One day, while I was learning about cipherspace, I discovered BitCoin. BitCoin is a completely decentralized, anonymous online monetary system that relies on a distributed database to facilitate transactions. The creator put a great deal of effort into ensuring that the system is secure and reliable. Unfortunately, there are no real assets backing he currency of BitCoin (and no coercive government backing it either). Thus ends BitCoin.
I can imagine, though, a system like BitCoin that allows people to write promissory notes and sign them with an RSA digital signature (to prevent couterfeiting). These promissory notes could be backed by gold, silver, fiat currencies, stocks and bonds, or pretty much anything. Then, these notes could be transfered from one person to another anonymously.
Couple this with an ebay-like service that allows people to swap these virtual currencies. Say, for example, that I have a gold note issued by a bank in South Africa. Since taking delivery of the gold could be a problem, I trade my notes for notes issued by a bank in U.S.A. Then, I can redeem those notes and have them FedEx me the gold (insured, of course).
This system would be Fed-proof, IRS-proof, FBI-proof and judgment-proof. This system would protect the users against monetary inflation, making it Fed-proof. Since nobody has a bossman ratting out their earnings, it is IRS-proof. It is FBI and NSA proof because all transactions are encrypted and anonymous. And, most importantly, it is judgment-proof because it is perfectly legal.
There are, at present, no laws that could be used to criminalize what I propose. Laws against money-laundering, for example, do not apply because there is no way to prove that the money came from an illegal source, such as drug dealing. Laws against tax-evasion do not apply either, because no taxes have ever been levied on imaginary currency. In addition, if you had your day in court, you could defend yourself on First Amendment grounds. Besides, international free trade agreements also have generous loopholes.
So what we are dealing with is anarcho-capitalism and wildcat banking on a global scale. If not for my non-existant programming skills, I'd be forking a new project off BitCoin right now.
Anybody here know C++?
"As long as there are sovereign nations possessing great power, war is inevitable."
@gabriel: Oh, man, you're begging for a flame-war.... ;-)
Of course, C++ and Perl are not even in the same solution-space... but I absolutely love Perl. Unfortunately, Perl has lost its roots with Perl6, which I think is going to be a fork, I don't think Perl5.x is ever going to be truly end-of-life'd, the code base is a large part of what makes Perl so powerful. Ruby and Python are Perl's closest relatives but they both lack the "down-and-dirty" quality of Perl5 that I fell in love with.
Clayton -
No worries, I'm just being inflammatory. I write C/C++ (C#, and some assembly) for a living, so I have a certain affection for them :). Now if there's any "God that Failed" book that should be written about a programming language, it's Ruby. Not a fan.
Micah71381: Your post had some other points against BitCoins that I believe have merit as to why BitCoin is unlikely to come into popular use but I am hesitant to delve into those points without an agreed upon terminology.
Your post had some other points against BitCoins that I believe have merit as to why BitCoin is unlikely to come into popular use but I am hesitant to delve into those points without an agreed upon terminology.
Whether he is willing to participate as a peer or not, I'd very much like to explore these points you mention. After all, I would like to know if I throwing my money away.
filc: MoonShadow:And before you say "because that is what (Mises|God|The-voices-in-my-head) say so", that won't be acceptable. I understand you not appreciating appeals to authority. I am not saying it is so because Mises said so. I am saying that Mises articulates the argument best and if you want to learn it you'd read it before aarogantly arguing against it. Technically it's not Mises's argument. The fact that so many of you only think the bulk of this theorum belongs to Mises is further proof that most of you have done only enough research to debat me in this thread. You can start reading about it here. I already explained it adequately enough once. I explained why bitcoin or a currency like it would not be an adequate replacement for the dollar even if the dollar collapsed. I don't need to explain it to you again simply because you have a condescending tone.
MoonShadow:And before you say "because that is what (Mises|God|The-voices-in-my-head) say so", that won't be acceptable.
I understand you not appreciating appeals to authority. I am not saying it is so because Mises said so. I am saying that Mises articulates the argument best and if you want to learn it you'd read it before aarogantly arguing against it. Technically it's not Mises's argument. The fact that so many of you only think the bulk of this theorum belongs to Mises is further proof that most of you have done only enough research to debat me in this thread.
You can start reading about it here.
I already explained it adequately enough once. I explained why bitcoin or a currency like it would not be an adequate replacement for the dollar even if the dollar collapsed. I don't need to explain it to you again simply because you have a condescending tone.
<sigh> Okay, I'm going to try this again.
First off, I'm not the one who set the tone. You have, more than once, referred to myself (and everyone else who disagrees with you, it would seem) as "intellectually lazy". It's not just in the past several days that this phrase occurs in this thread, either. Personally, I consider he who resorts to such 'tone' as the loser by default, but I can certainly give it as well as I can take it.
Futhermore, I do not contest that Regression Theory is a sound explaination for the rise of money as a medium of exchange in a free market. I don't even contest that it is applicable to a shift of use from one money to another. What I contest, and you have not addressed, is that Regression Theory is necessarily applicable to a shift of currency; which as I have already asserted, is a distinct concept. Nor have you addressed, or even mentioned, the actual examples of fiat currencies that at least appear to contradict Regression Theory, such as the Euro. You have not attempted to explain why my viewpoint is invalid, and simply just string words together that invariablely end with some variation of "go read this, and your intelectually lazy".
I demand that you either respond to the arguments that have been presented while ending the bile; or just stop trolling.
MoonShadow:What I contest, and you have not addressed
On the contrary I explained it here.
I know you said it left much to be desired but you never bothered to tell me what about it confused you.
Moonshadow:I demand that
No no no, it doens't work like that here. Your in no position to make demands. You can either accept what voluntary time I give you or ignore it. Otherwise if you want to make demands you need to offer up something in exchange that I'lll consider worthwhile.
Speaking of "setting the tone"....
Clayton: I cannot speak for MoonShadow but I have read Mises's regression theorem in Human Action. Having read it, I believe that there is a hole in his argument which I have brought up a couple times in this thread (though I don't mind bringing it up again if you would like). It becomes an appeal to authority not when you reference an expert in the field but when someone poses an argument against a statement made by such an expert and instead of arguing on behalf of the expert based on your knowledge of the subject you refer back to the expert who is unavailable for debate or you suggest reading even more material which you are certain will backup your point for you. I asked you a couple pages back to cite the passage where Mises commits the "disjunctive fallacy" and/or assumes the truth of his own argument. I can't show you where you are misunderstanding Mises if you don't cite the passage you think is fallacious.
I cannot speak for MoonShadow but I have read Mises's regression theorem in Human Action. Having read it, I believe that there is a hole in his argument which I have brought up a couple times in this thread (though I don't mind bringing it up again if you would like). It becomes an appeal to authority not when you reference an expert in the field but when someone poses an argument against a statement made by such an expert and instead of arguing on behalf of the expert based on your knowledge of the subject you refer back to the expert who is unavailable for debate or you suggest reading even more material which you are certain will backup your point for you.
I asked you a couple pages back to cite the passage where Mises commits the "disjunctive fallacy" and/or assumes the truth of his own argument. I can't show you where you are misunderstanding Mises if you don't cite the passage you think is fallacious.
Copied from a previous post:
http://mises.org/humanaction/chap17sec4.asp
In paragraph 7 he states:
no good can be employed for the function of a medium of exchange which at the very beginning of its use for this purpose did not have exchange value on account of other employments.
and
It must happen this way. Nobody can ever succeed in construction a hypothetical case in which things were to occur in a different way.
However, I do not see how any of his previous premises or conclusions back up those two statements. I assert that he is affirming a disjunct by claiming that because his solution to the problem is proveably true then there can be no other solutions to the problem. In fact, he states that it's impossible to construct a hypothetical case in which things were to occur in a different way of which I provided two such cases and BitCoin is currently an empirical case against him in that it is used as a medium of exchange.
I am open to being shown the specific premises that lead to his conclusion but if they are stated in that article I have missed them and need some guidance in locating them.
filc: On the contrary I explained it here. I know you said it left much to be desired but you never bothered to tell me what about it confused you.
I would still like to discuss those points you made but I believe I still don't fully understand your definition of money. Last place I think we were was here: http://mises.org/Community/forums/p/9853/406844.aspx#406844
http://mises.org/humanaction/chap17sec4.asp In paragraph 7 he states: no good can be employed for the function of a medium of exchange which at the very beginning of its use for this purpose did not have exchange value on account of other employments. and It must happen this way. Nobody can ever succeed in construction a hypothetical case in which things were to occur in a different way. However, I do not see how any of his previous premises or conclusions back up those two statements.
However, I do not see how any of his previous premises or conclusions back up those two statements.
I can't find the cite right now, but I recall watching a lecture where Dr. Hoppe expounds one of the axioms of praxeology that a human will never exchange a less valued thing for a more highly valued thing. This is true by definition since valuation is evidenced by the act of exchanging (revealed preference). Hence, in order for a good to be used in indirect exchange, it must first have value in direct exchange and, since no one will ever exchange away something of higher value (say, an apple) in order to get something of no value (a string of bits, a piece of paper with the word "Money" printed on it, etc.) we can conclude that Mises was right. "No good can be employed for the function of a medium of exchange which at the very beginning of its use... did not have exchange value on account of other employments."
Does anyone know where there is a list of common axioms in praxeological arguments? This would be nice to have as a reference for these sorts of discussions.
I assert that he is affirming a disjunct by claiming that because his solution to the problem is proveably true then there can be no other solutions to the problem.
No, that's not what he's saying, he's saying that "since we've assumed that a person will never exchange away something of greater value for something of lesser value, therefore, no good can be employed for the function of a medium of exchange which at the very beginning of its use... did not have exchange value on account of other employments... and ... it must happen this way. Nobody can ever succeed in constructing a hypothetical case in which things were to occur in a different way ... assuming that a person will never exchange away something of greater value for something of lesser value."
In fact, he states that it's impossible to construct a hypothetical case in which things were to occur in a different way of which I provided two such cases
You have not constructed such a hypothetical case that is consistent with the praxeological axiom that a person will never exchange away something of greater value for something of lesser value. Think carefully about your island example, it necessarily requires that the participants willingly exchange away things of greater value for things of lesser value.
and BitCoin is currently an empirical case against him in that it is used as a medium of exchange.
BitCoin is not a money. I can't buy a bag of potatoes with BitCoins anywhere on the face of the planet.
Clayton: and BitCoin is currently an empirical case against him in that it is used as a medium of exchange. BitCoin is not a money. I can't buy a bag of potatoes with BitCoins anywhere on the face of the planet.
In a bit of a rush right now so I'll respond to the rest later but this one part seems to be incorrect to me. I can't buy a bag of potatoes with it, but I can buy a video card with it, I can purchase services with it, etc. This just means it is not a popular medium of exchange, but it is still a medium of exchange in a limited market.
It seems that you are meaning to say popular medium of exchange and not medium of exchange. It appears this is really where are argument lies, whether or not BitCoin is a medium of exchange.
Clayton: I can't find the cite right now, but I recall watching a lecture where Dr. Hoppe expounds one of the axioms of praxeology that a human will never exchange a less valued thing for a more highly valued thing. This is true by definition since valuation is evidenced by the act of exchanging (revealed preference).
I can't find the cite right now, but I recall watching a lecture where Dr. Hoppe expounds one of the axioms of praxeology that a human will never exchange a less valued thing for a more highly valued thing. This is true by definition since valuation is evidenced by the act of exchanging (revealed preference).
I agree with you up to this point.
Clayton: Hence, in order for a good to be used in indirect exchange, it must first have value in direct exchange and, since no one will ever exchange away something of higher value (say, an apple) in order to get something of no value (a string of bits, a piece of paper with the word "Money" printed on it, etc.) we can conclude that Mises was right. "No good can be employed for the function of a medium of exchange which at the very beginning of its use... did not have exchange value on account of other employments."
Hence, in order for a good to be used in indirect exchange, it must first have value in direct exchange and, since no one will ever exchange away something of higher value (say, an apple) in order to get something of no value (a string of bits, a piece of paper with the word "Money" printed on it, etc.) we can conclude that Mises was right. "No good can be employed for the function of a medium of exchange which at the very beginning of its use... did not have exchange value on account of other employments."
You are correct in the first part but the conclusion you draw is incorrect because predicted future value is value to those who predict it. If someone believes that a string of bits will have value in the future then it has some value for them now that is slightly lower (due to risk assessment) than it's predicted future value. I suppose this could be in line with Mises's regression theorem if you assume that "other employments" includes future value predictions. However, if this is the case then BitCoins meet the criteria, as does any other man-made currency as long as there is a single person that believes they will have a future value.
Clayton: No, that's not what he's saying, he's saying that "since we've assumed that a person will never exchange away something of greater value for something of lesser value, therefore, no good can be employed for the function of a medium of exchange which at the very beginning of its use... did not have exchange value on account of other employments... and ... it must happen this way. Nobody can ever succeed in constructing a hypothetical case in which things were to occur in a different way ... assuming that a person will never exchange away something of greater value for something of lesser value." ... BitCoin is not a money. I can't buy a bag of potatoes with BitCoins anywhere on the face of the planet. Clayton -
...
I performed many of the first Bitcoin trades and I can honestly say that I value bitcoins for what they are, in and of themselves. I would happily sell you a sack of potatoes today and I would have happily sold you a sack of potatoes before bitcoins had a dollar value. Just because you don't value them, don't assume that no one values them. What is the value of a work of art? What is the value of a mathematical equation? What is the value of the strongest cryptographic hash tree in human existence? Bitcoins have value on so many levels, and not only to myself. Gold in and of itself is of little worth to me. What am I supposed to do with it? It's a rock. That's all it is. A bitcoin, now there is something that is worth working for.
Well, since BitCoins are basically worthless at the present time, that's the only possible explanation for why people are exchanging things for them... they are speculating that the tokens will have more value in the future than they have in the present. I think they are mistaken (hence, I would never exchange anything of mine for BitCoins). Either way, as you've noted, this phenomenon of people exchanging in BitCoins is consistent with the axiom of exchange given above precisely for this reason... that those who are exchanging them believe they will have more value in the future than they do in the present.
That's all well and good but "having some value to someone" is not a sufficient condition for something to be money. Money is, as filc has noted in the last several pages, the most marketable or most vendable good. The only goods that are even candidates to become money are those goods which are in highest demand, highly liquid goods.
Clayton: That's all well and good but "having some value to someone" is not a sufficient condition for something to be money. Money is, as filc has noted in the last several pages, the most marketable or most vendable good. The only goods that are even candidates to become money are those goods which are in highest demand, highly liquid goods. Clayton -
Bitcoins have more value than gold to me AND OTHERS. To us, they are the most marketable and most vendable good. And to us, they are in the highest demand and are highly liquid goods. I'm not being sarcastic. Don't assume that everyone values gold for what it is nor that the majority will always continue to value dross over beauty, a rock over an idea.
Clayton: You are correct in the first part but the conclusion you draw is incorrect because predicted future value is value to those who predict it. If someone believes that a string of bits will have value in the future then it has some value for them now that is slightly lower (due to risk assessment) than it's predicted future value. I suppose this could be in line with Mises's regression theorem if you assume that "other employments" includes future value predictions. However, if this is the case then BitCoins meet the criteria, as does any other man-made currency as long as there is a single person that believes they will have a future value. Well, since BitCoins are basically worthless at the present time, that's the only possible explanation for why people are exchanging things for them... they are speculating that the tokens will have more value in the future than they have in the present. I think they are mistaken (hence, I would never exchange anything of mine for BitCoins). Either way, as you've noted, this phenomenon of people exchanging in BitCoins is consistent with the axiom of exchange given above precisely for this reason... that those who are exchanging them believe they will have more value in the future than they do in the present.
This is why I wanted to get through a clear understanding of what money is as you, filc and others define it since that seems to be the big point of contention. It seems we agree that BitCoins meet the requirement for a potential money as defined by Mises if we assume predicted future value as having present value for the person making the prediction and this therefore fulfills the initial requirement of value through other employments.
You have mentioned that money is "the most marketable good" and the part I am not understanding here is the "most" part of that statement. By this definition there can be only one money at any given point of time. This means that globally there is only one form of money (likely the USD at this time) but as soon as another good becomes more marketable then the USD is no longer a money and instead only a currency while the new "most marketable good" becomes money. Is this correct by your definition?
If so, I do not see what is preventing the BitCoin from having the potential of becoming the most marketable good. Right now it is not the most marketable good, just as gold isn't the most marketable good, there is something more marketable at this time. However, if some people accept BitCoins today, and every day a new person starts accepting BitCoins, eventually (in about 5 billion days) BitCoin would be the most marketable good.
When BitCoin first started there was one person who valued it based on speculated future value. He offered some good/service that someone else wanted in exchange for BitCoins. The person that wants our original speculator's good/service now has a desire for BitCoins, especially if the good/service is something he may want to buy on a repeated/regular basis. This second individual now might start offering some of his goods/services for BitCoins so that he can buy more of the original guys goods/services. A third guy desires the goods/services of the second guy but doesn't desire those of the first guy, so he too starts selling his goods/services for BitCoins so he can have some to buy the goods/services of the second guy. The first guy, who originally speculated on future value, has a bunch of BitCoins stocked up and sees the third guy offering goods/services that he desires in exchange for BitCoins. He can use his store of BitCoins to purchase those goods/services.
As we can see in this example we have a full economy at this point. BitCoins are fully circulating in this little economy of 3 guys. You can't buy everything with BitCoins alone but there is a certain amount of BitCoin circulation going on here. From here we can continue adding people to the little BitCoin economy, each one who perhaps wants to buy something that one or more people accepting BitCoins is offering. There is no longer speculation about future value occuring (the BitCoins are no longer backed by the original "value") and BitCoins are behaving like any fiat currency would. As more people accept BitCoins for services it becomes a more and more marketable good. As long as this trend continues it has the potential (though no guarantee) of becoming the most marketable good.
The only way at this point to claim that BitCoins can't become the most marketable good (and therefore money) is to claim that there is some barrier stopping them from continuing to gain support. You have mentioned that you have no value of BitCoins right now, but what if everything you wanted to buy (a bag of potatoes) could be bought with BitCoins and at a lower net cost to you than USD or EUR? Would you still use USD or EUR to purchase your goods at a higher price than BitCoins because of the way they came into existance or would you switch to using BitCoins?
Well, the act of exchanging BitCoins does not violate praxeological laws but I won't go any further than that. BitCoin is a curious social experiment, nothing more. I'm glad people are participating in it and I'm sure there are valuable lessons to be learned from it.
Well, the nationalization of money changes things drastically. The market for Zimbabwean dollars, for example, is a forced market. Demand for Zimbabwean dollars exists no matter how much more attractive another currency might be by comparison becuase Zimbabweans are prohibited from using anything else as money (which is why they started exchanging cellphone minute cards as money). Wherever there is an artificial demand created by monopolization, you cannot blindly apply economic arguments that assume voluntary transactions.
Most Austrians agree that one global money would emerge in the absence of interference from States and they believe that the international gold standards of the late 19th century is the perfect example of this. However, the whole issue is not as simple as this, since silver has always co-circulated with gold as a kind of "shadow money." Part of the reason for this is that silver has usually been less valuable than gold (though there were a few times/places where silver was actually more valuable than gold) and, therefore, serves as a "common man's money." Another part of the reason is that the value of gold has always fluctuated slightly over time and anyone with a lot of wealth will do well to diversify his holdings... half in gold, half in silver helps insure against unexpected flows of one or the other metal out of the country where you reside (which flows were invariably the result of bonehead bimetallic policies or unrestrained money printing).
It is conceivable that there could have a gaggle of shadow-monies and some of these might be wholly local... say, an Amish schilling or a LETS-hour, and so on. But each of these shadow-monies would have some valuation in the global, universal money which would be the final "measuring stick" for all transactions. This is the result of the same forces that created indirect exchange in the first place.
Yeah, but that "if" part is precisely what violates the regression theorem. The goods which have come into use as money were invariably selected from those goods which were already highly marketable, highly liquid goods. Gold is extremely marketable even in its purely decorative use (gold essentially has no monetary value in the modern West, yet it remains highly marketable)... you won't have to try very hard to give away a gold necklace but it might be pretty tough to convince someone to accept a BitCoin, even if they have heard of it and you were just giving it away. Why bother? The gold necklace is valuable in itself, regardless of the fact that it could be melted down and turned into a gold coin.
The barrier is that BitCoins have no value. Yes, they have a small value to those within the BitCoin community. But the issue is not whether anyone anywhere values BitCoins but, rather, how does the marketability of BitCoins in their non-monetary use stack up relative to the value of other potential moneys in their non-monetary uses? The answer to this is clear - BitCoins have no non-monetary value so any commodity, even dirt, has more marketability than a BitCoin and, therefore, stands further ahead in line to become a money.
The intrinsic value of bitcoins to the average person who likes bitcoins is higher than the intrinsic value of gold to the average person who likes gold. The average person who likes gold, primarily likes it because it is expensive. If gold was as common as dirt, gold would be 100% worthless. Gold jewelry would be valued no more than play jewelry, but hammer the gold jewelry and it would again be worthless. It would still have industrial use, but they would never buy it. In fact most people would pay to dispose of it. Bitcoins are immaterial and potentially infinitely divisible, yet they are valued much more than dirt by people who have a more accurate sense of worth than you. Their value arises not from meaningless chance geological existence, but from the infinitely exquisite mind of man. The discovery of gold was the culmination of 'hey, look at these purdy rocks!' The discovery of the correct implementation of the calculations that makes bitcoins possible is the culmination of seemingly infinite man hours of blood and sweat, toil and trial, to loose the chains of the gold backed currency tyranny unto the prosperity of fiat currencies that fostered sufficient peace, wealth and creativity to create computers, computer science, cryptography, modern society and the Internet, all cumulatively culminating in the magnificent intellectual miracle that is Bitcoin.