliefs are centuries out of date.
When merchants started accepting bitcoins, verifiers (because miners is a misnomer) started to see that their generated coins were worth something.
If they're "verifiers" then I would like you please to send me all your bitcoins for checking. Or are you saying that this form of verification is unique in finance in that it requires no audit? You can smell a cult a mile off when they insist on such absurd euphemisms.
Some keep their machines under dry ice.
It's like giving portable fans to people who mine.. sorry, verify... gold.
A bitcoin laundry already exists.
Which is sufficient reason why no government will accept it, ever. For who are you hiding your transaction details from?
Bitcoin would provide these same services that payment services, credit cards or banks do but with much less cost to the merchant and customer.
Why is there less cost? Please try to at least justify one thing you say.
I have lofty dreams of a world where people can send money abroad without having to pay 20+% in many cases
Your lofty dreams are my reality. Which world do you live on?
Where people can raise funds through services like paypal but not have their accounts arbitrarily frozen.
No, the ISP will just deny you connectivity. Or your computer will be confiscated. Anyway, since you'd be an idiot to accept potentially laundered money, people will be wanting to see some sort of accountability attached to transactions. The accountability services will be denied to you if you're seen to misbehave.
Also, people who leave a lot of money in Paypal accounts are idiots. And idiots will do even worse with the plaintext bitcoin wallet on their C:\ drive.
Where citizens in developing nations who already oppose their government do not have to pay for wars of genocide out of their own pockets as was the case in ex-Yugoslavia where authoritarian control over the money supply helped finance a terrible war and bring about the worst hyper-inflation in Europe since WWII.
Woah there, sparky, unresolved issue alert. Meanwhile during any bitcoin-age civil war each side will just go around stealing computers for bitcoins.
Bitcoin in some form is going to be adopted
I shall pump the value of my stock! I shall! Believe in me and make me rich!
Our aspiration for bitcoin is to provide competition to the current system making everything cheaper for all.
"Competition makes stuff cheaper" being the most common justification of capitalism and the capitalist's primary fallacy in the eyes of those who oppose capitalism. And there was you going on about how diverse you are. Just another Ayn Rand internet libertarian.
It's about cutting the middleman,
In a few cases. Mostly you'll still want one to do the same authentication, storage, exchange, etc.
democratising money
I can vote money for myself?
and handing back power to people
You sound like Thatcher. Privatising services means handing them back
Here's how it's going to go. 1: congress will legislate the currency out of legallity. 2: as a means of exchange, it will then only be of value in fully obfuscated exchanges, meaning you won't be able to use it to buy anything isn't illegal or being illegally sold or being publicly sold. 3: Then they'll start catching people and jailing them (for a LONG time) for using a currency they don't permit in transactions they don't permit for items they don't permit. 4: the value will settle out at zero in the USA, inasmuch as there is no inherent value in the currency itself, and it will have no value as a unit of work exchange.
This includes transactions for drugs; because drug dealers won't have any way to spend the currency -- so the value will be zero there, too.
The idea that congress would let an untraceable currency minted by the public get going in any serious way... that's just delusional. They didn't even let EBay go unmolested. Game over.
I've fallen off your lawn, and I can't get up.
The major difference is that credit cards and the computerization of banking didn't "replace" any currencies, they simply eased the circulation of standard fiat currencies around from bank to bank and account to account. They digitized the existing system, in other words.
There are *very* few use cases where Bitcoin offers substantial benefits above and beyond using something like a credit card, and most of those use cases are directly antagonistic to the governments and regulatory bodies who would need to embrace bitcoin to make it a truly viable standard beyond the niche market it currently occupies. Of the list of strengths Mr. Taaki cited, the only ones truly unique to Bitcoin (that could NOT be implemented in our current system) are the decentralization and privacy offered - both of which do nothing to entice a centralized regulatory body charged with overseeing, taxing, and monitoring the system to accomplish those goals, and in fact actively work against their accomplishment of those goals.
I'd also say that you could make a pretty solid argument that the majority of people who are buying into the Bitcoin hype at this point are the paranoid & the criminal (for whom a decentralized, anonymous transaction mechanism is appealing), or the excessively-nerdy folks with very fast computer rigs (who dream of making millions on something which bears all the hallmarks of a pyramid scheme).
If SHA256 or ECDSA was ever cracked, we'd have far bigger problems to worry about than bitcoin being destroyed
Yeah, the world was in chaos and turmoil with no currency system or economy whatever before SHA256 or ECDSA.
The internet wasn't built perfect. But years of reshaping/patching/incremental design have shaped it into a workable network. Bitcoin will too undergo this transformation with time as it ages.
You insult the people who built the Interent by comparing your little project with it. The Internet wasn't built to make a few people with awful PR skills rich. It was a resilient defence network, then an academic network, then a general communications tool. It is a network of autonomous networks, parts being built independently to make a useful whole. Bitcoin is a single, poorly-thought-out idea with one fairly routine mathematical feature.
Bitcoin's protocol itself will need to be extended in order for it to grow.
By me, right? This is a democratic thing, so I get to vote for the representatives who decide on monetary issues, just like with regular government, yes?
The point to Bitcoin is that you can choose your own level of trust in an external service.
That is the "point to" every social endeavour, including exchange of plain-ol' dollar bills.
Then we can go further to where a person has all their funds in a trusted service like with email today-
We could call it a "bank".
Bitcoin- calling it a scheme for drug trafficking networks.
So you're saying it's not for that? It shouldn't be for that? What objection do you have to that statement?
The accepted 'standard' is to use SI prefixes.
The accepted standard when dealing with currency you're trying to sell to the wider population is not to say things like "the accepted standard is to use SI prefixes". This is the real world, not the science lab.
Our organisation has been aggressively seeking FSA regulation here in the UK for Britcoin.
If the FSA even thinks about granting some sort of approval for bitcoin then I'll be giving up on this country entirely. The disease of caveat emptor libertarianism has already deregulated the financial industry to the point that the country's public and private financial affairs are neck-deep in the shit - if the same disease manages to weave its own currency into the system then sensible investors and workers ought to pack up and leave before the country collapses into depression.
The illicit markets are a very small part of Bitcoin
Prove it. Show me the records that bitcoin is supposed not to have.
Sending funds abroad is time consuming, expensive and difficult. Recently I tried sending funds to a Polish bank from the UK- the bank was closed and I waited until Monday. Requiring me to be in person at the bank, the woman was unable to enter the Polish L looking character into her terminal. I had to aquire an internet banking code to do it online. Waited 3 days, logged in and the internet banking form didn't work. In the end, I ended using a friend to aquire Bitcoins and use the Polish exchange bitomat (we never use Britcoin ourself).
Because of the number of Polish people in the UK there are a billion and one reasonably priced ways of sending money quickly to Poland. If you don't know any of them and don't know how to use the Internet to find any of them then I seriously question your competence. When Poland enters the eurozone it'll be even SWIFTer, and certainly free for individuals. You know, there's a reason why it's harder to send money to certain countries, and as countries develop and their financial systems become more secure, it becomes easier to send money to those places. Since you're clearly libertarian you won't be able
bitcoins with magic beans sold some charleten was trying to pass off as a cure all and get the same pointless, short sight, and fallacious arguments.
Waste.
The Kruger Dunning explains most post on
All the morons who just don't get it. The same tools that make drug dealing hard allow governments to freeze assets and confiscate support money for anti-establishment causes. That's great when it's the "good guys" who are stopping "terrorists", what happens when they are putting the "freedom fighters" in prison? Oh, right, it's a question of perspective. But I'm sure you'll always be on the right side in that kind of battle. Fucking nazi.
1) The expansion curve has nothing to do with the volatility BTC is currently experiencing; that's because it's a new currency with an uncertain future (in terms of who will accept it later).
The expansion curve has everything to do with BTC's issues. The poorly-chosen curve guarantees deflation if the currency is going to expand to a level where the net value of every BTC in existence is more than a trivial, useless, quantity. Expected deflation triggers hoarding. Hoarding triggers illiquidity. Illiquidity triggers volatility.
2) People's expectations of a nascent currency's volatility are way too high. Any new currency is going to be that way! This expectation is effectively ruling out any new currency that can't get its volatility down to that of the USD immediately -- which means you're against any new currencies that don't start with some stabilizer. (Btw, no you can't tell me how much gasoline a USD will buy tomorrow.)
When the Euro was introduced, nothing even remotely like this volatility occurred. Nothing like this: http://bitcoincharts.com/charts/chart.png?width=1228&m=mtgoxUSD&k=&r=60&i=&c=0&s=&e=&Prev=&Next=&v=1&cv=0&ps=0&l=0&p=0&t=S&b=&a1=&m1=10&a2=&m2=25&x=0&i1=&i2=&i3=&i4=&SubmitButton=Draw& That's a chart that I'd expect to see with a pump-n-dumped penny stock or a fad like Beanie Babies. Not a serious means of value transfer.
This is a problem with the currency, not "people." If the currency was more liquid because of a better chosen expansion curve, it would not be an issue. (BTW, I can say that my USD will purchase 93-octane gas at around $3.90 to the gallon tomorrow in my area. I can say that with error bars of around 2%, barring some major swing in the world oil markets that have nothing to do with currency valuations. I can make no such statement about BTCs.)
3) Inflation and deflation are caused by changes in *expectation* of the growth the money supply. That is, it's only unexpected money shocks that change the price level/inflation rate. Bitcoin has broadcast how many there will be at all points in time, eliminating this uncertainty. This means that there will be no unexpected growth (though their could be unexpected velocity, liquidity, or acceptance level), and so the limited (final) quantity of bitcoins is *already priced in*.
So you won't have a scenario where, in 20xx, people say, "golly, they just stopped minting bitcoins, now they're suddently ultra scarce so we have to bid MORE MORE MORE for them." No: everyone will price in this event well in advance of the termination of growth.
At current prices, the total number of BTCs, after every single one has been mined many years from now, is roughly $303M (at current supply levels, it's much smaller, but I'm trying to cut the BTC some slack here.) For a currency that seeks worldwide adoption as an alternative to Visa/MC, this is, to be blunt, puny. Last year, Visa ran $5.4T in payments. If BTCs achieve the pathetic ubiquity of Discover (not accepted most places, little international presence), they managed to transact about $100B. If every BTC in existence at the end of BTC creation changed hands twice a week (which would be an unheard of currency velocity for an economy with a vaguely stable currency... the USD's velocity is approx. once a month.), the currency would have to deflate by a factor of 30 to reach $100B. (At the velocity of the USD, it would have to deflate by a factor of 240-ish.) Because it would have to deflate so much to be useful, it's unlikely to ever actually do so. T
The BTC exchange volumes are still far too low for a sane merchant to accept; the bid/ask spread and intra-day volatility is far too high. So, I'd accept my BTC, wait the required 10 minutes before I can turn it around (the BTC FAQ talks about this), and then end up collecting several percent less (or more) actual currency than I priced for. And that's if I implement totally dynamic pricing feeding off the data feed of my preferred exchange.
And Visa/MC provide far more services than just transfer. I guess for a more fair comparison would be the ACH system, which runs $0.25 and up per transaction.
Left out a zero there... ACH (according to an old ComputerWorld, anyway) starts at $0.025 per transaction, and tops out at 25 cents.
I suppose you would argue people should only develop programs for Windows then? Windows is a lot more popular. This is actually important: There are 900 million people willing to buy your program if you offer them the ability to run it on a certain operating system called "Microsoft Windows".
That's how I feel when game system posts come out. There are lots of topics that don't interest me, you don't see me cry each time an article gets posted.
If not with Bitcoin, do you really, really think this is NOT going to happen in my lifetime?
Yes, I really, really think this is NOT going to happen in your lifetime.
History is littered with the detritus of "inevitable ideas whose time has come" that weren't inevitable, and whose time hadn't come.
Yes but this time it's different. What you are missing is that bitcoin is the economic singularity!
I mean just listen to this sage investment advice:
Since bitcoin appreciates in value very rapidly during the singularity phase, you should convert all of your liquid assets to bitcoin as quickly as possible. Do not keep any cash, savings, or checking beyond what you need to pay for goods and services that cannot yet be paid for with bitcoin. The more things you can buy with bitcoin, the more bitcoin you should keep.
Stop wasting money on excessively expensive meals, televisions, cars, and anything else that loses value quickly or instantly. Instead, put your money into bitcoin. You will be much richer that way. You may think having less stuff is less fun, but actually the pleasure of financial freedom far, far outweighs any losses.
During the singularity phase, you should also take out loans to buy bitcoin, since bitcoin appreciates far more rapidly than interest on any fiat currency loan. When bitcoin gets near saturation, which is the end of the singularity, you should pay off the loans, because at that point the rate of appreciation will probably be a lot closer to the interest on the loans, and you may not be able to reliably earn money that way anymore.
I'm always reassured when I read such a balanced consideration of the pros and cons of any situation, aren't you? Clearly the people who really understand the all the nuances of finance and have thought this through deeply are on board with Bitcoin. What could possibly go wrong?
Better to be despised for too anxious apprehensions, than ruined by too confident a security. --Edmund Burke
Will I be able to play "Where's George" with bitcoin?
Siggy Wiggy Figgy Tiggy a bana bo Biggy!
Cash:Credit Cards:Bitcoins::VHS:DVD:Blu-ray
Doug Casey on Bitcoin and Currencies
L: Doug-Sama, we’ve had a number of readers ask for your take on this new Bitcoin system. As a person who likes to see the private sector compete in areas that governments try to reserve for themselves, this seems right up your alley – what do you think?
Doug: It’s a sign of the times. Lots of people are actively looking for an alternative to the dollar. I think Bitcoin is a very good thing, in principle. But after the recent disastrous hack, it’s probably a dead duck, at least in version 1.0.
It’s appropriate, however, that we’re talking about Bitcoin – an Internet-driven phenomenon – while you are in Bishkek, Kyrgyzstan and I’m in Beirut, Lebanon, and we’re speaking essentially for free over the Internet. Money is increasingly going to be Internet-related. But first we should explain what Bitcoin is.
L: Sure. There’s a Wiki entry, but the basic idea is that Bitcoin is an online (and therefore digital), non-government-backed currency. It’s not backed by anything, actually, but that doesn’t seem to be a problem for many users. The system has been adopted by a growing number of people around the world in just the last two years. People are used to currencies not backed by anything, so I guess I shouldn’t be surprised, but I am. On the other paw, unlike government currency, the Bitcoin system is based on a decentralized computer system that no single person or entity – including any government – has control over. That’s part of a design to keep the number of Bitcoins in circulation (inflation) strictly in check. So I can see why some people would see Bitcoin as being just like government currency, but better, because it’s supposedly inflation-proof.
That’s the idea, anyway, but in my view, it’s still not money – no more than unbacked government promises are. You can only use them among others willing to pioneer this cyber-frontier, so I really was quite surprised to see them catch on as well as they have. I’ve seen estimates that the market value of Bitcoins in circulation rose to about $130 million before they crashed last weekend.
Doug: Again, it’s quite encouraging to see that so many people are so disgusted with government currencies, and the total lack of privacy in banking. That’s why Bitcoin could catch on at all. But let’s go back to basics, and see if Bitcoin qualifies as money. Money is a medium of exchange and a store of value. Bitcoin may work as a medium of exchange sometimes, but not a very good one, because it’s proving so unstable. It has fluctuated so much in value over its short life that it is totally unsuitable as a store of value. Over 2,300 years ago, Aristotle identified the five essential attributes that are necessary for a good money
L: It has to be durable, divisible, convenient, consistent, and have value in itself. But don’t forget your own addendum of “can’t be created out of thin air infinitely.”
Doug: Right. Let’s see how Bitcoin stacks up. First, is it durable? As nothing more than ones and zeros on a computer network, it might seem that the answer is no – it’s certainly not as substantial as gold. But a Bitcoin is arguably a lot more durable than a piece of government-issued paper than can be lost, burned, or even fall apart in your jeans pocket if you forget to take it out before doing the laundry. Moreover, since the Internet was designed to be multiply redundant, and even able to withstand nuclear attack, it’s arguable the Bits won’t just disappear.
L: We should point out that the recent problem with a bunch of usernames and accounts being exposed was not a failure of the Bitcoin system itself, but apparently of the physical security of an intermediary business that interfaces between the public and Bitcoin. There
I have lofty dreams of a world where people can send money abroad without having to pay 20+% in many cases to rip offs like western union. Where people can raise funds through services like paypal but not have their accounts arbitrarily frozen. Where citizens in developing nations who already oppose their government do not have to pay for wars of genocide out of their own pockets as was the case in ex-Yugoslavia where authoritarian control over the money supply helped finance a terrible war and bring about the worst hyper-inflation in Europe since WWII.
You can do this now just by everyone using the same currency, be it gold or whatever. THe government can try to deflate a currency's value but it's worth whatever people decide it is ultimately, and if i physically have 5 dollars, i have 5 dollars. Inflation and freezing accounts only works on virtual money, which lets face it is what bitcoin's biggest downfall is.
I'm sorry, but I read your comment as: "I'm butthurt because I didn't thought of investing/mining Bitcoins when it was easy/they were cheap and, because of that, I'm throwing a tantrum and refusing to deal with Bitcoin or even acknowledge its advantageous properties."
If you have any actual argument on why Bitcoin is worthless/unfeasible in the long term, we would love to hear it. "Boohoo, I don't like the people who hang around the Bitcoin forum." is not an objective reason, although it may be a totally valid reason for YOU not to use/invest/mine Bitcoins.
You're going to have to do better than that, if you want to make sure Bitcoin doesn't become more widely accepted, though.
tl;dr: u mad bro?
It seems that out of the numerous question posts on the other thread asking him about the bitcoin scam none made it to him.
I am shocked. So how many bitcoins do the editors here own?
So, your view is that the current BTC is "flying", and therefore I should offer no constructive input for BTC 2.0? It isn't an opinion that the currency is volatile and illiquid; that's a fact. Something with a net value of $150M (or whatever it is this hour) should be way more liquid than it is. It isn't liquid because the BTCs are being hoarded.
"Keep [my] idea way the [explitive] away from the current Bitcoin project." Worry not. My ideas aren't directed at the current BitCoin project. I realize it's infeasible to rescue it.
Damn skippy I'm not using it... When the EFF decides to return donations in this currency (even though it's technical ideas are right up their alley), I'd say the likelihood of BTCs becoming a useful form of electronic value transfer is approximately zero.
And I never said fixed-expansion-curve currencies were bad. They are not inherently inflationary or deflationary. I said that the curve that was chosen was a poor one, that DID guarantee deflation.
So, your view is that the current BTC is "flying", and therefore I should offer no constructive input for BTC 2.0?
No, offer all the constructive advice you want for an open source currency project. Another currency project, even one cryptographically modeled off Bitcoin. Just don't pimp the idea of fucking over the people using the currently *existing* Bitcoin by retroactively increasing the ultimate supply, which your post came dangerous close to legitmizing. (and that remains true even if you didn't explicitly advocate that -- the problem is that complaints such as yours have the subtext of encouraging inflation of the existing bitcoin)
And I never said fixed-expansion-curve currencies were bad.
Good thing I never accused you of such, then!
Btw, I have an idea to help you out on your endeavor, apprpriate for your moral character: when you introduce Bitcoin's twin brother, promote it as something with the same growth curve as Bitcoin 1.0, or least one whose growth asymptotically terminates. THEN, once all the suckers start using it, fuck them up the ass by converting it to an expansionary currency -- you know, just to "stabilize" the market and provide "liquidity". Morons'll never see it coming when their coins get inflated away!
Information theory is life. The rest is just the KL divergence.
Is it really? Personally I think that before long they'll start falling over themselves to start accepting untraceable bribes and kickbacks no matter what kind of noise they make on camera.