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Online Gambling Site Bets On Bitcoin To Avoid U.S. Laws
SomePgmr writes with a story about an online gambling site planning to use Bitcoin to sidestep U.S. regulations that effectively ban online gambling. From the article: "Michael Hajduk had sunk one year and about $20,000 into developing his online poker site, Infiniti Poker, when the U.S. online gambling market imploded. On April 15, 2011, a day now known in the industry as Black Friday, the U.S. Department of Justice shut down the three biggest poker sites accessible to players in the U.S., indicting 11 people on charges of bank fraud, money laundering, and illegal gambling. ... Infiniti Poker ... plans to accept Bitcoin when it launches later this month. The online currency may allow American gamblers to avoid running afoul of complex U.S. laws that prevent businesses from knowingly accepting money transfers for Internet gambling purposes. 'Because we're using Bitcoin, we're not using U.S. banks — it's all peer-to-peer,' Hajduk says. 'I don't believe we'll be doing anything wrong.'"
And good job. Base your business off a virtual currency with ZERO backing and no control whatsoever.
And it's worse than US Dollars exactly how now?
Science advances one funeral at a time- Max Planck
Because the right people don't make money with it.
Science advances one funeral at a time- Max Planck
Sounds like a dumb idea, until you realize that Chuck E. Cheese and similar businesses have, for decades, been using a similar tactic to avoid running afoul of gambling laws: You're not playing for gifts or money, you're playing for worthless tokens!
The fact that said worthless tokens can be exchanged for things with monetary value is, apparently, non sequitur.
An enigma, wrapped in a riddle, shrouded in bacon and cheese
Not too long after Black Friday I had the same idea of using Bitcoin currency instead of real moolah. A site called Betcoin had already done this using the jpoker/jspoker library. I frequented the site for a while and even went back to it months later. In both cases the volume of people on the site was extremely low and the amount of bitcoin compared to real USD value was paltry even in comparison to the Full Tilt Poker $0.25/$0.50 tables. There just wasn't enough money in circulation on the site and not many people wanted to stake their futures on the volatile Bitcoin currency in the poker world. Plus, anyone that did any decent research just found various overseas and Indian-owned online casinos (harder for the US Gov to prosecute Indian territory casinos in Canada) and could exchange money by select Visa merchants, cash proxy sites, or by money order.
That isn't what backing means. Every single reply to my post has the same issue. Backing does not mean "the issuing authority has assets they can sell" and it doesn't mean "the issuing authority can force me to use their tokens through the barrel of a gun".
To say a currency is backed by something has a very specific meaning, which is that there is an asset literally "behind" the currency. The currency itself is merely a proxy for the backing material, one can be exchanged for the other at a specific rate. The gold standard meant you could, at least in theory, go to a bank or the government, hand in some currency and walk out with gold bars.
So given this clear definition it's meaningless to say a currency is backed by "the authority to tax". That authority might incentivize a large population to obtain these tokens and thus give them some value - but that isn't backing. It's taxation. It's also wrong to say a currency is backed by the ability to sell something like land - OK, so the government sells some land it owns. What does it sell that land for? Oh, right, it sells the land for dollars. So if I lose confidence in the dollar and want to hand them in, in return for the asset that backs them, the government selling land and giving me back more dollars doesn't help. I'd need the actual land itself and there'd need to be an actual somewhat fixed exchange rate between dollars and land. But there isn't.
If you want to argue that dollars have value because the US government taxes its citizens in that way, go right ahead. That argument doesn't lead to "Bitcoins are worthless because no government taxes in them" though. Bitcoins obviously aren't worthless because they started out having no value when they were first created, and obtained value over time as people learned about them. The system is an existence proof that you'd be wrong.
Is the US going away tomorrow? No.
Is the US government and banks going to continue to manipulate the US dollar for the foreseeable future? Yes.
Is "A. Random H@X0R" going away tomorrow? It doesn't matter. Bitcoin is a decentralized currency. Bitcoin is not dependent upon "A. Random H@X0R" for it to be trusted.
Where does the trust in bitcoin come from? Well if you don't know anything about bitcoin, you probably shouldn;t trust it. If you know something about computer science and theory of computability, you'd know that bitcoins are actually much harder to acquire than a government issued currency, and is therefore much harder to manipulate (e.g. like gold). A trillion US dollars can be created virtually with a keyboard stroke. The only thing stopping this from happening is the people in charge. What stops a trillion bitcoins from being instantly created is the laws of physics and math.
A lot of currencies have collapsed from rampant inflation exactly because the people in charge could *not* be trusted.
Some people trust government officials more than the laws of physics and math. I personally don't.
Sorry, but your entire post is wrong from top to bottom. Don't take it personally, it isn't like they teach this stuff properly in schools.
First, you did appeal to authority, and continue to do so. That you didn't do it in a way that is obvious to you is your problem, and yours alone. I will give you a hint: economics is not a science. There is no proof, there is no truth. If you take physics as your standard for avoiding self-delusion, economics doesn't have theories either. Citing "economics" as a source is automatically an appeal to the prestige of a collection of untested speculation.
Second, you ignore velocity and divisibility. If we assume that the hoarding hypothesis is correct, then you end up in a situation where deflation is forestalled, but acceptance is not. I'm going to skip my angry rant about people not understanding the dynamic equilibrium, but the short version is that virtually everything in your experience is the product of a balance of opposing forces. To the extent that hoarding can raise the exchange rate, the exchange rate tempts people to divest their funds. Acceptance is a product of utility and familiarity. Utility is very high and getting higher every day, while familiarity is very low, but also growing fast.
Third, you appear to have weak grasp on the distinction between money and wealth, and also on the Janus nature of credit and debt. I'm not sure how useful it would be to try explaining how much of your third section is wrong. From your point of view, your analysis appears to be completely correct, but it isn't, because your mind is wrong. In our current system, borrowing money is really damn cheap because most of the cost of your borrowing is paid for by other people (mostly through currency inflation). If you ignore the external costs, then yes, borrowing is the cheapest way to go.
Capital is wealth, you cannot borrow it unless someone has already produced it and is willing to lend it to you. You cannot buy it unless it has already been created and someone is willing to sell it to you. You can, however, create it yourself, but specialization says that your efforts are likely to be better spent doing whatever it is that you do well instead.
Money on the other hand, is merely a system for accounting and exchange. Since it is ruled not by laws of the universe, but by laws of men, it does whatever we say it does. We can create and destroy it at will. And by "we", I mean special people. You and I don't got a vote. Bitcoin is an attempt to more closely approach the platonic ideal of money-ness, and part of that is by deciding up front the answers to the questions "how much money?", "who gets it?" and "when?".
Bitcoin is an agreement among men, made real through software. We agree to follow certain rules, and give up any chance at special privilege, in return, we know that everyone else also has to follow the same rules, and are prevented from ever trying to claim special privileges for themselves (like the ability to shave a bit off of other people's money to make new money for themselves).
I tend to come off a bit harshly, but I hope this post was educational rather than offensive. I hope you (and everyone else) will ponder carefully on what is real, and what is imaginary.
See that "Preview" button?