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.
The reason why bitcoins can arise as money from the free market is because we know what they are worth compared to gold. 1 gram of gold is worth 111 bitcoins right now.
Of course bitcoins could never arise as money before gold did because you need computers to make bitcoins, think of bitcoins and future crypto-currencies as improvements to money as gold was an improvement to Tally sticks.
Now that being said, no crypto-currency is every going to defacto replace gold as money. In a free market different currencies will compete against each other, this will include crypto-currencies, gold, silver and other types of commodities.
Clayton, you should know your definitions before spouting nonsense. "Fiat money is money that has value only because of government regulation or law." This is not the case for Bitcoin and is therefore not fiat money.
Agreed. Bitcoin is simply not money.
The value of bitcoins do not come from physical properties, but from much more important properties that gold/silver-backed currencies do not hold, as non-counterfeitability, anonimity, no need for third party (banks, PayPal), impossibility of fractional reservers, etc.
The only properties which a good or service has which are valuable are those properties which satisfy human wants. Is a Beethoven symphony physical or spiritual? I'll let the philosophers debate the point, the fact remains that a Beethoven symphyony must be performed in order to charge for it (get something in exchange). Only real goods and services have value, bit strings do not.
Value is subjective, and Mises never stated that money cannot arise from a competitive market; in fact it did, gold and silver outcompeted all other commodities to become money.
You seem to be confused about the tenor of my views, the views prevalent on these forums and Austrian economics, generally. Not only did Mises not state that money cannot arise from a competitive market, he championed the controversial position that money can arise and be regulated in a competitive market and that any interference in the market for money (through debasement or interest-rate setting) has disastrous consequences on the economy (this is nowadays called Austrian business-cycle theory, ABCT).
You are definitely clueless about monetary issues and should know better, perhaps store.mises.org is a good start? I realize I am not trying to be civilized saying this, but I just can't help it :p Don't take it personally ;)
*shrug. I can't buy a bag of potatoes anywhere in the world with Bitcoins. We can continue this debate when that changes.
gold was an improvement to Tally sticks
rawfreedom:Clayton, you should know your definitions before spouting nonsense. "Fiat money is money that has value only because of government regulation or law." This is not the case for Bitcoin and is therefore not fiat money.
I think you should probably consider re-reading Clayton's post. This time, when re-reading, please understand that Clayton is not out to get you. He's not trying to attack you. When you make comments like "spouting nonesense" simply because he disagrees with you makes it seem like you are offended, agitated and or both. Further more it's clear you misunderstood what he said. It makes it seem like you didn't understand it at all.
rawfreedom: Mises never stated that money cannot arise from a competitive market; in fact it did, gold and silver outcompeted all other commodities to become money..
Um... Who here has stated this? Where are getting this from?
rawfreedom:You are definitely clueless about monetary issues and should know better, perhaps store.mises.org is a good start? I realize I am not trying to be civilized saying this, but I just can't help it :p Don't take it personally ;)
I am completely lost as to how you came to the above conclusions. In all honesty any veteran here who is familiar with Mises, Carl Menger, and their combined literature is going to understand exactly what Clayton is saying. Those veterans ironically might refer you to the book store.
I've started looking into bitcoin and it is pretty interesting. Bitcoin supporters would do well not to be so defensive about it, as they are working against spreading the idea with such an approach.
Clayton are you naturally stubborn or a [INSULT DELETED]? Or both? Just as gold evolved over time as money, so will crypto-currencies. You are right that you cannot buy potatoe chips for bitcoins yet, but you will in the future, whether it be with bitcoins or other crypto-currencies. The free market will prevail your gold bug fantasies. When gold started to be used as money thousands of years ago, you couldn't buy much with it either, it took time for people to accept it as money.
Now I repeat, bitcoins could not have evolved as money from scratch, without being tied to a currency that did evolve "naturally" as Mises stated, such as gold did. Now that gold did most of the work, crypto-currencies can finish the job ;) Once again, in a free market in money, crypto-currencies will compete with gold and consumers will use both types for diffrerent purchases.
Oh shit, Tally sticks were invented way after gold became money. Fail indeed. Doesn't change the nature of my argument whatsoever. Gold was an improvement in money to eggs, or chickens, or cow turds, or anything that was used for barter.
rawfreedom, there are community standards here for civil discourse. Things get hot sometimes but you are being blatantly and deliberately insulting.
Clean it up.
That goes for everyone.
filc, just read the nonsense Clayton is spewing :p I mean give me a break, bitcoins are currently being used as money and he is denying such an easily veriable fact. Bitcoin and other crypto-currencies will emerge over time and will compete with gold, silver and fiat currencies for that matter.
Please don't take my foul language personally, it's just how I communicate with others who I disagree with. Well sometimes, but especially when it's Clayton :p
filc, just read the nonsense Clayton is spewing :p I mean give me a break, bitcoins are currently being used as money and he is denying such an easily veriable fact. Bitcoin and other crypto-currencies will emerge over time and will compete with gold, silver and fiat currencies for that matter. Please don't take my foul language personally, it's just how I communicate with others who I disagree with. Well sometimes, but especially when it's Clayton :p
Allow me to quote Lew Rockwell. He sums up my views of Bitcoin or any experimental money or money-substitute:
Just imagine what would happen if legal tender laws were repealed and the government stopped intervention in the market for money. Virtually overnight, we would see the appearance of hundreds if not thousands of new payment systems and alternative monies online. Merchants would be free to accept any means of payment. There would be intense competition among them. Some would be foreign currencies like the Euro. Some would be new currencies based on existing commodities such as gold and silver. I'm certain that we would see a period of wild experimentation take place before the market settled back down again into a standard system that was famed for its reliability and stability and honesty.
Would we be able to endure the process of discovery? Certainly. We do this every day with our shopping online, or searches for good providers of services and products in the physical world, and our habits on how to invest our money. The market is a process of trial and error, one that never stops innovating and changing. We see everyday on the World Wide Web how this process of creation and change create the right balance between chaos and order, experimentation and standardization. This would happen in the field of money too.
In fact, it might have happened already had the feds not intervened to stop the rise of alternative payment systems online. Wal-Mart might have already entered the banking sector. We might have a wide variety of currencies available to us. Google might already have created its own currency based on any number of goods. We might see a more elaborate use of barter in the online world taking shape, and that barter slowly converting itself into currency. This might be based on Google ad points, on PayPal dollars, or some other currency.
I see Bitcoin as a genuine monetary experiment which uniquely manages to sidestep most of the legal and logistical pitfalls that have taken down other experimental monies like e-gold or Liberty Dollar. While my personal view is that gold and gold-backed digital currencies would easily win such market competition, I am not theoretically dogmatic on this... any good which has greater than zero exchange value on the open market has the potential to be money. But the most liquid goods (most easily traded away) have a theoretical advantage over all other goods in that they already possess one of the qualities of a monetary good: high liquidity. In any case, I don't think Bitcoin will succeed but it's a noble effort and I'd rather that people be playing with Bitcoin than not playing with it. The whole concept that something other than government paper can be money if the market freely chooses it to be money is inherent in the very act of experimenting with Bitcoin and I think that is a good thing.
rawfreedom:filc, just read the nonsense Clayton is spewing :p I mean give me a break, bitcoins are currently being used as money
I have explained in previously why bitcoin is not being used as money but as dollar proxy. Just as make believe dollars on my credit card are dollar proxies. No economic calculation is done in bitcoin, there is no exchange ratio's of goods and services in bitcoins. There is an exchange ratio in dollars to bitcoins, and everything is priced in dollars. So you just make a simple conversion, but that doesn't make bitcoin a medium of exchange.
Many of these points are being repeated. I respecfully suggest that you re-read the whole thread again.
rawfreedom:Please don't take my foul language personally
Please explain to me how else we are suppose to take insults? Are they meant as terms of endearment? Why would we think this?
rawfreedom:it's just how I communicate with others who I disagree with.
I feel bad for anyone you disagree with.
I actually do have a theorized way that a digitcal currency could come about on the market. I have hashed out this theory with a co-worker and it seems to be compatable with the regression theorum. I would have to make a second post about it and I want to make sure I explain things correctly. So it may be a while before I make that post.
Of course gold has more liquidity than Bitcoin, but that's just because it has been used as money for thousands of years. Bitcoins have really started openly being traded in the open market around 6 months ago, and 100 bitcoins are already worth almost as much as 1 gram of gold. Merchants accepting bitcoins are growin by the week, and this trend will only accelerate over time when the news picks up with the masses. I'm really into gold, money, anarchy, reading articles on a daily basis and what not, and it still took me over a year to find out about bitcoins lol.
Also, there wouldn't be any "winner" as you state it in the market. Both currencies appeal to different people, different types of markets and different types of transactions. Bitcoins, other crypto-currencies, gold and silver will co-exist by competiting in the free market.
Just the fact that it costs nothing to maintain bitcoins is a huge advantage against gold that costs a lot to store, transfer, protect and insure. Gold is an expensive form of money. Furthermore, you need a third party to trade gold-backed currencies for assets in the digital world. With Bitcoin, you don't.
And what's gonna happen when scientists find a way to duplicate gold, which isn't as farfetched an idea as it might seem in the 21st century. 99% of innovation has been brought about in the last century, compared to thousands of years of civilization. Scientific breakthroughs are accelerating in an exponential rate.
I therefore would indeed say that it is gold that will have hard times competing with bitcoins, not the other way around ;)
Also, you can insure gold against theft, but not against legalized theft (govermments anyone?). Being decentralized, you simply cannot steal bitcoins as you can steal gold, and no government of this galaxy can do anything about that!
filc, in order for Bitcoin to truly become money, it has to be a proxy to an already established currency in order for us to know how much assets would be priced in bitcoins. A digital currency cannot see life without first being pegged to a current standardized unit of exchange.
Once bitcoins are accepted by enough people as money, Bitcoin will naturally depeg itself from fiat currencies and even see itself appreciate against gold, but only slightly, as gold inflation is very small after all.
It just seems that most people bash Bitcoin because it hasn't proven it's worth yet. Let's not dimiss something while it's being done by someone else ;) Patience my friend, it's only been just over 6 months that bitcoins have actually been actively traded in the open market.
rawfreedom:And what's gonna happen when scientists find a way to duplicate gold, which isn't as farfetched an idea as it might seem in the 21st century. 99% of innovation has been brought about in the last century, compared to thousands of years of civilization. Scientific breakthroughs are accelerating in an exponential rate.
Your assuming that we're all espoused to gold as a medium of exchange. We aren't.