Well hello peoples. I am increasingly amazed at the harsh criticism Bitcoin has gotten from Austrian economists. Everyone is all hot and bothered about the fact that Bitcoin does not have any physical backing. So here's an experiment: Imagine that tomorrow someone releases a website called GoldBackedBitcoin.com claiming the following;
"I hereby promise that I will redeem one ounce of gold for 250 bitcoins." Skepticism sets in and many people sell their bitcoins to this mysterious buyer, a thousand ounces of gold are redeemed before people start to have confidence that the promise is legitimate. Confident that the buyer isn't going anywhere, people buy back into bitcoins, and a merry digital gold-backed peer-to-peer currency goes on its way doing what it does best; Facilitating trade. Is this what it would take for people to accept Bitcoins? A jedi mind trick? "Backing bitcoin with gold" is no different than simply buying bitcoins to facilitate an exchange of goods and services. To be fair, this same mind trick was used to jump start us onto fiat paper money. "But why wouldn't everyone just sell out of Bitcoins!?" Gold Advantages: 1.) Rare. 2.) Divisible. 3.) Restistant to decay. 4.) Useful in manufacturing. 5.) Can't be hacked. 6.) Anonymous 7.) Restricted supply. Bitcoin Advantages: 1.) Rare. 2.) Divisible. (Easier than gold.) 3.) Practically immortal 4.) No central authority. 5.) Deflationary. 6.) Can be transferred quickly to anyone on the planet. 7.) No transaction fees. 8.) Very little storage space required. 9.) Anonymous (If used correctly.) 10.) Restricted and perfectly predictable supply. Some people would sell out of bitcoins but it would be their loss, as the value of bitcoins would quickly surpass the value floor of 250 bitcoins for an ounce of gold. The utility of bitcoins as a medium of exchange clearly far surpasses gold. This whole conversation is vexing to me since people are beating their chest and growling at bitcoin while they sit on a wad of fiat paper based currency which begs the question: If a paper based currency can facilitate transactions, why can't an electronic currency?
I understand what youre saying.
When you get bitcoins you either buy it with money or you can mine it with your computer.
To get gold, you can buy it with money or you can mine it with a pick axe.
But the thing is, the amount of bitcoins in circulation can be infinity.
I dont understand bitcoins that much but how are they deflationary>?
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Your criticism is valid enough. I personally like the idea of bitcoin, but will like it more if we can get a large userbase to make it their primary currency. I'm not sure bitcoin in its current technical implementation will ever achieve that, but perhaps a version descended from the current one will be able to pull it off.
One thing that's vexed people about bitcoin now is its price fluctuations. In a sense that's because it doesn't have a commodity backing, but having one wouldn't help too much either on that score.
Rather, bitcoin, like everything, is subject to supply and demand. We had hoped that a currency with strictly limited supply would be price-stable, but regardless of constant supply we still have to deal with variable demand, so the price will still always move.
Now, in theory that would level out if enough people were demanding bitcoin, that is if it were the primary currency of some large economy. So, again I return to that point :P
But, bitcoin or some similar scheme, is to my mind definitely the future of currency. And if I ever start a new country, I would start it with bitcoin.
kelvin_silva: But the thing is, the amount of bitcoins in circulation can be infinity.
o_O? clearly you don't understand bitcoin at all, or you'd know the number of bitcoin is strictly limited to 20 million, iirc. There can never be more unless the whole system were to be hijacked, which is not likely.
20 million might seem small, but each bitcoin is essentially infinitely divisible, so it doesn't matter. You can take any fraction of bitcoin and that would work too.
There are already lots of existing threads on Bitcoin. My view.
Can you cite where some Austrian economists have expressed opposition to Bitcoin? To my knowledge, they haven't commented on it at all.
Also, here's a recent thread I started explaining what I think would be a superior alternative to unbacked digital currency.
Clayton -
What makes you think that all the people would buy bitcoins after selling them for gold? If I had bitcoins and somesone started selling them for gold at a good price, I would buy the gold with the bitcoins. The bitcoins would have to be available at a better price for me to want to purchase them again. Which I think would be unlikely. I don't think it would also create what could be called a gold backed bitcoin currency. It would just be some one selling gold for bitcoins.
Is it a commodity? No.
Then it will never be a money.
'Men do not change, they unmask themselves' - Germaine de Stael
Jack Roberts: What makes you think that all the people would buy bitcoins after selling them for gold?
Andrew Cain: ...Commodity?
Clayton: There are already lots of existing threads on Bitcoin. My view. Can you cite where some Austrian economists have expressed opposition to Bitcoin? To my knowledge, they haven't commented on it at all.
Anenome: One thing that's vexed people about bitcoin now is its price fluctuations.
Yeah, he said he's writing an article on it. If you haven't already you can hear some of his thoughts on Bitcoin in this video:
I think it's the second question he answers.
Andrew Cain: Is it a commodity? No. Then it will never be a money.
This isn't supported by reality. The US currency is not commodity-backed and functions just fine as money. It may be fraught with long-term risks by doing so, primarily vulnerability to inflation (because politicians control the presses), but it is money nonetheless.
The reason why commodities make an excellent money, rather than being the only things that can serve as money, is because if you don't want to use a commodity for money you can always just use it for something else. It always has built in utility, and thus the price of that commodity-money will, in theory, not drop below the price of commodity. Which means built-in inflation protection.
However, a quick historical look at the price of silver will show massive silver inflation when the Spanish were sucking silver out of the Americas and the price of silver dropped some 400%+. Much harder to inflate a commodity currency, but it does happen.
We prefer gold for many good reasons, but even gold could be easily inflated. We're on the cusp, as a planet, of mining asteroids. It's possible we could find an asteroid with more mineable gold on it than exists on the entire planet now, which would have the effect of halving the price of gold on the planet in the long-term, or thereabouts, were it immediately dumped on the market.
In this sense, bitcoin is a far, far better currency if your main desire in having a currency is inflation-protection.
Also, there is another major problem with all commodity currencies: they cannot be transacted digitally. Sure, you can make commodity certificates and transmit those digitally, but where's the law saying you can't make more certificates than you have commodities? The second you make a certificate, you have the inflation problem yet again.
An inherently digital currency with built in inflation-protection is the best possible currency available if your primary value is inflation protection, which for many people it is.
Anenome: We prefer gold for many good reasons, but even gold could be easily inflated. We're on the cusp, as a planet, of mining asteroids. It's possible we could find an asteroid with more mineable gold on it than exists on the entire planet now, which would have the effect of halving the price of gold on the planet in the long-term, or thereabouts, were it immediately dumped on the market. In this sense, bitcoin is a far, far better currency if your main desire in having a currency is inflation-protection.
Except bitcoins can be effectively shut down by putting up enough transaction servers that do what you want, rather than what the bitcoin market wants to do (I believe it was Peter Surda who explained this), which is far more likely than finding and mining an asteroid with more gold than there exists in use in the world today.
So if we're going to judge currencies on the most remote and unlikely scenarios, bitcoin is just another failure that will be used by the state to defraud anyone who uses them, which means weimar republic(bitcoin) versus a 50% drop in purchasing value (double the gold).
excel: Anenome: We prefer gold for many good reasons, but even gold could be easily inflated. We're on the cusp, as a planet, of mining asteroids. It's possible we could find an asteroid with more mineable gold on it than exists on the entire planet now, which would have the effect of halving the price of gold on the planet in the long-term, or thereabouts, were it immediately dumped on the market. In this sense, bitcoin is a far, far better currency if your main desire in having a currency is inflation-protection. Except bitcoins can be effectively shut down by putting up enough transaction servers that do what you want, rather than what the bitcoin market wants to do (I believe it was Peter Surda who explained this), which is far more likely than finding and mining an asteroid with more gold than there exists in use in the world today. So if we're going to judge currencies on the most remote and unlikely scenarios, bitcoin is just another failure that will be used by the state to defraud anyone who uses them, which means weimar republic(bitcoin) versus a 50% drop in purchasing value (double the gold).
Well, that's one reason why I always say that Bitcoin is the future but perhaps not in its current incarnation. A future incarnation may be more resistant to takeover. Or it may be that, once adopted as a currency by a large population that taking over the network in that fashion becomes effectively impossible.
On the other side of the coin, we don't really know what the likelihood of finding a golden asteroid is. Go look up the state of the art, they think there's a lot of heavy metals in asteroids. I think they said a single (relatively small) asteroid had about $20 trillion worth of metals in it, and there's many millions of asteroids up there. Finding one rich in gold might not be as far out as we imagine. They already assume many of them are quite rich in platinum. And supposedly the vast majority of the gold we have on the planet has come from asteroid strikes in the first place.
Anenome: Andrew Cain: Is it a commodity? No. Then it will never be a money. The second you make a certificate, you have the inflation problem yet again.
You dont unless its forcibly imposed monopoly provider of certificates. In order for me to trust you dont debase your certificates you will have to convince me that you can't just print them up and you have to do better than competition.
Anenome: An inherently digital currency with built in inflation-protection is the best possible currency available if your primary value is inflation protection, which for many people it is.
For me store of value is more fundamental property of money than just inflation protection. Gold at least has other utility than to be used as money so it is better at this (I admit - not perfect, just relatively better). As it currently stands bitcoin to me has no value at all besides being used as ticket to a speculation game. I am not convinced this is enough to store my purchasing power over a longer period of time.
Boniek: As it currently stands bitcoin to me has no value at all besides being used as ticket to a speculation game.
boniek: Anenome: The second you make a certificate, you have the inflation problem yet again. You dont unless its forcibly imposed monopoly provider of certificates.
Anenome: The second you make a certificate, you have the inflation problem yet again.
The second you make a certificate, you have the inflation problem yet again.
You dont unless its forcibly imposed monopoly provider of certificates.
Which it inevitably is in the modern world.
boniek:In order for me to trust you dont debase your certificates you will have to convince me that you can't just print them up and you have to do better than competition.
You can't get a better guarantee of that than the cryptographic guarantee. All these people talking about auditing commodity reserves, it's silly to think that's even in the same category as a cryptographic guarantee.
boniek: Anenome:An inherently digital currency with built in inflation-protection is the best possible currency available if your primary value is inflation protection, which for many people it is. For me store of value is more fundamental property of money than just inflation protection.
Anenome:An inherently digital currency with built in inflation-protection is the best possible currency available if your primary value is inflation protection, which for many people it is.
For me store of value is more fundamental property of money than just inflation protection.
Whoa, whoa, store of value is exactly what inflation protection gives you. One of the primary causes of value-loss is inflation.
boniek:Gold at least has other utility than to be used as money so it is better at this (I admit - not perfect, just relatively better). As it currently stands bitcoin to me has no value at all besides being used as ticket to a speculation game. I am not convinced this is enough to store my purchasing power over a longer period of time.
Bitcoin has a certain inherent value as money, because of its exchange value. The price / value of bitcoin isn't likely to significantly stabilize until a large population adopts it as currency.
In any case, we'd better hope that a commodity-currency isn't the only viable kind of currency, because the future will be full of digital currencies.
excel: Except bitcoins can be effectively shut down by putting up enough transaction servers that do what you want, rather than what the bitcoin market wants to do (I believe it was Peter Surda who explained this), which is far more likely than finding and mining an asteroid with more gold than there exists in use in the world today. So if we're going to judge currencies on the most remote and unlikely scenarios, bitcoin is just another failure that will be used by the state to defraud anyone who uses them, which means weimar republic(bitcoin) versus a 50% drop in purchasing value (double the gold). The number of 'transaction servers' has nothing to do with the ability to control the network. Participation does not equate to direct control any more than speaking a language directly changes the words used. Similarly, initiating many transactions (called 'dusting') causes the network to raise transaction fees in response, so flooding the network would rapidly become prohibitively expensive. Bitcoin's current weakness is in the proof-of-work mechanism that prevents double spending. Control over more than half of the processing power would afford an attacker the ability to slow or stop transactions. It would still not allow an attacker to spend anyone else's funds, only his own. In addition, this 51% of network processing power control would need to be maintained in order to prevent the attacker's double spending from being rolled back. At its current processing capacity, the Bitcoin network is prohibitively expensive to attack in a direct manner even for most nations. It is still vulnerable, but this processing power is rapidly growing. An attacker would also need time to set up such a system, leading to a race against the network itself as it naturally expands its capacity through private interests. Even if such an attack were to be implemented, the blockchain (a record of all transactions) would fork (split in half) and lead to continuation of the 'natural' blockchain. A simple software update or adjustment to network routing separate from Bitcoin could easily redirect processing power to the natural chain, ignoring the attacker. So no, Bitcoin cannot be effectively shut down any more than the Internet can be turned off. | Post Points: 5
The number of 'transaction servers' has nothing to do with the ability to control the network. Participation does not equate to direct control any more than speaking a language directly changes the words used. Similarly, initiating many transactions (called 'dusting') causes the network to raise transaction fees in response, so flooding the network would rapidly become prohibitively expensive.
Bitcoin's current weakness is in the proof-of-work mechanism that prevents double spending. Control over more than half of the processing power would afford an attacker the ability to slow or stop transactions. It would still not allow an attacker to spend anyone else's funds, only his own. In addition, this 51% of network processing power control would need to be maintained in order to prevent the attacker's double spending from being rolled back.
At its current processing capacity, the Bitcoin network is prohibitively expensive to attack in a direct manner even for most nations. It is still vulnerable, but this processing power is rapidly growing. An attacker would also need time to set up such a system, leading to a race against the network itself as it naturally expands its capacity through private interests.
Even if such an attack were to be implemented, the blockchain (a record of all transactions) would fork (split in half) and lead to continuation of the 'natural' blockchain. A simple software update or adjustment to network routing separate from Bitcoin could easily redirect processing power to the natural chain, ignoring the attacker.
So no, Bitcoin cannot be effectively shut down any more than the Internet can be turned off.
Anenome: boniek: Anenome: The second you make a certificate, you have the inflation problem yet again. You dont unless its forcibly imposed monopoly provider of certificates. Which it inevitably is in the modern world.
That sadly seems true.
Anenome: boniek:In order for me to trust you dont debase your certificates you will have to convince me that you can't just print them up and you have to do better than competition. You can't get a better guarantee of that than the cryptographic guarantee. All these people talking about auditing commodity reserves, it's silly to think that's even in the same category as a cryptographic guarantee.
Why certificates cant be digital? Granted as long as certificates are backed government can just shut down warehouse with backing material of competition to its FIAT, that is why I think we can agree that commodity money is not perfect.
Anenome: boniek: Anenome:An inherently digital currency with built in inflation-protection is the best possible currency available if your primary value is inflation protection, which for many people it is. For me store of value is more fundamental property of money than just inflation protection. Whoa, whoa, store of value is exactly what inflation protection gives you.
Whoa, whoa, store of value is exactly what inflation protection gives you.
That is not true or at least it is not whole picture. Bitcoin to me has no value at all as store of value because I have no guarantee it wont become worthelss so guarantee that number of bitcoins wont grow is not relevant (and useless). Scarcity doesnt make something valuable by itself. Gold wont ever become completely worthless because it has utility outside of monetary usage.
Anenome: One of the primary causes of value-loss is inflation. boniek:Gold at least has other utility than to be used as money so it is better at this (I admit - not perfect, just relatively better). As it currently stands bitcoin to me has no value at all besides being used as ticket to a speculation game. I am not convinced this is enough to store my purchasing power over a longer period of time. Bitcoin has a certain inherent value as money, because of its exchange value. The price / value of bitcoin isn't likely to significantly stabilize until a large population adopts it as currency. In any case, we'd better hope that a commodity-currency isn't the only viable kind of currency, because the future will be full of digital currencies.
One of the primary causes of value-loss is inflation.
There is no such thing as inherent value. Value is subjective. Just because people are giving money in exchange for bitcoins (for whatever reason) now is not a guarantee of any value whatsoever in the future because bitcoin is useless outside of monetary use. Imagine that something better than a bitcoin comes around or somebody permanently compromises bitcoin - bitcoin will become completely worthless very quickly. If something better than gold come along gold would still retain some value because of its use in various industries. Thus bitcoin is in my opinion not a really good money system and not a solution to problems with commodity money and commodity backed certificates.
"This isn't supported by reality. The US currency is not commodity-backed and functions just fine as money. It may be fraught with long-term risks by doing so, primarily vulnerability to inflation (because politicians control the presses), but it is money nonetheless."
Check your facts. The dollar arose out of its relation with gold. It was redeemable in gold therefore it was backed by a commodity.
Bitcoin is the best form of money currently available to mankind, based on its specific attributes.
Given that Bitcoin is A) 100% free-market and B) works beautifully, It'd be nice if the Mises community would stop fussing about how it does or doesn't fit the Regression Theorem and actually helped us build it.
Personally, I feel there is a bit of hypocrisy in any Austrian or more broadly any free-market advocate who condemns Bitcoin while simultaneously using government fiat on a daily basis. Bitcoin works and it is growing. Try it. Use it. Learn about it. Again, it is the best form of money currently available to mankind.
Chart of daily Bitcoin transactions globally...
http://blockchain.info/charts/n-transactions?showDataPoints=false×pan=all&show_header=true&daysAverageString=7&scale=0&address=
I will give bitcoin advocates 50 Cain-Dollars each if they stop shilling for bitcoins here.
Perhaps I should also stop promoting Austrian principles elsewhere as well and just keep it all to myself? Much better to keep quiet, and abstain from advancing liberty as often as possible. We wouldn't want to cross-polinate various useful ideas between disparate liberty groups, would we? All the Austrians can just circle-jerk here on Mises.org, the Ron Paulers can fence themselves in on the DailyPaul, and us Bitcoin folk can just keep quiet on our forum as well. Better yet, let's all just sit at home and talk to ourselves, lest we risk schilling our thoughts beyond their proper place.
Or, maybe, we could all be friendly and open with each other since we all want the same thing.
If you hate Bitcoin so much, please explain to me how else one can move $0.10 or $10,000,000 across the world instantly with nobody knowing about it or having the power to stop it. Can you do that? No you cannot. Thus there is value in Bitcoin, and this makes it wholly separate from "Cain-Dollars" or whatever other money you think you can make up. Try sending me $0.50 worth of gold right now. You can't. But I can send you any denomination of value instantly, anywhere.
If you'd like to debate with me the economic principles upon which Bitcoin operates, please do, but don't dismiss it so fleetingly, for it reminds me of those who dismiss Austrian principles out of hand, believing it too far from the accepted wisdom to possibly be valid.
Most of the theory of what money is was built prior to the invention of the internet and digital transactions. Thus people are stuck in a pre-digital mindset.
This too shall pass with time.
I've never even seen a Cain-Dollar before. Ergo, they must be extremely rare. Ergo, they must be extremely valuable. This is an incredible offer!
evorhees,
Open and friendly is a wonderful idea. Are you open and friendly to summarizing your understanding of Mises' Regression Theorem, and then explaining why it is wrong, or why it is right but bitcoin is an exception to it?
...how else one can move $0.10 or $10,000,000 across the world instantly with nobody knowing about it or having the power to stop it....
http://en.wikipedia.org/wiki/Begging_the_question. Are you open and friendly enough to grasp why that statement of yours is begging the question?
[Hint: You are trying to prove bitcoin is money by assuming it is money. For example. Say there was a magical machine that could transport camel dung, and only camel dung, across the world instantly with nobody knowing about it or having the power to stop it. Would that prove that camel dung is money? Can you think of something camel dung is perhaps missing that might keep it from being money, despite being so secretly transportable? Do the words "intrinsic value" possibly have something to do with it?]
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It's easy to refute an argument if you first misrepresent it. William Keizer
Again it has exchange value as money, that -is- its intrinsic value. It is not a commodity value, but it's still value per se.
Past economists assumed money must have commodity value. They couldn't conceive of a currency based upon service value, such as Bitcoin.
Anenome,
1. Where is your summary of Mises' regression theorem, and your subsequent rebuttal of it, or else your subsequent explanation why bitcoin is somehow an exception?
Saying the past economists couldn't conceive a currency based upon service value doesn't cut it.
2. Do you think camel dung would be money if there was a magical way to transport it as easily as bitcoin? Would camel dung then not have commodity value, but still be value per se? Would you accept payment for your hard work in camel dung, because it has service value? Do you think people who reject camel dung under such circs do so because they have an assumption that money must have commodity value, and cannot conceive of a currency based on service value, such as camel dung?
The point is, garbage in, garbage out. Being able to transport something all over the world etc does not give it value if the thing itself is just so much garbage, like camel dung. Bitcoin too, transports what exactly? Nothing. It too is just garbage moved quickly and secretly and securely from place to place. But it's still garbage, not money.
It surprise me the ease to use the term "intrinsic value" when is totally misleading. Ignoring how close that is from the Marxian "Labor theory of value". There's no such thing as intrinsic value, value is always subjective and you're supposed to have learned that from Mises.
People accept money because they want to exchange it for other goods and services. The price of gold would be much lower if it were completely demonetized (gold is still a functioning money despite what some peole may think), because it would depend only on its properties as industrial commodity. Gold is money because of its qualities as money not because it's shinny or a good conductor.
Although I disagree with him when he says that mmoney is a natural monopoly and should be public, here's how Gesell demonstrates that money doesn't need that so called "intrinsic value".
In fact, if you campare both monies only AS MONEY (ignoring the unimportant fact that gold-money can be "converted" into commodity-gold), it turns out that bitcoin is a superior form of money over gold. The value of bitcoin comes from its properties as money and it doesn't need anything else.
Clayton:There are already lots of existing threads on Bitcoin. My view.
I completely agree with Clayton's view on this.
My comment.
Hi Smiling Dave, fair question.
Technically, I don't think it begs the question. If you have $10m in USD, and want to move that value to China instantly, Bitcoin works -as a payment mechanism- to enable that to occur. You buy the BTC in US, send BTC instantly, then sell BTC for CNY in China. In this specific case, Bitcoin acts as a secure payment transfer system and not really so much as a "currency". It is this functional value - the ability of the Bitcoin network to provide this service - which justifies the BTC currency units themselves having a nominal price. For if a system exists which can transfer already-accepted monies across distance instantly and anonymously, and that system has a scarce quantity of units by which to enable these transfers, then it follows those units will command a market price of their own - for the wise speculator, seeing this system, is surely willing to bid at least $0.01 per Bitcoin because he could buy the entire technology for $210,000 (21m max coins).
Regarding camel dung, if it could be used to instantly and anonymously (and without stench or mess) transport value across the world, and it had a scarce supply, then yes I'd expect camel dung to command a certain price in the market. Of course, camel dung cannot do this, and thus there is no reason to pay attention to it as a global payment system. Bitcoin CAN do it, and IS doing it, right now. I don't like the term "intrinsic value," since all value is subjective to the person doing the valuing (gold was not valuable before humans arrived to value it), but if you need to find an intrinsic value in Bitcoin, then look at Bitcoin the payment system, not Bitcoin the currency, to find it.
It is quite possible that people get caught up in this, because they don't realized "Bitcoin" refers to two unique things. 1) a payment infrastructure and 2) units of account within that infrastructure. The payment infrastructure is vastly valuable, and because the units of account are scarce within it, they command a price. Further, because these units of account have all the attributes of a good money (scarce, divisible, verifiable, fungible, etc) it should not be suprising that people use them as money.
To claim Bitcoin has no fundamental value is to be unaware of its profound usefullness, and it is not "theoretical" usefullness, but is in fact being used as I type this to transfers value around the world beyond the clutches of the State.
Dave: But it's still garbage, not money.
William M. Briggs: The love of theory is the root of all evil.
@Seraiah: Wow, I haven't seen that many red-herrings in one post in a long time.
The best way to create a theory is to make observations and work from there.
I suppose this applies to Geometry and Number Theory, as well?
Reality: Bitcoins is a cryptocurrency that is currently being used to facilitate trade.
It is a medium of exchange. A real Austrian economist (Bob Murphy) has stated that this is the case. But that doesn't make it money... a medium of exchange becomes money when it is widely accepted for all goods. That is definitely not true of BC.
-Only physical objects can be a currency.
Who said this?
-Bitcoins have no value.
Who said this??
-Bitcoins can not store value.
-All currency must be able to trace its value back to a valued physical good.
Who ever said any of this???
Bitcoins are not a fiat currency.)
Again, who ever said this???? Bitcoin is an unbacked digital currency (medium-of-exchange). No one on this forum disputes that definition. You need to pay attention to what people write instead of building straw men stuffed with red herrings.
Haha, Clayton. If none of that was said (Which it has, I can't believe you're serious.), then nothing in essence has been said against Bitcoins and my point is even stronger. Nice try though! And yes, it does apply to Geometry and Number theory. They are both observations about reality. Literally; observations about reality. I don't know how that could prove my point any better.
Clayton: a medium of exchange becomes money when it is widely accepted for all goods. That is definitely not true of BC.
Clayton: You need to pay attention to what people write instead of building straw men stuffed with red herrings.
@skylein: Nice analogy with the prison-communication... I heartily agree.
Money is a medium of a exchange, they're synonymous. Robert Murphy actually said that? How silly.
This is a common dispute that appears in this kind of conversations, but I think it only depends on the definition you use. Is unbacked equivalent to fiat? I would say they are, As in fiat lux, something becomes money just through the agreement of a community of users. Others claim that money is only fiat if a state enforces its use. The state, according to them, would be the only one that can say "fiat pecunia". The more radical ones simply say that money and fiat are just incompatible, money is never fiat and only currencies can be. On this point I'm with Huerta de Soto when he says something like "USDs are money nowadays we like it or not". Still on the point of fiat/unbacked, let's see some extreme examples. WIR is a private currency in Switzerland based on mutual credit among businesses. One could say that "is backed by the goods/services the businesses offer" but let's not complicate it more. The currency is unbacked, is it fiat? If one takes the definition that requires a state, it's not, since the currency is private. Now there's another currency in Uruguay very similar to WIR called C3. The main difference is that this one is accepted as payment of taxes (you can still pay in the national currency so it's usage is not technically enforced, just encouraged through the state). Is it fiat? I prefer the definition in which fiat money is just the opposite of commodity money. So according to my definition all Btc, WIR and C3 are fiat. But I don't have anything against unbacked money, only agaisnt money monopolies enforced by the state (even if what they enforce is a gold standard). I think that the problem is just that fiat has become a dirty word that no one wants to use but as an insult. Being bitcoiners mainly austrians, they prefer the definition in which bitcoin is not fiat. But I think that being commodity money (that is, coupled with a real good with money, that could be used for other purpose) is actually a disadvantage of gold-money. The public is indiferent of the money material. Blocking the comodity when monetizing gold is just a price to pay to prevent the abuse of governments and conterfeiting, not an advantage per se. Bitcoin just solves this same problem through cryptography rather than phisycal laws. To avoid the term fiat for bitcoin others claim that bitcoin is a "digital commodity". I don't buy that. The ebook example will lead us to another debate about the so called "intellectual property" and maybe even DRM or Diablo3. The instrinsic value believers can still say that gold is a better storage of value because it would still have some value even if it is demonetized. But you were storing the value it had when it was money, you will suffer a tremendous lost if what you hard as money gets demonetized. Yes, you would retain some value from the gold as commodity but the same applies to paper-money (in a much lower scale). When paper money is demonetized (hyperinflation), it is still useful as a firestarter or to cover walls one could argue. And now my most daring claim: storing value with an abstract agrement like money is directly impossible, is a phantom property of money. Let's better leave this for another thread...you probably hate me enough already.
To summarize my position, bitcoin is a fiat money. So what? That doesn't make it worse than gold.
jtimon: And now my most daring claim: storing value with an abstract agrement like money is directly impossible, is a phantom property of money. Let's better leave this for another thread...you probably hate me enough already. To summarize my position, bitcoin is a fiat money. So what? That doesn't make it worse than gold.
Money A cow is a medium of a exchange mammal, [but] they're [not] synonymous.
Do you see?
Oy.
Some definitions:
Note that even backed currencies are not necessarily secure - a bank issuing private banknotes can go bankrupt and its notes can become worthless. So, a "backed" currency which is not also secured is no different than an unbacked currency. In other words, the real issue here is not backing or no backing, it is securing or no securing. If you have a corrupt legal system where bank owners are protected and bank customers (including holders of banknotes) get screwed during bankruptcy, it doesn't matter even if the government permits private issue of banknotes. Such notes are no better than the government's own funny-money.
Gold/silver coins/bars are different in that they are not money substitutes - they are money proper. The confusion arises in that funny monies blur the distinction between money proper and money substitutes.
Ive read about 75% of this thread so far, so hopefully this hasnt been mentioned.
Can't just about any nerd or group of nerds that are highly educated in programming duplicate what bitcoin is doing? I mean, couldn't there fairly easily be created bitcoin2, bitcoin3, bitcoin4, bitcoin5, bitcoin6, bitcoin7, etc, etc, ad infinitum? If so, then this would seem to indicate that bitcoin and it's successors are easily duplicated. Granted, some may be able to set themselves apart based upon their history, patronage, network of users, etc, but I don't see how such an easily duplicated 'me-too' currency could gain a decisive edge. It seems as though every single person in the world could be given his own software tools to create his very own currency or his own set of currencies.
"The best way to bail out the economy is with liberty, not with federal reserve notes." - pairunoyd
"The vision of the Austrian must be greater than the blindness of the sheeple." - pairunoyd