In the last couple of months, Bitcoin has passed the phase of "BC is nature's way of teaching economics to nerds" and entered the phase of "BC is natures's way of teaching political power to nerds"
Reading through the recent Treasury Department guidance this morning, it looked to me like the U.S. is initially attacking where hard currency comes in and leaves the system -- no matter where in the world that takes place (plug: http://freedom-or-safety.com/blog/the-other-bitcoin-shoe-dro... )
I imagine they'll leave that decision out there for a while -- months or years -- before they start heavy enforcement. But enforcement is coming. And reading through the AJ link, it looks like BC is beginning to integrate quite nicely into the EU banking system.
So now I have an anonymous virtual currency -- that governments can track the movement of. Which might require special licensing, permits, and insurance to broker. Perhaps I'm missing the point here?
We're getting to the point where the big boys step in, and my bet is that it's not going to be comfortable for the people who started the whole thing. I expect more "integration" into the traditional banking system, at least until there's no value-add between cash and BC, and then we've reached our starting point. BC becomes nothing more than "collecting sharp sticks" in such a fashion as to be closely monitored by world governments.
I think the main value of Bitcoin is that it's a perfectly hard currency, not that's it's anonymous (or not). Monetary dilution is alarmingly easy with today's fiat currencies, and replacing them with Bitcoin would fix that basic flaw. (Disclosure: I currently hold Bitcoins.)
Anonymity isn't the only value of Bitcoin. There's also the matter of exchanging money electronically without paying fees to banks, Visa, or Mastercard. Regulation might make transacting Bitcoin more expensive but still leave it cheaper than traditional approaches.
I'm not a fan of Bitcoin personally (too much speculation for me to be comfortable using it as a medium of exchange, much less a store of value) but I think people underestimate how badly we're getting screwed by the current payment oligopoly.
Bitcoin is not anonymous. All the transactions take place between cryptographic pseudonyms (the ECDSA keys used to sign transactions). Just how much information you can infer from the resulting anonymous social graph is unclear, but it's probably a fair amount.
That would still be progress, and the fact that bitcoin's value is dictated by democratic fiat rather than governmental fiat is still very powerful and a major differentiator. It is more similar to gold than cash in that respect.
>In the last couple of months, Bitcoin has passed the phase of "BC is nature's way of teaching economics to nerds"
>and entered the phase of "BC is natures's way of teaching political power to nerds"
That is one of the best quotes I've read on bitcoin.
The western world is waking up to distrusting their governments. In a low-tech way, most 3rd world countries have been there for decades. Squirreling away savings is a behavior enforced upon citizens with acquisitive governments (hello Cyprus!).
The world is changing, and bitcoin is there to help.
I've always liked the idea behind bitcoin (decentralized cryptocurrency), but I think ultimately it will serve the role of "specie gold" with something more useful on top for transactions -- either book-entry accounting at a wallet provider, or ideally some kind of blinded token system.
Bitcoin has numerous inherent deficiencies as a transaction system. It's also not a great store of value -- you ultimately want something equivalent to debt or equity in productive enterprises, rather than a commodity, to hold the majority of wealth -- that's the whole point of fractional reserve banking or mutual funds/investment accounts.
It may or may not be an ideal unit of account. Right now, USD is undeniably the default unit of account, and even bitcoin vendors tend to price in USD (with the runners up being EUR, JPY, etc.; other fiat nation-state currencies).
So, some kind of blinded token system where issuers of blinded tokens hold public amounts of bitcoin, and where the tokens are redeemable upon demand for bitcoin ("specie") would work a lot better than trying to shoehorn transactions into bitcoin directly.
I think ultimately it will serve the role of "specie gold"
I agree with this. (I don't understand the blinded token idea.)
I think it is quite easy to imagine that banking services are build on top of BTC. These would be account receivables against banks, much like current accounts and CDs in USD or EUR work today.
The transaction features of bitcoin are amazing, in my opinion, if you compare them with gold bullion. Granted it can take up to hours for a payment to become fully confirmed, but this is the cryptographic specie being transfered from one individual party to the other. It is a lot more direct on this account than even a fast bank transfer, because in that you still only have a receivable against your bank, much like equivalent ones in todays credit system denominating in USD, etc.
Plus you have the safety that no-one can inflate much value out of the currency, because it is specie-based. At least not for a very long time.
(Unless the "closing of the bitcoin window" trick is pulled again. "Closing of the gold window" was the language the was used euphemistically, when redeemability of USD into gold was ended in 1973.)
If you wanted instant transactions, that is just as easy as today, with a lot more pressure on banks to make transfers real-time, because one main business model would be to beat transaction speed. And that has an upper bound of max. a few hours in plain BTC.
The interesting thing to me is currency's role in providing certainty. In this case, about the total amount of something, and whether what you're encountering is a valid instance of it. Check out some examples and how Bitcoin compares:
Gold has chemical properties that ensure its finite scarcity (though supplies can fluctuate) and allow you to identify it as ture gold (through, e.g. density measurements).
Gold-backed paper currency has a scarcity determined by the trustworthiness of its issuer and a validity linked to the difficulty of its reproduction.
Fiat paper currency has a feature of allowing a fractional reserve system, which allows a central body to control its scarcity (and perceptions thereof), with validity again linked to difficulty of reproduction.
Open-source cryptographic currencies have a well-defined scarcity and easily verifiable validity.
Cryptography provides certainty better than a physical alternative like gold or paper, but governments traditionally have had control over currency and don't have control over Bitcoin. I think it's unlikely they'll give this up without a fight. I'm not sure that the token system you propose really gives them back that control unless it supports fiat: the arbitrary issuance or discontinuation of currency. But, the idea of Bitcoin as specie is a great one. If it is adopted it as such it becomes open to confiscation like FDR did with gold in 1933, which is an interesting prospect:
http://en.wikipedia.org/wiki/Executive_Order_6102
I wonder confiscation is even possible? If it's not this is a seriously revolutionary tech: property without government.
I totally agree with your first statement, that a more useful virtual currency will spring up on top of Bitcoin for immediate transactions (I actually have a good idea of what it will be). Yet I totally disagree with your second premise. I think Bitcoin is a fine store of wealth. Fractional reserve banking and a debt-based economy is what many of us are trying to get away from. And I can definitely see Bitcoin as a long-term store of wealth and an easy way to make deposits into other, more convenient virtual currencies that are springing up.
There is a really cool project called Ripple that's designed to do exactly what you suggest: build a P2P transaction system where Bitcoin or USD or whatever you want is the "specie gold." It's basically a distributed banking system which IMO is an awesome concept. I don't know if this is going to take off but I hope something like it does.
Many in the bitcoin industry /community think that fractial reserve banking was a bad idea, and there would have never been the recent banking trouble if all the USD could be converted into gold (just ignore the banking problem when there was a gold based currency and ignore other countries that had banking problems).
My problem with BTC (and I say this as a supporter) comes from a pg essay - you make what you measure. The BTC community measures BTC/USD exchange rate so it ends up optimizing for that, but I can't understand how focusing on that is a good thing. It already produced one massive crash and we're in the middle of another one.
The actual number (BTC/USD) is mostly irrelevant, but volatility is quite bad for people who actually want to perform transactions with BTC. I hope BTC is able to get over this and continue growing.
It already produced one massive crash and we're in the middle of another one.
Why do you believe a crash is forthcoming?
The actual number (BTC/USD) is mostly irrelevant,
Why do you believe it is irrelevant? The market capitalization is only 500 million dollars. Can you imagine operating an entire economy with only 500 million dollars? It's a proxy for adoption, although that is muddled by price speculation and so on.
but volatility is quite bad for people who actually want to perform transactions with BTC. I hope BTC is able to get over this and continue growing.
The bitcoin economy is very tiny. Google probably makes more money than the entire bitcoin economy in a year several times over. Of course, it's going to be volatile. That's because we are growing. It would be a more legit concern if that the economy is worth 100 billion dollars or a trillion dollars.
Arguably Bitcoin may have never been adopted at all if not for the enrichment of early adopters. As much as I dislike bubbles there is a real benefit to creating them.
It's unrealistic to expect that a thing could grow from a project on a hobbyist's computer to a major international currency without some volatility along the way.
> The BTC community measures BTC/USD exchange rate so it ends up optimizing for that
First, I wouldn't call bitcoin user base community. It is like saying the dollar user community.
Secondly, it is definitely not true that everyone in the bitcoin userbase focuses on the exchange rate. There are lots of people with different and varying goals.
I was surprised the other day when I was testing the bitcoin integration for a project of mine (here's a how-to: http://techblog.bozho.net/?p=1114), that the price is so high. I bought my bitcoin a couple of months ago at 10 times lower prices, and it was a pleasant surprise.
It's amazing what you can do with a digital-native currency. Creating accounts on the fly is as easy as sending an http request to the bitcoind client.
Despite it rising who in the right mind would hold bit-coins besides for speculation? The exchange rates are so variable. As a very risky investment great idea but day to day currency? I suppose it isn't a bad way to pay people abroad and avoid foreign transactions.
It's a cryptocurrency system that lets you store ANY currency that someone, somewhere is willing to support through it. So far it's just USD, AUD, EUR, CHF, BTC and a few others, but gold and silver are definitely going to appear soon.
Sounds like a few steps faster than the inevitable death of a gold standard: Gold coins, then bank storage, then gold lending, then gold certificate use, then lending of certificates, then certificates are declared paper money, then overprinted, then gold backing removed…
inevitably, if a competing currency pisses off the governemnt, it will be shutdown if it is centralized. it isn't really possible to do decentralized gold-backed currency (except perhaps, ripple may solve this).
I find it fascinating watching people's reactions to bitcoin. As near as I can tell from an informal eyeballing, the antipathy to bitcoin is correlated to how mainstream the person is.
I have heard from people who have heard, that the government of China is through proxies aggresively buying large amounts of Bitcoins for future strategic advantage.
I am not sure at all how accurate those reports are, it is probably just hearsay.
[+] [-] miles|13 years ago|reply
https://news.ycombinator.com/item?id=5369899
How is it possible for the same link to be submitted in such a short time again?
Old link: http://www.aljazeera.com/indepth/opinion/2013/03/20133913253... New link: http://www.aljazeera.com/indepth/opinion/2013/03/20133913253...
[+] [-] pg|13 years ago|reply
[+] [-] niggler|13 years ago|reply
[+] [-] SODaniel|13 years ago|reply
CAPITALISM!!
[+] [-] DanielBMarkham|13 years ago|reply
Reading through the recent Treasury Department guidance this morning, it looked to me like the U.S. is initially attacking where hard currency comes in and leaves the system -- no matter where in the world that takes place (plug: http://freedom-or-safety.com/blog/the-other-bitcoin-shoe-dro... )
I imagine they'll leave that decision out there for a while -- months or years -- before they start heavy enforcement. But enforcement is coming. And reading through the AJ link, it looks like BC is beginning to integrate quite nicely into the EU banking system.
So now I have an anonymous virtual currency -- that governments can track the movement of. Which might require special licensing, permits, and insurance to broker. Perhaps I'm missing the point here?
We're getting to the point where the big boys step in, and my bet is that it's not going to be comfortable for the people who started the whole thing. I expect more "integration" into the traditional banking system, at least until there's no value-add between cash and BC, and then we've reached our starting point. BC becomes nothing more than "collecting sharp sticks" in such a fashion as to be closely monitored by world governments.
[+] [-] mhartl|13 years ago|reply
[+] [-] lukasb|13 years ago|reply
I'm not a fan of Bitcoin personally (too much speculation for me to be comfortable using it as a medium of exchange, much less a store of value) but I think people underestimate how badly we're getting screwed by the current payment oligopoly.
[+] [-] anologwintermut|13 years ago|reply
[+] [-] danenania|13 years ago|reply
[+] [-] nunb|13 years ago|reply
>and entered the phase of "BC is natures's way of teaching political power to nerds"
That is one of the best quotes I've read on bitcoin.
The western world is waking up to distrusting their governments. In a low-tech way, most 3rd world countries have been there for decades. Squirreling away savings is a behavior enforced upon citizens with acquisitive governments (hello Cyprus!).
The world is changing, and bitcoin is there to help.
[+] [-] gasull|13 years ago|reply
The acronym for Bitcoin is BTC.
[+] [-] rockyleal|13 years ago|reply
[+] [-] rdl|13 years ago|reply
Bitcoin has numerous inherent deficiencies as a transaction system. It's also not a great store of value -- you ultimately want something equivalent to debt or equity in productive enterprises, rather than a commodity, to hold the majority of wealth -- that's the whole point of fractional reserve banking or mutual funds/investment accounts.
It may or may not be an ideal unit of account. Right now, USD is undeniably the default unit of account, and even bitcoin vendors tend to price in USD (with the runners up being EUR, JPY, etc.; other fiat nation-state currencies).
So, some kind of blinded token system where issuers of blinded tokens hold public amounts of bitcoin, and where the tokens are redeemable upon demand for bitcoin ("specie") would work a lot better than trying to shoehorn transactions into bitcoin directly.
[+] [-] febeling|13 years ago|reply
I agree with this. (I don't understand the blinded token idea.)
I think it is quite easy to imagine that banking services are build on top of BTC. These would be account receivables against banks, much like current accounts and CDs in USD or EUR work today.
The transaction features of bitcoin are amazing, in my opinion, if you compare them with gold bullion. Granted it can take up to hours for a payment to become fully confirmed, but this is the cryptographic specie being transfered from one individual party to the other. It is a lot more direct on this account than even a fast bank transfer, because in that you still only have a receivable against your bank, much like equivalent ones in todays credit system denominating in USD, etc.
Plus you have the safety that no-one can inflate much value out of the currency, because it is specie-based. At least not for a very long time.
(Unless the "closing of the bitcoin window" trick is pulled again. "Closing of the gold window" was the language the was used euphemistically, when redeemability of USD into gold was ended in 1973.)
If you wanted instant transactions, that is just as easy as today, with a lot more pressure on banks to make transfers real-time, because one main business model would be to beat transaction speed. And that has an upper bound of max. a few hours in plain BTC.
[+] [-] eah13|13 years ago|reply
Gold has chemical properties that ensure its finite scarcity (though supplies can fluctuate) and allow you to identify it as ture gold (through, e.g. density measurements). Gold-backed paper currency has a scarcity determined by the trustworthiness of its issuer and a validity linked to the difficulty of its reproduction. Fiat paper currency has a feature of allowing a fractional reserve system, which allows a central body to control its scarcity (and perceptions thereof), with validity again linked to difficulty of reproduction. Open-source cryptographic currencies have a well-defined scarcity and easily verifiable validity.
Cryptography provides certainty better than a physical alternative like gold or paper, but governments traditionally have had control over currency and don't have control over Bitcoin. I think it's unlikely they'll give this up without a fight. I'm not sure that the token system you propose really gives them back that control unless it supports fiat: the arbitrary issuance or discontinuation of currency. But, the idea of Bitcoin as specie is a great one. If it is adopted it as such it becomes open to confiscation like FDR did with gold in 1933, which is an interesting prospect: http://en.wikipedia.org/wiki/Executive_Order_6102
I wonder confiscation is even possible? If it's not this is a seriously revolutionary tech: property without government.
[+] [-] eric_bullington|13 years ago|reply
[+] [-] jvm|13 years ago|reply
http://ripple.com/
(I have an account and about $5 USD in XRP but no other involvement)
[+] [-] rmc|13 years ago|reply
[+] [-] martythemaniak|13 years ago|reply
The actual number (BTC/USD) is mostly irrelevant, but volatility is quite bad for people who actually want to perform transactions with BTC. I hope BTC is able to get over this and continue growing.
[+] [-] kiba|13 years ago|reply
Why do you believe a crash is forthcoming?
The actual number (BTC/USD) is mostly irrelevant,
Why do you believe it is irrelevant? The market capitalization is only 500 million dollars. Can you imagine operating an entire economy with only 500 million dollars? It's a proxy for adoption, although that is muddled by price speculation and so on.
but volatility is quite bad for people who actually want to perform transactions with BTC. I hope BTC is able to get over this and continue growing.
The bitcoin economy is very tiny. Google probably makes more money than the entire bitcoin economy in a year several times over. Of course, it's going to be volatile. That's because we are growing. It would be a more legit concern if that the economy is worth 100 billion dollars or a trillion dollars.
[+] [-] wmf|13 years ago|reply
[+] [-] jacoblyles|13 years ago|reply
[+] [-] nawitus|13 years ago|reply
[+] [-] jerguismi|13 years ago|reply
First, I wouldn't call bitcoin user base community. It is like saying the dollar user community.
Secondly, it is definitely not true that everyone in the bitcoin userbase focuses on the exchange rate. There are lots of people with different and varying goals.
[+] [-] kogir|13 years ago|reply
What I look forward to seeing next is how a malicious, distributed hijacking of the block chain is handled once it's profitable to attempt.
[+] [-] bozho|13 years ago|reply
[+] [-] mamcx|13 years ago|reply
[+] [-] yabbadabbadoo|13 years ago|reply
[+] [-] pg|13 years ago|reply
[+] [-] nym|13 years ago|reply
http://howdoyoubuybitcoins.com/from/coinbase/
I would love to know how many bitcoins PG personally holds:
http://www.quora.com/Paul-Graham/How-many-bitcoins-does-PG-o...
[+] [-] jacoblyles|13 years ago|reply
http://www.reddit.com/r/bitcointip
The second coolest thing are twitter tip bots.
It's amazing what you can do with a digital-native currency. Creating accounts on the fly is as easy as sending an http request to the bitcoind client.
[+] [-] jacoblyles|13 years ago|reply
http://bitbet.us/
Your sending address is your authentication. So frictionless, so good.
[+] [-] tvladeck|13 years ago|reply
http://en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op
[+] [-] vinayan3|13 years ago|reply
[+] [-] waterside81|13 years ago|reply
[+] [-] Thiz|13 years ago|reply
Buy gold shares with your dollars, use it as e-currency, exchange it for e-goods, merchants sell the shares and get dollars back.
I'd invest money in that venture, and money in that currency.
[+] [-] vbuterin|13 years ago|reply
It's a cryptocurrency system that lets you store ANY currency that someone, somewhere is willing to support through it. So far it's just USD, AUD, EUR, CHF, BTC and a few others, but gold and silver are definitely going to appear soon.
[+] [-] wintersFright|13 years ago|reply
[+] [-] mcantelon|13 years ago|reply
[+] [-] muyuu|13 years ago|reply
[+] [-] simcop2387|13 years ago|reply
[+] [-] eof|13 years ago|reply
http://en.wikipedia.org/wiki/E-gold#Crime_and_fraud
inevitably, if a competing currency pisses off the governemnt, it will be shutdown if it is centralized. it isn't really possible to do decentralized gold-backed currency (except perhaps, ripple may solve this).
[+] [-] jacoblyles|13 years ago|reply
[+] [-] Thiz|13 years ago|reply
http://www.dgcmagazine.com/voucher-safe-a-next-generation-di...
[+] [-] unknown|13 years ago|reply
[deleted]
[+] [-] unknown|13 years ago|reply
[deleted]
[+] [-] pnathan|13 years ago|reply
[+] [-] wiradikusuma|13 years ago|reply
[+] [-] bitgossip|13 years ago|reply
I am not sure at all how accurate those reports are, it is probably just hearsay.
But it makes one think.
[+] [-] rmc|13 years ago|reply