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:I was looking for real world examples of a medium of exchange that became generally accepted without state influence.
There are references and examples given in the text I recomended. Not too mention the rich history already acknowledged in the application of gold and gold coins. Many of which were not tied to kings and lords. It was on the other hand, kings and lords who monopolized those services so as to inflate(Coin shaving) currency to their benefit.
Obviously, for convienience and logistics people will want to make electronic transactions. I think these could be done with bank accounts which are backed by proper commodities like gold and silver (Or perhaps what the account owner chooses.) and all transactions can be encrypted in a way which the merchant cannot overcharge and can not store valuable details unless rquested and allowed.
At the moment the merchant takes card details and could potentially over charge or the details can get stolen etc.
Gold and silver coins can be used as physical cash and withdrawn from banks.
Banks should ensure they keep all deposits, aka full reserve banking.
It's stupid to say everyone should pay hand to hand with physical metal. Cards and other electronic payment methods make it simpler. How could internet commerce work otherwise?
Note: to make my posts more consise, I will use the term "money" to mean "generally accepted medium of exchange".
Micah71381:Out of curiosity (I truly don't know the answer to this question), have there been any generally accepted mediums of exchange that were generally accepted before becoming a medium of exchange and were not by decree?
Micah71381:Gold coins have very little use to the majority of people for consumption and, if I am not mistaken (I easily could be), they didn't find their way into general acceptance until minted by lords of the land (money by decree).
Please refer to my earlier post regarding the separating of form and composition. Gold Coins may have limited non-monetary use ( although I don't necessarily agree with you there ), but limited non-monetary use is irrelevant for a commodotity to become a money. Markets reuquire that money have a stable predictable valuation and already be widely traded. Once these requirements are met, market actors will often seek to package the money up into neat packages that make it easier for inderect exchange. If they are succesful, you then have a currency. But note that the gold coin was never the actual money; the gold was.
Micah71381: That is, if I have 50,000 airline miles the only thing I can do with that is buy a plane ticket.
Micah71381: When I get airline miles it is more akin to making a purchase of a promise for a future specific goods/service (with no ability to exchange it for anything else).
A simple Google refutes this:
http://www.delta.com/skymiles/use_miles/index.jsp
Micah71381: I think the most recent case in the US is the liberty dollar. It was not generally accepted but it was a medium of exchange. I will admit, the difference between the liberty dollar and chucky cheese coins seems to only be in how they are advertised which is an odd distinction, but one the government has chosen to make none the less.
First, I'll have to hound you with understanding the distinction between the real commodity money and it's form. Having said that, the Liberty Dollar had a HUGE difference with Chucky Cheese coins: The gold and silver that the Diberty Dollar contains or represents has already proven itself an excellent money in the past, and so if allowed to continue (regardless of the aims of the creator!), they represent a real and present threat to the current fiat state-controlled system. (And even before the fiat standards, states usually hated private minters, because the private currency (the form of the money) was usually of better quality and wasn't diluted (by diluting with base metals, weight reduction, or clipping).
avaspell: Jon Matonis:Like your stated "money substitutes", bitcoin is a fully nonpolitical unit of value with transactional non-repudiation and two-way convertibility. Please describe what you mean about "unit of value" and "two-way convertibility". I'm especially curious about what you consider BitCoin to be convertible between.
Jon Matonis:Like your stated "money substitutes", bitcoin is a fully nonpolitical unit of value with transactional non-repudiation and two-way convertibility.
Please describe what you mean about "unit of value" and "two-way convertibility". I'm especially curious about what you consider BitCoin to be convertible between.
A nonpolitical unit of value refers to a monetary designation that is unrelated to a political/national authority as an issuing entity. Two-way convertibility means that the unit's value is not stuck in some virtual world such as Linden Dollars and Facebook Credits where direct two-way convertibility is restricted. For example, and through various exchanges since bitcoin does not have a central issuing authority, BTC is convertible to gold, euros, dollars, and even russian rubles.
avaspell: I disagree. You're presuming that the reserve center is itself not distributed. I don't' consider a reserve system with 2 or more locations per 200 adults to be centralized at all. This differs from the "free banking era" in 2 ways: Essentially, all specie clearing centers are "branches" deriving from the p2p "trunk", which is decidedly different from free banking where branches were explictly disallowed, and; There doesn't explictly have to be a central issuer.
I disagree. You're presuming that the reserve center is itself not distributed. I don't' consider a reserve system with 2 or more locations per 200 adults to be centralized at all. This differs from the "free banking era" in 2 ways: Essentially, all specie clearing centers are "branches" deriving from the p2p "trunk", which is decidedly different from free banking where branches were explictly disallowed, and; There doesn't explictly have to be a central issuer.
It doesn't matter. The more important point here is not how many specie clearing centers are distributed, but the fact that specie clearing centers cannot both exist and be immune from confiscation. This particular challenge stems from the requirement to have auditing capability. This is a double-edge sword because strict auditing of specie reserves is what guarantees "note" holders that issuance is not fraudulent, but this same auditing also unwittingly grants authorities a full trail thereby revealing precise specie quantity and precise specie location. Results can be disasterous as in the case of e-gold.
Think about it for a moment. Can you devise a method of full-proof auditability that cannot then be exploited in the event of a confiscation? I suppose you could blind-fold accountants and drive them to your distributed centers or you could arrange a public meeting place and transport the assayed bullion to that location for serial number verification. However, both of those scenarios are subject to unwanted infiltration and undue trust in third-party auditors. Wavyhill and Andre Goldman attmpted to solve this exact problem in 2004, see http://themonetaryfuture.blogspot.com/2010/03/toward-private-digital-economy.html
Glancing through the essay by Wavyhill and Andre Goldman, I still don't see how this solves the centralization issue. While the system definitely makes it harder to track down the vaults, a limited number of vaults still exist simply due to the costs associated with running a vault. Sure, the government can't just look into public records and get the vault's address, but they system can still be infiltrated much like drug cartels can be infiltrated. Unlike the drug cartels though, the banks are very much stationary. One could argue that drug plantations (for certain kinds of drugs) are just as stationary as these bank vaults but this is exactly why illegal drugs have such a high premium, because the cost of running their business is so high. This means that participating in a banking system as described would likely have a similar premium to all it's users and I am not sure people would be willing to pay that much of a premium for a new currency.
Micah71381:In order for BitCoins to go from a market size of 0 to a market size that qualifies as "generally accepted" they need properties properties other than A to encourage adoption.
Micah71381:This logic assumes that the general populous has no ability to speculate into the future, which is why I am hesitant to get on board with it.
If you would like to test this theory, do the following: go advertise a deal to someone where if someone buys a pair of earrings from you, then they get a ticket. If enough people buy earrings from you, you agree to give them $10,000 towards buying a new car. Note that you don't tell people how much "enough" is. Now you'll get some people interested in the earrings themselves for various reasons, you'll get some people who buy them like a lottery ticket, but I'll be willing to speculate that you'll never get rational market speculators to buy your earrings merely for the hope of getting that $10k. Unfortunately, after a while and quite a few people are on, your market participants get tired that the promised $10k ever materialises, and so they discard their tickets. Eventually, the only people left will be the few holdouts who believe that if only they could get the erarings sales back going, everyone would be rewarded a nice $10,000 reward. In fact, some people would come to think you were a scam artist, trying to sell something that could never be attainable.
This is the same problem for BitCoin: Speculators can't engage properly in this trade because they have no way of calculating how many market participants would be required to pay them off. So you're left with a bunch of curious techies and some gamblers. But you'll never get what you really want. And even if you could calulate the probability, you may not like the exchange price that it would take to get a speculator interested.
Micah71381: This is the same as why people go to work, exercise, etc. People want some future reward so they put forth effort now in hopes of achieving that reward.
And at this point you've fallen totally off the wagon. People don't work or excerise as speculation of a greater future outcome. Every single worker that I know does so because they have a contractual agreement with their employer to be compensated for the work that they do. This is acting with near certainty of reward. Same goes for exercise. People who exercise do so because they can be nearly certain that they will obtain benefits.
Also, in almost all speculative ventures that one comes across, they only need 1 additional market particpant to agree for the speculation to be profitable: even gamblers only need 1 house to lose for you to win. Normal market speculators only need one person to accept the trade at the target price for the speculation to pay off. This goes for both oil futures and baseball cards. Your acceptance scenario requires that an enoumous and undefined number of market participants also engage in this speculative play with you, which is an extraordinarily difficult task. One that, had I had the education in math and probability theory, I could likely say is astronomically improbable.
I tend not to participate in things with astronomical odds. :)
The true measure of any currency goes back to the same thing everytime. How much will a prostitute ask for when she has rendered her services. If that said prostitute doesn't take Bicoin for her sevices, then Bitcoin is really worthless.
NidStyles: The true measure of any currency goes back to the same thing everytime. How much will a prostitute ask for when she has rendered her services. If that said prostitute doesn't take Bicoin for her sevices, then Bitcoin is really worthless.
Have you tried it? I'd bet that it's not much more difficult to find a hooker that would take payment in bitcoin than finding one in Chicago that takes Euros. Drugs are apparently easy to get with bitcoin these days.
I was referring to legal Prostitutes. In Nevada they do take Euro's.
NidStyles: I was referring to legal Prostitutes. In Nevada they do take Euro's.
Well, did you ask?
Just found that Hazlitt has a few words about money relevant to bitcoin.
One would think he had the gift of prophesy. Though written in 1978, he seems to be speaking right to the bitcoin crowd.
A long-established government money has an established purchasing power, even though additional paper- money issues reduce it. But how does a private issuer establish the value of his money unit in the first place? Why would anybody take it? Who would accept his certificates for their own goods or ser- vices? And at what rate? Against what would the private banker issue his money? With what would the would-be user buy it from him? Into what would the issuer keep it constantly convertible? These are the essential questions.
To assure a dependable, definite, and precise value for anything in terms of anything else, the first must be constantly convertible into the second. Under a gold standard each currency unit is con- stantly convertible, on demand, into a precise weight of gold. This not only assures a precise value for the pound, for example, and a precise value for the dollar; it also assures a precise "parity" ratio between the pound and the dollar, or any other two currencies...
But you cannot make a currency convertible into an abstraction. You cannot make a currency convertible into an index number... A private issuer cannot assure any specific or definite value for his money unit by limiting the volume of its issuance. There is no fixed and dependable relationship or ratio between the two.
The crucial question in the mind of the holder, or the accepter, will always be: What can I be confident of getting in exchange for this?
[Note: the bold type was done by me; it is all normal type in the book].
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It's easy to refute an argument if you first misrepresent it. William Keizer
Nice find! I added it to the description box of my video ( http://www.youtube.com/watch?v=DoK8HXMSsNg ).
Here are the others I've found:
"To be spontaneously adopted as a medium of exchange, a commodity must be desired for its nonmonetary services (for its own sake) and be marketable, that is, it must be widely bought and sold. The prices that are initially being paid for its nonmonetary services enable prospective buyers to estimate the future prices at which one can reasonably expect to resell it. The prices paid for its nonmonetary use are, so to speak, the empirical basis for its use in indirect exchange. It would be extremely risky to buy a commodity for indirect exchange without knowing its past prices; as a consequence, the spontaneous emergence of a medium of exchange is virtually impossible whenever such knowledge is lacking. On the other hand, when it exists, then there can arise a monetary demand for the commodity in question. The monetary demand then adds to the original nonmonetary demand, so that the price of the money-commodity contains a monetary component and a nonmonetary component. Although in a developed economy the former is likely to outweigh the latter quite substantially, IT IS IMPORTANT TO KEEP IN MIND THAT THE MONETARY USE OF A COMMODITY ULTIMATELY DEPENDS ON ITS NONMONETARY USE [emphasis mine]. The medieval scholastics called money a res fungibilis et primo usu consumptibilis. It was in the very nature of money to be a marketable thing that had its primary use in consumption." -The Ethics of Money Production (by Jörg Guido Hülsmann), p23. http://mises.org/resources/3747/The-Ethics-of-Money-Production & A most important truth about money now emerges from our discussion: money is a commodity. Learning this simple lesson is one of the world's most important tasks. So often have people talked about money as something much more or less than this. MONEY IS NOT AN ABSTRACT UNIT OF ACCOUNT, DIVORCEABLE FROM A CONCRETE GOOD; IT IS NOT A USELESS TOKEN ONLY GOOD FOR EXCHANGING; IT IS NOT A "CLAIM ON SOCIETY"; IT IS NOT A GUARANTEE OF A FIXED PRICE LEVEL. IT IS SIMPLY A COMMODITY [emphasis mine]. It differs from other commodities in being demanded mainly as a medium of exchange. But aside from this, it is a commodity--and, like all commodities, it has an existing stock, it faces demands by people to buy and hold it, etc. Like all commodities, its "price"--in terms of other goods--is determined by the interaction of its total supply, or stock, and the total demand by people to buy and hold it. -What Has Government Done to Our Money? (by Murray N. Rothbard) http://mises.org/money/2s3.asp
^^^ This is something I have been working to explain to the Bitcoin fanatics. I've even had one try to tell me that the stuff he bought in that Secondlife thing with his bitcoins were worth more than my tangible good's in my real house. I really did not know how to reply to this at first. Then I asked him if he was still thirsty after he drank one of his secondlife beers, and how many girls he's brought back to his pad.
MoonShadow:Well, did you ask?
Actually, yes I did. I asked some of the girl's when I ran into them in Vegas two months ago. I did not procure their services, as I'm happily married. They did confide in me that they take anything tradeable on FOREX. at an adjusted conversion rate. Obviously if you use Won, they do some profit taking.
Only the ignorant claim that Bitcoin is money. It's not. It's a pure currency. An artifical medium of exchange. That's all.
TBH It's not clear that you understand what currency or money is.
It is however definately artificial IE fake.