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What Bitcoin is

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If he really is just Smiling Dave back to rehash his same arguments then that's just sad.

Cheer up, it's not me.

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...meet the regression theorem at some point in the future.

How can it magically acquires intrinsic value?

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The former President of the Mises Institute AND its founder seem to be quietly coming around.

I expected an article by Lew defending bitcoins based on your balyhoo. All the link says is that he accepts DONATIONS of bitcoin. Note that you can't pay for the Mises Institute products in bitcoin.

I think bitcoin is a fraud, doomed to fail by the regression theorem, and that only fools will touch it. But that's if they have to pay for a bitcoin, or accept it in exchange for something valuable. If someone is willing to give you free bitcoins, take 'em, cash 'em in.

AJ and all you others, if you want to send me free bitcoins, I will graciously accept.

As for that computer store that accepts bitcoins, the Ithaca Hour had a bigger following for a few years. Then, like a game of Old Maid or Musical Chairs, the last one stuck with the Ithaca Hours lost.

BTW Kyle, have you read my blog articles on bitcoin?

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"Widely accepted" objection quickly melting though the hands of adherents.

You must be joking.

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BTW, I've stopped following the bitcoin threads here because:

1. The trolls just keep on coming, not bothering to understand or address my objections to bitcoin. You see what they are resorting to now. Lew Rockwell is willing to take bitcoins, if he doesn't have to give anything in return. But he won't sell you a single book or T-shirt in exchange for bitcoins. They report that as him "slowly coming around".

2. I've stated my case quite clearly in my blog. All the interested reader has to do is go there, search for "bitcoin", and he has it all.

3. My researches into various forms of fools' currency similar to bitcoin [published on my website, do a search for "Ithaca hour" to get you started] show that they may have a zombie like existence for a few years before collapsing into dust. The Ithaca Hour lasted 18 years. So the trolls can crow for 18 years. Meet you then.

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Smiling Dave,

your excuses are becoming and more ridiculous. Last time you denied that Bitcoin is a medium of exchange. Now when LRC started accepting donations, you found another excuse. Noone here is taking your "arguments" seriously anymore. Those that were halfway coherent were refuted. The rest are fables which are better suited for a different type of publication.

I'll just reiterate that Ithaca Hours are not a wannabe money, they are a wannabe money substitute, based on the US dollar, similarly to various LETS systems and mutual credit based on national currencies. As http://en.wikipedia.org/wiki/Local_currency says, their economic foundation lies in mercantilism and monetarism. It is an attempt to perform an expansion of the money supply by decentralised monetisation, without having to rely on banks. But this has no effect on their sustainability. They can hypothetically survive as long as their users believe in mercantilism. Although I think that mutual credit systems are probably more sustainable than less usual forms like the Ithaca Hours.

I think that if local currencies gained a larger market share in their respective geographical areas, the expansion of the money supply caused by them will cause larger and larger disequilibria and eventually their users will realise that they made themselves poorer. But who knows? Stupidity is boundless.

Bitcoin on the other hand is based on the Mengerian concept of emergent catallactic origin of money, as a result of a decrease in transaction costs of trade (which Menger calls "economic sacrifices") and the network effect (which manifests itself as liquidity, or in Menger's terminology, "salability"). What it provides is on one hand a more efficient financial system, on the other a better protection against the manipulation from the states and banks. Not everyone might be able to reap or even recognise its benefits at this stage, but this nevertheless is the logical conclusion. Its future does not depend on deniers, rather on entrepreneurship, such as that of BitPay which provide the LRC donation platform.

Last but not least, as I said on my blog, http://www.economicsofbitcoin.com/2012/12/let-me-tell-you-something-about-me.html , Jeffrey Tucker recruited me to write a book about economics of Bitcoin, to be published by Laissez Faire Books. I would like to thank you, Smiling Dave, for helping this happen, as your irrationality heavily contributed to my motivation in research and writing.

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Anenome replied on Fri, Dec 28 2012 2:53 PM

Smiling Dave:

"Widely accepted" objection quickly melting though the hands of adherents.

You must be joking.

Something tells me that when all the world already accepts Bitcoin, you'll still be saying it's not 'widely accepted.' Can you really claim your widely accepted objection hasn't been significantly chiseled away at within recent months and news? Or have you simply not been following the news?

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Anenome replied on Fri, Dec 28 2012 2:56 PM
 
 

Peter Šurda:

Last but not least, as I said on my blog, http://www.economicsofbitcoin.com/2012/12/let-me-tell-you-something-about-me.html , Jeffrey Tucker recruited me to write a book about economics of Bitcoin, to be published by Laissez Faire Books. I would like to thank you, Smiling Dave, for helping this happen, as your irrationality heavily contributed to my motivation in research and writing.

Hey! Rock on dude! I hope some of my contributions warrant inclusion :)

 
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Blargg replied on Fri, Dec 28 2012 9:01 PM

I think that Smiling Dave's comments on Bitcoin are given less consideration than they could be because he mixes his technical arguments with insinuations about the character of people he's discussing with. I find it tiring to read through. It's unfortunate because he seems to put a lot of thought into the technical side.

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Malachi replied on Sat, Dec 29 2012 9:34 AM
His technical objections have been dealt with. All he has left are the insults.
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AJ replied on Wed, Jan 2 2013 11:55 AM
Maclean's has posted an excellent article (http://www2.macleans.ca/2013/01/02/why-bitcoin-is-the-banking-industrys-newest-biggest-threat/) detailing Bitcoin's mainstream status.
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Blargg replied on Wed, Jan 2 2013 9:34 PM

From the article: Bitcoin’s big advantage is that it is essentially the cold, hard cash of the Internet.

It's things like this that make it difficult to take Bitcoin promoters seriously. The cold, hard cash of the Internet? So Bitcoin is accepted on websites as universally as cold, hard cash is in any country (except Zimbabwe)?

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Anenome replied on Thu, Jan 3 2013 1:56 AM

Wordpress accepts Bitcoin. So do a couple other quite large sites.

If that statement that Bitcoin is the 'currency of the internet' isn't yet true, it soon will be.

I think an often overlooked question is what Bitcoin means for financing terrorism >_> We may see a bitcoin crackdown in the name of fighting terrorism :\

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AJ replied on Thu, Jan 3 2013 2:34 PM
Maclean's a Bitcoin promoter? If only!
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The only way to determine what bitcoins are is to look at the way they are used. They are not used as a currency, they are tokens, same as in a game arcade. I actually use bitcoins, so I know. None of the bitcoin promoters on this thread will convince me that bitcoin, as it stands today, is a currency because I know from personal experience that it is not.
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Anenome replied on Fri, Jan 4 2013 3:51 PM

matt_kyle:
The only way to determine what bitcoins are is to look at the way they are used. They are not used as a currency, they are tokens, same as in a game arcade. I actually use bitcoins, so I know. None of the bitcoin promoters on this thread will convince me that bitcoin, as it stands today, is a currency because I know from personal experience that it is not.

How are you defining 'currency' and 'token'???

Are you suggesting that only something which begins and ends a complete lifecycle can be a currency? As in someone being paid in bitcoin, living on it and paying it out entirely?

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To provide a more specific question: let's say I live in Europe, receive my income in Euros and pay most of expenses in Euros, but occassionally order from American eBay using dollars. Am I using dollars as tokens? I hold to dollars for a very short time, probably milliseconds if the conversion is automated.

The Voluntaryist Reader - read, comment, post your own.
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I say that they are tokens because of the way they are used. Your definition of currency is anything that has been used in a transaction anywhere at anytime. That can't be true because there are barter transactions like that as well. Such as the use of salt in times past. Bitcoin is a token because of the way it is used. On SR, for example, vendors accept bitcoin because of its relative anonymity and ease of transaction. The vendors are completely hedged however - they get their payouts in US dollars, not bitcoins. Does this not fit the definition of a token? Buyer nor seller has the bitcoin as the ultimate goal. They use the bitcoin to facilitate the transaction. I appreciate that supporters of bitcoin advocate that bitcoin should be a currency to replace or supplement national fiat currencies. However, bitcoin isn't a currency because it doesn't function as a currency. I don't even know how anyone could even hold that to be in dispute.
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Malachi replied on Sat, Jan 5 2013 10:51 AM
I say that they are tokens because of the way they are used.
well tokens are used to represent something else, what are bitcoins tokens for?
Your definition of currency is anything that has been used in a transaction anywhere at anytime.
who told you that? Currency is a medium of exchange. Exchange media are used for indirect exchanges.
That can't be true because there are barter transactions like that as well. Such as the use of salt in times past.
barter exchanges are direct exchanges or they involve the use of exchange media (like salt) which makes them indirect exchanges and not really barter.
Bitcoin is a token because of the way it is used. On SR, for example, vendors accept bitcoin because of its relative anonymity and ease of transaction. The vendors are completely hedged however - they get their payouts in US dollars, not bitcoins. Does this not fit the definition of a token?
no, it does not. It is properly defined as an indirect exchange. Bitcoins are not tokens for dollars. Bitcoins are exchangeable for dollars in certain markets. A token stands in place of the thing of value that it represents. Bitcoins are currency, specifically digital cryptocurrency.
Buyer nor seller has the bitcoin as the ultimate goal.
the same can be said about exchanges involving dollars or euro or salt (when salt is used as media of exchange).
However, bitcoin isn't a currency because it doesn't function as a currency. I don't even know how anyone could even hold that to be in dispute.
if you look at the way these words are defined you might change your mind.
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AJ replied on Thu, Jan 10 2013 3:03 AM

Lew Rockwell, founder of the Ludwig von Mises Institute, already got $1,899 in Bitcoin donations since he started accepting them (and that's only as of Dec. 31, 2012). 

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Anenome replied on Sun, Feb 3 2013 4:06 PM
 
 

 
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Anenome replied on Sat, Feb 23 2013 3:02 AM

Bitcoin passed $30 today, and price parity with an ounce of silver.

Also, Reddit announced they'll be taking bitcoin in exchange for Reddit-gold.

Market cap has pased $300m, still in its infancy in those terms, so still a good buy if you are willing to risk that it has a long-term future! Gonna be one hell of a payoff if it ends up supplanting fiat currencies the world over.

I can imagine a scenario where, one day, oil becomes priced in bitcoin rather than dollars. That would send shockwaves around the world.

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matt_kyle replied on Thu, Feb 28 2013 7:50 AM
It still isn't money yet. As it stands, I have about $2500 worth of bitcoin. Definitely interesting to see where this will go.
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Anenome replied on Thu, Feb 28 2013 6:16 PM

"It still isn't money yet."

Buy something with it. In that instant, it is money.

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What do you buy with it?
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Malachi replied on Sat, Mar 2 2013 12:24 PM

whatever you want that is also for sale. what a ridiculous question.

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Anenome replied on Sat, Mar 2 2013 11:10 PM

matt_kyle:
What do you buy with it?

A better question might be 'what can't you buy with it.'

For a start try: bitcoinstore.com

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No, the question is "what do you buy with it?". Bitcoin store is an interesting idea. Some of the products, not all, are cheaper than you can buy elsewhere. That said, most people have to pay fees to purchase bitcoins in the first place, and that dampens or even negates any discounts. I am not here to debate the merits of bitcoin - I already know what they are. What I am saying is that they are not a currency YET because they are not widely accepted. They may become a currency, as intended, at some point in the future, perhaps even in the near future. Bitcoin is not a currency right now. That is what I am saying. When people start thinking about prices in bitcoin, and not US dollars or whatever other national currency they use, then bitcoin will be a true currency.
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Anenome replied on Wed, Mar 6 2013 4:03 PM

The "widely accepte" doctrine has been destroyed a number of times now.

It has no actual border, to way to determine when it has gone from not WA to WA. Can you give a determination on that?

Again, the only way to determine whether something is a currency is whether it is being used as a currency, not the number of times it's being used as a currency or by how many people.

If you use plastic bottles as a currency one time, then it's a currency right then.

Bitcoin is a currency for those who use it as a currency. If you don't use it, it's not a currency for you.

But to deny it's a currency because most people aren't using it as one, even though some people clearly are, is to use socialism as a definition and say it can't be X because most people aren't using it as X. What about the people who are? Is it a currency for them? Of course it is. Don't be ridiculous.

 

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Anenome replied on Fri, Mar 15 2013 5:01 PM
 
 

Our very own Peter Surda makes a name for himself, is due to present at Bitcoin 2013: The Future of Payments conference in San Jose in May, and is interviewed by AmericanBanker.com here:

http://www.americanbanker.com/bankthink/how-cryptocurrencies-could-upend-banks-monetary-role-1057597-1.html

"I recently had a fascinating chat with the economist Peter Šurda to discuss how nonpolitical cryptocurrencies like bitcoin could alter the future of fractional reserve banking

Peter is also a software developer experienced in the online payments industry and will present at the Bitcoin 2013: The Future of Payments conference in San Jose in May. His 2012 master's thesis at Vienna University of Economics and Business was entitled Economics of Bitcoin: Is Bitcoin an Alternative to Fiat Currencies and Gold? He's an abstract thinker, but the implications of his work are tantalizing: that digital money like Bitcoin opens up possibilities for banking without central planners or a lender of last resort, where interest rates and reserve requirements are driven purely by the market..."

Go get 'em, Pete!

 
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Anenome replied on Fri, Mar 15 2013 5:11 PM

Peter, I made a Reddit post for your interview here.

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Definitely interesting to see where this will go.

Don't come crying to me when you see how "interesting" your lost $2500 is.

I gave you all fair warning.

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Anenome replied on Fri, Mar 15 2013 6:04 PM

Smiling Dave:

Definitely interesting to see where this will go.

Don't come crying to me when you see how "interesting" your lost $2500 is.

I gave you all fair warning.

Make a prediction then. How long has Bitcoin got? What will precipitate a price-crash to zero? What do you expect the price of bitcoin to be on Jan 1, 2014? Let's go. Let's get some bets going. If I'm right, you pay me in bitcoin.

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Anenome replied on Fri, Mar 15 2013 8:02 PM

Peter, you're front page of /r/bitcoin right now: http://www.reddit.com/r/Bitcoin/comments/1admpi/economist_pete_surda_explains_why_litecoin_and/

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How long has Bitcoin got?

As you may know, Austrian Economics does not make such predictions. They predict that something will happen, but not when. This is not a cop out but something familiar to followers of AE.

Think of it as a doctor who notices that the patient has terminal cancer [= not satisfying regression theorem]. He cannot say when the patient will die, only that die he will, not of old age, and painfully.

Beanie babies were valuable for ten years before dropping to zero. The Ithaca Hour was walking dead for twenty. Other phony currencies were much shorter lived.

What will precipitate a price-crash to zero?

When the novelty wears off and folks get bored with this toy and decide to cash out. Or when the guys who started this pump and dump decide it has been milked to the last drop, or they need cash suddenly, and they dump. Maybe when Bernanke loses his nerve and stops printing more digital dollars, making the recession that much more visible, folks will need their cash and will try to get rid of their bitcoins. Bottom line, I don't know. I'm not a prophet. What I do know is that Mises has proven bitcoin is doomed.

What do you expect the price of bitcoin to be on Jan 1, 2014?

I don't know.

Let's get some bets going.

This approaches the heart of the matter. Bitcoin is for gamblers, not for people who work hard for a living and want full value in return for their labors. Folks who refuse to be paid in lottery tickets. In other words, almost everyone.

If I'm right, you pay me in bitcoin.

Right about what?

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Anenome replied on Sat, Mar 16 2013 5:16 AM

Bitcoin offer several features of clearly superior utility over other mediums of exchange for online purchase. It's about 3-4% cheaper to take an online order in bitcoin, due to not having to pay Visa or Mastercard. This represents a 50 - 100% profit margin increase for many small retailers. Also, they have no risk of chargebacks associated with bitcoin sales. Whether the figure is tens or thousands of dollars, money can be sent anywhere at low risk for a few pennies.

Lower transaction costs are a killer feature that can't be matched by any other class of currency.

So quick question, will online purchases get rarer or more prominent in the future?

Chances are they will take over all purchase. All credit card purchases in stores already basically are online purchases. I'd go so far as to say most purchases are now online purchases, even ones in phsyical stores.

Bitcoin is money, and you are going to eat your words. This is not beanie babies, this is the new digital gold standard. You pin your entire case on Mises regression theorem, an explanatory, backward-looking theory not meant to exclude something like bitcoin from being considered money.

 

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All your points have been anticipated in my blog. But you know that.

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Blargg replied on Sat, Mar 16 2013 3:36 PM

Wouldn't the fee structure change if bitcoin became the method of online purchase everywhere? I'd expect it to get at the same level as credit cards are, because it's what merchants accept with credit cards, though those offer lots of fraud protection aspects, so bitcoins could be cheaper (without the protection).

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Anenome replied on Sun, Mar 17 2013 5:34 AM

I don't see any reason for the fee structure to change as things stand now.

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z1235 replied on Sun, Mar 17 2013 8:31 AM

Anenome:

I don't see any reason for the fee structure to change as things stand now.

There are transaction fees allowed/implemented in the BTC protocol. Entities which apply processing power towards validating BTC transactions (now called BTC miners) are currently rewarded by newly "mined" BTCs (inflation). As the number of transactions increases, and as the # of BTCs approaches 21 million, validation will increasingly become incentivized/rewarded by actual transaction fees (offered by the transacting parties themselves to incentivize quick validation of their transaction). In addition, any venue offering additional security, insurance, or convenience features would, of course, charge for the benefits it offers. 

 

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