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.
Clayton: 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.
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.
Are you stating then that you believe Mises's theorem only applies to unregulated markets and it does not apply to the current market because it is regulated and enforced by the government?
Clayton: 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.
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.
So you are suggesting that for something to qualify as a money it does not have to be the most marketable good but rather just a highly marketable good? Are you also suggesting that there are lesser monies (highly marketable goods) and greater monies (most marketable goods)?
Clayton: 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. 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.
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.
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.
Would you say that the EUR is not a money because it did not come from a marketable good (it was created out of thin air by government mandate)?
Also, which "if" are you referring to? The "If so" at the beginning or the "if some people accept BitCoins today"?
Clayton: 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 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.
Assuming a total and sudden governmental collapse, do you suspect that the USD, EUR, etc. would lose their place as most marketable good in favor of something else? What if it was *impossible* to create more of them, do you believe they would they still lose their place as most marketable good?
Micah71381:I can't buy a bag of potatoes with it, but I can buy a video card with it,
Your not buying a video card with bitcoins. The video card is not priced in bitcoins. It's priced in dollars. Al the accounting that went into that graphics card was done via dollars. All the economic accounting, profit/loss, measrements were done in dollars. All the materials that went into making it were done in dollars. There is no BTC history of exchange, there is no BTC history in the cost of manufacturing goods, there is no economic accounting in BTC's. All bitcoin is at this point is a proxy representing more dollars. It's still USD, by a different name. Your graphics card is approrpriately priced here. The prices of goods sold in BTC's are based on USD's not based on any historical reference of BTC exchanges.
Also it's very interesting so take note that BTC's are only exchanged for in things that are less demanded. It seems mostly done out of experimentation. There is no real drive to it. When a real alternative currency begins to emerge you will readily be able to redeem it for staple goods. Not geek toys on a low profile geek website.
NewLibertyStandard: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.
Ignoring it's functionality as "money" what utility does bitcoin offer? None. Why would a household invest their purchasing power into a less vendable good then that of the dollar? Especially when they can't even afford internet?
You value bitcoins as a hobbiest, nothing more. In hard times people won't accept your digital currency when they'd rather have a chicken, rice, or a bag of potato's. Not to mention the extensive amount of capital needed at present to even use bitcoins(Personal computer, internet, ect...) Now you might say that you would still rather choose to hold bitcoins, but that proves nothing. You can't eat bitcoins and at some point you'll be forced to sell your BTC's or abandon them to more exchangeable prospects.
How do people who don't have(and/or don't want) a computer and internet participate in the BTC exchange? Commodity based currencies have no such set back where capital is required prior. People have utility in commodities prior to their function as a medium of exchange. BTC's offer no reason for people to demand them.
Why do you choose to hold BTC's? Is it because your purchasing power is greater with it than that of the dollar? ofcoarse not, that would be a ludicrous statement. But perhaps you think your purchasing power in the future would be greater. A simple chart of the progress of gold and silver over the past decade shows that people would rather invest their future into those commodities rather then BTC's.
filc: Micah71381:I can't buy a bag of potatoes with it, but I can buy a video card with it, Your not buying a video card with bitcoins. The video card is not priced in bitcoins. It's priced in dollars. Al the accounting that went into that graphics card was done via dollars. All the economic accounting, profit/loss, measrements were done in dollars. All the materials that went into making it were done in dollars. There is no BTC history of exchange, there is no BTC history in the cost of manufacturing goods, there is no economic accounting in BTC's. All bitcoin is at this point is a proxy representing more dollars. It's still USD, by a different name. Your graphics card is approrpriately priced here. The prices of goods sold in BTC's are based on USD's not based on any historical reference of BTC exchanges.
Wouldn't this be true during the inception of any money, historically or theoretically? The very first person that traded something he didn't want/need in exchange for something he did want/need with the hope of being able to later trade that undesired good to someone else. There would have been no history of that "marketable good" being used to produce the product being purchased with it. It would have been produced by barter, or whatever preceeded it in the case of any other currency/money in existance today.
When the first EUR was used the item being purchased did not have a history of transactions in EUR that lead up to it's production. People sold items in EURs because of percieved future value (they believed that they could use the EUR at a later date to acquire a good they desired).
filc: Also it's very interesting so take note that BTC's are only exchanged for in things that are less demanded. It seems mostly done out of experimentation. There is no real drive to it. When a real alternative currency begins to emerge you will readily be able to redeem it for staple goods. Not geek toys on a low profile geek website.
Are you suggesting that a real currency can just snap instantly into existance and be widely accepted everywhere overnight? There is no time period where it goes from being accepted by one merchant, then another, then another, etc. until it is widely used? It seems that a spontaneous (not government mandated) money would require some time to expand and would not instantly be used by everyone. Especially if it is competing with other currencies (i.e.: not going from barter to currency).
Micah71381:So you are suggesting that for something to qualify as a money it does not have to be the most marketable good but rather just a highly marketable good? Are you also suggesting that there are lesser monies (highly marketable goods) and greater monies (most marketable goods)?
Money, and a money qualifier are two different things.
Micah71381:Wouldn't this be true during the inception of any money, historically or theoretically?
Not entirely. Money candidates develop an exchange ratio on their own due to the demand of those goods on a market. BTC's develop an exchange ratio based off the exchange ratio of an established dollar. What your doigng is.
Goods -> Dollars -> BTC's
What you need is
Goods -> BTC's
Also, can you not agree that a currency candidate that is more widely accepted would not necessarily develop a more comprehensive historical set of exchange ratio's from which to build prices with? As opposed to a currency candidate who's exchange ratio's are taken directly from another currency, and who's employment is not widely accepted so that it's ratio history is very small or even non-existent?
Micah71381:Are you suggesting that a real currency can just snap instantly into existance and be widely accepted everywhere overnight?
No.
filc: Ignoring it's functionality as "money" what utility does bitcoin offer? None.
Ignoring it's functionality as "money" what utility does bitcoin offer? None.
Ignoring it's functionality as "food" what utility does rice offer? Ignoring it's functionality as "money" what utility does the USD offer? It's functionality is that of a medium of exchange. To me, a medium of exchange is very important just as food is very important. If you ignore the fact that food is food then it suddenly becomes unimportant.
filc: Why would a household invest their purchasing power into a less vendable good then that of the dollar? Especially when they can't even afford internet?
Why would a household invest their purchasing power into a less vendable good then that of the dollar? Especially when they can't even afford internet?
I don't think anyone is expecting BitCoin to instantly become the top currency overnight and inpact 3rd world countries and impoverished families. It will start with geeks and then, if it grows big enough, might spread to things like drugs, guns, etc. (where anonymity is very important). After that it might spread to the internet crowd such as eBay and Amazon. This won't all happen overnight and it may not happen at all but the point is that just because an impoverished family in a third world country doesn't use it doesn't mean it isn't money. There are still people in the world that don't use money at all (though they are very rare these days), does that mean that money doesn't exist?
filc: You value bitcoins as a hobbiest, nothing more. In hard times people won't accept your digital currency when they'd rather have a chicken, rice, or a bag of potato's. Not to mention the extensive amount of capital needed at present to even use bitcoins(Personal computer, internet, ect...) Now you might say that you would still rather choose to hold bitcoins, but that proves nothing. You can't eat bitcoins and at some point you'll be forced to sell your BTC's or abandon them to more exchangeable prospects.
The USD was money (unless you don't define it as such, in which case let me know) back during the great depression in the US and people would rather have fire wood than money. In fact, some burned money as a means of staying warm. Does this mean that the USD wasn't money because people didn't desire it when they were starving and freezing to death?
filc: How do people who don't have(and/or don't want) a computer and internet participate in the BTC exchange? Commodity based currencies have no such set back where capital is required prior. People have utility in commodities prior to their function as a medium of exchange. BTC's offer no reason for people to demand them.
Right now the capital required for BitCoins is a bit high but it is trivial to setup a payment system like Visa or MasterCard that would allow people to have, manage, buy and sell with BitCoins using nothing more than a card that is given to them in exchange for using a particular service.
filc: Why do you choose to hold BTC's? Is it because your purchasing power is greater with it than that of the dollar? ofcoarse not, that would be a ludicrous statement. But perhaps you think your purchasing power in the future would be greater. A simple chart of the progress of gold and silver over the past decade shows that people would rather invest their future into those commodities rather then BTC's.
Speculated future value. I can buy more with BitCoins on the internet right now than I can with a gold coin (on the internet). I make almost all of my purchases online so for me BitCoins are more useful than physical gold coins or bars.
filc: Micah71381:So you are suggesting that for something to qualify as a money it does not have to be the most marketable good but rather just a highly marketable good? Are you also suggesting that there are lesser monies (highly marketable goods) and greater monies (most marketable goods)? Money, and a money qualifier are two different things.
Please define money then. You previously stated that it is "the most marketable good". By that definition there can be only one money at a time. Do you agree with this statement? If not, how can two things be "most"?
filc: Ignoring it's functionality as money what utility does bitcoin offer? None. You value bitcoins as a hobbyiest, nothing more. In hard times people won't accept your digital currency when they'd rather have a chicken, rice, or bag of potato's. Not to mention the extensive amount of capital needed at present to even use bitcoins(Personal computer, internet, ect...) Two features that pretty much exempt large portions of the world. Commodity based currencies have no such set back and people have utility in those commodities prior to their function as a medium of exchange.
Ignoring it's functionality as money what utility does bitcoin offer? None.
You value bitcoins as a hobbyiest, nothing more. In hard times people won't accept your digital currency when they'd rather have a chicken, rice, or bag of potato's. Not to mention the extensive amount of capital needed at present to even use bitcoins(Personal computer, internet, ect...)
Two features that pretty much exempt large portions of the world. Commodity based currencies have no such set back and people have utility in those commodities prior to their function as a medium of exchange.
filc: Micah71381:Wouldn't this be true during the inception of any money, historically or theoretically? Not entirely. Money candidates develop an exchange ratio on their own due to the demand of those goods on a market. BTC's develop an exchange ratio based off the exchange ratio of an established dollar. What your doigng is. Goods -> Dollars -> BTC's What you need is Goods -> BTC's
Again we come back to the EUR. By your definition the EUR cannot be money since it started with Goods -> other currency -> EUR. It is now Goods -> EUR but that is not how it started, therefore the EUR cannot be money (by your above definition).
filc: Also, can you not agree that a currency candidate that is more widely accepted would not necessarily develop a more comprehensive historical set of exchange ratio's from which to build prices with? As opposed to a currency candidate who's exchange ratio's are taken directly from another currency, and who's employment is not widely accepted so that it's ratio history is very small or even non-existent?
Everything has to start somewhere. BitCoin currently does not have a large ratio history. This does not mean it can never have a large ratio history. Your argument suggests that once there is a popular currency it is impossible for any currency to overtake it's popularity because the popular one will always have a larger history and therefore the smaller one can never gain a large history. This is obviously not the case because currencies come and go all the time.
filc: Micah71381: filc: Also it's very interesting so take note that BTC's are only exchanged for in things that are less demanded. It seems mostly done out of experimentation. There is no real drive to it. When a real alternative currency begins to emerge you will readily be able to redeem it for staple goods. Not geek toys on a low profile geek website. Are you suggesting that a real currency can just snap instantly into existance and be widely accepted everywhere overnight? There is no time period where it goes from being accepted by one merchant, then another, then another, etc. until it is widely used? It seems that a spontaneous (not government mandated) money would require some time to expand and would not instantly be used by everyone. Especially if it is competing with other currencies (i.e.: not going from barter to currency). No.
Micah71381: filc: Also it's very interesting so take note that BTC's are only exchanged for in things that are less demanded. It seems mostly done out of experimentation. There is no real drive to it. When a real alternative currency begins to emerge you will readily be able to redeem it for staple goods. Not geek toys on a low profile geek website. Are you suggesting that a real currency can just snap instantly into existance and be widely accepted everywhere overnight? There is no time period where it goes from being accepted by one merchant, then another, then another, etc. until it is widely used? It seems that a spontaneous (not government mandated) money would require some time to expand and would not instantly be used by everyone. Especially if it is competing with other currencies (i.e.: not going from barter to currency).
How do you define "readily" in your statement then? Obviously during the inception of a new currency I won't be able to purchase everything in existance on day-one. Chances are it will start in a particular market, depending on the particulars of the currency, and eventually work it's way into all markets. Or are you suggesting that a currency is only real if the first market it is accepted in is a grocery store market (staples) meaning the only people in a position to create a currency are grocery store owners?
NewLibertyStandard: I wasn't really expecting lazy economists to understand.
I wasn't really expecting lazy economists to understand.
I think, perhaps, you have given him too much credit; and Micah is polite to a fault, continuing to attempt to debate a pretender as a peer. I don't believe that he really has any insights to contribute; and therefore, there is little knowledge to be gained from listening to him.
MoonShadow: NewLibertyStandard: I wasn't really expecting lazy economists to understand. I think, perhaps, you have given him too much credit; and Micah is polite to a fault, continuing to attempt to debate a pretender as a peer. I don't believe that he really has any insights to contribute; and therefore, there is little knowledge to be gained from listening to him.
Haha! Wasn't paying attention and misread your post as if you were Micah. Carry on!
Edit: I've been reading by email and I have not been paying attention to who is who because I wasn't expecting to discuss, but y'all sucked me in. :-P In any case, y'all are so polarized (myself included) that it's really just like listening to two collective consciousnesses talk round and round in circles.
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.
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.
That was my thinking. There are degrees of moneyness.
NewLibertyStandard:I wasn't really expecting lazy economists to understand. Learn and practice cryptology, computer science and other real sciences as much as you mentally masturbate to the thought of gold bars at Fort Knox and eventually even you can understand.
This sort of discourse is not appropriate for this community. Consider this your only warning.