Ask Slashdot: Should Bitcoin Be Regulated?

Nerval's Lobster writes "Federal regulators are starting to make noise about Bitcoin, the digital currency that's gained in recognition and value over the past few years: the Treasury Department's Financial Crimes Enforcement Network (FinCEN) is offering up 'guidance' for digital currency and those who use it as part of commerce. But the Bitcoin Foundation, which is devoted to standardizing and promoting the currency, doesn't like that idea; as Patric Murck, the organization's general counsel, wrote in a March 19 blog posting: 'If FinCEN would like to expand its statutory authority over "money transmitters" to include brand new categories such as "administrators" and "exchangers" of digital currency it must do so through proper rulemaking proceedings and not by fiat.' If Bitcoin continues to gain in value, it could spark a rise in virtual currencies—and force some very interesting discussions over regulation. But here's the question: would regulation actually be good for Bitcoin, if it made organizations and businesses more comfortable with using it as a currency?"

Comments

Should Bitcoin Be Regulated?

[Cornwallis]

It should if you want it to be as legitimate as the dollar.*

* That's a joke son.

Re:Should Bitcoin Be Regulated?

[icebike]

There are no conceptual flaws in the implementation of Bitcoin that I can foresee,

Well if TFA (first link) didn't point out a conceptual flaw then you weren't trying very hard.

When virtually the first mention of Bitcoin in any official capacity comes from "Financial Crimes Enforcement Network" of the US Treasury department, you can pretty much see that it would only take one or two government agencies throwing their weight around and equating Bitcoin with some form of crime to pretty much bring Bitcoin crashing down.

By the very way Bitcoin works, several aspects of it fall under the claimed power of this Agency:

FinCEN's regulations define the term "money transmitter" as a person that provides money transmission services, or any other person engaged in the transfer of funds.

Further all of Paragraph C (De-Centralized Virtual Currencies) is aimed squarely at Bitcoin. As long as you use your mined bitcoin to purchase green beans grown in your neighbors garden you are ok. But as soon as YOU or your NEIGHBOR try to spend the bitcoin beyond your little over the fence arrangement they come under regulation.

In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.

Its a huge power grab, designed to reign in Bitcoin by regulating anyone who tries to actually USE it, and failure to submit to this regulation will certainly be a defined as crime. Now who whats to hold Bitcoin?

Re:Should Bitcoin Be Regulated?

[murdocj]

it has a LONG way to go to be that legitimate.

Re:Should Bitcoin Be Regulated?

[shaitand]

"When virtually the first mention of Bitcoin in any official capacity comes from "Financial Crimes Enforcement Network" of the US Treasury department"

Their mention was a guideline saying to treat it the same way you treat any other currency interacting with the dollar. That isn't exactly an indication they are going to try to shut anything down let alone evidence that they could do so.

Re:Should Bitcoin Be Regulated?

[Paleolibertarian]

Before the question of regulation can be answered one must have a good knowledge of the difference between paper (fiat) money and real money as defined in the U.S. constitution. Paper money in the past was redeemable from banks in silver and gold coin. In fact paper dollars had printed on them "Silver Certificate" that guaranteed that the paper dollar could be redeemed for a 90% silver dollar coin. The fact that it was redeemable for "hard" money (silver) put a limit on the number of paper dollars that could be printed because banks were always subject to bank runs if the depositors felt that their paper was being inflated.

Inflation BTW is not a rise in prices (Consumer Price Index) but an increase in the supply of money.

So we have two kinds of money, real money (gold and silver despite what Ben Bernanke says) and paper (fiat) money. And now we have a third kind of money called digital currency (Bitcoin). Bitcoin is still a fiat currency because, like paper money it was created out of nothing. The fact that it was created by a computer(s) is irrelevant. Most of the "Dollars" nowadays are merely bookkeeping entries which were created by the Federal Reserve and "spent" into circulation thereby inflating the money supply. The same can be said of the Euro, Pound, Yen, Yuan etc...

Because Bitcoin is a fiat currency it is subject to inflation and like other fiat currencies its value is determined by the faith of the people who have Bitcoin wallets. If people stopped accepting Bitcoins then Bitcoins would be worthless. The same can be said of every other fiat currency. They are all faith-based money.

Gold and silver along with other traditional coinage metals copper and nickle are real money because they have an intrinsic value. Fiat money however requires that some institution or government stand behind it. Take a dollar out of your wallet and on it you'll find "THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE", but you'll find no such words on any gold, silver, copper or nickle coins because it isn't needed.

The good thing about Bitcoins have is that they currently are private, outside of the banking system and they facilitate monetary exchange without the need to ship "real" or 'fiat" money around the country. Bitcoin transactions have some of the utility of credit/debit cards with the addition that they are anonymous and private. If governments start regulating Bitcoins they will first lose their privacy and anonymity which to me is their only redeeming qualities.

Re:Should Bitcoin Be Regulated?

[ultranova]

Gold and silver along with other traditional coinage metals copper and nickle are real money because they have an intrinsic value.

The material a gold coin is made from might have value even if the coin is melted down. However, only "might". After all, no one is required to accept gold in payment, and they are unlikely to do so unless they think they can sell the gold forward, or have a need for its specific properties. Gold stops being currency the second people stop thinking it is; it will remain a pretty material useful for jewelry, but so is quartz. Thus, almost all of gold's value is based on people having faith in that value, which is no different than paper money (you can burn paper or wipe your ass with it, thus banknotes have intrinsic value - it's just tiny compared to the nominal value, just as with gold).

Something is money if and only if enough people to form a functional economy agree it is. At this point, Dollar and Euro are far more so than gold, and Bitcoin is getting there and will almost certainly surpass gold if it survives to the point where the network effect really begins.

Re:Should Bitcoin Be Regulated?

[Paleolibertarian]

I see. So you don't believe that Gold and Silver are money since "no one is required to accept gold in payment". While It's possible that some people would prefer Dollars over Gold or Silver I would call those people fools. The reason for the term "Legal Tender" is because paper currency has no intrinsic value above the value of the paper and ink which isn't much. In Germany's Hyperinflation during the early years of the 20th century people were using stacks of newly printed Reichsmarks for heating and cooking fuel. People became so distrustful of fiat money that "legal tender" laws had to be passed to compel people to accept them in payment. They would much rather had silver or gold or even copper penny's or nickles.

So if you have any old gold or silver coins that you think you can't spend like the real money they are just send them to me. You see paper money can be printed without end but gold and silver have to be dug out of the ground. This is why gold and silver have value while paper money only has value as long as some fool will accept it. When there are trillions of dollars being printed or created every day the dollars in your pocket will not be worth the paper they're printed on.

Previous to the invention of paper money, gold and silver served very well as money for thousands of years. Gold and silver will be freely traded again because the Dollar regime is coming to an end.

Confused

[Anonymous Coward]

How can your regulate something that you do not or can not control?

Re:Confused

[Anonymous Coward]

You might think bitcoin is impossible to control, but you're misinformed. The immediate rollback from 0.8 proves that all it requires is the large mining pools to reach a decision behind closed doors, and they'll implement whatever modified protocol they desire. The problem with such power being in the hands of the pools and large miners means all the government has to do is change them minds of 10 people, and they'll introduce whatever tracking/anti-laundering controls they desire right at the point of exchange.

Re:Confused

[fustakrakich]

Well, that's kind of the point. The banks want to regulate/control and profit from all human transactions. It's not a big stretch to see that government will comply with those wishes/demands.

Re:Confused

[Tim the Gecko]

The immediate rollback from 0.8 proves that all it requires is the large mining pools to reach a decision behind closed doors, and they'll implement whatever modified protocol they desire.

If most of the power lies with the active miners, then perhaps there will be a temptation to change the protocol to increase the production rate. The people sitting on huge stacks of previously mined bitcoins don't seem to be have much control over the current mining/validation.

Re:Confused

[AlphaWolf_HK]

Until of course, there are no more bitcoins to mine.

Re:Confused

[AlphaWolf_HK]

Who wants to have control over this are people like Chuck Schumer. They get off on telling people what to do. If some dumbass wants to get high on weed, Chuck Schumer wants to put him in jail. Chuck Schumer also foolishly asked the DOJ to seize the Silk Road's domain name. Chuck Schumer and his kind don't like bitcoin because they can't control it. They can and do control mastercard, visa, and paypal. If the US government doesn't like you enough, they'll make sure nobody in the world can pay money to you electronically, even if they aren't trading in US currency.

As for banks? Banks will always be around, period. Besides, I'd rather banks exist than not. In fact, I know this is going to be controversial, but those scam check advance and title loan agencies should be around too. Why? When stupid people get desperate, they make stupid moves, which includes stupid borrowing choices. It's either they go to these companies, or they go to loan sharks. Loan sharks answer to nobody but themselves, and if these stupid people borrow from them, things get much worse. Unlike loan sharks, scam companies can't rough up your wife, break your legs, or shoot up your house. They don't fund organized crime, and it actually is possible to pay them off. When you think you've paid off a loan shark, chances are he says you were a minute too late to the meeting and you owe him double interest. Repeat forever. Loan sharks are NOT subject to usury laws.

Not only that, but regular people make money off of banks. I do it all the time. If you ever need to start a business, often times banks are the best source of quick capital. Need to buy a home? Same thing. I rather like it that banks exist.

Re:Confused

[Rich0]

Indeed, you can't even spend bitcoin without the consent of the miners.

In fact, there is no obligation for the miners to allow any bitcoin to be spent at all (though if they did that they'd find it hard to spend their own bitcoin). They could simply generate new blocks and not include any transactions in them at all.

It does self-regulate to some extent. If you offered a $100k transaction fee for your transaction I'm sure somebody would be willing to spend some CPU cycles to get a block and list your transaction. Transaction fees are actually the way that non-miners influence the process. Right now it seems like most miners are wiling to accept transactions without fees, but there is no reason they have to do so.

Re:Confused

[khchung]

How can your regulate something that you do not or can not control?

So many posters here like to lament that lots of so-called "inventions" and patents are simply real world concepts with "on the internet" attached to it, so those should not be an invention nor should it be treated differently than their real life counterpart. E.g. selling songs on the Internet should be no different from selling songs on CD, i.e. you should be able to resell or lend it.

Yet when it comes to Bitcoin, which is practically "money ... on the Internet!", all common sense got thrown out of the window.

Cannot control? How can the government control the movements of small sheets of paper (i.e. cash)? Yet cash movement is still regulated. Same with small pieces of metal (i.e. gold, platinum, silver), or small bits of crystal (i.e. diamonds). Heck, even export of mathematical algorithms (encryption), information (movies, songs, classified documents) have been regulated in the past.

The real world is not WoW, the authorities can and do have laws in effect without first needing the ability to make that law impossible to break in the world. The law is not a game, you won't get away with something simply because the physical world do not prevent you from doing it like you do with using aimbots and cheats.

Bitcoin ARE already regulated just as everything of value is regulated. i.e. You can certainly _try_ to take a bag of diamond across border, and you will very likely succeed, though if you got caught, you will face harsh penalties. Similarly, you can certainly go ahead to transfer a large amounts of Bitcoins across borders, and you will most likely succeed without getting caught. But IF some law enforcement decided to target you, that transfer will be something they can get you punished for.

Re:Confused

[Anonymous Coward]

But the real point is that they're going to have a hell of a time trying to regulate this; it will be like the war on drugs... only much more futile.

Re:Confused

[ceoyoyo]

You usually don't tax OR regulate money of any type. Except for special circumstances you can't. You tax and regulate exchanges of money. The government doesn't tax you on how much money you have, they tax you on how much you earn and spend. You can already get around a lot of taxing and regulation if you use cash. But if you, for example, own a store, and you do it on a large scale, you might be caught when you get audited and somebody notices that your inventory keeps disappearing.

Bitcoin is a bit easier to sneak across borders in large quantities and it (currently) opens up some options for shenanigans to the average man that are usually reserved for bankers, but it's not really that different from a regular currency.

Re:Confused

[SerpentMage]

No they control the exchange sources, not the currency itself. So while you might be able to move the currency you will not be able to spend it. And if you think that the other countries are going to says, oh those stupid yanks we will not control the currency then let me sell you some swamp land in Florida.

Re:Confused

[squiggleslash]

The ability of a government to control anything is independent of whether the scheme in question originated with starry eyed libertarians with a shaky grasp of economics.

If the government wants to regulate Lego, model railroading, soda, The Interwebs, the word "Milk", supermarkets, pharmacies operating in the open, and water, it is able to, and does.

Virtually the only way a government cannot regulate the use of bitcoins (and thus the currency itself) is if it chooses not to, either by banning it completely forcing the currency underground, or by ignoring it.

Re:Confused

[fustakrakich]

The problem is that the banks are regulating the government. It should be the other way around. Your personal experiences don't necessarily reflect the average.

Re:Confused

[khchung]

Similarly, you can certainly go ahead to transfer a large amounts of Bitcoins across borders, and you will most likely succeed without getting caught. But IF some law enforcement decided to target you, that transfer will be something they can get you punished for.

A bitcoin is nothing more than the password to a decentrally managed account containing that amount of currency as agreed by the blockchain. Saying that you can transfer bitcoins across borders is like saying that by hopping on a plane from Canada to the UK while remembering your online banking password (and holding your debit card) you are "transferring" 50,000 dollars across the border.

An electronic money transfer is nothing more than some number in one bank's computer being decreased by a certain amount while another number in another bank's computer being increased by a certain amount. Nothing "crossed" any border, except possibly some bits. Yet law enforcement and the courts have no trouble sending people to jail over those changes in numbers.

Go ahead, keep playing word games. One day, you will discover that the world, or more precisely, the courts of the world, do not accept kindergarten word games as defense.

Re:Confused

[rmdingler]

This. And many times for many crimes a wire/mail fraud charge precedes the search warrants. The transfer of wealth acquired through questionable genesis is the easiest way for detectives to track illegal activity. With apologies to a French Inspector, to find the man you follow the money.

Re:Confused

[MrL0G1C]

It shouldn't take long before ASICs mine out most of the remaining Bitcoins and then mining will only be needed for transactions, not sure how that works but apparently a transaction fee should be paid to a miner for computational work done.

Why can't the client just do a little bit of processing each time it makes a transaction? I don't mean calculate for it's own transaction but a bit of distributed computing equal to the transaction processing needed.

It's as clear as mud how all of this scales, how much energy does it take to work out if a transaction is legit when millions of transactions start to happen daily? How much of the transaction history is actually needed (in GigaBytes) to determine if a transaction is kosher and how big will that transaction history be if there are millions of transactions per day?

Re:Confused

[AlphaWolf_HK]

My personal experiences reflect the fact that I am responsible with my money. I found out recently when applying for a bond that my credit score is 842. Here's why: I borrow, but pay back what I owe before interest is due. Novel concept, isn't it? Raises your creditworthiness, plus you get all of the perks of borrowing (e.g. hedging, fraud protection - and in the case of mastercard 1% rebates, free extended warranties, 60 day price guarantees.)

Contrast to that of somebody who does the opposite (borrowing while making the minimum payment or being late all the time) is going to get gouged. And it makes sense too, people like that are a huge risk to loan money to. I've loaned out my money before, interest free too, but I never loan it to somebody who I believe to be the slightest risk. For example, my friend who I loaned a very large sum of money to I am confident will pay me back, but I would never loan to my brother in law who is a model example of those who get gouged, namely because he owes everybody (including his parents) in the tens of thousands of dollars, with no plans to ever pay them back. He almost lost his car to one of those title loan agencies and financed his house recently at a 14% interest rate.

My personal experience could be the average if people would simply be more responsible with their borrowing, but that's about as hard as asking most people to think before they vote.

Re:Confused

[dwye]

The government doesn't tax you on how much money you have

There are a few depositors in Cypriot banks that might disagree. Also, Pennsylvania attempted to institute a Personal Property Tax on its residents about a decade ago. In the PA case, it fell apart because no one wanted to report their personal property to the state, and the state had no way to track out-of-state accounts, whether bank accounts, mutual funds, or brokerage accounts, nor had they any way of tracking what in the Middle Ages were called Movables, like jewelry, coin collections, art, etc. That its first attempt was politically suicidal and impracticable does not mean that the Commonwealth did not have a legal right to this kind of tax, though.

OTOH, all real estate taxes are on the assessed value of your property; since real estate is harder to hide than Movables, it is possible to send people around every so often to track changes in property values, as well as tracking the current real estate market and generalizing across the neighborhood and across neighborhoods. Of course, whenever a total reassessment is done, at least half the people in the county complain that their assessment is nonsense (i.e., too high), and often can prove it, since no county will employ an assessment company that reports that the county value has declined and cannot be taxed as highly, even if it has.

Bitcoin is a bit easier to sneak across borders in large quantities and it (currently) opens up some options for shenanigans to the average man that are usually reserved for bankers, but it's not really that different from a regular currency.

Actually, bitcoins should be easier to move in large quantities, as currencies have limited top bills ($100 for the USA, frex) while the all-digital bitcoins can be treated like jewelry. Smuggling jewelry is and has always been fairly simple (hence the name, Jews having to keep their wealth mobile back in the days of pogroms and expulsions).

Re:Confused

[KingBenny]

which makes the elitist basterdz the government of bitcoinland then?

Re:Confused

[ceoyoyo]

You'll note that I prefaced the paragraph with "usually" and "except for special circumstances."

But thank you, your Pennsylvania example illustrates my point - it's generally not practical to tax most held wealth (property being an exception), particularly when it's so easy to tax transactions instead.

here we go again....

[Anonymous Coward]

ENOUGH!

Re:here we go again....

[unixisc]

Yeah, one more bitcoin story. I have an idea for a /. story - how about one on how Raspberry Pi's can be used to mine bitcoins? That should be a double whammy here for /., since they'd get to cover 2 of their pet topics.

Re:here we go again....

[Pseudonym Authority]

Go to reddit if you want an endless supply of little bubbles tailored to your interest.

Re:here we go again....

[dwye]

q. how many raspberry pi computers does it take to mine a bitcoin?

a. unknown. a beowulf cluster of them is still working on its first one.

You forgot that in Soviet Russia, the bitcoin miners would still be trying to purchase their first raspberry pi, and something about Natalie Portman covered in hot grits.

Ask Slashdot: Have you forgotten about Bitcoin ye?

[Anonymous Coward]

Here's another pointless story to remind you to invest in it! You'll be a billionaire!

White paper on EXACTLY what a bitcoin is, please?

[ThorGod]

I've looked, didn't find it. I just found some vague mumbo about cryptography with a ton of loaded buzzwords.

I want specifics.

1.) What is a bitcoin, EXACTLY?
2.) How divisible is a single bitcoin?
3.) All the specifics of any relevant protocols.

No need to regulate it

[Anonymous Coward]

Just regulate the exchanges. Once the druggies and child pornographers see that it isn't really an anonymous currency, Bitcoin will crash hard.

Re:No need to regulate it

[cgimusic]

I don't really see how that will help. Laundering Bitcoins is incredibly easy compared to actual money. In addition, as more websites begin to accept Bitcoin, exchanges will become less important.

Re:No need to regulate it

[Qzukk]

and I've still to figure out what they have to gain by allowing a free site hosting that shit to stay up

It gives other countries people to bust.

Re:No need to regulate it

[peawormsworth]

I don't really see how that will help. Laundering Bitcoins is incredibly easy compared to actual money. In addition, as more websites begin to accept Bitcoin, exchanges will become less important.

Can you elaborate on this. How do you launder bitcoins?

Re:No need to regulate it

[cgimusic]

You dump a fixed amount of Bitcoins into a communal address operated by a laundering business. Other people, both others trying to launder the Bitcoins and those who wish for Bitcoin to be hard to trace do the same. The Bitcoins are then divided up again between everyone who put Bitcoins in. If you do this a few times then not only are the Bitcoins very difficult to trace but even if someone determined which source address was most likely to have received the coins before the laundering process, you still have a lot of plausible deniability.

Bored

[stevencbrown]

If Slashdot now sponsored by the Bitcoin promotional council or something?

seems like a story a day about it this week, I do find Bitcoin fairly interesting, but not reading about slightly different thoughts on it every day...

Re:Bored

[Anonymous Coward]

Dice pays the Slashdot staff in Bitcoins, so it's in their best interest to promote it.

Re:Bored

[prisoner-of-enigma]

In fairness to /., bitcoin value has risen dramatically in the last few weeks, so the attention isn't entirely unwarranted.

Re:Bored

[khallow]

How many Linden dollars is a bitcoin worth?

Re:Bored

[luther349]

its because its rose above 90$ a coin duo the run on them because of that bank having troubles. once the run on them ends and the new rigs get shipped i bet they will drop back down to below 11$.

Re:Bored

[murdocj]

Will it get as much attention when the bitcoin has another huge swing and drops way down in value?

Re:Bored

[Rinisari]

BTC/SLL BId: 24900 Ask:25000

Courtesy of VirWoX.

Re:Bored

[peawormsworth]

its because its rose above 90$ a coin duo the run on them because of that bank having troubles. once the run on them ends and the new rigs get shipped i bet they will drop back down to below 11$.

I dont think people in countries where the banks are stealing their deposits are running to bitcoin. Is that what you would do? Take out your money and invest it into a speculative digital commodity that you cant use to pay rent or buy clothes and is difficult to deposit into a foreign bank and may rise or drop 10% in a single day? Is that what you would do with your families savings in times of trouble? Or would you be getting your money out in the form of cash and other stable commodities which can be transported and deposited elsewhere? The world news about the behaviour of banks in Europe and the US may be driving speculation into bitcoin, but I dont think it is coming from Cyprus or Greece.

Also, the production of bitcoins is not determined by the "new rigs". The production level is flat: http://blockchain.info/charts/total-bitcoins. There is a built in moderation to the difficulty of mining which predetermines the output to a set amount. As the link shows... its very predictable and not likely to cause significant change no matter how much mining power is used.

Re:Bored

[luther349]

don't ask me but when the banks over there started failing there is a run from the euro zone on bit coins. i guess they figure if there dollar goes under they will have the coins and gold.

Re:White paper on EXACTLY what a bitcoin is, pleas

[GrandCow]

I've looked, didn't find it. I just found some vague mumbo about cryptography with a ton of loaded buzzwords.

I want specifics.

1.) What is a bitcoin, EXACTLY?
2.) How divisible is a single bitcoin?
3.) All the specifics of any relevant protocols.

You looked at what? First result of a google for "bitcoin white paper" is http://bitcoin.org/bitcoin.pdf, the white paper originally released by the creator of bitcoin.

Re:White paper on EXACTLY what a bitcoin is, pleas

[Gendou]

Protocol specification: https://en.bitcoin.it/wiki/Protocol_specification

1 Bitcoin can be subdivided into 100,000,000 Satoshis, the smallest possible unit under the current specification.

The bubble is bad

[Anonymous Coward]

If Bitcoin continues to gain in value, it could spark a rise in virtual currencies—and force some very interesting discussions over regulation.

Actually, if it continues to add value it will only make the unavoidable crash worse, and will deal a serious blow to virtual currencies, which will be viewed as a scam. The best thing right now is low volatility, there's sufficient valuation to facilitate huge trade. At a money velocity of 1 trade/month/unit (typical for US dollar base M1), there an 12 bln dollars market. few of those trades are happening right now, because people are too busy watching mtgox.

An even better thing was a properly designed expansion curve, with a long term for inflation of 3% which will drive hoarders and speculators away (Friedman's money by computer). Maybe an alt chain will solve this problem and displace Bitcoin.

Re:The bubble is bad

[mestar]

Bitcoin will surely come down from current levels. That's because, there is a constant downward pressure on price, due to mining.

Energy spent on mining is probably the biggest part of total costs of running Bitcoin network. Also, this energy is easy to predict, because energy spent on mining is a simple function of Bitcoin price and average total block awards. This is because mining has very low barrier of entry, and this ensures that as long as it is profitable, new miners will join, until the most inefficient miners are at the break-even point. And the most profitable miners will try to expand their operation.

This makes it that each block costs somewhere around (0.5 * block award * price) to (0.75 * block award * price). And since awards are paid in Bitcoins and electricity is paid in local currencies, this makes the situation that all mining costs hit the exchanges every day, and push the price down.

This can currently be estimated to be $150.000 to $250.000 each day (using price of $90), and this amount of fresh money must enter the exchanges every day, or the price will go down. Currently, this money comes in from "suckers".

At this point we have a temporary delay in the "mining difficulty follows price" process , because of the change in technology and delays in deliveries of ASIC miners, so mining is very profitable at this point, and this reduces the selling pressure on exchanges. This, plus block award halving is why we have this current Bitcoin bubble.

And this bubble will end soon, because of the process described above.

Re:The bubble is bad

[BlueMonk]

I'm confused about which variables are linked to what here. It seems to me that the way you have linked the price of electricity, the price of bitcoins and the value of money is a little more complicated than a simpler demand and supply model could explain. I'm not sure that the price of electricity controls anything but how many people choose to mine instead of buy bitcoins. And I wouldn't think that the price of electricity would be involved much in determining the value of bitcoins themselves (because increased mining does not produce increased number of bitcoins as it does with other types of mining). Maybe you're not saying that it does, but I'm confused why it is mentioned then.

In my mind, yes, the constant availability of new bitcoins pushes the price down, but the new demand for bitcoins obviously pushes prices up. So long as the demand is increasing faster than the supply, prices would continue to increase, would they not? The value of a bitcoin is simply a quotient of how much money is invested in bitcoins divided by the total number of bitcoins on the market. And your statement about needing a certain number of dollars added to the market each day to support that seems to agree with that.

So in rating the value of bitcoins in terms of dollars, isn't it more about the number of dollars in the economy versus the number of bitcoins in the economy? So long as the number of dollars is increasing (dollar inflation) faster than the number of bitcoins (bitcoin inflation) as a percentage of the whole, bitcoins will continue to be a better investment than dollars.

But as I've probably made painfully obvious somewhere, I'm no economist, so what am I missing?

Re:The bubble is bad

[mestar]

Yes, I had written is wrong. Not total energy, but total cost of energy spent on mining is a simple function of Bitcoin price and total awards. It tends to some number close to those two multiplied together (price * total awards)

Re:The bubble is bad

[alexander_686]

It is not a supply and demand curve because there is a kink in the curve. Computation costs (electricity, cost of GPUs, etc) put a kink in the supply curve.

The Supply curve generally has a positive slope. As there is more demand for bitcoin (i.e. as the price goes up) the more resources will be thrown at it. The opposite is true as well – the less demand the fewer resources will be thrown at it – until you get to the point where the cost to mine a bitcoin falls before the cost of mining it – then it just because a vertical line and nobody mines coins..

So electricity is not important in setting the price of bitconis but it does put a floor under which no new bitcoins would be mined.

The rest of what you say is broadly correct. I mean, you are making an assumption that people will continue to value and use bitcons. I don't think it will but that is a difference of opinion.

Re:The bubble is bad

[mestar]

I agree with everything you wrote.

The price of bitcoins is determined by the things that end up on the exchange.

(Ok, some things on this list are duplicate, sorry about that)

So, things that do not (or should not) directly effect the price, simply because no exchange is needed:
-transactions inside the bitcoin economy.
-roundtripping: buyer buys bitcoins, buys items from seller, seller sells the same amount of bitcoins.

Things that indirectly effect the price:
-more vendors accept BTC (more people will speculate and buy bitcoins for future use or speculative profits)

Things that directly effect the price:
-buying bitcoins
-selling coins
-mining*

Mining is creating a constant supply, simply because they have high costs, and this supply, while being constant in BTC, increases with the rise of BTC price. This will always keep the price of BTC in check, at least while block awards are high.

So, the point is, speculators will come, speculators will go, but the miners will always sell.

Re:The bubble is bad

[shaitand]

Correction, the price to mine doesn't set a floor at which nobody mines but the floor at which miners will sell the coins that they mine. At that point they don't stop mining, they stop selling, thus reducing supply until the price raises to the point where they are willing to sell again. Essentially the cost to mine is a market bottom for Bitcoin. This will continue to be important even after the mining efforts no longer unlock blocks because the miners will derive a significant portion of their revenue from transaction fees and similarly, won't sell that coin for less than the cost to accumulate it.

Re:The bubble is bad

[shaitand]

"-transactions inside the bitcoin economy."

Of course this affects the price. If I spend my BTC I have to replace my BTC before I can spend again.

Re:The bubble is bad

[shaitand]

In response to the reward halving the price has gone from $12 to $90... if that isn't much impact in your book I don't know what would be. The price starting rising before the actual event but only because of anticipation of the event.

Re:The bubble is bad

[elucido]

Bitcoin will surely come down from current levels. That's because, there is a constant downward pressure on price, due to mining.

Energy spent on mining is probably the biggest part of total costs of running Bitcoin network. Also, this energy is easy to predict, because energy spent on mining is a simple function of Bitcoin price and average total block awards. This is because mining has very low barrier of entry, and this ensures that as long as it is profitable, new miners will join, until the most inefficient miners are at the break-even point. And the most profitable miners will try to expand their operation.

This makes it that each block costs somewhere around (0.5 * block award * price) to (0.75 * block award * price). And since awards are paid in Bitcoins and electricity is paid in local currencies, this makes the situation that all mining costs hit the exchanges every day, and push the price down.

This can currently be estimated to be $150.000 to $250.000 each day (using price of $90), and this amount of fresh money must enter the exchanges every day, or the price will go down. Currently, this money comes in from "suckers".

At this point we have a temporary delay in the "mining difficulty follows price" process , because of the change in technology and delays in deliveries of ASIC miners, so mining is very profitable at this point, and this reduces the selling pressure on exchanges. This, plus block award halving is why we have this current Bitcoin bubble.

And this bubble will end soon, because of the process described above.

If the bubble pops you'd be prudent to buy not sell.

Re:The bubble is bad

[mestar]

Look at this chart:

http://bitcoincharts.com/charts/mtgoxUSD#igWeeklyztgSzm1g10zm2g25zi1gVolzv

Right after the start of trading, volume went to 50k per week, and never went below. 50k per week was the old block award per week total.

Look at the period from July 2011 to December 2011. Constant downward pressure.

January 2013, block award halved, this current bitcoin bubble started.

Re:The bubble is bad

[MrL0G1C]

Inflationary push will make bitcoins worth less and then what?

Care to explain how there's going to be inflation when no new coins can be added? (or perhaps you mean deflation - where the coins become worth more which would supply any demand)

Re:The bubble is bad

[peawormsworth]

This can currently be estimated to be $150.000 to $250.000 each day (using price of $90), and this amount of fresh money must enter the exchanges every day, or the price will go down

I believe new blocks are created every 10 minutes. Each block assigns 12.5 new bitcoins into the system. So every day there is 144 new bitcoins mined. At about $90/bitcoin, this is about $13k USD. Meaning that the the about $13k USD should be purchased in bitcoin every day. But price is not that liquid. Because I think this would assume that every miner is immediately trying to sell their coins on the exchange. So the real price is always whatever people are willing to buy or sell them for.

I do not feel that speculation is wrong. I think that bitcoin is a viable alternative for online payment systems. The reason is that it is about 3% cheaper for merchants to accept them. So either prices go down, or merchants make more profit. So there is incentive for merchants to offer this as an option. Secondly, the fact that you cannot commit bitcoin fraud means that businesses do not have to worry about chargebacks and all the costs that go along with that.

I may be wildly optimistic, but I believe that bitcoin will be offered on a fair number of merchant checkout sites within one year. I am also estimating that 1 in 1000 online purchases will go through bitcoin. Credit card companies process trillions of dollars online each year. A 0.1% stake of this would be billions of dollars. The daily flow of bitcoins would be multiple millions. In order to create the liquidity required to satisfy all of these transactions, the rate of bitcoin trading will have to go way up. Since there simply isnt enough bitcoins to meet this need, the value of each bitcoin will also go up and the bitcoin will be divided into smaller pieces in order to meet the demand as required. Fortunately bitcoin can be divided down into slivers of 0.00000001 parts. Similar to the way a dollar is divided down to 0.01 parts (cents). This is why I think bitcoin is not in a bubble, but rather it will continue to rise over the next year. There is no question that much of its current value is due to speculation, but what do you think that speculation is based on? nothing? Maybe some people really believe in the value of bitcoin as a viable currency option and see it as a valuable commodity that people will really need and demand more in the future.

Also, there are novell and interesting things you can do with bitcoin. Check this out: http://youtu.be/3UmynaPg8hw. This would be a way safer way to collect payments on the street... like if you are having a yard sale, or running a block party and selling burgers, or your kids are selling lemonade. Because bitcoin has a lot of cash like features... and it also has credit card like features. Its just a lot safer then walking around with and exchanging cash and its a lot cheaper and more available to people then credit card and their transaction fees. I dont know exactly all the ways bitcoin will be used in the future, but the reality is it does work and there are far more options for people to use it in unique ways then you can with a bank card or credit card.

Re:The bubble is bad

[mestar]

"I believe new blocks are created every 10 minutes. Each block assigns 12.5 new bitcoins into the system. So every day there is 144 new bitcoins mined. At about $90/bitcoin, this is about $13k USD. Meaning that the the about $13k USD should be purchased in bitcoin every day."

And you create an error for about each 10 words you write:

-It is 25, not 12.5
-It is 3600 every day, not 144
-That makes the total $324000, and probably not all will end up on the exchanges.

Re:The bubble is bad

[mestar]

Where were your big BTC holders in this period?

http://bitcoincharts.com/charts/mtgoxUSD#czsg2011-05-31zeg2011-11-01ztgSzm1g10zm2g25zi1gVolzv

Speculators will come, speculators will go, however, mining pressure will always be there, day after day.

See how your instrument without any yields or dividends does after 8 years of constant selling.

Re:The bubble is bad

[mestar]

"After the introduction of ASIC chips for mining, the barrier of entry has gotten significantly higher."

Not true. Before, any idiot could buy a $150 GPU and mine in his basement. Now, any idiot can buy a $150 ASIC card and mine in his basement.

If you want to see an example of a high barrier of entry, consider starting a gold mine.

"they only need to sell a fraction of the income to pay for electricity."

Until others join and that fraction becomes a significant part.

Re:The bubble is bad

[mestar]

When the price drops bellow the cost to mine, they do not stop selling, they stop mining.

And the cost of mining creates no such floor in price, because, when you sell your coins, nobody cares how much it costed you to create them.

Re:The bubble is bad

[mestar]

So, you are expecting a business with such a low barrier of entry to be highly profitable? That's absurd.

You just have to understand two simple facts and some basic logic:

-Anybody can mine, very low barrier of entry (In fact, I really can't think of any other business with such a low barrier. Buy some hardware, plug it in. No customers, no marketing).

-Once you have your hardware running, you don't turn it off until it costs you more than one BTC to mine one BTC.

From those two it follows that no miner will be hugely profitable for a long time, and that there will always be some who are borderline profitable.

Remember

[Impy the Impiuos Imp]

Let's not get confused here, people.

1. Government doesn't care about stability. They care about being able to tax it.
2. Government doesn't care about stability. They care about being able to tax it.
3. Government doesn't care about stability. They care about being able to tax it.
4. Government doesn't care about stability. They care about being able to tax it.

Re:Remember

[the eric conspiracy]

They care about stability if it interferes with their tax revenues.

Re:Remember

[Immerman]

Actually, no. As a rule governments do care about stability - more accurately they care that they have final control over the stability so that they can game the system as they see fit. For an extreme example see exhibit A: every case of hyperinflation, ever. Now I suppose you could consider inflation a savings tax, but very few economists (or governments) will actually term it such.

Which dollar?

[Roger W Moore]

It might be a joke but it raises the question: whose dollar? As a virtual currency whose regulations will apply to a transaction when, for example, one person is in Europe and another in the US?

Re:Which dollar?

[Anonymous Coward]

The United States obviously.

regulated?

[fustakrakich]

By whom? A government that is subservient to the banks, as most of them are? I should think not!

What to do with Bitcoin.

[ABEND]

If it moves, tax it.
If it keeps moving, regulate it.
If it stops moving, subsidize it.

Re:What to do with Bitcoin.

[philip.paradis]

Such projects are already funded with USD, and no, there is no accountability involved.

Bitcoin is not exempt from any law or regulation

[Anonymous Coward]

I'm not sure where people got the idea that bitcoin is not regulated. It is. And regulators will let everyone know that very soon, especially now that everyone is pulling their money from European banks in favor of bitcoin.

Not if based in the USA

[JabrTheHut]

If regulation is based out if the USA that will make it a no-go for me. The US already illegally snoops my EU-based bank account, illegally gets my UK-based purchase data and has illegally obtained SWIFT data in the past. A US-based regulator is not to be trusted.

Re:Not if based in the USA

[Coryoth]

If he is a US citizen it doesn't matter if he lives in the US or not; he's required to file, including all the foreign bank accounts (even if they are just usual bank accounts for your country of residence. Thus they are just as able to snoop for tax cheats.

Re:Not if based in the USA

[JabrTheHut]

If you're not in the US or a US citizen, I have a very hard time believing you'd be targeted so specifically without having done something specifically to deserve being targeted. Rather, I'd be inclined to think that you might believe yourself part of a generalized data snooping conspiracy that you believe the US perpetrates in all foreign domains.

It was just me and about 200 million other EU citizens. The US decided it was going to revoke the permission of SWIFT, the largest interbank exchange company in Europe, to operate in the US unless they voluntarily handed over all financial data for data mining.

The US has also been caught demanding lots of information from individual banks and online retailers.

The US government is not a nice bunch of people.

Re:You Can Try

[AuMatar]

Wow, that's an entirely laughable concept. Its quite easy to regulate- make it illegal to accept it as payment, and arrest anyone who takes payment in it. It wouldn't entirely stamp it out, but it would make it useless in day to day commerce, which will relegate it to a niche in black market trades at best. In reality it would pretty much kill it in any country that did it- normal people are not going to use a currency where you have to track down an underground website thats constantly being changed in order to buy groceries.

already is

[Lehk228]

bitcoin already is regulated, it's just difficult for .gov to track so many people do not report their income and the banks like mtgox don't follow the rules.

A more pertinent question?

[Anonymous Coward]

Perhaps a more pertinent question would be this - if an international currency is to be regulated, who should be in charge of the regulation? Who has jurisdiction?

In science fiction (at least, in games, not so sure about literature) we often see the term 'credit' used to refer to some vague internationally accepted currency. But if such a thing existed (and bitcoin might be heading that way), who sets the rules on it? if it's 'every country', then the concept breaks down and the currency becomes unworkable as you start having to track too much to use it. If it's the UN? I don't see the US ever accepting that.

So that leaves the only workable answer as the originators or the currency.

Regardless, different nations can tax transactions in the currency with the same rules they use for domestic currencies. If the currency is processed by a domestic bank or financial institution, they'd have to process it in much the same way as they would any other transaction. So it seems the simplest way to handle these things is just to make it clear in the law (if it isn't already) that all transactions, regardless of currency, must adhere to the same rules.

Re:You Can Try

[gd2shoe]

They might not be able effect changes on the system, but they can certainly regulate any actors they can find and reach with law enforcement.

inevitably going to happen

[onyxruby]

Exchanges have been compromised, customers have lost money, basic protections are absent. It is used freely for the silk road drug trade, hiding money from governments and evading taxes. Can anyone seriously make the argument that it won't be regulated?

Re:inevitably going to happen

[luther349]

being its so hard to track it would not change anything. evading what tax in most states there is no tax with online transactions. this is more the government trying get there hand in the cookie jar because the value has gone up.

Re:inevitably going to happen

[ras]

Can anyone seriously make the argument that it won't be regulated?

Look, I don't know whether you noticed, but the things you quote: Silk Road, tax evasion, money laundering, and add to that Internet Gambling are already heavily regulated. In fact they are flat out illegal, with the threat of heavy penalties up to an including death to back up it. It is in that very heavily regulated environment that Bitcoin thrives. I know politicians do stump speeches about how they are going to bring this thing under control, but they they also do stump speeches are bringing world peace and how they will wage war on the axis of evil. Bonus for claiming they will do both in the same speech.

Think about it for just a second. How well do they manage to regulate SPAM, or phishing, and even DDOS attacks? They should give you an idea about how hard it is to regulate people exchanging bags of bits. It is just about impossible and that is when one end of the transaction didn't want it to happen willing report infractions. With Bitcoin both ends of the transaction are willing participants - you know, just like alcohol, which they tried to ban during the prohibition.

What they may succeed in doing is stopping Bitcoin growing out of its current role a currency for the black market, into a currency used for legitimate transactions. But in the long term even that may be doomed. The banking system is currently an unwanted parasite in just about every internet transaction, a parasite that usually steals 1% or so of the transaction value. You don't need a bank, or Vista to facilitate a bitcoin exchange. Currently US internet sales sit at around $250 Billion, and growing rapidly. $2..$3 Billion is a pretty hefty incentive to give the parasite the flick.

Re:inevitably going to happen

[Electricity Likes Me]

Spam mail, phishing attacks and DDOS are hard to regulate because they don't involve a physical vector.

Money does - it has to be used to purchase physical goods. And for that matter, most phishing attacks are stopped by targeting the point of profit - the difficulty is always converting all those credit card numbers into cash. Ever see a "work from home" banner on a telegraph pole? The exact purpose of those is to get a bunch of mules to deposit money from defrauded credit cards into overseas bank accounts.

Re:inevitably going to happen

[ras]

Err, last time I checked most spam's were trying to see me sell me something physical. And internet gambling doesn't. The odds if the person does successfully steal something off me via phishing, I or my bank is going to report it. The odd's of me reporting a successful Bitcoin transaction seems slim, since I am breaking the law. All that aside, if I purchase a perfectly legal object with Bitcoin, how on earth does the fact that I have received it alert the authorities that I have used Bitcoin to pay for it?

The exact purpose of those is to get a bunch of mules to deposit money from defrauded credit cards into overseas bank accounts.

If you say so. But what does that have to do with Bitcoin? If you understand what is going on with the mule's, you also understand the reason they are required is that bank notes (or indeed any bearer bond) is effectively untraceable and irreversible. Just like the exchange made with newly generated random keys used when transferring the bitcoins is untraceable and irreversible. If is isn't clear yet, the reason the mules are used is because they are where the power of law enforcement and regulation end. The reason Bitcoin is currently used for the black market is ... the same.

Knock it off with that quote

[Sycraft-fu]

Or, go move to the Democratic Republic of the Congo or other similar place with effectively no government and see how unlimited liberty really works. Turns out that when there's no regulation, when people can do whatever they please you get a lot of people who's idea of "freedom" is "the freedom to oppress, kill, and harm others."

There's a reason why free nations actually end up needing a government, laws, regulations, and all that kind of shit. You have to keep people form shitting on the rights of others. If you don't, some people will, it is just the way humans are.

Some security is necessary if we want individual liberty, and if we want to be able to live and enjoy that liberty. That does not mean that all security is good, that we should trade off liberty for no reason (like with the TSA, which isn't even useful security wise and is just a dong and pony show) but stop quoting this like it is some kind of maxim, like we should just toss out all regulation and let people do whatever the fuck they want. We can see, time and time again, in history what happens when that goes on. the result is not good.

Re:Knock it off with that quote

[Anonymous Coward]

Stop crapping on the libertarian fantasies of basement dwellers who live on the Internet, bro. Even though the Internet was basically created by the government.

Re:Knock it off with that quote

[fustakrakich]

The fighters in Africa, and other strategic locales are proxies of American/European/Russian/Chinese influences and their business interests. With nobody to regulate these superpowers, they really are the stereotypical bomb throwing "anarchists" we've grown to loath and despise. They hardly have anything to do with liberty.

Re:Knock it off with that quote

[hsthompson69]

Simple: limit regulation to the strict protection of private property rights.

Unlimited liberty requires security of oneself and one's property. Government should simply be the collective use of force in defense of private property rights. Bastiat had it figured out over a hundred years ago: http://bastiat.org/en/the_law.html

Re:Knock it off with that quote

[ultranova]

Simple: limit regulation to the strict protection of private property rights.

You end up with an outright slave society, since anyone who has any kind of advantage over anyone else can use it as leverage to gain ever more draconian agreements, leading ultimately to de facto or de juro ownership.

Yours is a bad idea, even if we ignore the obvious problems of there no longer being regulations against selling tainted food and other such lovely details.

Re:Knock it off with that quote

[ceoyoyo]

Something along those lines was tried. It was nasty. Children working in coal mines, extreme poverty, tycoons.

If you're posting on Slashdot you're NOT one of the people who would benefit from extreme libertarianism.

Re:Knock it off with that quote

[Knuckles]

The places like the Congo (and other similar situations you'd raise) aren't actually examples of a pure libertarian or even anarchic state. The problems they face are mostly due to a high-turnover system of despotic leaders working against their own populations and/or failing to properly lead the country in general, combined with natural problems of food scarcity and a poorly-developed economy.

So they are actually exactly like a pure libertarian or even anarchic state.

Re:Knock it off with that quote

[EzInKy]

Simple: limit regulation to the strict protection of private property rights.

So the governemnt's job is to ensure that everyone has private property to protect? Wouldn't be a democracy, that is for sure. Unless, of course, you are one of those who believe only those who have property to protect should have a right to vote.

Re:Knock it off with that quote

[BonThomme]

"value the same things we do"

In the bible you're expected to beat your slaves, but not so much it kills them.
Exodus 21:20-21

you know, "judeo-xtian country" and all...

Re:Knock it off with that quote

[hsthompson69]

I'm not sure if I'm understanding your point.

I would assert that the individual's body, and the labors thereof, are the ultimate private property, and should be strictly protected.

I have no idea how you would imagine some minor advantage leading to slavery - it's almost as if you are trying to conceive of some sort of contract which abrogates private property rights...

Do you have a concrete example, so I can understand you better?

Re:Knock it off with that quote

[hsthompson69]

“I got my first job when I was 9. Worked at a sheet metal factory. In two weeks, I was running the floor. Child labor laws are ruining this country.” - Ron Swanson

Frankly, a large majority of children now housed in government schools for babysitting would do better for themselves and their families if they were working.

Re:Knock it off with that quote

[hsthompson69]

Everyone can consider themselves, and their labors, as their private property. Private property is indeed the basis of freedom.

From Bastiat:

"When a portion of wealth is transferred from the person who owns it — without his consent and without compensation, and whether by force or by fraud — to anyone who does not own it, then I say that property is violated; that an act of plunder is committed."

Re:Knock it off with that quote

[ceoyoyo]

Hey! An anecdote! From a fictional character!

I realize the American public education system is pretty bad, but perhaps fixing it is a better approach than sending children to coal mines. Perhaps if that had been done before you finished school (if you have), you wouldn't think that something a TV sitcom character said, which was meant to be satirical in the first place, supports your argument in any way.

Re:Knock it off with that quote

[hsthompson69]

The problem with the American government education system is that it is compulsory. Back in the day when education was literally forbidden by law, the underclass and discriminatory victims *valued* education. Education was seen as an escape route from poverty and as an empowerment.

Once the compulsory education system was set up, as a way to politically indoctrinate citizens and prepare them for factory jobs, instead of being grateful for the opportunity that was now an obligation, the response has typically been resentment amongst a large fraction of those being incarcerated.

The simple fact of the matter is that from a *cultural* perspective, compulsory education has engendered the creation of a resentful and destructive underclass, that actively *ruins* government education for those people who do value it. You cannot change this culture under the current compulsory system.

As for satire being relevant to the argument, often humor cuts to the truth. Of course it's silly to think of a nine year old working at a sheet metal factory in any sort of skilled position, much less running the floor. But say you had been working at the factory, slowly making your way up the menial job chain, starting at 9 years old - maybe you started off simply taking out trash, or mopping floors - it it so unreasonable to imagine that after 6 years of work, that 15 year old might in fact have grown into a position of responsibility and authority with enough motivation and work ethic? Is it further unreasonable to think that this 9 year old, at 18 years, would be in a better place to compete with a high school drop out of the same age with no work experience?

Our infantilization of teenagers through compulsory education needs to stop. While there are certainly those that value a government education, and will not ruin the enterprise for their peers, if we wanted better results from our government education system, it would be a privilege that can be revoked for failure to apply oneself.

Re:You Can Try

[feepness]

Exactly. No more than they would do so to watch TV.

Already is regulated

[michaelmalak]

https://en.bitcoin.it/wiki/Tax_compliance#Are_my_bitcoins_taxed_as_income.2C_or_as_capital_gains.3F

Are my bitcoins taxed as income, or as capital gains?

Income that is earned through the exchange of services with another person, whether in the form of bitcoins, dollars, or barter; is included in gross income, and would be subject to income tax at applicable rates. Also these bitcoins could be subject to self employment tax.

In some jurisdictions, income earned through the process of buying and selling bitcoins would also be included in gross income, but would be treated as capital gains.

Note: The above interpretation is based on the assumption bitcoins are treated as a store of value such as gold, or other such commodity. If instead they are treated as a currency or debt, the full gain could be taxed based on market value at the end of each tax year. 3858 IRS Ends Currency ETN Adantage Simply put, the IRS never considers currency a long-term investment. Consequently, if bitcoins are treated as a currency, you will be taxed the same as holding an account in any non-functional (foreign) currency.

I.e. if bitcoins are treated the same as gold coins, then for every transaction, one must calculate the capital gains or loss, and pay 28% tax on the total net gain on Form 1040 Schedule D. For anyone who tries to comply with U.S. tax code, such as those seeking political office or security clearance, this makes it impractical to use bitcoins for everyday transactions, and practical only for occasional, large transactions such as investing in bitcoins for the medium or long term.

Re:Already is regulated

[AlphaWolf_HK]

I'm pretty sure you only pay capital gains upon those gains actually being realized. For example, if you own a house that suddenly doubles in value, you aren't expected to pay any taxes* on those gains until you sell it. Otherwise they could very well be taxing you for money that you never earned and possibly don't even have. I don't think the government would fare too well if they booted you out of your house because you haven't paid them on the income that you never received.

* property tax is separate.

Re:Already is regulated

[BonThomme]

you pay taxes on unrealized gains all the time. I'm doing it right now on a stupid merger transaction where the company I owned converted my shares into their "new" shares because they suddenly wanted to be an Irish company. Same company, same number of shares, no cash in my pocket, big tax bill.

You also do it when the convert ISO into stock, even if you don't sell the stock (important lesson: just sell the damn stock).

Re:Already is regulated

[smellotron]

you pay taxes on unrealized gains all the time. I'm doing it right now on a stupid merger transaction where the company I owned converted my shares into their "new" shares because they suddenly wanted to be an Irish company.

"All the time"? How often do companies effect changes like this? I'm not trying to be sarcastic, I'm genuinely curious how frequently you are seeing events like this.

You also do it when the convert ISO into stock, even if you don't sell the stock (important lesson: just sell the damn stock).

Why not just sell enough to cover your tax bill? If it goes down in the future, yeah you're screwed because you payed taxes on value which you never really had access to. But if it goes up, then the capital gains on the eventual stock sale should be based on the market price when you converted, meaning you shouldn't be double-taxed.

Re:Already is regulated

[zippthorne]

If you were using bitcoins for everyday purchases, you could potentially have hundreds of transactions in which you would have "realized the value" that you would then need to calculate your taxes on.

If you buy a sandwich worth of bitcoin, and a month later you spend it to buy two sandwiches, have you not realized gains which the government will feel ought to be taxed?

Re:Already is regulated

[Sigg3.net]

But as long as the mining yield > electricity bill+tax you're out on top, no?

The reason people check it out, it's because it's potential extra income by robot labour. Free money!

Bitcoin.SE

[Rinisari]

Please check out http://bitcoin.stackexchange.com/ for questions and answers like these!

your missing the point

[detain]

bitcoin isnt a popularity contest, its an open distributed currency that was originally created to get away from the current system. asking if government regulation is a good tradeoff for increased popularity means you clearly dont get why people created bitcoin or are switching to bitcoin

Re:your missing the point

[CaptBubba]

No. Bitcoin was created as a plaything "fun with crypto" proof-of-concept and was never intended to be used for anything more. A bunch of people who wanted to get away from the current system (both those with hopes of striking it rich as a early adopter and those who needed a new currency for less-than-legal activities online after e-gold got shut down) latched on and that's where we are at now.

The bitcoin protocol is showing its weaknesses every day, particularly when it comes to scaling up to higher transaction volumes. The blockchain is getting bloated by SatoshiDice which is a nearly perfect transaction spamming system and the bugs in the older clients which nearly forked the blockchain a while ago mean there is presently a hard limit to the number of transactions registered every 10 minutes. Combined with the fact that some miners set the number of transactions they process if they hit a block to be very low in order to try and beat out others (smaller block propagate ever so slightly faster) and there is now a very real delay in transactions going through: more than enough to scuttle any chance to use bitcoin for anything other than a curiosity and which will only get worse.

Government doesn't need to regulate bitcoin: it will kill itself.

Re:your missing the point

[tftp]

there is now a very real delay in transactions going through: more than enough to scuttle any chance to use bitcoin for anything other than a curiosity and which will only get worse.

Nonatomicity of transactions (caused by delays in processing, for example) will result in you being able to pay for two products with the same bitcoin. Credit card transactions are atomic, and besides c/c does not transfer assets. BC transactions do that.

While an Internet seller may be able to detect the failure in time and refuse to ship, a brick-and-mortar store cannot do the same; so if several people walk in with copies of the same wallet and buy a $1,000 TV at the exact same time their transactions will be registered.

The official solution is to wait for several (six) confirmation blocks. But that can take 10 minutes on average - and more if BC sees more use. Do I want to wait 10 to 30 minutes at the store until my payment goes through? No way. Those [mythical?] BC users who buy coffee with their BCs, do they wait 10 minutes before they are given a cup?

Re:your missing the point

[ceoyoyo]

That's not really that much of a problem. Big transactions take time. When I bought my car I had to wait a day for the dealership to confirm that my cheque was good. I could have gotten around that by getting it certified by a bank, but only if I stored my money with that bank already.

Small transactions will be on the (short term) honour system. I the days before we had electronic credit card verification the store would take an imprint and only find out later whether the card was good or not. If you did screw them over you wouldn't be getting any more service there, and might get arrested.

Cash is the same. If you buy a coffee with a $5 bill the transaction will probably be essentially instant. If you buy something with a $100 bill you might have to wait for the cashier to inspect it. If you buy something with a suitcase of bills, it might take some time for the seller to verify them.

Re:your missing the point

[EzInKy]

bitcoin isnt a popularity contest, its an open distributed currency that was originally created to get away from the current system.

Okay, so how do you get those tied into one of the "current systems" to buy into bitcoin? There has to be some incentive for them afterall.

Re:your missing the point

[Mr.Radar]

Small transactions will be on the (short term) honour system.

One of the big selling points Bitcoin proponents use to try to get businesses to accept them is that Bitcoins "have no chargebacks." It seems like having every transaction "be on the honor system" is a much, much worse situation than getting virtually-instantaneous confirmation for all transactions upfront and then getting hit with a chargeback every once in a while.

I[n] the days before we had electronic credit card verification the store would take an imprint and only find out later whether the card was good or not.

Yes, and businesses also used to accept personal checks. Have you tried to use one lately? I can't think of any businesses I regularly patronize that accept them today. It used to be that the businesses had to account for bounced checks and declined credit transactions in their business overhead which was ultimately passed on to consumers. By accepting only cash, credit and debit cards with instant electronic verification (my newest credit card doesn't even have the raised lettering for imprint machines since so few transactions use them these days) they can remove this overhead and cut their prices, making them more competitive in the free market.

Re:your missing the point

[tftp]

Small transactions will be on the (short term) honour system.

And for a very short period of time. There will be always enough dishonest people who will pretend to pay, but in reality they will send the money to one of their own wallets. Do you think nobody will find it cool to have free coffee and free sandwiches, every day, just because they can? Do you think fast food places will be able to keep a record of patrons? If they want to do that, how would they, and what recourse do they have? The contract law will not be on their side if they deliver a product without ensuring that the payment have arrived. Due diligence is expected. Once the goods change hands, the deal is done. If you were given fake goods... it's a fraud case; but good luck writing a police report for $3.99. The police will file it in their bathroom; the officer will also quietly tell you to be more vigilant next time about your money.

The problem is quite complex also because there are no tags on transactions. You have addresses, but you do not know what address paid for this or that cup of coffee. This means that you cannot associate patrons, visits, purchases, payments and confirmations. You also cannot forbid service to people who you think failed to pay a week ago. What you think is not relevant; the business may have a right to refuse service to anyone for any reason, but by doing so you will throw a lot of babies with the bathwater. You also will not be punishing the freeloaders because they simply go somewhere else. BC merchants will be in a bad spot, compared to their non-BC counterparts who require honest cash up front.

Re:your missing the point

[ceoyoyo]

Bitcoin proponents say all sorts of things, some more or less true, some ridiculous, and some in between. The fact is, bitcoin is very similar to a conventional currency, in both strengths and weaknesses except that it has some desirable properties of cash but is electronic.

When a merchant accepts a credit card or cash the transaction is essentially on the honor system. If the card is stolen or the cash is counterfeit, the merchant is simply out of luck. Very recently banks started using a PIN system so that in person transactions could be (sort of) verified in a minute or so. With bitcoin the merchant has a choice - accept the payment on the honor system, or wait a varying amount of time for a varying confidence verification. I don't think that's a major advantage or disadvantage, except that full verification with a bitcoin takes half an hour and with a credit card it takes something more like a month or two. That might be important in some circumstances, but doesn't really matter for most of us, most of the time.

I doubt bitcoin will become really mainstream because it lacks any strong advantage for most people, and has some drawbacks. The big drawback isn't verification time though, it's currency conversion. Even if you're using bitcoin regularly you're still likely going to be paid in your national currency, and will need it for many things, including paying taxes. Most people hate doing currency conversions.

Re:your missing the point

[ceoyoyo]

My cousin who works at Starbucks tells me that if the customer's debit card doesn't work and he has no cash, the cashier is supposed to give him his coffee free. That's a policy that some people would, and probably do, exploit. The majority of people won't though, the loss is small, and repeat offenders probably do get caught. Cashiers remember regulars.

If someone uses a fake credit card, the merchant is out of luck. It takes a couple of months to fully verify a credit card transaction.

There are lots of reasons you're not going to be routinely paying for your coffee with bitcoin. The time it takes to verify the transaction seems like a minor one.

Re:your missing the point

[ceoyoyo]

Oh, and a merchant certainly can refuse to accept a bitcoin payment from a person they think failed to pay. You can't refuse to take the official currency, but you're under no obligation to accept bitcoin.

Re:your missing the point

[tftp]

You can't refuse to take the official currency

Generally, only the government cannot refuse to take the official currency as taxes. Everyone else must take it for payment of debts... if there are debts. But there are catches.

First, you cannot force me (or my business) to sell you anything, be it a product or a service. Anti-discrimination laws do limit that freedom somewhat, but as long as the merchant does not deny the purchase on protected grounds he is OK. It doesn't matter how you want to pay if the item is not for sale.

Second, you can avoid creation of debt. For example, you can exchange your house for a sack of tulip bulbs. The buyer cannot give you a bunch of USD instead of tulip bulbs because that's not what the contract says. If you sell a rare stamp the buyer cannot just give you the 5 cents of its face value.

A bitcoin transaction would have to be treated as a barter deal, with the value of it calculated from whatever other information is available. For example, it can be your own prices of the same product in different currencies; or it can be an average exchange rate. This is all difficult to do for merchants because they are not setup to sell for anything but the local currency. This makes them vulnerable because the tax authorities *will* find something wrong, even if the merchant did everything in his power to do it right. Volatility of BC only adds to this problem; not only you have to convert the transaction's value to the local currency at the exact instant of the transaction, you also are vulnerable to fluctuations of the exchange rate. BC is a nice toy currency, but the real world is not interested in toys. The real world is interested in stuff that works - and specifically in stuff that accountants understand. It is tough enough to even deal with USD; adding BC to the mix is guaranteed to trigger an IRS audit. That one audit will cost you all the extra profit that you may have earned over a century of BC sales.

Re:your missing the point

[squiggleslash]

Just because you created it to be free of regulation doesn't mean it can't and will be regulated. All you're doing, really, is (indirectly) raising the question: if the government starts being serious about regulating Bitcoins, could it cause the final collapse of the currency?

One or more of the higher ups is in it

[Sycraft-fu]

One (or more than one) of the editors/staff is in to it and thus they push it here. Bitcoin is only valuable so long as people keep giving a shit and buying in to it. If suddenly everyone ignored it, the value would drop to zero. It has no national economy behind it, there are no taxes you can pay with it, there is no reason to hold it unless you are playing the bubble game with it. So those in Bitcoins need it to keep getting hype.

Re:One or more of the higher ups is in it

[fireteller2]

Well it's not a very effective strategy since most up-voted posts are against the technology.

I'm starting to find the sociology of bitcoin even more interesting then bitcoin. It's fascinating how people are so passionately against a piece of crypto technology. Many people seem to have such a visceral dislike for it long before really understanding the fundamental technology. It's as if people kept yelling about how /. should stop posting about some new programming language.

Oh wait I think I did do that about java back in the day. God I hate java.

Re:One or more of the higher ups is in it

[AbRASiON]

While I'm no bitcoin miner, how is this sentence "only valuable so long as people keep giving a shit and buying in to it. If suddenly everyone ignored it, the value would drop to zero" any different to our current system?

Re:One or more of the higher ups is in it

[murdocj]

The difference is that you can go pretty much anywhere in the world and buy things with dollars. Not so much with bitcoins.

I have a wonderful new currency, the donuthole, that I think is much better than the dollar. Why would you want dollars instead of donutholes?

Re:One or more of the higher ups is in it

[ceoyoyo]

National currencies are backed by large organizations (national governments) with lots of guns (national militaries). If, for example, some shopkeeper in the US decided to stop accepting US dollars, he'd get a nice visit from a man with a gun. On a larger scale, when Iraq decided they were going to stop accepting US dollars, they got a nice visit from a bunch of men with guns (and aircraft carriers). That last one might have been a coincidence, but the first one definitely isn't.

In order for national currencies to lose their value, a national government has to lose interest in it. That does happen sometimes, but not very often with the major ones. That's why nobody holds vast reserves of Zimbabweyan dollars, unless they have need of large amounts of cheap toilet paper.

Re:One or more of the higher ups is in it

[Pseudonym Authority]

Then perhaps you could say that Bitcoin is backed by the US Dollar. Since it usually has to be exchanged to be spent, then it's just an instrument to facilitate the transfer.

Re:One or more of the higher ups is in it

[Pseudonym Authority]

Funnily enough, many of those same posters have huge erections for gold. They probably feel that Bitcoin is a threat to their uneducated nostalgia.

Re:One or more of the higher ups is in it

[TFAFalcon]

The law forces people to accept dollars for things like repayment of debt or taxes. So you'll be able to use them for at least that. With bitcoin there is no such guarantee.

Re:One or more of the higher ups is in it

[Electricity Likes Me]

This is almost exactly not true. One of the big advantages of bitcoin even now is that you can convert it to local currency almost anywhere. Which is also what you'd have to do with dollars (with hefty exchange fees). I'll grant you that there are fewer bitcoin currency converters at the moment, but since literally anyone could be a converter and bitcoin is on a growth cuve (in terms of proliferation, not value) this should improve quite a bit over time.

You donutholes have no value because no one would be wiling to trade with you for them. Bitcoin does have value, people do trade them.

Please if people are going to argue against bitcoin can we at least stick to things that bitcoin is actually bad at?

Firstly, in reference to the USD, you frequently don't. The USD is the de facto currency of many places (i.e. Argentina) because the local currency is so distrusted.

More importantly: the USD has value as long as the United States exists, because it represents the ability to purchase some amount of US GDP output. If you want to interact with the US government, you have to do it in USD. If you do business with US companies, then you do it in the USD (while you could negotiate for a contract denominated in Euros or whatever, a court challenge would allow the contract to be revalued into USD and they would be forced to accept payment in it).

BitCoin does not represent any of these things. No large organization considers BitCoin a real currency, so there's no implicit demand or backing store of wealth. BitCoins have no value or practical use, and aren't legally enforced as a representation of the wealth of another party (i.e. the USD is legally enforced as representing the value of the US economy).

Re:One or more of the higher ups is in it

[Electricity Likes Me]

Re:value drops to zero. This straw man is beaten more than 10 dead horses at a slaughter-house for horse meat. If everyone suddenly stopped using the dollar and ignored it, then the value of the dollar drops to zero; doesn't everything else also?

Except they can't do that, because they have to pay taxes and fees to the government in US dollars. If they accept large sums of some other currency, then the IRS audits them, works out the exchange rate, and says "you owe us taxes of X USD on this transaction". Then you get to fight it out in court if you disagree on the valuation, but you still end up paying taxes.

BitCoin has no government backing it, and is deflationary. There's no reason for anyone to buy BitCoin, since everyone using it needs to turn it into other currency as fast as possible.

Re:One or more of the higher ups is in it

[fireteller2]

Well as a world traveler I'd disagree with you a bit on your characterization of the ubiquity of the US dollar. Nevertheless, I agree the USD is an extremely convenient and well respected currency, with lots of lovely features pursuant to being issued from one of the most successful countries in the world. However that is not an argument against bitcoin.

You are correct that no large organizations accepts bitcoin for payment yet (whether they consider it a 'real currency' is rather harder to ascertain). It does make one wonder though if that was not so similar to what people said about cars before highways where built, or computers before the personal computer or the internet before the world wide web. Are bitcoins just pet rocks? Maybe, but it doesn't seem likely, there doesn't seem to be any evidence for that, just some people's emotionally negative reaction to it that is always very thin on facts.

That something is *only* successful now and growing in popularity and peer reviewed success constantly since it's inception couldn't possibly mean that it is an idea that could have some future success. It just must fail becuase it isn't the most successful thing in the world yet. /irony

Regardless of arguments it is a fact that bitcoin is successful now, and does store value now. It is theory that it will fail. Your assertion that bitcoins have no value or practical use is clearly and demonstrably not true, and that it is not legally enforceable does not seem to have any effect on it's adoption rate. You are arguing why it won't be accepted, but we have already passed that point, it is accepted, and just like any innovative new technology that acceptance is growing bit by bit.

Re:One or more of the higher ups is in it

[Electricity Likes Me]

The car and the computer both have use without support infrastructure. Less use, but they're valuable. In fact both represent a large pile of repurposable spare parts as well.

What is BitCoin if not exchangeable? BitCoin's don't do anything. That string of bits doesn't do anything unique - its not externally valuable to anyone. You can't break it down and get those processing cycles back.

Re:One or more of the higher ups is in it

[Registered Coward v2]

Then perhaps you could say that Bitcoin is backed by the US Dollar. Since it usually has to be exchanged to be spent, then it's just an instrument to facilitate the transfer.

That's different than being backed by the US Dollar - there is no guarantee you can get dollars for bit coins. You can only get what and how much someone else is willing to give you. It's not really a currency but more like a very loosely controlled commodity exchange. There is no assurance you will be able to sell any bitcoins you have nor that anyone will accept them for payment. Currency have value because they are a way to store value - a euro can be exchanged for work and I can keep the euro with some assurance someone else will take in the future.

Re:One or more of the higher ups is in it

[drinkypoo]

You are correct that no large organizations accepts bitcoin for payment yet (whether they consider it a 'real currency' is rather harder to ascertain). It does make one wonder though if that was not so similar to what people said about cars before highways where built,

Before highways were built, cars worked fine. They weren't suitable for interstate travel, but they're only a good choice for that today because of the large amounts of money that went into the interstate highway program. The highway program reshaped the nation, moving entire populations. It amounts to a subsidy for automakers at the expense of the people, whose needs would better be served by national high-speed rail. Of course, the railroad expansion was another example of gross government malfeasance, which was designed to permit massive land theft.

or computers before the personal computer

Well, no. And also no. Many people saw the potential for computers to become smaller and more ubiquitous.

or the internet before the world wide web.

Before the web, hardly anyone was even really aware of the internet. Most who were found it fairly compelling.

Bitcoin's only inherent flaw AFAICT is that it's based on waste. But that's never stopped humans before. I find it probable that bitcoin will be regulated. It's just a currency. Currency is regulated in developed nations, which want to collect taxes.

Re:One or more of the higher ups is in it

[shaitand]

The taxes thing is oft repeated and silly as could be. You'd have no need of USD to pay taxes if you weren't using USD and thereby generating a tax debt.

Re:One or more of the higher ups is in it

[shaitand]

It doesn't matter. Nobody needs to make such a guarantee. As long as it is perceived that you can exchange BTC for dollars people will accept it in lieu of dollars and people will give you dollars for it. It is a self-fulfilling prophecy.

If I offer to send BTC to your Mtgox account for $80 each right now are you going to accept? Of course you are, because you know you can instantly turn around and sell that for $94. Thus you and I both perceive it to be worth at least $80. And if you don't believe in USD we can play the same game with Euros, or silver, or gold. From here it is no longer a question of whether it is worth something but merely one of how much it is worth.

Re:One or more of the higher ups is in it

[shaitand]

I know it really is amazing. I can understand why supporters want to voice their support. But I can't for the life of me grasp why people who don't see Bitcoin are vocal or hostile. If you don't think it's sound or a good idea why would you care at all?

Re:One or more of the higher ups is in it

[Registered Coward v2]

It doesn't matter. Nobody needs to make such a guarantee. As long as it is perceived that you can exchange BTC for dollars people will accept it in lieu of dollars and people will give you dollars for it. It is a self-fulfilling prophecy.

That is exactly what I said - unless you can be assured of a liquid market for bitcoins they will not be widely accepted. As you say and I pointed out, the perception of that bitcoins have value for someone in exchange for what you want is the key to their acceptability as a medium of exchange. Right now, unlike ost currency, there is no way to provide that assurance other than the belief someone will accept it and is for what you paid for it or more.

If I offer to send BTC to your Mtgox account for $80 each right now are you going to accept? Of course you are, because you know you can instantly turn around and sell that for $94. Thus you and I both perceive it to be worth at least $80. And if you don't believe in USD we can play the same game with Euros, or silver, or gold. From here it is no longer a question of whether it is worth something but merely one of how much it is worth.

As long as you have a liquid market anyone will take advantage of arbitrage opportunities. But let me ask you this - if someone wanted to sell a billion dollars euros, pounds, etc) of bitcoins would they find buyers at the current price? I doubt it. It's not a currency but a commodity and behaves like one.

Re:One or more of the higher ups is in it

[shaitand]

"No large organization considers BitCoin a real currency, so there's no implicit demand or backing store of wealth."

fincern just released a guideline saying that they see Bitcoin as a real currency so there is one. You seem to have this backwards though. Bitcoin is already perceived to have value. Watch. I'll give you 10BTC for $50, do you want it?

There you go. 10 BTC is clearly worth more than $50. Thus it has value. BTC is the only thing I know of with no risk of being devalued through additional discovery and that can't be counterfeited, doesn't require me to trust any third party, and yet can be divided into small enough pieces to cover any quantity of transactions. Turns out that property is actually extremely rare. In fact, even with USD, EUROS, Gold, Silver, and Governments in the world Bitcoin is still the only thing I know of that meets all of those criteria. That special and unique property gives BTC utility and innate value. You are right. USD is only as good as long as the United States is around. BTC lacks that weakness.

I for one prefer BTC to fiat as a trade token. I'd much rather accept BTC in payment and use it for payment. Any business venture I engage in is likely to at the very least accept Bitcoin as a payment option and may well be centered around Bitcoin.

Re:One or more of the higher ups is in it

[shaitand]

"What is BitCoin if not exchangeable? BitCoin's don't do anything. That string of bits doesn't do anything unique"

Bitcoin does do something unique. It has unique properties. It can be exchanged almost instant among people anywhere in the world. No new hidden or unexpected cache of it can never be discovered that could reduce any value it represents. And anyone can detect a counterfeit without knowing a single thing about it. And once someone has given it to you they can't take it back. Despite there being no possibility of unexpected caches being discovered, It is is not dependent on any government, organization, or entity for any of that to remain true.

Those properties are quite unique. They create the ideal tool for one very specific utility that almost everyone has need for. A representative token of trade value. That is a use, an important use, a use with a great deal of practical value. It might be fair to say that everyone has need of such a tool. Other tools which people use for this are either better suited to other uses (like looking pretty on a finger) or have substantial weaknesses like people being able to "indian give" aka charge backs, or failing when an entity fails, or being counterfeitable, or being at risk of sudden devaluation if new sources are found.

The innate value of Bitcoin comes from being the uniquely ideal tool to carry trade value. Food, water, shelter, medicine, fire, and a knives have greater practical use but not much else.

Re:One or more of the higher ups is in it

[shaitand]

"In order for national currencies to lose their value, a national government has to lose interest in it."

Or it has to be counterfeited. Or said government has to fail or destabilize. None of those things has the potential to devalue Bitcoin.

Re:One or more of the higher ups is in it

[shaitand]

If Bitcoin is deflationary and therefore increasing in value, the incentive would be to turn inflationary (and therefore devaluing) currency into BTC as fast as possible.

Re:One or more of the higher ups is in it

[ceoyoyo]

So long as the government requires a currency be accepted (i.e. hasn't lost interest in it), the currency retains value. If the government hasn't lost interest it will generally take action to limit hyperinflation as well. That can include (and has) setting mandatory prices. The currency may massively devalue internationally, but within a country, a sufficiently motivated government can dictate the value. If nothing else, you can still pay your taxes with it.

Bitcoin lacks any powerful group (such as an interested government) to control its value. If bitcoins were counterfeited, the value would free fall. If a large fraction of people came to believe bitcoins could be counterfeited, the value would free fall. Shenanigans at exchanges, flooding the market or anything else that shakes faith in bitcoin cause the value to fall in an unrestricted way. Announcements of large organizations accepting bitcoin and investment cause the value to rise in an unrestricted way.

Re:One or more of the higher ups is in it

[Electricity Likes Me]

I just received 10 BTC for $50. What's my next move? I go to MtGox and cash it out into USD immediately.

BTC may not be devalued through arbitrary printing of it, but it can be rapidly devalued through people dumping it (which has happened a few times). The liquidity preference for BTC is either zero or infinite - either you want BTC (say for trade), or you have BTC and want to turn it into another currency (to buy something real with).

BTC, in not being able to pay taxes or be legally enforceable to extinguish debt, has no guarantee of being valuable in the future once it loses momentum. And if it can't do those two things, then there's no reason for anyone to want it.

Except of course, for the ability to buy illegal things with it "anonymously". But a currency with the sole value backing of being a good way to trade in illicit goods doesn't even work, since no one will be able to run legal money-changing services.

Re:One or more of the higher ups is in it

[peawormsworth]

...It has no national economy behind it, there are no taxes you can pay with it...

I cannot pay taxes in gold, but given the choice between a ten dollar bill and a lump of gold, I would take the gold. Despite the limitation that I might have to find another way to pay my taxes.

Re:One or more of the higher ups is in it

[peawormsworth]

http://vancouver.en.craigslist.ca/rds/wan/3712081353.html

Re:One or more of the higher ups is in it

[peawormsworth]

I just received 10 BTC for $50. What's my next move? I go to MtGox and cash it out into USD immediately.

BTC may not be devalued through arbitrary printing of it, but it can be rapidly devalued through people dumping it (which has happened a few times).

Bitcoin has dropped quickly a few times. Mostly due to dumping, but it keeps coming back. There are a fair number of people who see a large drop as a good thing as it would allow them to capture more bitcoins at what they believe is an undervalued price. For those who believe in the long term value of bitcoin, a big price drop is not really a bad thing.

Re:One or more of the higher ups is in it

[Muad'Dave]

The taxes thing is oft repeated and silly as could be.

Be careful what and whom you call silly. States and localities tax much more than income. Virginia has personal property and real estate taxes - even if I own my home outright and eat food I grow myself and never touch a USD, I still must pay my real estate tax in USD.

Re:One or more of the higher ups is in it

[shaitand]

Shait's Counter rule: Never use a word in spoken form that you've only read and never heard. You will end up sounding foolish.

yes

[houbou]

all forms of currency should be regulated, else there will be abuse, it's that simple and it's been proven historically over and over again.. Even today, normal currency gets counterfeited.. So, digital currency can't?

Re:yes

[Anonymous Coward]

No, bitcoin can't be counterfeited, that's kinda the point. Distributed transaction history shows source of every satoshi.

Re:yes

[Darkness404]

Show me how you can -truly- counterfeit gold/silver, the only things that have been historically always accepted as money. Sure, you can try to fake it with brass/white metal but under any sort of inspection it fails miserably, its density won't be close to gold and so it will either be the wrong weight or wrong diameter. You can try to fake gold with tungsten but, in all but the largest bars, a simple punch (like what you see on silver/gold bullion ranging from antiquity to present) will bring the counterfeit to light.

Sure, you can counterfeit fiat currency but it isn't money and it will be counterfeited all the time by the issuing authorities. The deathblow of EVERY fiat currency has been death by hyperinflation. The US dollar and bitcoin are no exceptions.

Re:yes

[JesseMcDonald]

The deathblow of EVERY fiat currency has been death by hyperinflation. The US dollar and bitcoin are no exceptions.

Bitcoin is an exception, because it can't be hyperinflated. There are no "issuing authorities"; the total number of bitcoins in existence is governed by the mining protocols, which are effectively fixed in stone. These protocols limit the total number of bitcoins to 21 million, to be issued on a fixed schedule at a rate which gradually decays over the next century or so. Approximately half of those bitcoins are already in circulation, meaning that over the long term devaluation due to inflation cannot exceed 50%.

If bitcoins do end up losing significant value, it will be through a decrease in demand, not because some issuing authority instituted hyperinflation.

Re:Those who would trade a little liberty

[Mr. Slippery]

Instead, the users of bitcoin should seek to to destabilize the enemies of freedom and move towards a post-regulatory society.

That would include being "post" the state regulations that, for example, prohibit me to build a cabin on your front lawn?

I'm all for anonymous digital cash (an idea that's been around much longer than Bitcoin), but pretending that any sort of economic regulation is an "enemy of freedom" is a juvenile misunderstanding of freedom.

Re:Ask Slashdot: Have you forgotten about Bitcoin

[prisoner-of-enigma]

While "billionaire" is a bit beyond me, I did just cash in a bunch of bitcoins I've mined over the last several months using several of my PC's with dual AMD video cards. Compared to the cost in power to generate those bitcoins, I made quite a handsome profit. And I cashed out just three USD below the current high water mark of bitcoins, so I timed it pretty good. Hard to argue with the moneymaking aspect of it, at least if you've been mining since bitcoins were $5 each like I have.

Re:Those who would trade a little liberty

[Jeremy Erwin]

Juvenile misunderstanding?
It is a young avnt-garde understanding, prior to the corrupting cynicism that enables the tyrannies of conventionality.

Go ahead regulate

[Arthur B.]

Bitcoin was built to evade controls. Sure you can regulate that transactions above a certain amount must be reported, but good luck enforcing it. Transactions can be split into thousand of components at no cost, be dispatched through mixers to thousands of wallets. If the government become savvy enough to track such movements, then anonymous internet banking with chaumian cash can be implemented on top of bitcoin.

So if regulation gives the government the temporary illusion that it's controlling bitcoin, then by all means start regulating. The alternative is government trying to kill bitcoin, which it might be able to pull off at this stage by targeting the exchanges.

Re:White paper on EXACTLY what a bitcoin is, pleas

[turkeydance]

Scrooge McDuck here: if i can't own it and hold it while i count it and then weigh it before storing it in my safe, then i don't accept it. all y'all go ahead.

Hang on...

[silenttroll]

One of the founders of a currency designed from the ground up to be resilient to Government intervention, is now complaining that the Government wants to intervene. Have they realised they failed in their mission (which at this point, I think is too early to say) or were they naively hoping it would never actually happen. Or maybe, the anti Big Brother thing was just marketing and they actually expected the whole thing to collapse (and they would have cashed out) long before that point.

Re:Hang on...

[AlphaWolf_HK]

They haven't failed in anything. There is no central authority on bitcoins, so I'm not sure what or who they would regulate. That would be like saying the government could regulate the tor network. If they had that much power, the Silk Road would be gone already.

Re:Hang on...

[Pseudonym Authority]

Bitcoin Foundation had nothing to do with designing bitcoin. They are a group of leaches\exchanges and are actively trying to corrupt the standard to bring it even more under their control by selectively paying developers and coming out with stupid ideas that only serve to line their pockets. It's nice that they are fighting against regulatory agencies that are trying to force shit in the name of money laundering, but make no mistake: they are not allies.

Re:You Can Try

[prisoner-of-enigma]

Its quite easy to regulate- make it illegal to accept it as payment, and arrest anyone who takes payment in it.

Care to cite what law and/or provision of the U.S. Constitution (assuming you're a citizen) that would allow the government to do this?

I owe you

[dinther]

Money is a "I owe you" As long as we play the game and use fiat money the governments can regulate but there are so many kinds of alternative currencies becoming more popular.

It is quite common to do a plumbing job for a mate and have the mate come around one weekend to build a fence. I owe you. Currencies can take so many forms and those that are trusted will become main stream.

After I have done a plumbing job for my mate he owes me building a fence. However, I don't need a fence but my neighbor who is a baker does. What I do need is bread. I can go to the baker and pass on my mates debt of building a fence to the baker in exchange for bread but if my mate has a bad reputation and the baker doesn't trust my mates promise then there can't be a deal.

Governments can only regulate through compulsion. Fiat money that may not be refused as a legal tender. But with bitcoin, they don't appear in the game at all. I like that.

Re:I owe you

[shoemilk]

Sue Lowden is that you?!

Re:I owe you

[luther349]

i think you mean as long as they can take most of it threw taxes and shitty laws.

Re:I owe you

[Procrasti]

Fiat money can certainly be refused as legal tender, what it cannot be refused for is for the settlement of debts as ordered by the courts.

For example, I can refuse to trade for fiat currency and only accept bitcoin for my services... but if I offered my services on credit, in exchange for bitcoins later, and I did not get my bitcoins, a court could order the debt be paid in fiat currency, and upon offer of that currency I could not then claim that the debt was not paid.

This is the meaning of 'legal tender for debts both private and public'.

Re:You Can Try

[CharlieG]

In addition, they just 'prove' that Bitcoin is being used to circumvent Money Laundering laws, and that the admins SHOULD have known/built tracking in, and they get arrested for RICO act violations, and the founders/admins/server admins, do life in Federal Prison. Lather, rinse, repeat like they did for the mob, and...

Re:You Can Try

[Anonymous Coward]

Care to cite what law and/or provision of the U.S. Constitution (assuming you're a citizen) that would allow the government to do this?

It's cute that you think the government actually cares.

Wrong Question

[bill_mcgonigle]

Clearly everybody involved with Bitcoin does not want to be regulated - if they did it would have been designed differently.

So the actual question here is, "should an unregulated currency be allowed to exist?" Or, without the euphemisms and passive voice, "should we bust the heads of people who use an unregulated digital currency?"

Re:Wrong Question

[luther349]

when we used the gold standard are currency was unregulated. the feds started the regulated crap so they could control the money and make themselves richer..

Re:Wrong Question

[EuclideanSilence]

I prefer your second choice of conceptualizing the question. The phrase "should X be allowed" puts the burden of proof on choosing freedom, but I prefer that freedom always be the default choice until otherwise persuaded.

I guess it's somewhat definitive of libertarian to consider the answer to "should X be allowed" to always be true, until someone gives a very convincing argument otherwise.

Re:Wrong Question

[argStyopa]

It's a question to which governments in general are always going to say "no" - it's in their self-interest (if a government can be said to have one; clearly the government often acts in ways that suggest its own existence is more important than anything else) to insist that ANYTHING - the friends we have, the heights of our doorknobs, and most certainly the fiat currency we use - *must* be regulated by government for it to have, well, currency.

Of course, allowing government to do so is a teensy act of abasement, and, I'd submit, a long way from what our Founding Fathers envisioned. (OK, maybe not Hamilton).

Re:Ask Slashdot: Have you forgotten about Bitcoin

[Dan541]

Every paycheck I get I spend of bitcoins. Then cash those coins out a month later, it's like have an incredibly high interest rate bank account.

No

[koan]

The primary benefit (aside from being able to create your own) is anonymity, and if they are going to look into regulations then they are going to look into anonymity.

Lol so true

[raymorris]

Put it this way, the rest of the population is even dumber than /., for that reason alone nothing should be regulated, because who do you think comes up with regulations and votes for people that set regulations?

Lol so true.

Re:You Can Try

[AuMatar]

Interstate commerce. This one is even legitamate, if the server running the exchange and the user aren't in the same state it is interstate.

Or as mentioned various anti-money laundering statutes. Or declare that exchanges are banks (they are in a lot of ways) and regulate them under banking statutes. Bonus if they can get PayPal declared a bank at the same time- that's well overdue.

Re:honestly

[koan]

I've often wondered if the powers that be hire angry retards to post on forums, ever since I found that manual on "COINTELPRO Techniques for dilution, misdirection and control of a internet forum".

Re:You Can Try

[Anonymous Coward]

By your (lack of) logic, all countries other than the U.S. should be put in jail.

(Hint: The internet isn't a U.S. territory. That's why I'm free to pay for Mexican purchases in Pesos, and German purchases in Deutschmarks.)

Re:You Can Try

[ancientt]

Two things: 1) The lack of a provision in the constitution doesn't seem to deter Congress from making laws as a general observation. 2) I'm pretty sure that if challenged, they would cite the Commerce Clause.

Re:Ask Slashdot: Have you forgotten about Bitcoin

[Anonymous Coward]

You could just keep the same coins, you know.

Probably not.

[meburke]

Bitcoin is not "legal tender" nor is it a government-backed currency. It is a contract for trade based on a nearly secure system. If you can buy discount coupons or tokens and trade them for goods and services, why not Bitcoins? Not only is this virtual currency helpful, but the purchase price changes to reflect the relative risk and combined value of the purchasing currency. Apparently the value of a non-regulated currency has appreciated about $40 per unit over the last month.

Some Regulation is good

[Gonoff]

I am just not keen on the idea of the US government being the one to do it.

Is Bitcoin restricted to the US only? In that case, it would be up to the US to look after its own.

The problem is that the US government regularly shows that it has as much idea about "international" as I have about gynaecology. It's complicated, do do with other people and it really helps if you actually know where the patient is.

You can tell the suitability of someone to have any say in something trans national if you find out how they feel about it being regulated by a UN body.Yes the UN contains corruption but so does every government in the world and the US one is well known to be in corporate pockets to an impressive degree.

Sure Congress can identify Bitcoin use as gambling or something and that will keep it under control of the Mafia where it belongs but fortunately, the remaining 96% of humanity can ignore their veniality.

Re:Some Regulation is good

[Gonoff]

The Congress shall have Power... ...
To coin Money

Does that mean they have the sole power?
Are they obliged to exercise that power? Because I understand the the US government gave its rights to do that away 100 years ago.

Re:You Can Try

[Immerman]

>admins SHOULD have known/built tracking in

What do you mean "should have"? Bitcoin is probably the most trackable currency ever created - anyone who wants to can readily trace every transaction of every bitcoin back to the moment of it's first creation. It's only "anonymous" in that your name isn't directly attached to anything and you have the option of easily sending your coins through a shuffling (aka money laundering) service. The only difference where money laundering is concerned is that it's currently much more readily available so that anyone can play, rather than just the big boys as is the case with dollars, yuan, etc. The existence of money-laundering services has nothing to do with the currency itself.

Re:White paper on EXACTLY what a bitcoin is, pleas

[khallow]

A Bitcoin is nothing more than a rivalrous good (or an attempt at one), and other rivalrous goods have already been shown to be acceptable mediums of exhange (like cigarettes or sea shells). It just happens so that this involves computers.

So how hard is it to carry a few billion dollars worth of cigarettes or sea shells? For bit coins, it's as hard as carrying a memory stick.

as a bitcoin expert...

[slashmydots]

Let me end this right now. It's unregulateable. They can try to nip at the heels of the exchanges but other than that, it's impossible. Nobody runs it, nobody controls it. It's distributed, encrypted, and transactions cannot be modified or blocked or intercepted or duplicated. So that sort of makes any "decision" pointless.

Re:as a bitcoin expert...

[tftp]

Let me end this right now. It's unregulateable.

It's trivial to regulate. On the mild end of regulation a BC user probably violates a few IRS and local taxation laws per transaction. On the harsh end of regulation BC transactions may be made illegal.

You can still hold illegal BCs and you can use them - just as you can own a "hot" handgun and carry it illegally. Once you are apprehended this becomes an additional charge. Nobody will to go after you unless you are "a person of interest." Once the authorities want you arrested, an illegal BC "money laundering" operation charge will do the job nicely; tax evasion, through IRS channels, is also a good method to keep you in jail until you break and start talking. You as a person are irrelevant; the authorities are interested in the whole network. A few major convictions will send a loud and clear signal to all BC users that the game is not worth it.

Re:as a bitcoin expert...

[EzInKy]

Let me end this right now. It's unregulateable.

Government: "Pay your taxes or go to jail".
Citizen: "All I have are these bitcoins".

Re:as a bitcoin expert...

[TrentC]

transactions cannot be modified

Didn't at least one exchange deal with a rash of compromised Bitcoin accounts (which spurred a crash in the value) by rolling back transactions? Yes, they did. How is that not modifying transactions?

If someone steals US dollars out of my wallet, they're gone. If someone breaks into my bank account and transfers money out, I may get reimbursed but the money that I am compensated with more then likely comes from the bank itself; no one waves a magic wand and takes the money back from the thief.

I have feeling that Bitcoin is secure the same way Mac OS X was "secure" for a long time: because there wasn't enough of a profit motive for attacking it. The more people that flock to Bitcoin, the more bad guys will start to work on breaking it to their advantage. (I'm happy to be proven wrong, though.)

Re:as a bitcoin expert...

[slashmydots]

Then you just proved you know absolutely nothing about how BTC works or the history of it.

Re:as a bitcoin expert...

[tftp]

Did that work for torrenting?

As matter of fact, yes. Perhaps not for everyone; but among my friends everyone is very much aware, and downloads of free music are at zero level now. Or maybe they already have everything that is worth having :-)

Re:White paper on EXACTLY what a bitcoin is, pleas

[Nikker]

I bet you're better off with out debit and credit cards anyway.

Re:You Can Try

[jcr]

Only the US government is permitted to create currency

Nope.

The constitution prohibits the states from making a legal tender of anything other than gold or silver. It also authorizes the federal government to issue coinage. It has no prohibition at all on private parties making coinage or scrip.

-jcr

Re:White paper on EXACTLY what a bitcoin is, pleas

[Anonymous Coward]

So you won't accept the $50,000 USD wire transfer either? interesting.

Re:White paper on EXACTLY what a bitcoin is, pleas

[BlueMonk]

My understanding is:
1) A bitcoin is 100 million Satoshis. A satoshi is the smallest amount of value that can be exchanged on the bitcoin network. Each transaction on the bitcoin network transfers some number of Satoshis from one address to another. The number of bitcoins a wallet/person owns is the sum of the number of all the Satoshis that have been transferred to addresses in wallets they own minus the number of Satoshis sent *from* addresses in wallets they own, all divided by 100 million.
2) 100 million units per bitcoin.
3) Can't be answered in a brief summary like this, but suffice it to say that the important thing to understand is that each wallet or address is associated with a private key and a public key. You need to public key to transfer value to the address, and you need the private key to be able to send value from the address to another address.

Re:You Can Try

[CharlieG]

"Should have" was meant in the legal way. By building in money laundering without tracking, they ARE in violation of RICO. That means they Can do life without parole, as can anyone who assists, the second the govt decides to crack down. They can say " we don't know" and the govt says "you should,and should have, retroactively" life in jail for not playing the game tends to end this stuff

Re:So how do one know if bitcoin is real

[Agent ME]

I was able to buy things with bitcoins, and sell bitcoins for dollars. That's real enough for me.

hell no.

[shentino]

Regulation doesn't stop corporate elite from robbing us blind and committing all sorts of fraud with our money.

Fuck regulation, all it gets us is smoke and mirrors reassurances that don't have any teeth.

I'd say that bitcoin is better off staying wild and untamed. At least that way people KNOW not to be stupid with who they trust.

With dollars, people get lulled into a false sense of security.

With bitcoins people are naturally paranoid and are much more careful.

Re:You Can Try

[alexander_686]

Mod parent up. US Banks have a long history of issuing their own dollars.(This was mainly true before the US Government started issuing paper currency.)

http://www.npr.org/blogs/money/2012/12/07/166747693/episode-421-the-birth-of-the-dollar-bill

No, peaceful people should not be threatened

[czth]

Translating "Should Bitcoin Be Regulated?" into its plain meaning, that is, "Should peaceful Bitcoin users be threatened with harm, or harmed?" should yield the answer almost immediately: of course not, any more than any other peaceful people should be harmed, whether they want to sell or consume "large" sodas, trade or manufacture "high" (standard) capacity firearm magazines, use drugs, give food to the hungry, or engage in any other pursuit that is not directly harmful to other people or property. How can it ever be right to so threaten and harm peaceful individuals? And is not all regulation such a threat - give us money or we will harm you (take the money by force, cage you, murder you if you resist); conform to our requirements, even though you do no harm, or we will harm you? There is no case where such harm is justified.

Re:White paper on EXACTLY what a bitcoin is, pleas

[unixisc]

Why did they divvy it up this way? Since it exists only on computers, they could have divided it into 1,073,741,824 (2^30) parts for the smallest value. But what when the value grows and bitcoins need to be divided into more? Wouldn't Satoshis appreciate as well?

Re:You Can Try

[cheekyjohnson]

Now, you can quibble over the interpretation of this clause, and over how much power it provides. I'll grant you that.

Which I think is kind of important, you know. These posts explain it.

Psuedo-banks should be regulated

[Animats]

Bitcoin itself doesn't need much regulation, but some of the companies profiting from it do. Entities which hold onto your money, from PayPal to Mt. Gox, are depository institutions, and should be regulated as such. Customers need to know who's behind them and that they really have the money. There's a long list of defunct "Bitcoin exchanges" which took the money and ran. That's where regulation is needed.

Customers need strong enforceable rights against exchanges. Mt. Gox is notorious for blaming their own business partners (OKPay, Dwolla, etc.) when something goes wrong. They also limit how fast you can take money out (even in Bitcoins) change those limits from time to time, and the limits are very low by banking standards. Since Mt Gox supposedly has 100% of the deposited Bitcoins, they should be able to pay out 100% of any account on demand.

Re:You Can Try

[Pseudonym Authority]

Having a copy of the block chain seems pretty useless when there are quadrillions of quadrillions of possible addresses and only the exchanges have personal information (if you exchange it for cash). You could even use a mixing service to minimize the impact of that, or you could spend them as bitcoin directly and never connect your identity as +ki114|h4xXx0R|666 to be linked to Kevin Johnson, 916-12-6252 at all (though there is the fact that there is a painful lack of useful things to buy with bitcoin).

Re:Put it this way

[Pseudonym Authority]

Put it this way, the rest of the population is even dumber than /.,

Are you truly so delusional that you think that you are a beacon of intellectualism in the dark, witch-hunting world? Consider this question: does thinking you are the last sane man on earth make you crazy?

So, is there intrinsic value in any of this?

[sup4hleet]

I'm new to Bitcoin but I've Seti@home'ed a lonnng time ago and done gene folding so I get the distributed CPUs thing. What I'm missing here is why. If I understand it correctly all these processors are essentially looking for rare numbers and when they find one they're give a Bitcoin. Do these numbers have an actual value to science or math or is it just manufactured scarcity? Does all this do anything worthwhile or are bitcoins essentially tokens of luck and wasted electricity? In all that I read about Bitcoins nothing suggested that anything useful is being created by all this cpu time and energy spent crunching hashes. I kinda hope I'm wrong and someone clues me in.

Re:honestly

[Pseudonym Authority]

No one fucking cares about your opinion about what belongs and what doesn't, either fuck off or go buy some stock in Dice and try and get the Directors to listen to you.

Treasury Department's Financial Crimes Enforcement

[Requiem18th]

Glad they admit having a departament enforcing financial crimes.

You can't regulate the actual Bitcoins

[Erk2]

Bitcoin can't be regulated, it's not country specific, and there is not centralized data store under any jurisdiction. A government can try and regulate a company that converts normal money into Bitcoins for you, but realistically you can simply walk up to anyone you know that has enough Bitcoins for your requirements, give them a wad of cash, and transfer them to your personal Bitcoin wallet without the use of a regulated 3rd party at all, and the government would be none the wiser.

Re:You can't regulate the actual Bitcoins

[BonThomme]

guy who first registered coke.com on line 1...

This will be regulated at some point...

[loustic]

No, there is not intrinsic value, unlike gold. So when one day, nobody will accept your nice stack of bitcoins as payment you won't be able to do anything with those. If this is not regulated before, this will be regulated at that point because "We lost a lot of money, how did this happen? Why the government was asleep at the wheel and did not regulate that shadow bank?"

Fundamentally it isn't, in reality it is

[Sycraft-fu]

So yes, all currencies are just theoretical constructs, they have value purely because we believe they do. Yes even in the case of things like gold coins. If the world suddenly decided to stop taking a currency, it would cease to be one. Money is only money if you can spend it, and money is only money if people do spend it.

However the difference is that US dollars are legal tender in the US. What that means is the government requires taxes to be paid in them, and so all of the country's residents who pay taxes, which is most adults that aren't retired, have to get US dollars to do so. Speaking of the retirement thing, it is also the currency that the government pays out to retirees. Also, the government requires it to be accepted for all debts. So if you owe someone in the US money, they have to accept its value in US dollars to settle the debt. They cannot require you to get another currency.

That little reality means that there will always be a good deal of interest in US dollars so long as the US exists. There are even more factors that make it much, much more desirable and useful, but so long as it is what you use to do business with the government and to settle debts, it is what will get used all over.

Same deal in other countries. If you move to Canada, you'll find you need Canadian dollars. There is a good deal of acceptance of US dollars there since there is a lot of tourism and the US dollar has a sort of special status as the world's reserve currency, but you can't function entirely in them. The Canadian government wants to be paid in Canadian dollars and you'll encounter other agencies that are the same. The fact that it is a national currency keeps it going.

More or less, national currencies are backed by the economy of that nation. Because of that economy, they are useful and valuable to at least the people in that nation.

Bitcoin has none of that. It is just some geeks faffing about that read Cryptonomicon and thought it was a guide, not a work of fiction. Very, very few places accept it, and they just use it for payments, they immediately convert it to a real currency. It fluctuates as much or more than a thinly traded stock, any currency that fluctuated like it did would be said to be in extreme crisis. It's value is almost entirely based on speculation. That means that for its value to hold or increase, the hype and speculation needs to continue. If it vanishes, the price will crash, perhaps down to zero.

Real currencies that actually get used as currencies don't need hype to keep them going.

Re:Fundamentally it isn't, in reality it is

[jmauro]

So if you owe someone in the US money, they have to accept its value in US dollars to settle the debt.

This only applies to debts owe to one of the levels of the US Government. Private parties can reject US currency for any reason, else signs like will not except dollar bills larger than $20 would be illegal.

Re:Fundamentally it isn't, in reality it is

[fireteller2]

So yes, all currencies are just theoretical constructs, they have value purely because we believe they do.

...

More or less, national currencies are backed by the economy of that nation. Because of that economy, they are useful and valuable to at least the people in that nation.

100% agree with you up to this point, but none of this is an argument against bitcoin.

Bitcoin has none of that. It is just some geeks faffing about that read Cryptonomicon and thought it was a guide, not a work of fiction.

Here, however, is where you go off the rails and just get emotional.

Very, very few places accept it, and they just use it for payments, they immediately convert it to a real currency.

This is not quite accurate, since many people (rationally or not) like bitcoin and keep it as bitcoin. Also it isn't a matter of number of places that accept it, the fact is that the number of places / people / services that you can use bitcoin with is increasing. Did facebook fail because it only had 1000 users at one point, or google or apple or any business ever. It's early and it's growing, that doesn't sound like failure to me. In fact I've personally used it to commission work done by someone I never meet in another country. Nobody in between just email, and bitcoin between us. That to me is unbelievably cool.

It fluctuates as much or more than a thinly traded stock, any currency that fluctuated like it did would be said to be in extreme crisis. It's value is almost entirely based on speculation. That means that for its value to hold or increase, the hype and speculation needs to continue. If it vanishes, the price will crash, perhaps down to zero.

Real currencies that actually get used as currencies don't need hype to keep them going.

Well these are unsupported assertions, but I certainly agree that the valuation has been very volatile. But how does one distinguish between a new monetary system that is totally successful genius idea and a totally horrible idea? Wouldn't either one exhibit such volatility early on? In fact wouldn't the horrible one simply disappear quickly? Four years on and no one has been able to crack the confidence in bitcoin. Quite the opposite, it has a larger user base and valuation now then it ever has and the long term trend has been growth, not failure.

One of the things that drives the emerging economy of bitcoin is the value of the bitcoins (valid or not). People are finding ways to get them because they are valuable. Telling people that are irrationally afraid or angry with bitcoin does nothing to get them more bitcoins, and is of almost no value, but starting an online business that can accept bitcoins from customers anywhere in the world regardless of who you are and your access to bank accounts and CC clearing services can get you bitcoins. We are seeing exactly that, new bitcoin accepting businesses starting up all the time. Also existing companies such as wordpress and reddit start accepting them, or simply individuals offering services, because all the gatekeepers and costs are gone.

The only reason I'm on here talking about it at all is becuase I'm trying to cut through some of the noise and provide accurate information. You don't have to like bitcoin. Fuck I don't like java. But it is clearly working, like it or not. Might as well get the facts about why. Don't you think?

Re:Fundamentally it isn't, in reality it is

[makomk]

Nope, you're misreading that. It applies to all debts. Private parties can accept or refuse whatever they like as payments for goods and services, but for debts they have to accept payment in US dollars.

By whom?

[jandersen]

Bitcoin is already regulated by somebody, so it is only a question of who gets to write the rules. It's a bit like PayPal - they do all the things a bank does, but they escape bank regulations by not calling themselves a bank - I don't think I need to reiterate all the complaints against PayPal, so I won't, but they are getting away with these things because they don't follow the normal banking rules.

The reason we have laws and standards regulating the handling and production of money is to protect society, ie mostly ordinary people. And the reason the rules have to be written by the legislature is that self-regulation never works in favour of people, it only works for the said industry. At least the government has to consider all the industries, and who knows, maybe even the people sometimes.

As far as I can see, somewhere behind Bitcoin there's a group of people who are making a profit from it, and whose profit would be diminished by having to follow rules meant to protect the ordinary user. I haven't been able to find out who they are; IMO, you should never trust a business who doesn't want to look you in the eye. There is nothing wrong with wanting to make money out of something, so why hide behind anonymity? It is certainly not because they are saintly idealists who only want the best for you. Remember the old saying: "If it's too good to be true ..."

Re:By whom?

[ka9dgx]

Here, let me tweak what you said a bit to increase cognitive dissonance a bit, and hopefully reveal hidden assumptions which might be wrong.

FRNs (Federal Reserve Notes) are already regulated by somebody, so it is only a question of who gets to write the rules. It's a bit like PayPal - they do all the things a bank does, but they escape bank regulations by not calling themselves a bank - I don't think I need to reiterate all the complaints against PayPal, so I won't, but they are getting away with these things because they don't follow the normal banking rules.

<Assumption> The reason we have laws and standards regulating the handling and production of money is to protect society, ie mostly ordinary people. </Assumption> And the reason the rules have to be written by the legislature is that self-regulation never works in favour of people, it only works for the said industry. At least the government has to consider all the industries, and who knows, maybe even the people sometimes.

As far as I can see, somewhere behind FRNs there's a group of people who are making a profit from it, and whose profit would be diminished by having to follow rules meant to protect the ordinary user. I haven't been able to find out who they are; IMO, you should never trust a business who doesn't want to look you in the eye. There is nothing wrong with wanting to make money out of something, so why hide behind anonymity? It is certainly not because they are saintly idealists who only want the best for you. Remember the old saying: "If it's too good to be true ..."

The system is protecting itself, not use. The reason there checks and balances throughout the constitution is to try to hold on to democracy as long as they could. The bankers won in 1913, and are obviously running us all into the ground in spite of the losses to the rest of us, so they can keep extracting resources from us.

Re:By whom?

[jandersen]

The system is protecting itself, not us.

Very true - the way I use the word 'society' is to mean or include 'system'. My point here was not to state that laws and regulations spring from noble and selfless ideals, but that the laws are there to provide long-term stability, mostly. Lofty ideals are inherently unstable, because even at best, they can only be valid in a rather narrowly defined range of circumstances; long-term stability requires a combination of willingness to change and a frankly rather grubby pragmatism.

And pragmatically speaking, you have to take the interests of ordinary people into account if you want long-term stability. Even if you are extremely cynical and regard people as nothing more than cattle, you will still realise that your livestock needs feeding and conditions in which they can breed, work productively etc. It's common sense, really.

The bankers won in 1913, and are obviously running us all into the ground in spite of the losses to the rest of us, so they can keep extracting resources from us.

I think the era of that sort of banking is coming to an end; as is the era of that sort of capitalism in general. Accumulating wealth beyond a certain point, whichever way that is defined, is damaging to stability; there is only a limited amount of it to go round, despite what the economists tell us, so if it accumulates in one place, there will be less in other places, and at some point it will collapse: basic Marxist theory (you should pay a little bit of attention to it - some very prominent, capitalist economists are taking this seriously). The point of this observation is not that we should make a revolution and introduce a Soviet style Communism, but that wealth is only meaningful if it is circulating. It is like energy: potential energy doesn't do anything - it is only valuable when it is transformed into work, in a sense.

The big question here is: how do we ensure that wealth keeps circulating? I don't know, but we will have to solve that problem in order to keep things stable in the long run. The good news is that when wealth does circulate, it benefits us all - ie. even us normal people.

Re:Ask Slashdot: Have you forgotten about Bitcoin

[Electricity Likes Me]

Which belies the bubble-like nature of BitCoin. There is no reason to hold it. It's predicated on the greater fool theory - you don't want to hold BitCoin (because you can't spend it) - so you sell it on to someone for whom the same will be true, but who is either a fool, or convinced they'll sell it on to yet a greater fool.

Re:You Can Try

[Electricity Likes Me]

By your (lack of) logic, all countries other than the U.S. should be put in jail.

(Hint: The internet isn't a U.S. territory. That's why I'm free to pay for Mexican purchases in Pesos, and German purchases in Deutschmarks.)

You don't pay for any of those things in that currency. Your credit card company converts your USD to Pesos, then pays your debt for you in it.

The US simply says that it'll regulate BTC to USD exchangers, and BTC is then done - since you either register as an official exchanger, or get shut down as an unregistered one for not complying with the law on the matter.

Re:no

[f3rret]

what the hell...

Re:White paper on EXACTLY what a bitcoin is, pleas

[MMC Monster]

Who cares.

I don't need to know who created the U.S. dollar in order to use it as a store of value or medium of trade for goods or services.

Re:Ask Slashdot: Have you forgotten about Bitcoin

[shaitand]

You can't spend Bitcoin? News to me. There are fewer places to spend Bitcoin but you can certainly spend it.

Re:Bored how about a little humor?

[wanfuse123]

Bitcoin Miners Threaten Strike Over Fed Regulations

well....

[BonThomme]

The number of Bitcoin stories on Slashdot should be regulated...

Re:8 Bitcoins are a Bytecoin?

[BonThomme]

I think you mean 10 bitcoins...

Re:Regulation or manipulation?

[BonThomme]

some would argue a bitcoin has no sides

Re:honestly

[BonThomme]

When the chickens come home to roost, eat them.

Re:Nice anti-US rant, but...

[JabrTheHut]

You don't have traffic cameras in the US? Are you sure about that?

And you do know the whole "Van that can detect your TV" is a myth, don't you? I think you've just discredited yourself...

Re:It should be taxed

[BonThomme]

your brain have obviously never been taxed

Re:Technically they GAVE USA that data

[JabrTheHut]

Technically speaking, SWIFT *gave* the USA all that lovely private data free to be mined for the good of the EU citizens being spied on.

Yes, it was entirely voluntary or SWIFT would be barred from operating within the US or with any US banks outside the US.

Re:It should be taxed

[gelfling]

Plural brain?

White Bitcoin is generally harmful compare to LETS

[Paul Fernhout]

We have vast amounts of technology now, and we should use that technology to create material abundance for all. We do that through five interwoven types of economic operations involving subsistence production, gift giving locally and globally, exchange in the market, planning at various levels of government, and theft/extraction/conquest (see my site). Bitcoins fall mostly into the area of exchange (as an artificially scarce token). However, there is a seeming subsistence aspect in Bitcoins because you can in theory produce them yourself. That is similar to how people can create virtual objects in some online games which they can exchange for national currencies. But, in the case of Bitcoins, they are produced more as a form of almost online gambling (since you may not find one even having put in the electricity).

In general, it is a waste of CPU cycles and electrical energy to engage in this form of creating artificially scarce tokens to be used for exchange. Society woudl be better off if peopel with spare CPU cycles from always on computers donated them to other causes like protein folding or NASA or SETI or whatever. It is better to create locally useful products for subsistence, or to create inherently worthwhile things for exchange or gift-giving. We should be planning how to create more shared abundance not more artificial scarcity.

For those interested in a virtual currencies, a better model is "LETS" (Local Exchange Trading System) systems where currency production is regulated by democratic involvement in a LETS system, which anyone can set up for their local community (subject to any local laws and gathering community support).
http://www.lets-linkup.com/
http://en.wikipedia.org/wiki/Local_exchange_trading_system

Anything that has some value due to rarity can be used as a currency as a medium of representing demand. That can include artificially created things like fiat dollars, Bitcoins, Kanban tokens, or LETS credits. But a currency not based on one-for-on exchange with a useful item (like electricity currently or food or CPU cycles) only has value if the community gives it value as a medium of exchange and signaling demand. Thus stable currencies need to be regulated by a community or a trusted organization the community delegates the responsibility to -- because a currency represents a social contract. Otherwise, we will see some pattern of valuation as a bubble as the community eventually figures out the dynamics of the thing (which may take some time for the learning to propagate). Example of a community slowly becoming aware it is being collectively scammed in another financial context:
http://abcnews.go.com/US/wireStory/600m-ponzi-scheme-incubated-small-nc-town-18845335#.UVhOeLAq3D0

The bottom line: it is wasteful of electricity to compute otherwise worthless mathematical functions for arbitrary social reasons. Of course, the same can be said of much gold mining, too -- although at least gold looks pretty and has some inherent usefulness. If people want a fiat currency, there are many ways to create one like via LETS that don't entail that level of waste.

Perhaps the biggest problem with Bitcoin conceptually if it is successful may just be that anyone can make a slight variant of it with a somewhat different mathematical function (Bitcoin1, Bitcoin2 ... Bitcoin100000) -- and then what is the value of Bitcoin0, the first one? The only value is in the social sentiments about it. And feelings can change about the social worth of a pattern of bits in some computer somewhere.

Will some people make a lot of money from Bitcoin0? No doubt, as people have told about on Slashdot already. But people will likely lose a lot in the bubble, too. And the waste of electricity is a surety. LETS its a better idea which promotes a re

Re:White paper on EXACTLY what a bitcoin is, pleas

[khallow]

Yes, and your post above includes "It just happens so that this involves computers."

It's remarkable how the narrow-minded can trivialize the most remarkable inventions and discoveries. Let's suppose a carton of cigarettes weights 200 grams and costs $40. A billion dollars of cigarettes then is 5,000 metric tons. A memory stick might be oh, 10 grams. Do you see where I'm going with this? An eight order magnitude improvement in mass (over your example) for something that is in use today and it's just an "idea".

Re:You Can Try

[Immerman]

But money laundering isn't "built into the currency", it's just really convenient because the currency can be readily transferred anywhere in the world directly by individuals, a quality that would be shared by almost any decentralized digital currency mechanism. Dollars are almost as convenient to launder by those individuals with secure access to a large black-market financial infrastructure, all bitcoin does is level the playing field.

Re:You Can Try

[Immerman]

The number of potential addresses is irrelevant, only the number of used addresses matter. And any time you buy a physical good you risk giving revealing your identity - it only take one mail-ordered item or in-person transaction within sight of a security camera to potentially tie an account to your real identity. You can route your money through various shell accounts to try to disguise it's path, but unless you are extremely skilled at it a competent transaction analysis will reveal most such games, so compromising one of your accounts will compromise most of them.

Which leaves us with the mixing services, which are in fact bald-faced money laundering services. But they have nothing to do with the currency itself, they would exist in one form or another for any digital currency, and I fully expect there to be an international crackdown on them if/when major governments start taking Bitcoin seriously.

Re:Ask Slashdot: Have you forgotten about Bitcoin

[Electricity Likes Me]

All of which depend on being able to exchange Bitcoin into another currency first in order to realize it's value. None of them can pay taxes or rent in Bitcoin.

Re:You Can Try

[CharlieG]

But the Government doesn't CARE about a level playing field. There are anti-money laundering laws, many of which were the actual original reason for the RICO act in the first place. They don't have to PROVE that you laundered money, just that you set up a system that could, and didn't follow the "Know Your Customer" rules, and things like Dodd Frank (come April 10th). The mere agreeing to setup a system that COULD be used to bypass is enough for you to go away for a LONG LONG LONG time.

NO

[wirehead_rick]

Regulation of currency is evil.

Re:You Can Try

[Immerman]

Of course they care about a level playing field - they much prefer one tilted in favor of themselves and the big players who know enough to discretely make the appropriate "campaign contributions" so that the relevant officials look the other way.

As for the legal implications - sounds to me like one of many goods reason for the original creators to have hidden behind a pseudonym, and for anyone else to to avoid operating a bitcoin exchange within US jurisdiction. Still doesn't address the fact that there's already a far more anonymous currency in wide circulation which much (most?) money laundering is performed in. Many actually. They're collectively known as "cash".

Re:You Can Try

[NewYork]

https://en.wikipedia.org/wiki/NORFED

Re:bitcoins

[petteyg359]

Because all your bank accounts and credit cards and retirement funds and home/vehicle loan information aren't also on computers. Right.

Good for Bitcoin???

[Baldrson]

The "respectable" institutions will be forced to use Bitcoin for the same reason they were forced to use Bill Gates's DOS: The network effect.

Bitcoin doesn't need the "help" of regulators to make that happen anymore than did Gates need their help to spread DOS.

Re:Bored AND Preposterous

[rmdingler]

So your accusation involves a for-profit Corporation accepting astroturfing money??

Re:White paper on EXACTLY what a bitcoin is, pleas

[dwye]

Scrooge McDuck being a cartoon character, I would no more expect real economic behavior of him than I would have expected it from the family that found A Diamond As Big As The Ritz (from the F.Scott Fitzgerald short story).

Re:White paper on EXACTLY what a bitcoin is, pleas

[dwye]

I don't need to know who created the U.S. dollar in order to use it as a store of value or medium of trade for goods or services.

Everybody else does, though. Otherwise, Confederate bills would have value (interestingly, uncut bills DO, as a curiosity), and Zimbabwe would be the richest country in the world, followed by the Weimar Republic It is only the one-time probity of the US Government that made the US dollar better than other fiat currencies, and only since the term of Alexander Hamilton (ever hear the expression "not worth a Continental" describing the first attempt at a US dollar as a store of value?).

Re:You Can Try

[Pseudonym Authority]

I was not speaking of physical measures such as security camera's.

You can route your money through various shell accounts to try to disguise it's path, but unless you are extremely skilled at it a competent transaction analysis will reveal most such games, so compromising one of your accounts will compromise most of them.

That is not what a mixing service is. It takes money from many different people, then, after breaking it up among various addresses or mixing services, returns it to the depositors over the period of a few days, breaking that 1000BTC trade up into a 500ish blocks of 1~5BTC so that the original address can be thrown out and have the money sent to many addresses from several other people's addresses as a lot of small transactions.

Re:You Can Try

[peawormsworth]

Its quite easy to regulate- make it illegal to accept it as payment, and arrest anyone who takes payment in it.

I dont think your "easy" solution would be easy to make into law. What possible motivation could the government have to tell its citizen what it can and can not accept in an agreement of trade. I think they would need to show some sort of danger or reason to protect citizens from it. Its unclear what danger that would be.

Re:You Can Try

[peawormsworth]

The US makes dollar bills, knowing full well that it will be used to pay for smuggling drugs, paying terrorist activities, fund human trafficking, gambling, paying for stolen goods and other crimes. And in the case of HSBC, we know full well that managers were directly aware of many of these transactions.

Re:You Can Try

[Immerman]

>That is not what a mixing service is...

In other words it's a service specifically designed to transfer money from account(s) A to account(s) B in a manner that pretty thoroughly obfuscates the connection between them. How exactly is that different than any other money-laundering service? In principle I mean, obviously the implementation details are different.

Re:You Can Try

[Immerman]

Oh, I think I misread that. In which case I agree, the money routing games are certainly not the same as a mixing service - they're the sort of thing you can do on your own to try to obfuscate the money flow - done well it may not be readily apparent that a hundred different accounts belong to the same person .

as for
>I was not speaking of physical measures such as security camera's.

Sure, any system is secure if you make an exception for the glaring security flaws. But the basic fact is that if you buy any physical good or service the anonymity of the account you use is easily compromised, and with it most of the other related accounts which aren't "firewalled" from it via a money-laundering service.