Malach: iyou know, there is something of a meritocracy here, in that to deny someone the use of a term you have to make a case.
Fair enough, let me give you a common example of 'counterparty risk', that is specifically not involved in a particular transaction. Say a major corporation decides to borrow cash, and does so by issuing bonds. Bond brokers buy these bonds, and sell them to a pension fund. The pension fund has an audit, and decides they are cash poor, so they offer those same bonds on the secondary market. You buy those bonds at a slight discount from their face value. Your counterparty risk isn't with the pension fund, it's with the corporation that issued the bonds. Specificly the counterparty risk here is the risk that the corporation defaults before the bonds come due. Yet, you had no agreement with that corporation at all, only the pension fund. As Peter mentioned, there is no particular bitcoin transaction processing node that has any obligations to you at all, therefore there is no counteryparty risk.
Malachi:When you hold bitcoins, you become party to the bitcoin network. Transacting in bitcoins involves multiple parties. The risk that those parties will fail to carry out the tasks that bitcoin members reasonably expect from them is hereby declared "counterparty risk." semantic dictators may now take their signs and go home, the mere technicality of the absence of a written contract has no bearing, unless you are a semantic legalist. In that case, simply take your dictionary down from the shelf, and pencil the words "bitcoin" in under the entry for "money" and have done with it.
You're still using that term wrong, but I think that is actually irrelevent, since both you and I seem to understand how you are using it now. Let's just move on, okay?
Let address your concern, but let me first restate it so we are both clear that I do actually understand it. You are saying that, by using bitcoin, I run the risk that by the time I'm ready to actually buy something with them, the peer-to-peer network that functions as a clearinghouse could cease functioning for some unknown reason. This is the risk that you are describing, calling the p2p network itself a third party to my transaction with a particular person. I acknowledge that this risk exists, and that it does not for natural money, because without the p2p network in some functional state Bitcoin itself does not exist. Personally, I consider this risk vanishingly small, because nothing short of the complete destruction of the Internet itself could accomplish this, and even that is in question. However it is a non-zero risk.
Malachi:I'm glad we are on the same page. And to address an earlier concern, a cryptographic network that enabled sending large encrypted messages without transferring equally large balances would be industrially useful, especially if you could do it from mobile phones. These crypotgraphic problems would be additional work for the bitcoin network, which woukd be rewarded by the small deduction in balance. If bitcoin or its successor could do that, it would be a contender.
Actually, the bitcoin network can send arbitrary data, encrypted or otherwise, and obuscate both the sending node and the receiving node via rapid redundency, and timestamp that data packet while it's doing so. Bitcoin supports an arbitrary script method that, when paid for, will get the mining node that captures that block to execute that script. It's a rudimentury scripting language, and is presently disabled because it's still considered potential attack vector, but it's possible. Since that data would be replicated all over the network, doing so with large data sets is considered bad form anyway, although outlinks to someplace else on the Internet would be fine. More likely is a 'merged mining' parallel blockchain that would support such things, like namecoin does now as a distributed nameserver. Bitcoin can do a number of other rather useful things with that scripting system as well, such as 'timelocking' which basicly involves creating a transaction to be processed at a later date and not before, permitting a kind of automatic escrow; and 'channeling' which allows two persons to set up a mutually fixed 'deposit' with each other for a predefined amount & time period. This last one would be useful for smaller online 'wallet services' functioning as banks to permit their users to transact with each other without creating a transaction every single time, and settle up at the end of the period with a single, special transaction.
Malachi:All it needs is a secure front end and a few years of devo then. Somebody start writing code
Somebody already is writing code, and the front-end is the easy part.
@Malachi You stretched my metaphor and I'm supremely offended.
Assuming that today everyone were using swiss army knives to butter their bread. (Unlikely, I know!) The butter knife is better for buttering bread, swiss army knives are great for lots of things, but they're not as good for buttering bread. Butter knives will replace swiss army knives in all instances where buttering bread is the objective since butter knives are blatantly better at buttering bread. Yes it makes sense that if all of the sudden no one wanted to butter bread, you would still have the swiss army knives other features, whereas the butter knife would become pretty much useless. But what circumstance would lead everyone on Earth from not wanting to butter their bread? The value of the butter knife for buttering bread can't just be repudiated rationally. Sure, people could discard all of their butter knives tomorrow and go back to buttering bread with the pocket knives, but why? Never underestimate stupid people in large quantities, but I still have a hard time believing this could ever happen. There will always be some people that will retain their butter knives for buttering bread, because it makes their lives easier. Butter knives make the user more productive, and when people realize this, butter knives will regain their appropriate market share in the area of buttering bread.
Assuming that everyone is using gold to facilitate exchange. (Unlikely I know!) Bitcoins are the better medium of exchange, gold is great for lots of things, but they're not as good as a medium of exchange. Bitcoins will replace gold in all instances where facilitating transactions is the objective since bitcoins are blatantly the better medium of exchange. Yes it makes sense that if all of the sudden no one wanted to facilitate exchange, you would still have golds other features, whereas bitcoins would become pretty much useless. But what circumstance would lead everyone on Earth from not wanting to facilitate exchange? The value of bitcoins for facilitating exchange can't just be repudiated rationally. Sure, people could discard all of their bitcoins tomorrow and go back to facilitating exchange with gold, but why? Never underestimate stupid people in large quantities, but I still have a hard time believing this could ever happen. There will always be some people that will retain their bitcoins for facilitating transactions, because it makes their lives easier. Bitcoins make the user more productive, and when people realize this the bitcoins will regain their proper market share in the area of facilitating exchange.
I'll just leave this here...
Good news! Our bank account integration feature finally launched. You can now connect any U.S. bank account to buy or sell bitcoins on Coinbase! The process is fast and simple, and we’d love to have you try it out. Here are the steps after you sign in: Add and verify a bank account (for most large banks in the U.S. we’ll be able to instantly verify the account - smaller banks or credit unions may take a few days to verify while we credit two small amounts to your account and wait to see if you can verify the amounts). Now you can buy or sell bitcoins, and the USD amount will be debited or credited to your bank in 2-3 business days.
Good news! Our bank account integration feature finally launched.
You can now connect any U.S. bank account to buy or sell bitcoins on Coinbase! The process is fast and simple, and we’d love to have you try it out.
Here are the steps after you sign in:
Would you invest in a money with a chart like this? :) I pretty sure most of you did..
I forget where I read this, but that chart is exactly what you'd expect from uptake and mass acceptance. This same shape has been noticed in so many new things that it's become characteristic. Even the Dotcom boom follows this same chart, with an early explosion of hype that broke and then lead to continuing growth over time.
Before the spike is early adopters. The spike is where it suddenly becomes big news and investors rush in hoping not to miss the boat. This caused overvaluation and the resulting selloff, which then settles into a relatively calm slow-growth shape.
If anything, this chart adds credibility to bitcoin. It's been stable for a long time now.
Btw, here's what it looks like, price since inception to present day:
Would you invest in a money with a chart like this?
What happened to this money at the end of 1979? ;)
Christian Sherriff: Would you invest in a money with a chart like this? :) I pretty sure most of you did..
I thought that you were talking about Bitcoin, and was about to respond with "I did!", but I'm certain that Bitcoin didn't exist before 2009, so I have difficulty understanding how it had a value in January of 1968.
I'm pretty sure he or someone made that chart and just fuzzed up the years.
That chart is the price of gold. That was his point, the similarity between the two.
Prime: That chart is the price of gold. That was his point, the similarity between the two.
Isn't that silver?
Yes, it is silver, I didn't even look at the y-axis.
Prime: Yes, it is silver, I didn't even look at the y-axis.
I just looked at the file namein "View Image."
Yes, it's silver. It occurred during the Hunt brothers buy up a few years after Nixon broke from gold. Remember it only came to a end due to a short ban. The point I'm making here is that silver (or any free market money such as bitcoin) are not immune from market forces. They are however ultimately immune to fiat decree.. which is our goal.
Bitcoin does satisfy the definition of a free market money and we shouldn't let its novel crypto form distract us from its real attributes as a money. There seems to be some confusion between a bitcoin (money) and the bitcoin network (medium or market). The network shouldn't be confused for a counter-party.. It's like saying that the market which demands gold is the counter-party. Obviously a party needs to buy the gold but you wouldn't say that is a counter party.
The question is could bitcoin authentication (via the bitcoin network) be a similar concept to the market authenticating you have real gold??