Bitcoin

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  • Premier Icon cinnamon_girl
    Subscriber

    *waves to Torm* How are you? Been hiding?

    Sorry, cba’d to read your post!

    Premier Icon maccruiskeen
    Subscriber

    Are they like Nectar Points?

    atlaz
    Member

    I don’t really get the excitement. It’s just another currency that will come with problems all other currencies come with except for the fact it’s all on your computer and so almost certainly more likely to be an issue for fraud and hacking.

    Torminalis
    Member

    Hi c_g, I am well, been mad busy working so not been on here much (or on the bike for that matter), sorry to hear about family stuff, hope all is well.

    I don’t really get the excitement. It’s just another currency that will come with problems all other currencies come with except for the fact it’s all on your computer and so almost certainly more likely to be an issue for fraud and hacking.

    The difference with this currency is it does not depend on a central regulator, it has various features built into the system that ensure it is all decentralied and transparent. In many ways it has parallels to gold in that it is created through a process that is finite and extraction becomes harder over time. I think it is a stunning idea.

    Torminalis
    Member

    There is always someone on here to tell me that what I thought was a good idea is actually a stupid idea so I present to the forum…

    Bitcoin.

    Bitcoin is a digital currency created in 2009 by Satoshi Nakamoto. The name also refers to the open source software he designed that uses it, and the peer-to-peer network that it forms. Unlike most currencies, Bitcoin has no central authority or issuer. Bitcoin uses a distributed database spread across nodes of a peer-to-peer network to journal transactions, and uses digital signatures and proof-of-work to provide basic security functions, such as ensuring that bitcoins can only be spent by the person who owns them, and never more than once.

    Bitcoins can be saved on a personal computer in the form of a wallet file or kept with a third party wallet service, and in either case bitcoins can be sent over the Internet to anyone with a Bitcoin address. Bitcoin’s peer-to-peer topology and lack of central administration make it infeasible for any authority, governmental or otherwise, to manipulate the quantity of bitcoins in circulation or induce inflation by producing more of them.

    It seems to me to be an absolutely fantastic idea, So, doomed to failure or could it actually change the world?

    CountZero
    Member

    Read this from boingboing on May 15:
    http://boingboing.net/2011/05/15/bitcoin-a-new-peer-t.html
    particularly the comments.

    konabunny
    Member

    it has various features built into the system that ensure it is all decentralied and transparent. In many ways it has parallels to gold in that it is created through a process that is finite and extraction becomes harder over time.

    1) the supposed transparency of bitcoins is not a parallel to gold. I say supposed because very few of the users will understand it.

    2) money supply growth is not the sole or possibly even main cause of inflation. This is one of the few lessons of Thatchernomics (unfortunately for Thatcher and her Treasurers, who thought it was).

    3) gold is overhyped as a means of exchange and saying that bitcoins have a parallel in gold is not a good thing. The bitcoin project and the current retail goldshillers are keying into a wave of FUD about “fiat money”, the gold standard, federal/global government, survivalism, Tea Party, Trutherism and conspiracy theory generally.

    4) the central problem with bitcoins: it’s a solution looking for a problem. it’s interesting technology but it’s not actually solving a dilemma for anyone because generic money does a pretty job job of being useful, transferable, acceptable etc.

    Torminalis
    Member

    1) the supposed transparency of bitcoins is not a parallel to gold. I say supposed because very few of the users will understand it.

    I am a programmer and have a pretty good understanding of cryptography and I reckon the system is sound, I am not an expert but much bigger brains than mine have failed to find a problem with it. It is open source and secure from what I can tell. If there are problems with it, I don’t think they are technical.

    2) money supply growth is not the sole or possibly even main cause of inflation. This is one of the few lessons of Thatchernomics (unfortunately for Thatcher and her Treasurers, who thought it was).

    It is a very solid reason for inflation of currencies, few things devalue a currency more than diluting it. I would be very interested to hear what you think is the true cause of inflation? This is by its design a deflationary currency. It has 8 decimal places to play with so people can easily deal with milli-bitcoins in the future and there are more than enough to represent the smallest subdivision even the smallest fraction of the planetary wealth.

    The main cause of Inflation is money creation, but as per the OP, I am looking forward to the disussion that proves me wrong.

    3) gold is overhyped as a means of exchange and saying that bitcoins have a parallel in gold is not a good thing.

    It is in many repects better than gold. It can be backed up, it is easy to store and move in bulk. We know there is a finite supply of them whereas one day we could find a seam of vast seam of gold and crash the market.

    Bitcoins are the ultimate liquid currency, you could if you were so motivated, memorise your currency and transmit it by morse code.

    The bitcoin project and the current retail goldshillers are keying into a wave of FUD about “fiat money”, the gold standard, federal/global government, survivalism, Tea Party, Trutherism and conspiracy theory generally.

    FUD about fiat money is all well and good but centrally controlled currency does have serious problems. It’s supply is controlled by central banks who often have far more vested interests than the public good (bombing in Libya anyone?), interest rates are distorted, hyperinflation has happened in countless spots around the world, our purchases are tracked online because we have no means for instant anonymous transactions.

    My big problem is inflation though, it is basically theft, the government and central banks can devalue the cash in our pocket at whatever rate they like. You can’t put cash in a mattress because it will end up worth less than the mattress. You can opt for a decent interest account but our lovely central banks control the interest rates too so they decide if you can have your cash or whether they need for yet another misadventure benefitting only a select few.

    The top 1% have a massively disproportionate amount of the cash, more than enough to feed and clothe the world over, if we were to find a medium for exchange that was not distorted by vested interests, everything would change.

    4) the central problem with bitcoins: it’s a solution looking for a problem. it’s interesting technology but it’s not actually solving a dilemma for anyone because generic money does a pretty job job of being useful, transferable, acceptable etc.

    Okay, imagine you live in Zimbabwe (or any of the other dozens of countries that have suffered currency collapse in the last few decades), you have no access to dollars, you can see it coming and you have to watch your savings evaporate because that has been the only option you have had.

    Now imagine that you could transfer all of your savings into an anonymous, secure, instant, irreversible crypto-currency with a real world value that you can carry across a border on a USB stick.

    Bitcoin wont take off here to start with, but as the value of such a commodity becomes clear it is going to take off like wildfire around the world. The governments of the world will have to turn off the internet to stop it.

    derp
    Member

    Now imagine that you could transfer all of your savings into an anonymous, secure, instant, irreversible crypto-currency with a real world value that you can carry across a border on a USB stick.

    Just a word on the anonymous side of things:

    Update: Jeff Garzik, a member of the Bitcoin core development team, says in an email that bitcoin is not as anonymous as the denizens of Silk Road would like to believe. He explains that because all Bitcoin transactions are recorded in a public log, though the identities of all the parties are anonymous, law enforcement could use sophisticated network analysis techniques to parse the transaction flow and track down individual Bitcoin users.

    “Attempting major illicit transactions with bitcoin, given existing statistical analysis techniques deployed in the field by law enforcement, is pretty damned dumb,” he says.

    Source (final paragraph)

    Not totally relevant to the usage discussed, but interesting stuff all the same.

    Torminalis
    Member

    The above is true, and it is not perfectly anonymous, but for me that is nowhere near the major appeal. It would though take some considerable effort to actually locate the source of a transaction.

    I understand why they are saying such things. If it gets made illegal they will do it on the grounds that it is too easy for money launderers and perverts to do business which is not the major appeal of the system. The major appeal is that it provides a safe way to trade that cuts out all of the middlemen.

    EDIT: there is also precedent in the bitTorrent world that says merely owning a broadband connection is not enough to convict you for the activity that takes place on it.
    http://torrentfreak.com/victims-of-wifi-theft-not-responsible-for-illegal-uploads-080709/

    ruh-roh
    http://forum.bitcoin.org/index.php?topic=16457.0

    let’s hope this is true:

    He explains that because all Bitcoin transactions are recorded in a public log, though the identities of all the parties are anonymous, law enforcement could use sophisticated network analysis techniques to parse the transaction flow and track down individual Bitcoin users.

    Probably still safer than cash, I’d have thought. is there the concept of a ‘bitcoin bank’?

    muddy_bum
    Member

    I haven’t read all this but my thoughts are:
    It’s ideal for money laundering.
    It’s a real hacking target.
    Once it has an exchange rate it will be no different to any other currency.

    Premier Icon molgrips
    Subscriber

    So hang on – without regulation, what’s to stop people doing the kind of things that we already hate the banks for having done?

    chvck
    Member

    So it’s kind of like keeping cash in that if you lose the storage device that your bitcoins are on then you’ve lost all that money? I presume that’s where the third party wallet service comes in as they provide somewhere for you to keep your bitcoins. What’s to stop the third party services charging for having an account with them?

    Or effectively just becoming like a bank with different levels of account etc… Seems like it’s solving a problem that doesn’t exist to me. Happy to be shown otherwise though, it is about time more things were made digital!

    joeydeacon
    Member

    It is quite interesting.. the way I see it, all currencies only survive as people have faith in them, so if people did put enough faith in it then it could take off. Not entirely convinced it’ll do to the banking industry what p2p file sharing did to the music industry, but you never know.

    I did read an interesting article about a few marketplace websites that were springing up (think you needed TOR to access them) which a journalist successfully used to buy (illegal) drugs using bitcoins from an anonymous dealer. LSD / Coke / Weed / Heroin all for sale.

    If it did take off then it would have a major effect on drug trafficking / other illegal activities – no more face to face meets, and payments would be pretty much anonymous.

    Torminalis
    Member

    I have been following this very closely for a couple of weeks now and I still think it is going to absolutely massive.

    So hang on – without regulation, what’s to stop people doing the kind of things that we already hate the banks for having done?

    The main problems I have with our central banks is that they think it is fine to print money when they need to get themselves out of jail, which is effectively theft from the rest of us as it makes the money in our pockets worth less. With Bitcoin this will not be able to happen. It also makes micro payments and international payments a doddle without having to deal with middlemen which I think is seriously attractive to many merchants online.

    Also, it is decentralised, in order to make any changes to the protocol, the entire community needs to adopt it and that will be nigh on impossible to do unless there is a very solid technical reason.

    Seems like it’s solving a problem that doesn’t exist to me

    There are an awful lot of problems that it will solve, to name but a few:

    Free, (nearly) anonymous transfer of cash across the internet with out the need for third party intervention.
    Irreversible transactions
    Decentralised, no one to stop you contributing to Wikileaks if you fancy..

    Loads of other things can be said for it, instead of regurgitating loads of spiel I can refer you to some of the better articles that have been floating about in the last few days…

    The Economist
    Guardian
    Wall Street Journal Blog

    konabunny
    Member

    few things devalue a currency more than diluting it…This is by its design a deflationary currency. It has 8 decimal places to play with so people can easily deal with milli-bitcoins in the future and there are more than enough to represent the smallest subdivision even the smallest fraction of the planetary wealth

    Do you care to consider how the last sentence sits with the first two there?

    Clue: allowing subdivision of currency is the same as adding zeros to the end of it.

    Getting hung up about inflation per se is a sideshow when its effect on real value is mediated by interest rates.

    So I can pay my mortgage in Bitcoins? No, oh well.

    This quote sums up Bitcoins well I feel:

    You could probably recreate this currency with horseshit. People with horses “mine” the currency and then trade it for services and whatnot, plus horseshit can only be sold once, and instead of being digitally “secure”, horseshit is theft proof because who the **** steals horseshit?

    Torminalis
    Member

    Getting hung up about inflation per se is a sideshow when its effect on real value is mediated by interest rates.

    There are two schools of thought on deflation and inflation.
    Keynesian economics, which favors government intervention and money supply inflation. This not surprisingly is the most popular school of thought with world governments (if someone told you to just print money and spend it you’d like them too).

    This school not only supports inflation, but believes it to be essential to growth.

    Then there is the Austrian school, which is for a free market, against government intervention, and generally think inflation is bad and deflation is good. Again unsurprisingly these people are not popular in government circles around the world.

    This is an argument between these two theories of economics, not bitcoin. At best bitcoin could be thought of as a modern experiment in deflation.

    You could probably recreate this currency with horseshit

    You would have to kill each horse after it does a shit in order to make it even vaguely comparable to Bitcoin, and if there was a finite amount of shit it would indeed make a good currency. As long as it was unforgable and everyone recognised it’s value.

    nacho
    Member

    I read an article on this recently as apparently bitcoin has massively increased in value, will be interesting to see how it develops….

    One of the problems with money (not specifically the folding paper representations) is that it is anonymous.

    You cannot be sure that it belongs to the claimed owner. This is because it is a simple arithmetic number – good for arithmetic, but that’s all.

    I would be interested in a form of money that is designed to do more than basic arithmetic.

    Hey you guys I have some magic beans

    konabunny
    Member

    This is an argument between these two theories of economics, not bitcoin.

    Bitcoin has no raison d’etre without monetarism.

    jon1973
    Member

    I would be interested in a form of money that is designed to do more than basic arithmetic

    Isn’t that was CC’s, Debit Cards and Bank Transfers basically are?

    Torminalis
    Member

    One of the problems with money (not specifically the folding paper representations) is that it is anonymous.

    That is not true, one of the great advantages of hard currency is that it is anonymous. The fact that I can walk into a shop and buy a paper without the shop owner needing any information about me is a huge benefit.

    There is an advantage in being able to transfer money from your central repository of funds into their central repository of funds (ie bank account) but this then incurs fees, has privacy implications, opens up new avenues for fraud, relies on the availability of a central processing power for authentication etc. There is a huge infrastucture built around negotiating these trust issues and it is expensive to maintain.

    Bitcoin allows you to combine the best of both, you can transact with people online or in the flesh and can do it quickly, transparently and without the need for the mediation or trust systems that currently surround our existing currency.

    Bitcoin has no raison d’etre without monetarism.

    Bitcoin is just a medium for exchange. If by monetarism you mean the neccesity of the involvement of a government then yes, I agree, it’s very reason for existence is to provide an alternative to the existing centralised and easily manipulated financial systems.

    That is not to say that in a theoretical future where bitcoin is the only currency, it would be rendered useless by the lack of a monetaristic currency. That is daft.

    At it’s heart Bitcoin is simply the first credible attempt at a decentralised currency that is for the people and not for the ruling elites who who work so hard and have so many resources to protect the system that they have built over many many generations.

    People spend an awful lot of time bitching about central banks and how the government is trashing the economy. This is a chance to actually empower people to transact freely without impedance from the government and other assorted middlemen.

    There are some major problems with Bitcoin but no one here seems to have touched on them, they include:

    Usability
    Ubiquity
    Threat from government and existing banking cartels.
    Ability to tax and regulate.
    Security

    These are pragmatic considerations though all of which can be resolved with technology. As far as I am concerned money should be for the people, not to be used as a tool to manipulate the populace as it so clearly is today.

    Premier Icon Flaperon
    Subscriber

    Two words – pyramid scheme. Strongly suggest avoiding.

    The algorithm that generates BitCoins is computationally demanding, hence the reason why we can’t just go out and make our own – trying to do so would eventually cost more than the resulting “coin” will ever be worth.

    However, the energy cost of generating BitCoins increases exponentially as more coins are produced. This means that the creators of the currency spent the least amount of money and hold the bulk of the coins.

    Anyone who buys a coin from this point onwards increases the value of the creator’s bank account but ultimately devalues the entire currency.

    Premier Icon molgrips
    Subscriber

    At it’s heart Bitcoin is simply the first credible attempt at a decentralised currency that is for the people and not for the ruling elites

    Is it hell. Centralised currencies have been around for a lot less time than money or valuable items have. The BoE was invented for a reason, remember.

    People spend an awful lot of time bitching about central banks and how the government is trashing the economy.

    Yes, doesn’t mean they know sh*t from shinola though does it?

    Bitcoin allows you to combine the best of both, you can transact with people online or in the flesh and can do it quickly, transparently and without the need for the mediation or trust systems that currently surround our existing currency

    Honestly – what is the problem with me using bank transfer or cash for small interpersonal transactions?

    The main problems I have with our central banks is that they think it is fine to print money when they need to get themselves all of us out of jail

    FTFY.

    Premier Icon Cougar
    Subscriber

    The algorithm that generates BitCoins is computationally demanding, hence the reason why we can’t just go out and make our own – trying to do so would eventually cost more than the resulting “coin” will ever be worth.

    If that’s true, then expect to see it as a worm payload Real Soon Now. Around ten million servers fell to Conficker, that’s a lot of processing power for the square root of sod all.

    Torminalis
    Member

    I do not see it as unreasonable that the early adopters of the system stand to benefit from it. They invested time, money and hardware into the development of the infrastructure of the system for a start.

    The same could also be said of Apple shares (or any share for that matter), each further investor increases the value of the existing shares.

    It should also be noted that only 1/3 of the total number of coins has been created. The playing field for the creation/aquisition of the rest of the coins is open to everyone.

    A pyramid scheme (and similarly a Ponzi scheme) is unsustainable without new recruits, it requires the investment of the new members to redeem the investment of the early adopters.

    There are now far too many people invested in seeing this system work, the biggest danger from the early adopters is that they dump a lot of currency into the system and devalue the existing holdings. This is a threat but it seems that last weekend a few large holders of coins cashed out and it has not yet crashed the market, merely distributed their holdings out to others.

    It should be noted that the current establishment represent exactly the same threat to our existing currency, it would be perfectly possible for large stake foreign holders of Sterling to lose faith in our currency, dump it onto the market and devalue the currency. The reason they will not do this is because it would effectively diminsish the value of their holdings and they are invested in the success of the currency.

    The same could be said for the early adopters of Bitcoin so I think accusations of Pyramid scheme are unfounded.

    Torminalis
    Member

    Honestly – what is the problem with me using bank transfer or cash for small interpersonal transactions?

    If you wish to buy something online for 50p, it is very hard for a merchant to make that transaction profitable when there are often fixed overheads for these transactions. What about 10p? or 1p? Can’t be done at the moment.

    For small interpersonal cash based transactions, cash does very well, but what was a penny sweet when I was a kid costs 5p now and as stated above, a bank transfer requires potentially several days to clear, can be reversed up to six months later, details of that transaction can be passed onto third parties and if someone decides that they do not witsh you to be able to make that transaction, certain groups can be cut out of the monetary cycle. For a good example of this see Wikileaks (who incidentally are now accepting bitcoins as donations).

    The main problems I have with our central banks is that they think it is fine to print money when they need to get themselves all of us out of jail

    Occasionally true, but often not. Waging wars in Afghanistan, Iraq or Libya is not getting us out of any jail, it is being done by the government under pressure from the banks and the arms companies because they require an indebted and very well armed nation to survive. The intervention in Libya has no palpable benefit for us and is morally dubious despite what our press and our leaders tell us.

    If that’s true, then expect to see it as a worm payload Real Soon Now. Around ten million servers fell to Conficker, that’s a lot of processing power for the square root of sod all.

    There is a need for individual users to secure their Bitcoins in exactly the same way as users of cash are currently required to do so. Amongst the problems I stated above are Usability & security, which are problems we can resolve as the system grows and evolves. It is not currently granny proof but it will be before long necause there are now legions of very capable programmers working to fix the problems because they see the power of the idea in a decentralised currency and want to see it work.

    Centralised currencies have been around for a lot less time than money or valuable items have.

    True, the market for gold is flourishing at the moment but you cannot transmit it across the internet and it is pretty heavy if you wish to carry any substantial amount of it.

    Premier Icon molgrips
    Subscriber

    I’m still confused.

    Why is it good to have a deregulated currency? If I were to hold bitcoins, what’s to stop their value disappearing completely in a few years’ time when some security issue is uncovered, or legislation makes it impractical or whatever? I’m not exactly getting interest on my bitcoins, am I?

    If I were to have my salary paid in bitcoins, I’d presumably avoid taxation (until HMRC wise-up and see it as benefit-in-kind, which it would be) – how is this good?

    What’s to stop speculators manipulating values in some way?

    True, the market for gold is flourishing at the moment but you cannot transmit it across the internet

    You can transmit ownership though surely? I’m sure gold traders don’t drive around the City with gold in the back of a truck dropping it off at various offices 🙂

    Premier Icon Cougar
    Subscriber

    There is a need for individual users to secure their Bitcoins

    I wasn’t talking about theft of ‘coins,’ I was referring to the generation of new ones. But that’s a good point as well; the security-awareness of the average PC user isn’t all that high. Anything that relies on the public at large to secure their PCs is doomed to exploitation and fraud. It has to be inherently secure for it to work.

    Torminalis
    Member

    Why is it good to have a deregulated currency?

    Because it ensures that central bankers cannot manipulate the currency, cannot devalue the pound in our pockets by printing more cash and cannot determine who is and is not a valid recipient of our funds. It has often been said that if we cannot extend basic humans rights to those who deserve them least then we probably do not deserve them ourselves. The measure of a society is how well we treat it’s enemies.

    If I were to hold bitcoins, what’s to stop their value disappearing completely in a few years’ time when some security issue is uncovered

    The software is open source, they are a great number of people trying to expose security issues in both the white hat and back hat communities. Thus far (ie two years later) none have come to pass. I am not saying it is a perfect system but I have reviewed the code and it seems sound to me. The security of the system is backed by a powerful network of miners, validating transactions, distributing transaction histories and generating new coins.

    or legislation makes it impractical or whatever?

    This is an interesting one and I have no doubt that they will be legislated against when the powers that be finally twig onto what a huge threat Bitcoins pose to their power base.

    The thing to remember is that it is a global, decentralised, peer to peer network. It cannot be killed off by any central authority by technical means, if one node retains a history of the transactions, it can be propagated out to the network again and it is business as usual. It may become hard for merchants in the UK or the US to accept bitcoins but in our newly globalised economies, the geographical location of our vendors makes increasingly little difference, especially as a lot of the goods traded online are not even physical (think software, music, film, donations to carities, social media etc).

    I personally think that one of the key drivers of this technology will be the black market. Envelopes full of cash could potentially be a thing of the past and will eventually ensure that it becomes mainstream. Whether or not this is a good or a bad thing is largely irrelevant. It is going to happen anyway, all that it requires is a wealthy arab to throw some small change at it and it will gain the stability and traction it needs and then, I believe, nothing will stop it.

    It is also a very good thing to argue about in the meantime. 😉

    Torminalis
    Member

    You can transmit ownership though surely? I’m sure gold traders don’t drive around the City with gold in the back of a truck dropping it off at various offices

    Yes, and in order to do so you require a central arbiter to manage those transactions which incurs cost. You also need a very expensive infrastructure to store your gold, issue certificates, trade them with others and redeem them if neccesary.

    Anything that relies on the public at large to secure their PCs is doomed to exploitation and fraud. It has to be inherently secure for it to work.

    As stated above, there is a great deal of work going into turning this from an interesting experiment in decentralised currency into a usable medium of exchange for the masses. Technology does have the answers though and they will be coming with wider adoption of the tech.

    Torminalis
    Member

    If I were to have my salary paid in bitcoins, I’d presumably avoid taxation (until HMRC wise-up and see it as benefit-in-kind, which it would be) – how is this good?

    In order for it to be legal, mechanisms for avoiding this will have to be developed. One interesting thing to note though is that the entire transaction history is stored in the block chain which means that if you are registered to a particular set of addresses, an audit of your income is publically available to those who have the pertinent bits of information.

    The system is ready for all these problems to be resolved.

    Premier Icon molgrips
    Subscriber

    Yes, and in order to do so you require a central arbiter to manage those transactions

    Do you?

    Anyway I’m still curious about stability of the currency. What’s going to protect my investment?

    konabunny
    Member

    Bitcoin is just a medium for exchange.

    We have plenty of mediums of exchange of value. They all work very well. As you yourself say, there is nothing in bitcoins that is fixing a convenience problem. The existing money system does a great job of exchange of value for everyone from Prince al Waleed to the market trader in remotest Chad.

    If by monetarism you mean the neccesity of the involvement of a government

    I have no idea how you would ever define monetarism in that way. Bitcoin is tied up with monetarist beliefs about the relationship between money supply and inflation – which is the whole point about there being a ceiling on the number of bitcoin being in circulation. (Except there isn’t, because it’s infinitely divisible).

    This in turn is tied up with the current fad for gold standard/right wing conspiracy theory/ federal reserve/ fiat money/ Rothschild/ Jews/ lizards silliness.

    If you don’t subscribe to monetarism, then bitcoin is adrift.

    Torminalis
    Member

    Anyway I’m still curious about stability of the currency. What’s going to protect my investment?

    At the moment, nothing. That is why it is an experiment. I have bought 1 hundred quids worth of bitcoins (because a game is much more interesting when you have a wager on it). During that time they have been worth triple what I paid for them briefly, now they are worth about 20% more. It is certainly not more than I am prepared to lose, that would be stupid.

    What will stabilise the currency is when it achieves widespread adoption and people can live entirely within the bitcoin economy without having cash out to fiat currencies in order to survive. that is theoretically possible now but would be very very hard. Over time though, I reckon it will stabilise.

    This is a link to a list of companies that accept Bitcoin:

    Bitcoin Traders

    It has grown massively over the last few weeks and continues to do so.

    There is every chance that it will fade and die, sinking without trace. At the moment the bitcoin economy has a market cap of about $100m. Each bitcoin is worth about $16. It is however reaching a point where it will be very hard to stop it, a critical mass is being reached if it has not already.

    The global blackmarket is worth trillions, if 1% of that market adopts bitcoin as it’s currency, a single Bitcoin will be worth a fortune.

    Torminalis
    Member

    there is nothing in bitcoins that is fixing a convenience problem

    For the record, I did state that it does sort out the convenience problem of micro transactions over the internet. At the moment the barriers to taking a payment of a single penny are too high for merchants to bear.

    I have no idea how you would ever define monetarism in that way

    Monetarism is a tendency in economic thought that emphasizes the role of governments in controlling the amount of money in circulation – Wikipedia, line number 1 in the article about monetarism.

    infinitely divisible

    No it is not, it is divisible to 8 decimal places.

    If you don’t subscribe to monetarism, then bitcoin is adrift.

    I do not believe this to be the case, in this case you predefine the rules of the currency, encode them into a secure algorithm and let it rip. From that point it requires no further intervention into the monetary supply because it is all clearly set out in advance, transparently so everyone can predict the rate of inflation.

    Bitcoin is designed to facilitate a world beyond monetary policy, it solves the problems that have neccesitated a mechanism for changing the supply of currency within an economy.

    Yes, and in order to do so you require a central arbiter to manage those transactions

    Do you?

    Yes, of course. Oh hang on, maybe not… I have these certificates you see, they relate to my gold which I have and you can definitley trust me. Yours for a song, bargain at half the price ect etc

    Premier Icon molgrips
    Subscriber

    it solves the problems that have neccesitated a mechanism for changing the supply of currency within an economy

    Can you expand on this please?

    Premier Icon molgrips
    Subscriber

    which is the whole point about there being a ceiling on the number of bitcoin being in circulation

    I don’t see why this would solve any kind of problem – it’s surely going to go the other way. If there’s a limited supply then the currency will end up becoming massively strong – so one bitcoin owned now could buy a car in 10 years time. How’s that fair or sane?

    Torminalis
    Member

    It solves the problems that have neccesitated a mechanism for changing the supply of currency within an economy

    Can you expand on this please?

    At the moment we have an economic system where the money supply can be arbritrarily increased on the whims of the government. Interest is used to ensure those people that have savings can keep up with inflation by adding to their savings as a proportion of what they have saved.

    The problem is that the interest rates are set by the government and the capacity to inflate the currency is also held by the government. As is happening at the moment, they can bring the interest rates down to virtually nothing to disincentivise people to save, but eventually they will have to increase it to try and reign in inflation, disincentivising spending.

    This balancing act is always doomed to failure because without debt there is no money. If society were to pay all of its debts, all of the money would go back to the central banks. the problem is that we can never give all of the money back to the central banks because we cannot increase the supply and there is always the interest on the original loan to pay back. More money is owed to the central banks than exists in the entire economy.

    The only way that we can keep abreast of the ever burgeoning debt we owe to the central banks is to create growth in the economy by pulling in money from abroad. If we fail to grow, all of a sudden things start looking very shaky and nations like Greece and Ireland start to drop like flies. This is important to note – if we stop growth, even if we just stand still, we will be forced to default on our debts to the central banks.

    This is all of course very simplistic and I am an armchair economist at best but it makes sense in my mind and I am open to debating this, though possibly in another thread.

    I believe Bitcoin is a better system than this for the following reasons:

    Currency supply is predictable and finite. We live on a finite planet whose resources can be broken down into a finite number of the smallest denominator (though nanotech means those bits are getting smaller all the time). If there are enough units of a single currency to cover even the smallest denomination of resources on the planet then why would we need to create more?

    The barriers to transmission of Bitcoins are minimal. Yes, you need access to the internet but that is it. Other than that you don’t even need an email account.

    Your wealth cannot be controlled by any outside party, nor can it be removed from you without your consent. Coercive governments may not be a large problem here in the UK but if you were to ask the people of Zimbabwe if that was a tangible benefit I am sure they would be quite enthusiastic.

    so one bitcoin owned now could buy a car in 10 years time. How’s that fair or sane?

    It is fair because the people who invest in the currency early are the ones who will make it work. A single bitcoin may well be able to buy a car in ten years but that will be the result of enough people storing them for long enough so as to provide a solid base against which the value of the currency can be measured.

    Apple shares used to cost nothing but you could now buy a car for only a couple of dozen of them. This is not unfair, it is just that those with the foresight to purchase them provided stability and funds to Apple which in turn allowed them to flourish. It is perfectly sane that as more people adopt a currency, those who invested heavily in it at the start are should benefit.

    If in ten years you need some groceries, only have a bitcoin grocer and some fiat currency from your own country, you can exchange them at the going rate, pick up a handful of nanobitcoins and go to the shop. Just beacaue one of the large investors from 10 years ago happens to have a lot of bitcoins does not mean that your gorceries are more expensive, it just means that there are some people out there who have a lot more cash than you because of their prudent investments at the start.

    Also worth bearing in mind, in the world as it stands today, the top 10% of the population have over half the wealth in may countries. I would be most surprised if the Bitcoin ratio was any worse.

    Premier Icon molgrips
    Subscriber

    The problem is that the interest rates are set by the government and the capacity to inflate the currency is also held by the government.

    I don’t see why it’s a problem. Their goal is to keep the economy growing, but not too quickly. Why? Cos that results in the best situation for US normal folk, and then we vote them back in. There’s no ulterior dark motive behind interest rates and QE, imo. Oh and btw it’s the BoE and the Fed in the US, not governments.

    It is fair because the people who invest in the currency early are the ones who will make it work. A single bitcoin may well be able to buy a car in ten years but that will be the result of enough people storing them for long enough so as to provide a solid base against which the value of the currency can be measured

    Right. So then bitcoins are an investment opportunity, with risks, not a currency as such. That’s a totally different ballgame. If the goal of the bitcoin system is to eliminate bank and government control of currency then it has to be used as common currency – we’d have to pay our mortgages in it, be paid in it and so on. For that to be workable it NEEDS to be a stable currency not volatile like stocks and shares.

    If early adopters can make themselves very rich by buying it up when it’s cheap, then it’s no different to land rushes in the USA is it? A few people grab all the good stuff and leave the poor folk scrabbling around for crumbs. How’s that any good?

    Your wealth cannot be controlled by any outside party, nor can it be removed from you without your consent

    I most definitely disagree. If the value crashes, your wealth’s gone. Nothing you can do about it. It’s at the mercy of the wider market just like any other currency, but WITHOUT anyone trying to stabilise it like normal currencies.

    uwe-r
    Member

    Wont work for me for two reasons:

    Its a solution to a non existant problem.

    Currencies develop from an initial point where they are convertible (underpinned by tangible value) only when they have mass acceptance does the need for the underlying value fall away. Bitcoin has no underlying value so could fall flat at any point.

    Premier Icon molgrips
    Subscriber

    I still might buy some though – as a speculator 🙂

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