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Could Bitcoin Go Legit?
Velcroman1 writes "On May 15, the Department of Homeland Security seized a digital bank account used by 'MtGox,' the world's largest exchange, where people buy and sell bitcoins. DHS alleged, and a judge agreed, that there is 'probable cause' that MtGox is an 'unlicensed money service business.' If proven, the penalty for operating such a business is a fine and up to 5 years in jail. FoxNews.com caught up with several bitcoin exchanges, including CampBX, MtGox, CoinLab and more, to ask them how they've navigated the regulatory waters — and how to go legit." In other shady bitcoin news, it appears the demise of Liberty Reserve has caused hackers to find a new alternative. twoheadedboy writes "Despite suggestions Bitcoin might be the ideal currency for dealers on the dark web, it appears Perfect Money, a Panama-based operation, is proving the most popular alternative to the now-defunct Liberty Reserve. A source working the underground forums told TechWeekEurope that, for now, fraudsters are rapidly migrating to Perfect Money. Many vendors have started accepting it, having previously primarily used Liberty Reserve, which was shut down following the arrest of its founder and four other members this past week. Internet fraudsters might be interested in Perfect Money as it has distanced itself from the U.S., cutting off all new American registrations. However, one forum user said he was turned down by Perfect Money as their 'type of activity is not welcome.' Other currencies may yet win out."
I view BTC as less flawed than Zimbabwe dollars or US dollars because it's not a fiat currency and thus not open to hyperinflation.
BTC is fiat money because it meets the criteria of "money without intrinsic value." Per Wikipedia:
While gold- or silver-backed representative money entails the legal requirement that the bank of issue redeem it in fixed weights of gold or silver, fiat money's value is unrelated to the value of any physical quantity. Even a coin containing valuable metal may be considered fiat currency if its face value is higher than its market value as metal.
BTC is not just "open", it is doomed to hyper-deflation. As more people are born and as efficiency of labor increases, more and more tokens for exchange are needed to match the mass of available goods. (A society that has 1000 coins can bake 100 loaves of bread for 1 coin each. But if one day 100,000 loaves of bread are needed and baked, there is no way to pay for them with only 1000 coins if each loaf is still 1 coin.) The supply of BTC is fixed. Therefore, each BTC will become more and more expensive. Spending becomes a fool's errand. All BTCs will be kept, and a different currency will be used instead for day to day purchases.
But bitcoin isn't American and most of the interesting legal stuff you can buy with it, isn't American and it will outlive the collapse of the USSA.
You are imagining a very fancy collapse of USSA, where everyone comfortably sits at their homes, run their computers on reliable and free electric energy, and calculates hashes of transactions that keep coming over fast and cheap Internet connection. I want that "collapse" right now, pretty please!
In reality, if the USA collapses, it will be closer to Yugoslavia. If you remember the wars there at the threshold of the century, it was not a comfortable place where you'd leisurely run servers. BTC would be dead in such a country. The only money in use would be foreign (CAD) and natural (barter.) Internet will not be available.