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Why Bitcoin Is Doomed To Fail, In One Economist's Eyes
Hugh Pickens DOT Com writes "Economist Edward Hadas writes in the NYT that developers of bitcoin are trying to show that money can be successfully privatized but money that is not issued by governments is always doomed to failure because money is inevitably a tool of the state. 'Bitcoin exemplifies some of the problems of private money,' says Hadas. 'Its value is uncertain, its legal status is unclear, and it could easily become valueless if users lose faith.' Besides, if bitcoin ever really started to take off, governments would either ban it or take over the system says Hadas. The authorities might be motivated by a genuine concern about the stability of a shadow monetary system or they might act out of self-preservation because tax evasion would be too easy in a parallel economy. 'Part of the interest in virtual currencies like bitcoin is that their anonymity can provide a convenient cloak for criminal activity. Part is technological — this is a cool idea. And part is speculative — gamblers bet that bitcoin's value will increase,' concludes Hadas. 'Truly private money is an inferior alternative to the money that comes with the backing of a political authority. After all, no bank or bitcoin-emitter can be as public-minded as a government, and no private power can raise taxes or pass laws to unwind monetary excesses.'" Could be there's something good about money that can't be manipulated by law. Some people at least think there's plenty of value in Bitcoin and similar currencies, despite the risks. And those risks at present probably aren't enough to comfort the unfortunate Welsh fellow who (HT to reader judgecorp) "has realised he threw out a hard drive containing 7500 bitcoins, worth £4 million at today's prices. It is now under four feet of garbage in a landfill site the size of a football pitch."
He's just pissed he didn't mine bitcoins when it was still practical.
An economists view on this issue means about as much to me as an astrologist's. The whole subject of economy is a joke.
We've played this game before.
I look forward to the first Bitcoin Panic, it should be interesting to see what happens...
Everything described here is what makes bitcoin a superior form of money, not inferior.
Liberty in your lifetime
Seems like this economist is too fond of governments to be really objective. The last quote in the summary was specially awful. No bank or financial institution will ever be able to do as much harm to a population as a bad government.
That said he has a point regarding government interests in taking virtual currencies down or controlling them. The thing is, technologies evolve, and albeit bitcoin may find its end in government interventions, sooner or later other alternatives that are even harder for governments to control will appear. It was the same with file sharing and it will be always like this. People resent control and given the means to avoid it most will.
He's right, but in the wrong way. All currencies are doomed to fail. As long as people are willing to exchange something for something else, both have value. Most FIAT money has value because governments are willing to exchange it for taxes, so then it has value to almost everyone. When a government collapses, or people lose faith in it, it's currency becomes worthless. Seashells are no longer values as currency, but they once were. Gold/Silver have boom/bust cycles. BitCoin had value because of SilkRoad, and the silk-roaders were willing to accept it for... something. Frankly I'm surprised BitCoin still has value after SilkRoad's demise. If something significant replaces SilkRoad, BitCoin will remain valuable. Until then bitcoin's going on momentum. May crash soon, may not. Will crash eventually.
Here's to losing my Karma Bonus again....
Just as gold and silver standards which was always "privitized" and was never a "tool" that was "centrally owned" by one figure.
I'm pretty sure that there is an argument that gold and silver, as far as macroeconomics is concerned, has been "public" and centrally controlled for a long time.
After all, no bank or bitcoin-emitter can be as public-minded as a government, and no private power can raise taxes or pass laws to unwind monetary excesses.
Well, except of course the Federal Reserve.
All my liberal friends think I'm a conservative, all my conservative friends think I'm a liberal.
This is utter crap. With very, very few exceptions, money has always been issued by government. Governments have always imposed currency by requiring that taxes are paid in using it. Governments have always set standards for the production of money. Governments have always punished those who attempt to interfere with money.
Gold and silver standards were exactly a system of money imposed by governments, effectively legislating the price of the underlying metal. Such standards caused problems exactly because it was a government attempting to impose money at a fixed price to a commodity where the market (ie the people) tried to push to a different price for that commodity.
I guess you're thinking of 19th century banknotes, issued by private banks, but they are not money as such, just a promissory note which the bank would exchange for a fixed number of coins which were the state-imposed money. Once they became government-backed legal tender they were subsumed into the existing money system (although you might argue that eg UK bank notes are still only promissory notes redeemable for coins, at least in theory). They were never an independent, floating-exchange currency like bitcoin is.
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I'm just waiting for the first tax audits of BitCoin users who get dinged for not having paid capital gains tax. I give it a few years.
'Bitcoin exemplifies some of the problems of private money,' says Hadas. 'Its value is uncertain, its legal status is unclear, and it could easily become valueless if users lose faith.
Cash's value is uncertain, its legal status is ... well, not unclear, but situationally dependent in a pretty bad way[1], and like anything, it becomes valueless if nobody wants it.
1. In the US, at least, while it's legal to use arbitrarily large amounts of cash in any legal transaction, it's not legal to use it for drug deals, money laundering, etc.. Sounds reasonable so far, but there's a whole boatload of policy and precedent to the effect that having large amounts of cash constitutes evidence that you were using it for drug deals, money laundering, etc., which combined with civil forfeiture, means that having large amounts of cash permits the state to seize that cash, unless you can prove that you were doing something good with it. Short of being an employee of a bank, vending machine company, etc., that's pretty hard.
Kind of brings up a problem with Bitcoin though. If money can cease to exist due to a bad hard drive, and there is a limited amount of Bitcoin, then eventually a decent amount of it will be lost. If the average person starts using it, with their usually ability to keep things safe and backed up, it probably won't take long to disappear a significant amount of the money. The government could even destroy any Bitcoins it takes possession of through drug busts or other means, simply by deleting the wallets.
Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
Are you sure? BitCoin is a finite reserve of cash and, as the Welsh chap's story confirms, will be regularly lost down the back of the digital sofa as we go forward. The energy costs associated with mining the outlying end of the blockchain are also going up. What's the estimate of when we hit peak BitCoin, in terms of the number in circulation?
Due to its mathematical design, bitcoins are similar to a comodity, not a fiat currency.
The selling feature of Bitcoin is that it is not backed, nor traceable by, governments. That's the main drive behind this boom - very little trust remains in the US government, or in many others. That covers the Silk Road-type drug-trade users - they have a very good reason not to trust the currency of a government that has declared war on them. That covers the technological side - tech-savvy people tend to be much less trusting of any government, and we in particular were betrayed by their widespread monitoring. And it even covers the investment bubble - the marketplace wants US monitoring of damn near everything to stop, and anything that steps in to fill that need will find a ready consumer base and investor backing. Those are the three groups *he* identifies as behind the Bitcoin boom, and each one is motivated, directly or indirectly, by a fear and hatred for the American government (note that it's specifically the government, not the American people, that are the target here).
Bitcoin will die as soon as we can get similar guarantees of security for official, government-backed currencies and banking systems. Oh, and not just from America - a currency that is secure not just from the issuing country, but all others.
Yeah, even if Bitcoin dies (I can see a big enough crash destroying the brand, and any currency is only as strong as the collective desire to use it), something else will come up to replace it.
There is a bit of a tautology here. If a government issues it, it is defined as "money" if some other entity issues it, it is a "coupon" or whatever. What TFA misses, I think, is that anything can be used as a basis of exchange. I can buy and sell things by denominating the exchange in widgets, well there you go. If I later convert the widgets to US dollars, well that's no difference. May as well say 'world of warcraft gold' for widgets, or whatever you like, in that example. It is an excellent point that since government require protection money to be paid in their own preferred currency, there is a huge advantage in terms of acceptance in the marketplace. This does not mean, however, that other mediums of exchange cannot exist. My main point is that the word "money" is an arbitrary one unless one includes 'issued by governments for payment of protection money' in the definition. Otherwise, me trading babysitting stints with my neighbors also counts as money.
This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.
US Dollars aren't "issued by government." The US monetary supply is completely in control by a private banking system called the Federal Reserve System.
Gold and silver standards pre-existed state control of money. Attempts to legislate the price of metal always failed because the state could never resist the temptation to inflate the currency base, making the price of the metal unsupportably low.
Not the 19th century. This century starting in 1913. That's what we (in the US) have now: a private bank issuing private banknotes.
No Inflation Taxation without Representation
There are 4 countries[1] in the world where private banks still issue banknotes - Scotland, Northern Ireland, Hong Kong and Macau. But only government approved banks have a licence to print money, and they are required to deposit funds with the central bank to cover the notes they have issued.
[1] None of them are independent countries, and only Scotland is technically a country, but they all have their own parliaments and legal systems.
they might act out of self-preservation because tax evasion would be too easy in a parallel economy [...] no private power can raise taxes or pass laws to unwind monetary excesses.
Way to miss the point, Ed.
The governments of the world have proven themselves much too irresponsible to manage fiscal policy. We-the-Fuckin'-People have, therefore, decided to take that power back from the government.
When a government can't keep its own spending in check, "raise taxes" does not count as a valid response, whether or not they have that power by virtue of having the biggest guns. The interests of the world's governments have drifted so far away from "public-minded" as to make your entire suggestion laughable. No, we obviously can't trust most private entities to act in our best interests - But I could name literally a hundred that do a hell of a lot better job than any world government.
The federal reserve and the ECB need to cease to exist, ASAP. No more of this "implicit taxation through inflation" crap - If governments can't play on the same monetary field as the rest of us, they need to go away and have something better able to live within its means replace them.
What is money if not basically a promissory device? I promise to give you a certain amount of goods and services.
Moreover, different bank notes were worth different amounts. You might have a bank note from The Bank of Here with $5 on it, a bank note from The Bank of There with $5 on it, and a note from The Bank of Nowhere with $5. But, actually, a shopkeeper might not trust the Bank of Nowhere, and think that the Bank of There is too far away, and so will only provide $3 and $4 worth of goods respectively for the two $5 notes. So, three Bank of Here $5 notes might be worth 5 Bank of Nowhere $5 notes, and four Bank of Here $5 for five Bank of There notes.
HELP MY ACCOUNT HAS BEEN HACKED BY AN ILLIBERAL ART STUDENT SET TO DESTROY THE INTERWEBZ!
in other words, state sanctioned VIOLENCE.
FTFY
Shoes for Industry. Shoes for the Dead.
"I guess you're thinking of 19th century banknotes, issued by private banks, but they are not money as such, just a promissory note which the bank would exchange for a fixed number of coins which were the state-imposed money."
The Ithaca HOUR is a local currency used in Ithaca, New York and is the oldest and largest local currency system in the United States that is still operating.
http://en.wikipedia.org/wiki/Ithaca_Hours
BerkShares is a local currency that circulates in The Berkshires region of Massachusetts. It was launched on September 29, 2006[1] by BerkShares Inc., with research and development assistance from the New Economics Institute.
http://en.wikipedia.org/wiki/BerkShares
Bitcoin is just alternative currency. There are plenty of that around - most of them are pegged to some other currency though, but they are, for the most part alternative currency.
Think: Gift Cards (Amazon/Apple/Steam/Google/etc), alternative store currency (Canadian Tire Money), etc. Then there's non-traditional currency, like WoW Gold.
If anyone says Bitcoin isn't a "money" they're plain old lying. It can be used to facilitate trade (which is the purpose of currency).
Of course, there are a few fundamental problems with Bitcoin, but there are problems with all currencies.
When any economist, banker, etc., says Bitcoin is doomed, the real reason is them saying is "we haven't figured out a way to make money on it yet". No currency is invulnerable to making money by doing things of little value, Bitcoin included. It just means the quants haven't sat down to figure out schemes to exploit to get bitcoins for little effort. Either it's because the entire bitcoin market is too small so the benefits of skimming 1/1,000,000th of a Bitcoin from every transaction is barely worth the effort, or other reason.
That's the real message.
or it was slips of paper referring to actual, valuable stuff stashed away in private vaults.
I'm assuming you're referring to gold convertability. It's nonsense: The reason gold is valuable is that societieshave historically used it as currency. The commodity price of gold has little to no reference to its actual uses (jewelry, electronics, etc), and everything to do with people thinking that if the US dollar collapses there will be people willing to exchange gold for other more-useful stuff.
For a very long time, bronze was an important and valuable currency. It isn't now, and that isn't primarily because copper is more common than it once was.
I am officially gone from
Because no one has any other data they want to back up effectively in perpetuity? This is a totally new concept unique to Bitcoin?
Not quite sure how you see the FRS as 'private' - it's a national reserve bank established by legislation. It also, crucially for this discussion, is not responsible for issuing US dollars - that's the US Department of the Treasury.
I'd be interested to see proof of this. I agree that it seems likely to have been the case, but I don't think we can actually point to a culture where it was true. Issue of coinage by governments goes back a long way in human history, and for the majority of that it consisted of a gold or silver standard - initially by minting coins from fixed quantities of the metal in question, later by legislating a fixed ratio of metal to coins.
There is a lot of confusion here. 1 - 1913 is not in this century, it's in the last century. 2 - The FRS is not private. Its operations are independent of the other organs of government, but that doesn't make it a private organisation. 3 - The FRS does not issue currency (see above).
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First, a brief correction: the author of the op-ed is not an economist. He's a journalist and former financial analyst who writes on economics topics for the NY Times.
Second, the op-ed makes a number of errors:
1. He asserts without evidence that non-government currency is inherently inferior to government currency, without defining the purposes for which it is supposedly inferior and in what ways. Medium of exchange? Unit of account? Store of value?
2. His argument relies upon his unsubstantiated belief that "no bank or bitcoin-emitter can be as public-minded as a government", and that "no private power can raise taxes or pass laws to unwind monetary excesses". This ignores the signficant body of research on the not-so-public-mindedness of public officials. It ignores the fact that the "monetary excesses" he needs to unwind are frequently caused by government monetary policy, rather than being inherent to currency. It also ignores the fact that Bitcoin's cap on supply was designed precisely to avoid such monetary excesses. Perhaps Bitcoin's design in this regard is deficient, but the author apparently could not be troubled to make any argument detailing how.
3. He criticizes "private money" such as Bitcoin for having uncertain value, and for its potential to lose value if users lose faith, despite these problems applying to state-backed currencies as well. It's not as if we've never seen runs on banks, unexpected inflation or even hyperinflation with government fiat currency.
4. He further criticizes Bitcoin for its alleged anonymity and thus a potential for tax evasion, neglecting the fact that Bitcoin is less anonymous than the goverment paper currency known as "cash".
5. He repeatedly makes the argument that because we've had state-backed currencies for a long time, they must be superior. This neglects the possibility that effective non-government currencies were not feasible at scale in the past simply due to a lack of technology (crypto and global instant communications). And it neglects the possibility that the future of currency is not either-or, but both.
This is what happens when the poltical-media establishment tries to shoehorn a story about technology and economics into the same tired left-vs-right, government-as-perfection vs. government-as-catastrophe narratives. You get an incoherent, poorly researched, poorly argued mess. The author may end up being right that Bitcoin won't last, but he's not given us any sound argument to support his claim.
...and once it gets (and its inevitable people) linked to a 1. worldwide child porn ring 2. high-viability murder-for-hire 3. terrorist act that kills many citizens in some random country or 4. large scale drug operations, it will be legislated away with the blessings of the state-run media, the banking system, and the average person in the street as something exotic and hard-to-understand-and-therefore dangerous.
so play in the sandbox while you can, its not going to be around for long....and for you people who say nothing can stop it? lol wait til they make it a 3rd degree felony to have a wallet on your harddrive.
never bring a twinkie to a food fight.
You sound like someone who doesn't understand how the banking system works. The Federal Reserve is about as "private" as the Post Office. There's some language about being private, but the non-governmental bank ownership is completely symbolic. All the power is in the hands of the Presidentially appointed Board of Governors and the Federal Open Market Committee, which is also mostly political appointees.
You might need to look at this as a systemic issue. If losing the data on a hard drive (and related backups) can render bitcoins unusable, then over time bitcoins will be lost. I think that means the theory that underpins bitcoin is wrong because it can't be a stable monetary supply if it has a finite number of coins each of which can be destroyed or lost.
Fanatically anti-fanatical
Not quite sure how you see the FRS as 'private' - it's a national reserve bank established by legislation. It also, crucially for this discussion, is not responsible for issuing US dollars - that's the US Department of the Treasury.
Wrong. Paper bills are Federal Reserve Notes (http://en.wikipedia.org/wiki/Federal_Reserve_Note). The Department of the Treasury has nothing to do with issuing Federal Reserve Notes. The US Mint (a part of the Treasury) is responsible for issuing coins.
as I understand it Bitcoins are infinitely divisible so when coins are lost the value will go up for the remaining coins to compensate, so prices will simply adjust.
---Saying gnome 3 is better than windows 8 not so much a compliment as it is damning with light praise.
as I understand it Bitcoins are infinitely divisible so when coins are lost the value will go up for the remaining coins to compensate, so prices will simply adjust.
I could not find the website, email address, or phone number to report lost Bitcoins. If they aren't reported lost then how would they know if I didn't just put them under my mattress? If they have been reported lost, can they be reinstated later when they are found?
Given that economics (as a field) seems to be even more willing to pretend that anthropology has nothing to tell us about the economic behavior of human groups than it has been willing to pretend that psychology has nothing to tell us about the economic behavior of human individuals; I'd take any just-so stories about the origins of currency with a serious grain of salt.
Archeology certainly suggests that we've been taking shiny things seriously for a long time; and gold certainly has lots of properties that appeal to the primitive would-be metalsmith (soft, ductile, low melting point, nontrivial amounts that are usable without any refining, accidental or deliberate alloying with copper has very good results, etc.); but positing a 'gold standard' involves a couple of gigantic leaps (most notably, the existence of 'currency', in something like recognizable form, along with the theoretical and technical expertise to worry about and handle clipping, debasement, and other nontrivial weights-and-measures stuff).
The bitcoin already crashed multiple time read this forbes articles (http://www.forbes.com/sites/timothylee/2013/04/11/an-illustrated-history-of-bitcoin-crashes/) everytimes calling the end of the bubble.
Silk Road was only down for a month or two, following the arrest of one individual.
http://www.forbes.com/fdc/welcome_mjx.shtml
"On Wednesday morning, Silk Road 2.0 came online, promising a new and slightly improved version..."
Implicit taxation through inflation? First, inflation is extremely low on the entire western world. Second, inflation only eats away at you if you are sitting on currency as assets, which is a terrible thing to do. If most of your wealth is being productive somewhere, changes in the medium of account shouldn't matter a bit.
Now, having zero inflation, or all the way into deflation, is not a good thing for an economy. We have this fundamental problem called Money Illusion. It's been measured in a whole lot of studies, just look it up. As long as there's money illusion, in practice, economies work better when economies grow in a predictable manner, which implies some mild inflation. Without said inflation, velocity drops, and with it economic activity. We really, really, don't want a shrinking GDP. A central bank is a compromise to make sure that someone, in some way, is actually altering the money supply to achieve that objective. What we need though is a way to make sure central banks are making less decisions that look like reading entrails, and more that are empirically testable and forward looking.
Because it is wholly owned by a consortium of private banks, and not subject to government audits?
No, because none of that is true. No one really "owns" the Fed.. The private banks are more like members than owners, government appointees have all the decision making power. Also, all the Fed banks are subject to audits by the GAO and independent entities.
New gold is produced regularly through mining. Old gold is generally recovered and not lost. Gold has little utility, so the demand for it is for other purposes.
Bitcoins are limited in number forever. Lost bitcoins cannot be recovered like gold in watches or teeth can. Although Bitcoins have zero utility, too, they have near-zero liquidity at the moment in the physical world. I can sell my old gold Hamilton watch at any pawn shop in the world; what can I do if I need cash and I have bitcoins and no working computer? Or no net connectiity?
There is no comparison. Literally. It's comparing oranges to quarks.
Government money fails because governments can't be trusted to meet their contractual obligations. The US dollar has had a pretty good run, but once FDR stole our gold and Nixon broke the Bretton Woods treaty, its eventual demise became inevitable.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
False analogy. It's like having wads and wads of US Dollars after a nuclear war. In the end, Nuka Cola caps are the only currency worth anything. (Except of course the Sierra Madre)
Science advances one funeral at a time- Max Planck
Bitcoins are limited in number forever.
Bitcoins are infinitely divisible.
If they aren't reported lost then how would they know if I didn't just put them under my mattress? If they have been reported lost, can they be reinstated later when they are found?
The value of Bitcoin fluctuate depending on demand/supply.
Currently the supply of bitcoin is low and only slowly increasing (only 25 BTC per mined block are shared across all the users of the mining pool which successfully validated the block, and the total number can be computer around 12 mio).
Currently the demand is expanding (bitcoins can be used as payment medium in an ever increasing number of shops. The days where Silk Road was the main place were you could buy/sell using BTC are long over [and in fact, during some time, Silk Road was down due to being seized by authorities. At that time the BTC market barely noticed]. Also BTC are in demand by traders [although again given the low impact of various pump-n-dump attempts, traders don't have as much an influence today as back then] ).
Hence currently the price is globally heading up (with more or less some small very localised perturbations).
But globally, BTC evolve according to demand/supply AND ONLY demande/supply. (Unlike fiat currencies which can be manipulated by printing more or less bills by the controlling state).
If some coins stop circulating (either because you destroyed the harddrive cointaining the private keys to spent them, or simply because you forgot about them, or because you're hiding them as a reserve for later) the total number of "coins currently available on the market" will get a bit lower (a bit under the current 12 mio). Because of that, simply following the demand/supply rule, the price of bitcoin will increase a little bit.
If suddenly you brought them back into circulation (you remembered that damn password, found the old laptop that you though was thrown away, or simply decide to use your reserve) the number of circulating coins increases, and because of the slightly increased supply, its price decreases a bit.
Now the "magic" of bitcoin is that its a decentralised currency.
- In a centralized currency, the issuer can massively print new money. Or destroy gigantic amount of bills. Such large scale variation of the supply can cause big changes in the value of the money, and thus the state can manipulate its own money. Create inflation or deflation depending on needs. Thus value of money is not only influenced by pure demand/supply rule in the market, but also very directly by government and politics.
- In a decentralized currency, *nobody* owns the system and nobody in particular decides, instead all agree. (Nobody will accept your mined block if you granted yourself 1000 BTC instead of the current 24+fees)
Also, most of the people only own a small part of the whole amount of bitcoins. So any "bitcoins pulled out of circulation" by 1 single individual will only concern a very small amount, a small fraction from the whole stash, and thus barely have any registrable effect (the theoretical effect of you not spending your 100 BTC on the value of the whole 12 mio will be smaller than the noise).
A single individual (or government body) can't influence much the value of bitcoins. (For influence to be successful, that would require massive coordination of a sizeable proportion of all bitcoin holder. Which would be near to impossible given how much the money is spread).
The only influence of bitcoin going in and out of market that can be sizeable is the total influence of all bitcoins getting lost.
If over the first 10 years of bitcoin lifetime 1 million total of coins get completely lost for ever, the overall price will jump up by 5-10% accordingly.
So it's a situation of "the market will heal itself".
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]
1) use massive budget spending to fund an organization to stage a 51% attack on the network. The NSA has the capability to do this. They can coerce private industry to develop ASICs in larger volume production than what currently exists, and shutdown any other ASIC reseller.
That won't be easy.
The required hashing power is ridiculously high:
- Current hash power of the whole network is 6 Peta-hash/s (OMGWTF: it was still counted in Tera-hashes back when I looked).
- At the current trend of hashrate/difficulty increase, by the time the NSA puts their evil plan into production, they'll probably need to deploy several exa-hashes.
Next-gen mining machine are presumed to go into the Tera-hash range by unit. To control the whole network the NSA would need hundreds of thousands of them (if not million).
Also about shuting down:
- Good luck. As if the NSA had any power to shut down foreign ASIC makers.
- In fact its the opposite. I doubt that the USA alone has enough foundries to support the necessary production of chips. Very probably, its going to be the NSA which would have to beg foreign foundries to help the churn out the necessary chips.
And do you want to shut down the rest of the industry:
- re-purposing as much foundries as possible to make your massive number of ASICs would require diverting them from the current production of other useful stuff.
I don't think the last few remaining foundries would appreciate being forced to make miners and stop producing the CPU that all foreigners are still producing and make the lose market share.
Last but not least:
- this only affect bitcoins (and the other less popular SHA256^2 based coins).
- this will not affect the number 2 coin: Litecoin (and the other coins using Scrypt, which is notoriously bad on ASICs due to memory requirement)
- this will not affect primecoin (which is based on prime number factoring)
- this will not affect coins based on SHA-3 like Yacoin, nor Quark (uses all the SHA-3 candidate at the same time).
- this will not affect all the other coins that will pop-up with original proof-of-works between now and then.
2) give power to police services to setup busts on individuals looking to sell/buy Bitcoins for cash, and shut down Localbitcoins.com or any other website that provides such services.
Good luck to the *NSA* managing to shut down a site operated in *Finland*. Ever heard the word Jurisdiction ?
One of the biggest exchange, Mt.Gox, is Japanese.
It would be a cat-and-mouse game if sites like Localbitcoins were only in the Tor network, however this increases the difficulty to 'cash out' so it could effectively devalue Bitcoins.
A. in the USA.
B. the current population in the USA has been burned already enough by the NSA. Tor usage will probably rise anyway in the future, and barrier of entry will get lower too.
coerce ISPs to install multiple Bitcoin p2p nodes with preferential network conditions so non-sanctioned p2p nodes connect to them first within the data centre and monitor which IP addresses are sending or receiving Bitcoins.
Yup, that worked so well with peer-2-peer download back then... except not.
These node will get blacklisted.
US citizen could simply use web-wallets and similar.
The rest of the world either ignores or moves to tor.
The author makes one solid implied argument: the state has the ability to resort to threat of violence, detention, financial ruin, seizure of assets over its citizenship.
Which would be the best way for the USA to substract themselves from a growing and thriving market.
The US needs to ask them self:
- do they want to exclude themselves from what is apparently here to stay? Do they want to take part in it?
(See how well shuting down the internet has worked for dictatures)
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]
It can be.
That means bitcoin value will never be stable enough to become a useful mechanism for trade.
How many people are going to want to sell products for bitcoins when the value of those coins could slide 50% by the close of business that day?
I'm very sympathetic to the idea of cryptocurrency, and the idea of a private currency. However, I'm not sure I would ever want to participate in such a currency if it was anything but local. A worldwide private currency can never work, because it only exists as long as governments allow it. Further, a cabal of large bitcoin holders could easily manipulate the price, hurting a lot of people.
I'm afraid we're just going to have to accept that governments are necessary. That makes it more important than ever that we make sure our governments are accountable. And central banks have to be reined in, but good. If we can't agree to act to keep our governments accountable, what makes anyone think that we can keep bitcoin accountable just with our own collective good will?
You are welcome on my lawn.
https://en.bitcoin.it/wiki/FAQ#How_divisible_are_bitcoins.3F
" How divisible are bitcoins?
A bitcoin can be divided down to 8 decimal places. Therefore, 0.00000001 BTC is the smallest amount that can be handled in a transaction. If necessary, the protocol and related software can be modified to handle even smaller amounts. "
"When life gives you lemons, don't make lemonade. Make life take the lemons back!" -- Cave Johnson
The coins themselves are not lost, as they are not themselves stored on the drive. Rather, the drive contains the user's key and their respective addresses, to which they match themselves up to the network. This is why if the file wallet.dat is stolen, someone can easily open the Bitcoin client with the stolen copy, authorize the transmission of coins from that key to another address, and then just wait for the transmission to be validated.
There is, however, no mechanism for the recovery by the network for addresses and keys which have been lost or destroyed. I personally mined slightly more than 4 bitcoins out of curiosity back in 2011, then stopped as I ran the power cost to income calculations. I eventually rebuilt that system, but accidentally destroyed that wallet.dat. Although I know the public receive address, I don't have the key associated with it to claim those transactions in the network that indicate the 4BTC. The claim to the transactions which represent those coins collectively are essentially irrevocably lost, with no way of the network as a whole reclaiming them due to inactivity as the system currently stands. The transactions are still present in the Blockchain, just no one can claim them.