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.
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Micah, I used your name here because you were pointing out previously that everything is taxed, even bitcoin. I was simply stating to you that bitcoin allows you the sole option of what is taxed or not taxed, because bitcoin usage can be structured so that its usage is only known by you and your God (that is a private matter).
Micah71381 replied on Thu, Mar 17 2011 12:45 AM I agree that BitCoin does not meet the requirements to make it as a form of money as Mises defines it. I disagree that Mises's regression theorum is the only way to create a new form of money. I feel that people keep pointing at how BitCoin does not meet the regression theorem requirements yet I am arguing that the regression theorem is partially flawed, not that BitCoin meets it's requirements.
Micah71381 replied on Thu, Mar 17 2011 12:45 AM
I agree that BitCoin does not meet the requirements to make it as a form of money as Mises defines it.
I disagree that Mises's regression theorum is the only way to create a new form of money.
I feel that people keep pointing at how BitCoin does not meet the regression theorem requirements yet I am arguing that the regression theorem is partially flawed, not that BitCoin meets it's requirements.
Micah is absolutely correct here. Until we can molecularly transport physical gold over a wireless or broadband connection, we will have bitcoin (or a close relative).
Just as Gresham's Law is invalid without legal tender laws, the Mises regression theorem does not hold in an environment of anonymous digital value transfer, such as the Internet where value goes intangible and legal tender laws become increasingly irrelevant and ultimately obsolete. This is due to the fact that Mises and the Austrians did not anticipate the notion of extrinsic value.
You people are intellectually irresponsible and dilute the value of these forums. Why don't you try reading a little more and writing a little less? Perhaps the point of the corpus of Austrian economics is that nobody can divine the "right outcome" of the market and this is precisely why entrepreneurs are needed to venture out into the market and take risks bringing new goods and services to consumers. Those who guess incorrectly go bankrupt and those who guess correctly earn profits, leaving consumers with a market filled with valuable goods and services from which to choose. This is no less true of money. You cannot know that BitCoin is the money of the future so such claims are absurd. You even appeal to Misesean theory in an attempt to shoot down my observations on why BitCoin is not and cannot be money (it has no commodity value) yet you turn around and spit out Misesean theory whenever it doesn't suit your preconceived agenda.
I'm starting to wonder if these boards are being flooded by shills.
Micah71381: I agree that BitCoin does not meet the requirements to make it as a form of money as Mises defines it.
Yes and I believe I asked you to define money. Part of our error in thinking here is understanding what money is. It's just simply a medium of exchange. Again I'm looking for a 4 word definition.
Micah:I disagree that Mises's regression theorum is the only way to create a new form of money.
It's obvious that you disagree with the Regression theorum but you have yet to demonstrate that you even know what money is and therefore understand the theorum.
Micah:I feel that people keep pointing at how BitCoin does not meet the regression theorem requirements yet I am arguing that the regression theorem is partially flawed, not that BitCoin meets it's requirements.
Micah:BitCoin pricing can initially be determined similarly to how one might determine the value of a precious metal. It can be calculated (by the market) by the cost associated with creating new precious metals (mining them) and therefore you set prices for your goods in such a way that it is more profitable/desirable for you to make/sell your goods than it is for you to mine the precious metals directly. Since BitCoins are, at their core, a proof of work that means that there is a cost associated with creating new coins, just as with precious metals. This gives BitCoins a reasonable starting value which merchants can base their pricing on. This is not in line with Mises's regression theorem (see above).
Your still not understanding me. If I go to a bitcoin store today. How are these prices detirmined, today. For example what point of reference does bitcoingadget.com use to detirmine that an Nvidia GeForce GT210 should be priced as 64BTC? How did the store clerk detirmine this?
I don't know how to make this any more clear to you. You keep going off on these tangents on how prices are formed. Thats not what I am asking. If I go to the store TODAY how does the store clerk know how much the graphics card is worth TODAY in bitcoins. How did the store clerk figure that the Geforce card was vendable at 64btc? What point of reference did he use to come to this conclusion? Why does a Nvidia GeForce GT210 cost 64btc? Why not 300btc? or 2btc? What point of reference was used to detirmine 64btc?
Aside from the fundamentals, which bitcoin fails, it also requires an extensive amount of resources for an individual to adopt. The only people who readily have access to it are programming geeks that spend too much time armchair theorizing and not enough time reading. It's not readily available too the masses and there is no reason for the masses to adopt it as an object worth anything. There is no intrinsic value in it which would drive further investment into the "object". Money is created bottom up praxeologically speaking, it cannot be imposed top down without the use of coercion.
When you understand markets, and exchange, it makes far more sense.
Clayton: Perhaps the point of the corpus of Austrian economics is that nobody can divine the "right outcome" of the market and this is precisely why entrepreneurs are needed to venture out into the market and take risks bringing new goods and services to consumers.
Perhaps the point of the corpus of Austrian economics is that nobody can divine the "right outcome" of the market and this is precisely why entrepreneurs are needed to venture out into the market and take risks bringing new goods and services to consumers.
Clayton: BitCoin is not and cannot be money
BitCoin is not and cannot be money
These two quotes seem contradictory. In the first one you are stating that no one can know the right outcome and in the second you are claiming to know the right outcome. I am making no claims that BitCoin will work. I am mearly claiming that it may work as a counter argument to those who claim it can't work.
Clayton: Why don't you try reading a little more and writing a little less?
Why don't you try reading a little more and writing a little less?
Just because I disagree with you doesn't mean I am underread. I have read everything people have linked in this thread along with some of my own research regarding Mises's regression theorum.
Clayton: You even appeal to Misesean theory in an attempt to shoot down my observations on why BitCoin is not and cannot be money (it has no commodity value) yet you turn around and spit out Misesean theory whenever it doesn't suit your preconceived agenda.
You even appeal to Misesean theory in an attempt to shoot down my observations on why BitCoin is not and cannot be money (it has no commodity value) yet you turn around and spit out Misesean theory whenever it doesn't suit your preconceived agenda.
Please explain why it cannot be money or why it must have commodity value. I request that you argue your point without the assumption that Mises's regression theorem is true. I have read Mises's regression theorum and I do not feel it explains this particular point well. In my opinion, Mises commits the logical fallacy of affirming a disjunct. He claims that because his regression theorem is proveably true (something I don't disagree with) then other theorems on the same topic must necessarily be false.
I do not feel it is invalid to agree with some points made by an individual (Mises) yet disagree with others. I see no problem in referring to one argument made by an individual that both parties agree is true yet argue another point by the same individual which both parties do not agree is true.
Micah71381:These two quotes seem contradictory.
Do yuo know what money is?
Micah: Mises commits the logical fallacy of affirming a disjunct.
If we are making a distinction between White and Black, white cannot be black. It is not affirming a disjunct in claiming that white is not black and black is not white. So you need to understand what money is before you can understand what it isn't. Otherwise all your doing is trying to claim that white is both white and black and that makes on logical sense whatsoever.
It's in very poor taste to call a logical fallacy over a subject you don't understand.
filc: <money> is just simply a medium of exchange.
<money> is just simply a medium of exchange.
I can agree with this definition of money.
filc: Then you need to demonstrate your understanding of the theorum and adequately explain it's faults. So far you haven't even addressed it. Which leads me to believe that your knowledge of the theorum extends as far as wikipedia.
Then you need to demonstrate your understanding of the theorum and adequately explain it's faults. So far you haven't even addressed it. Which leads me to believe that your knowledge of the theorum extends as far as wikipedia.
Wikipedia doesn't have any significant information on Mises's regression theorem that I could find. My information is from here on mises.org, particularly http://mises.org/humanaction/chap17sec4.asp. Perhaps you missed my post where I described my problem with Mises's regression theorem so I will go over it again.
In paragraph 7 of the above link he states:
no good can be employed for the function of a medium of exchange which at the very beginning of its use for this purpose did not have exchange value on account of other employments.
and
It must happen this way. Nobody can ever succeed in construction a hypothetical case in which things were to occur in a different way.
However, I do not see how any of his previous premises or conclusions back up those two statements. I assert that he is affirming a disjunct by claiming that because his solution to the problem is proveably true then there can be no other solutions to the problem. In fact, he states that it's impossible to construct a hypothetical case in which things were to occur in a different way of which I provided two such cases and BitCoin is currently an empirical case against him in that it is used as a medium of exchange (though the market is currently very small).
I am open to being shown the specific premises that lead to his conclusion but if they are stated in that article I have missed them and need some guidance in locating them.
filc: Your still not understanding me. If I go to a bitcoin store today. How are these prices detirmined, today. For example what point of reference does bitcoingadget.com use to detirmine that an Nvidia GeForce GT210 should be priced as 64BTC? How did the store clerk detirmine this? I don't know how to make this any more clear to you. You keep going off on these tangents on how prices are formed. Thats not what I am asking. If I go to the store TODAY how does the store clerk know how much the graphics card is worth TODAY in bitcoins. How did the store clerk figure that the Geforce card was vendable at 64btc? What point of reference did he use to come to this conclusion? Why does a Nvidia GeForce GT210 cost 64btc? Why not 300btc? or 2btc? What point of reference was used to detirmine 64btc?
Today prices can be determined based on the prices of other goods/services you are intersted in, the same way that any other established money works. I can go look at what 1BTC can buy me from other merchants and then base the price of my goods on that. As in Mises's regression theorem, this works back regressively until BitCoin's inception which is where BitCoin differs from a commodity based currency.
filc: Aside from the fundamentals, which bitcoin fails, it also requires an extensive amount of resources for an individual to adopt. The only people who readily have access to it are programming geeks that spend too much time armchair theorizing and not enough time reading. It's not readily available too the masses and there is no reason for the masses to adopt it as an object worth anything. There is no intrinsic value in it which would drive further investment into the "object". Money is created bottom up praxeologically speaking, it cannot be imposed top down without the use of coercion.
I am not disagreeing that moving past a niche market could prove to be the death of BitCoins. My arguments are only against the assertion by Mises that currency must originate from commodity. I think there is a high probability that the BitCoin won't take off because it's advantages do not outweigh the advantage of popularity for most people. I am also not suggesting the use of coercion, but I do believe that it is a theoretical way to disprove Mises's assertion that currency must originate from commodity.
filc: Do yuo know what money is?
I have accepted your definition of money (a medium of exchange) and it is not new to me.
filc: If we are making a distinction between White and Black, white cannot be black. It is not affirming a disjunct in claiming that white is not black and black is not white. So you need to understand what money is before you can understand what it isn't. Otherwise all your doing is trying to claim that white is both white and black and that makes on logical sense whatsoever.
Mises is not distinguishing white and black. He is stating cause and effect and claiming that because cause A leads to effect B, cause C..Z cannot lead to effect B. There can be multiple causes that lead to the same effect. Gravity causes matter to attract. Nuclear forces cause matter to attract. Claiming that because gravity causes matter to attrect therefore nuclear forces cannot cause matter to attract is incorrect.
filc: It's in very poor taste to call a logical fallacy over a subject you don't understand.
Mises drew a conclusion. I believe his conclusion is invalid because it commits a logical fallacy. I have shown how it commits this logical fallacy. I am open to explanations as to how my reasoning for this fallacy is incorrect. Telling me that I am incorrect because I don't understand is a fallacy in itself. If you have a counter argument make it. If you don't, telling me "you don't understand" is not a valid argument.
I suppose I am not explaining this adequately.
Question1) What is money? 4 word definition
The most vendable good.
Money is the most vendable good.
In order to reach that status of "most vendible good" you must have some type of prior value before it is even established as a medium of exchange. People have to have a reason to want to hold that good in their inventory. The good must have been widely accepted and marketable prior to it becoming a currency. That ensures wide acceptance. Another reason why it's important that the good is already widely desireable as this acts as a quality check mechanism. Being widely accepted ensures that the features wanted in money already exist. Features such as:
There has to be a reason for a vast majority of people to HOLD that good BEFORE it becomes a medium of exchange. That will ensure it's already in wide circulation and is already widely accepted. In this way money is discovered on the market bottom up. Not top down! No one makes currency for currency then tries to push it's function out onto the market. Instead the market finds currency by identifying the most vendible good.
As it stands, short of being a programming geek, normal people have absolutely on reason to adopt bitcoin. It is far too much of a hassle as compared to using USD. USD is far more convenient for anyone. So there has to be an underlying reason for people to want to hold bitcoins, but there is none(as is the case with any fiat). There is no intrinsic value in bitcoin that would drive normal folk to invest into it, not as a medium of exchange, but as a commodity. No one has any reason to hold it into their vaults. A bitcoin has no consumable or industrial function, you cannot make jewlrey with it, you cannot make circuit boards with it. Therefore there is no reason for people to widely adopt it over an already existing medium of exchange. And even if the medium of exchange broke down there is still no reason for bitcoin to be the rescue currency. People would certainly not risk placing their savings into such a system. Preferring more concrete goods which are more likely to guarantee the immediate ability to exchange.
Money is the most vendible good. This definition runs in-line with the regression theorum in that the most vendible good is discovered over time by individual adoptation. People increased their holding in gold and silver before it was a medium of exchange. Bitcoin offers no such reason to be held.
Thats the first point.
Question 2) How does a store clerk detirmine the price of goods in BTC?
Well it's easy. The common denominator is still the dollar. They just price their goods in dollars and translate it over using a currency exchange ratio. But this doesn't mean you've established a medium of exchange, as all goods are still getting priced by the dollar. What you've done instead is made a dollar proxy. You didn't replace the dollar. All the economic calculation and accounting is still done in USD's, not BTC's.
BitCoin prices are detirmined and pegged to the dollar. When the first Bitcoin store went up how did they know how much their goods and services would be sold for in bitcoins? Well they looked to see what those items cost in dollars. It's like using a check instead. Shoot you could argue that mastercard's plastic transaction system is another bitcoin.
In all instances all goods and services sold in BTCs are actually priced in dollars and then converted over. Goods and services are not priced in BTC's. There is no exchange ratio between goods and services and BTC's. A store clerk knows that a graphics card costs 64BTC's because he knows what the exchange ratio between dollars and those goods are and he simply follows a currency ratio. A store clerk and supplier purchased those goods via USDs then ran their markup and prices in dollars. After that they converted that price into BTC's. I guarantee nearly all of those company's do their accounting in dollars, not BTC's.
To spell it out. In order for BTC's to become currency it must eliminate the dollar.
BAD -> Goods/Servics <-> Dollars <-> BTC's
Good -> Goods/Services <-> BTC's
This is an EXTREMELY fundamental point of the regression theorum. The moment an exchange ratio between goods and services is established between BTC's and goods then and only then can you call BTC any sort of money. However for now it is simply a dollar proxy. One that is not likely to get wide acceptance. So you have to explain logically how BTC's replace dollars. How do they get wide acceptance prior to becoming currency.
So we now tie ourselves back into point #1. In order to develop a history of exchange ratio's betweena candidate currency good and all other goods you need the candidate to have already been widely accepted as a good that people demand. It has to already have a history of exchange. The history of exchange must be an exchange ratio between itself and other goods. It cannot have a exhcange ratio history as a proxy as all your doing is mimicing the exchange ratio of another currency that is already more widely adopted. Bitcoin offers no reason to be held as a good. If the dollar collapsed tommorrow people won't be rushing to throw all of their cash holdings into bitcoins. Long before the collapse consumers will have instead started investing heavily in actual goods that people demand for satisfaction. Cigarette's, alcohol, food, water, fuel, silver, gold, farming equipment, ect....
Bitcoin's cannot be offered praxeologically, prior to becoming a currency, as a way of satisfying consumers. Except as it's roll as a toy for programming geeks. People wouldn't dare increase their holdings in a good that doesn't immediately bring satisfaction to anyone.
So as you can see there is no reason for anyone to hold BTC's as a good outside of money. But you cannot establish it as money untill it becomes widely accepted as a good prior to it's funciton as a medium of exchange. Thats the paradox.
This is why I have said this over and over and over. Money is discovered from the bottom up praxeologically. The most vendible good is not imposed top down.
It's amazing that you claimed to have read the regression theorum yet in all of our discussion over the past several pages you failed to address these two fundamental points. These two points ofcoarse being the central focus of the whole regression theorum.
These two quotes seem contradictory. In the first one you are stating that no one can know the right outcome and in the second you are claiming to know the right outcome. I am making no claims that BitCoin will work. I am mearly claiming that it maywork as a counter argument to those who claim it can't work.
It can't work by the Regression Theorem. You and I can't know what will work because that's up to the market. The two statements are logically unrelated, it is fallacious to connect them.
We can, of course, make educated guesses about what kinds of monies might emerge in a free market of currency.
Note that you and others are not talking about digital money substitutes which I not only believe to be possible but actually inevitable. PayPal is essentially a digital money substitute.
Micah:I have accepted your definition of money (a medium of exchange) and it is not new to me.
I said on several occasions "4 word definition" not 3.
Micah:Mises drew a conclusion. I believe his conclusion is invalid because it commits a logical fallacy
No he didn't. Take this class your sounding silly.
Please explain why it cannot be money or why it must have commodity value.
It cannot be money because money must have a commodity value to begin with, else, it cannot possibly become money. Cf the regression theorem.
I request that you argue your point without the assumption that Mises's regression theorem is true.
The regression theorem is a theorem not an axiom, so it it is not assumed.
I have read Mises's regression theorum and I do not feel it explains this particular point well. In my opinion, Mises commits the logical fallacy of affirming a disjunct. He claims that because his regression theorem is proveably true (something I don't disagree with) then other theorems on the same topic must necessarily be false.
Cite it.
I do not feel it is invalid to agree with some points made by an individual (Mises) yet disagree with others.
Of course not but it is usually indicative of cherry picking. If Mises was so confused he couldn't even make a simple argument then why are you quoting him on anything else? Note that there are mainstream arguments against the regression theorem but I'm not aware of any economist who says "Mises committed a basic fallacy in the structure of the argument." Feel free to correct me if you're aware of such a refutation.
This is my third attempt to post, so I'm going to split this up.
I'm shocked at the misinformation on this thread, so I going to correct a few errors...
1) Bitcoin is not a theory, it presently is.
2) Bitcoin is not, and does not attempt to be, a money. Bitcoin is a currency. I would have thought that members of the Mises.org forum would know the differences.
3) Nor is bitcoin a fiat currency. By definition, a fiat currency is the legal tender of a geographic region by a matter of law. Bitcoin neither has such support, nor requires it.