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'm still trying to make sure I understand you correctly and I am not arguing any of your points yet. Do you consider any of the various paper currencies of the world (USD, JPY, RMB, etc.) to be money by your definition?
By decree yes. You could definately make bitcoin a money by decree. Absent states though the concept of paralell money on a national basis would go away. In fact prior to rampent state monetary control nations generally used the same currency.
MoonShadow: That would be a wonderful problem to have, and not an insurmountable one. It is one that has already be considered on the Bitcoin forum, and the answer given by the main programmers is that the 8 digits of divisability is an artifact of the 64 bit number, and not one that cannot be worked around. As a matter of the protocol that governs the Bitcoin system (as opposed to the actual programming for the current clients that perform that protocal) a bitcoin is infinately divisable. Even if it wasn't, it's generally expected that there will be dirivative cryptocurrencies develop in parallel to Bitcoin. If anything destroys Bitcoin, it will be a better version.
That would be a wonderful problem to have, and not an insurmountable one. It is one that has already be considered on the Bitcoin forum, and the answer given by the main programmers is that the 8 digits of divisability is an artifact of the 64 bit number, and not one that cannot be worked around. As a matter of the protocol that governs the Bitcoin system (as opposed to the actual programming for the current clients that perform that protocal) a bitcoin is infinately divisable. Even if it wasn't, it's generally expected that there will be dirivative cryptocurrencies develop in parallel to Bitcoin. If anything destroys Bitcoin, it will be a better version.
This ties into another problem I have with the BitCoin system in that it does not have a built-in upgrade path. In this exapmple, divisibility will likely need upgraded at some point (assuming it reaches global usage) but the same problem will occur for the cryptography used. Eventually (far off) SHA-256 will be broken and a replacement cryptographic system will be needed.
In both of these cases a redesign to the underlying system needs to be implemented. This means that the original BitCoins will need to be converted to some new BitCoins that have more divisibility, better security, or both. Because the protocol is all that matters and both of these things are based in the protocol, everyone will have to upgrade in order for the system to work.
This reminds me very much of IPv4 and IPv6. In order to upgrade the size of the address space *everyone* has to upgrade. The whole process is taking around 20 years to implement. Advances in quantum computing have potential to lead to a rapid decline in the level of security offered by SHA-256 and we may not have 20 years to migrate everyone to a new system.
You did indicate that the protocol allows infinite divisibility. However, in order for two people to to complete a transaction they must both share the same level of security and the same level of divisibility in the software they are using. This means that, like with IPv4 to IPv6 one party has to upgrade and then has to wait for the other party to upgrade before they can make the switch. Also, once a BitCoin is divisible past the quadrillion mark it can not be transferred to anyone using the older system (same with the security method). This means that it's generally not a good idea to be the first to accept "upgraded" BitCoins because they will not be widely accepted.
4) Bitcoin is a new form of monetary system. It has features similar to a LETS, but notable differences as well. Any attempt to compare Bitcoin to existing monetary systems is prone to error.
Micah71381:I'm still trying to make sure I understand you correctly and I am not arguing any of your points yet. Do you consider any of the various paper currencies of the world (USD, JPY, RMB, etc.) to be money by your definition? By decree yes. You could definately make bitcoin a money by decree. Absent states though the concept of paralell money on a national basis would go away. In fact prior to rampent state monetary control nations generally used the same currency. If I am reading this correctly, and you are saying that without state intervention most people of various nations generally used the same thing as a money and currency, then you are historicly incorrect. Many things have been used as money, beyond gold and silver. Including, but not limited to; salt, spices and even nails. And they were also used concurrently with gold and silver. Nails were used as money by the Romans for so long, and by so many, that the legacy of it persists to this day. The (imperial) standard of sizes of nails are still measured by the 'pennyweight', but the unit is marked by the small letter "d". This is because for two hundred years, before the debasement of the Roman coins, the cost of a particular sized nail was so stable over time, and consistant across the region, that the exchange value of a particular nail, in denarius, was also it's weight. Regular citizens were known to trade nails as currency on a regular basis, particularly in the countryside or cities far from Rome. This legacy was passed down through the history of Europe and then to the United States, and because the need to build with wood was common to the colonists; nails were sometimes traded as a currency substitute, when silver was scarce, by their 'pence'. | Post Points: 5
If I am reading this correctly, and you are saying that without state intervention most people of various nations generally used the same thing as a money and currency, then you are historicly incorrect. Many things have been used as money, beyond gold and silver. Including, but not limited to; salt, spices and even nails. And they were also used concurrently with gold and silver. Nails were used as money by the Romans for so long, and by so many, that the legacy of it persists to this day. The (imperial) standard of sizes of nails are still measured by the 'pennyweight', but the unit is marked by the small letter "d". This is because for two hundred years, before the debasement of the Roman coins, the cost of a particular sized nail was so stable over time, and consistant across the region, that the exchange value of a particular nail, in denarius, was also it's weight. Regular citizens were known to trade nails as currency on a regular basis, particularly in the countryside or cities far from Rome. This legacy was passed down through the history of Europe and then to the United States, and because the need to build with wood was common to the colonists; nails were sometimes traded as a currency substitute, when silver was scarce, by their 'pence'.
Actually, it does have a defined upgrade path, which may or may not ever come into play. With respect to the cryptologies used, those parts are modular, and can be replaced by comparable crypto functions should one of them be broken. Also, the system isn't dependent upon one crytpo function to maintain security, but overlaps several types, so even if one is broken, Bitcoin isn't laid bare in the meantime. It would be astronomically unlikely that more than one such function would be broken at the same time.
Again, no. This was considered before the system began. The current client doesn't impliment the entire protocol, which is complex and quite elegant. There will almost certainly be a point that an upgrade to the common client will be required, but that will not require that the user's bitcoins be "converted". In fact, the client itself is irrelevent. The coins don't actually exist, even as a digital artifact. The 'blockchain' is a massive, distributed and collective ledger of the entire history of the system; and all the coins exist as cryptologically signed entries into this ledger. The 'wallet' file, or online account with a 'wallet provider', simply contains the public/private keypairs that permit the true owner of a set of coins to digitally sign a transfer of ownership that the p2p network can verify as legit.
Again, no. I don't need to upgrade my client to accept coins from a newer client. The clients don't even need to communicate with one another. Hell, I don't even need my client (or any client) running to receive bitcoins, ever. I may need to upgrade my client to spend them, but that is always voluntary.
filc: Micah71381:This post has some good points in it and I would like to go over them one at a time to decrease the chance we get derailed so I will start here. This statement indicates to me that there can be only one money at any given time. Your definition includes the word "most" which is a relative maximum term and indicates that there can not be two items that meet this requirement. If someone wanted to hold the good that was most liquid with the intent to use it as a medium of exchange, why would they prefer a less liquid good over a more liquid good? Assuming both currency candidates are readily accessible to them? The only reason why a person would choose the less liquid good as a medium of exchange is if he mistakenly thought it was more liquid when in fact it wasn't.
Micah71381:This post has some good points in it and I would like to go over them one at a time to decrease the chance we get derailed so I will start here. This statement indicates to me that there can be only one money at any given time. Your definition includes the word "most" which is a relative maximum term and indicates that there can not be two items that meet this requirement.
If someone wanted to hold the good that was most liquid with the intent to use it as a medium of exchange, why would they prefer a less liquid good over a more liquid good? Assuming both currency candidates are readily accessible to them? The only reason why a person would choose the less liquid good as a medium of exchange is if he mistakenly thought it was more liquid when in fact it wasn't.
I am trying to understand the definition of money as you have worded it. Why people would choose to accept one over another does not matter for defining the term. In some places, both the USD and the EU are accepted as a medium of exchange as well as perhaps a local currency. Am I correct in understanding that only one of these can be considered money while the others cannot?
Assuming pure global anarchy in which nails and screws are both commonly used as a medium of exchange, would nails be considered money and screws not if nails were used in 51% of transactions and screws in 49%?
filc: Micah:I also assume that in a country with multiple currencies in very high usage only one can qualify for money and the others cannot? Can you provide an example? A good example of multiple currencies is something like gold, silver, copper each working together with a very strict ratio between the two. Do you have another example to provide? Bitcoin is an example of a currency proxy, not a currency.
Micah:I also assume that in a country with multiple currencies in very high usage only one can qualify for money and the others cannot?
Can you provide an example? A good example of multiple currencies is something like gold, silver, copper each working together with a very strict ratio between the two. Do you have another example to provide? Bitcoin is an example of a currency proxy, not a currency.
Any country in which two currencies are widely accepted. I will admit, I am not familiar enough with current world politics to know of many good examples but it is my understanding that Somalia widely accepts the USD as well as their own currency.
Any how I've said more than enough that needs to be said and covered all the necessary basis. We're just going to start going off on side-tangents and I haven't the energy. My recomendation to you is to do further reading on the regression theorum. There are a host of qualifiers that bitcoin lacks which prevent it from ever becoming a widely accepted medium of exchange.
My wager is that it will forever be a geeks/programmers toy. It serves no purpose beyond adding some type of development experience to your resume.
Interesting argument to make, just before quitting, considering that you never addressed his statement that regression theory may not apply in all cases. Also, what do you consider "widely accepted"? At what point does a medium of exchange become successful? The Bitcoin currency, as a whole, represents over $5million at present. That's a drop in the bucket compared to some things, but it is only two years old, and many other local currencies have existed for decades and still represent less total value. Do you not consider the Ithica Hour a medium of exchange? Is it not successful, or widely accepted among it's target demographic?
My wager is that it will forever be a geeks/programmers toy. It serves no purpose beyond adding some type of development experience to your resume. Perhaps it will forever be a geeks' toy, but it already serves a purpose beyond that for myself, and many others besides. I'm not a developer anyway. | Post Points: 20
Perhaps it will forever be a geeks' toy, but it already serves a purpose beyond that for myself, and many others besides. I'm not a developer anyway.
MoonShadow:$5million at present.
5 Million what? Dollars? Interesting that you use the dollar to demonstrate it's value.
MoonShadow: just before quitting, considering that you never addressed his statement that regression theory may not apply in all cases.
I don't need to address it, and you don't know what the Regression Theorum is any more then Micah does. :)
Before you accuse me of quitting please consider the time I took out of my day to write this little explanation up for you and Micah. Please be more curtious if you want me to spend my time explaining more.
Or you can do us all a favor and go read up on the subject ensuring for yourself whether it's right or wrong. Rather then just asserting it's wrong because your intillectually too lazy.
MoonShadow:$5million at present. 5 Million what? Dollars? Interesting that you use the dollar to demonstrate it's value. It's a relative valuation. I could have done the same in Euro, Rubbles, gold ounces or pounds of copper. MoonShadow: just before quitting, considering that you never addressed his statement that regression theory may not apply in all cases. I don't need to address it, and you don't know what the Regression Theorum is any more then Micah does. :) Before you accuse me of quitting please consider the time I took out of my day to write this little explanation up for you and Micah. Please be more curtious if you want me to spend my time explaining more. Or you can do us all a favor and go read up on the subject ensuring for yourself whether it's right or wrong. Rather then just asserting it's wrong because your intillectually too lazy. Really? You're accusing me of being rude? For the record, I read your 'explanation' already, and again just now, and found it lacking. I find it amusing that you accuse me of not understanding regresssion theory, and yet you can't even summarize it properly. Even in your broken version, regression theory doesn't exclude Bitcoins from ever becoming a directly traded currency without the need of a fiat currency as an intermediary. And such as it is, your version would exclude the possibility that Bitcoin is traded directly for goods and services presently, and yet not only can I prove that it has been done, I've personally done it. The fact that the relative valuation of those goods may, or may not, be a conversion from US$ (or Euros, or gold) is not relevant to regression theory. All oil is priced in US $, that does not mean that US $ is required to buy oil; nor that oil will always be price in US $. My teenaged daughter could summerize regression theory better than this. Are you an adult? | Post Points: 35
It's a relative valuation. I could have done the same in Euro, Rubbles, gold ounces or pounds of copper.
MoonShadow: just before quitting, considering that you never addressed his statement that regression theory may not apply in all cases. I don't need to address it, and you don't know what the Regression Theorum is any more then Micah does. :) Before you accuse me of quitting please consider the time I took out of my day to write this little explanation up for you and Micah. Please be more curtious if you want me to spend my time explaining more. Or you can do us all a favor and go read up on the subject ensuring for yourself whether it's right or wrong. Rather then just asserting it's wrong because your intillectually too lazy.
Really? You're accusing me of being rude? For the record, I read your 'explanation' already, and again just now, and found it lacking. I find it amusing that you accuse me of not understanding regresssion theory, and yet you can't even summarize it properly. Even in your broken version, regression theory doesn't exclude Bitcoins from ever becoming a directly traded currency without the need of a fiat currency as an intermediary. And such as it is, your version would exclude the possibility that Bitcoin is traded directly for goods and services presently, and yet not only can I prove that it has been done, I've personally done it. The fact that the relative valuation of those goods may, or may not, be a conversion from US$ (or Euros, or gold) is not relevant to regression theory. All oil is priced in US $, that does not mean that US $ is required to buy oil; nor that oil will always be price in US $. My teenaged daughter could summerize regression theory better than this. Are you an adult?
filc: MoonShadow:$5million at present. 5 Million what? Dollars? Interesting that you use the dollar to demonstrate it's value.
I can state that I have 4,929,500 CAD in USD. That doesn't speak to whether USD is money or not.
filc: I don't need to address it, and you don't know what the Regression Theorum is any more then Micah does. :) Before you accuse me of quitting please consider the time I took out of my day to write this little explanation up for you and Micah. Please be more curtious if you want me to spend my time explaining more. Or you can do us all a favor and go read up on the subject ensuring for yourself whether it's right or wrong. Rather then just asserting it's wrong because your intillectually too lazy.
I have been trying to understand what about the regression theorem I am "not understanding" by participating in this discussion. You and others keep saying "go read" but I have read everything that everyone has pointed to on the regression theorem and I still don't agree with one of it's assertions. You are trying to claim that I am wrong because I am uneducated on the topic, not because I have made a specific fallacy (with the exception of the post you linked).
I would very much like to discuss that post but, as I mentioned previously, I think that discussion will go smoother and result in less derailing if we work on it piece by piece. The first piece I want to get through is your definition of money because you have indicated that everything builds off of that. So far I have not argued any of your points, I am first trying to understand how you define money so I can then correctly understand the rest of your post and either argue it's points or agree with them.
It seems like you have a different definition of money than I do, which is not a problem for me. However, because we are coming from different definitions we need to establish a common ground in order to proceed with the discussion. I have no problem conceding to your definition but this means that I need you to explain it to me. In particular is the "most" qualifier that you have applied to your definition because this implies to me that there can be only one "money" and everything else is therefore not money.
MoonShadow:...
Your quoting of text is breaking the forum page layout. I have seen this happen before and it is related to how you copy/paste quoted information (the forum software is kind of buggy in this regard). In order to avoid this I would recommend clicking the reply button on a post and then editing the address of the page you are sent to to read "&Quote=True" instead of "&Quote=False". This will reload the reply page but with the text quoted by default so you don't have to copy/paste the taxt from your browser into the edit box.
MoonShadow:5 Million what? Dollars? Interesting that you use the dollar to demonstrate it's value.
MoonShadow: I find it amusing that you accuse me of not understanding regresssion theory, and yet you can't even summarize it properly.
Well people(Mises) far more knowledgable then me have given the topic thousands of pages worth of written literature. Cut me some slack. How best can I explain the theorum in a 200 word essay?
MoonShadow:Even in your broken version, regression theory doesn't exclude Bitcoins from ever becoming a directly traded currency without the need of a fiat currency as an intermediary.
Yes it does because
A) There is no intrinsic, industrial or consumable value to it. No one has any reason to hold bitcoins beyond a medium of exchange.
B) It is not the most vendible good as a result it will continue to play as a proxy currency, and run as back seat to real currency. It's no different from a check, mastercard, paypal, or anything else of that nature.
Here, let me help.
Mises's Regression Theory is an attempt to explain how money initially gains it's value, and rises naturally from a barter economy. Therefore, it only applies to the transition from a barter economy to a monetary exchange economy. It's application towards the rise of Bitcoin, which must transition from a physical fiat currency to a purely digital currency and not from a barter economy, is dubious at best.
From Wikipedia...
" In this work, Mises looks at the nature and value of money, and its effect on determining monetary policy. Included is his regression theorem, that tries to explain why money is demanded in its own right, as moneys at first glance do not serve a consumable need. Mises explained that moneys only can come about after there has been a demand for the money commodity in a barter economy."
http://en.wikipedia.org/wiki/The_Theory_of_Money_and_Credit
Furthermore, Regression Theory is just that, a theory. It could still be wrong. Mises wasn't a god, and most certainly got something wrong. It is a reasonable explaination of how a common commodity becomes a standardized medium of exchange within a barter economy without the will of the state, but that is as far as it goes. To call details of Regression Theory into question, particularly in this context since Bitcoin doesn't have to arise from a barter economy (which probably couldn't happen), is not the same as rejecting praxeology in whole.
MoonShadow: I find it amusing that you accuse me of not understanding regresssion theory, and yet you can't even summarize it properly. Well people(Mises) far more knowledgable then me have given the topic thousands of pages worth of written literature.
Well people(Mises) far more knowledgable then me have given the topic thousands of pages worth of written literature.
This is an appeal to authority, which is a logical error. Don't do this in my class, you will get an F.
Cut me some slack. How best can I explain the theorum in a 200 word essay?
See my 'let me help' post. I summerized the scope of Regression Theory in, what? Two sentences?
MoonShadow:Even in your broken version, regression theory doesn't exclude Bitcoins from ever becoming a directly traded currency without the need of a fiat currency as an intermediary. Yes it does because A) There is no intrinsic, industrial or consumable value to it. No one has any reason to hold bitcoins beyond a medium of exchange.
There is no intrinsic, industrial or consumable value to a $1 Federal Reserve Note, either.
It may be a 'proxy currency' from a certain perspective, but it is also the 'most vendible good' for the purpose of online transactions. That is the point of it all. If it wasn't better, overall, at this function than physical US $, credit cards denominated in US $, or payment processors denominated in US $, then I might agree with you. But it is better, in the sense that transactions are more secure, more private, and less costly than those alternatives.
Micah71381: MoonShadow:... Your quoting of text is breaking the forum page layout. I have seen this happen before and it is related to how you copy/paste quoted information (the forum software is kind of buggy in this regard). In order to avoid this I would recommend clicking the reply button on a post and then editing the address of the page you are sent to to read "&Quote=True" instead of "&Quote=False". This will reload the reply page but with the text quoted by default so you don't have to copy/paste the taxt from your browser into the edit box.
Thanks for that, I'm too old to catch on quickly to some of this computer stuff.