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.
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.
5) Bitcoin does not violate regression theory. That is a description of how a monetary system must arise from a barter system in the absence of force. That is not the conditions that Bitcoin must incubate within. Presently, Bitcoin is bootstrapping against the many fiat currencies, and probably would not survive independent of those fiat currencies if they were to fail today. Perhaps Bitcoin will never function as an independent currency, but I'm betting that it will.
6) Bitcoin is highly inflationary at present, and will be for many years. The present rate is around 45%APR, and will not drop below 2% APR till about 2016.
7) The stability of a currency is dependent upon it's predicability. Currency backed by commodities can aid predicability by limiting the possibilites of future changes in the monetary base. Bitcoin aids predicability as a matter of mathmatics.
8) Bitcoin will not hit the 21 million coin mark, ever. It won't even hit 99% of that mark within my lifetime, but cannot hit 21 million bitcoins because that is a log limit. Ever approaching, but never reaching.
However, the 21 million is actually 2,100,000,000,000,000, because the client currently hides the divisability of a bitcoin from the user by arbitrarily placing a decimal point in the middle of a 64 bit integer, resulting a bitcoin with a divisability to 8 decimal places.
9) Bitcoin is not anonymous to trading parties. If those parties are careful and trustworthy, bitcoin can be anonymous to third parties.
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.
I don't think Austrian economists use the word "currency" as a technical term. Rather, they speak of money, money substitutes, fiduciary media, demand deposits, time deposits, and so on.
Money is defined as the medium of exchange, that is, the final payment in settlement of any obligation. It is perfectly liquid (zero time required to determine its market valuation) is widely acceptable in payment for goods and services. If you think Bitcoin is not trying to be any of these things, I think it is you who are confused.
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.
filc: Question1) What is money? 4 word definition The most vendable good.
Question1) What is money? 4 word definition
The most vendable good.
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.
I would assume that in any given city, state, society, nation, etc. there can be only one but there might be a different one for each group you are working with. So in the US the USD is the only money whereas in Japan the Yen is the only money. I also assume that in a country with multiple currencies in very high usage only one can qualify for money and the others cannot?
I find this forum software frustrating, as I keep losing long posts.
This may be how money is defined for some, but it is a loose definition. Money is more than a medium of exchange. Money is a commodity with intrinsic charcteristics that lend it well towards the use as a medium of exchange. Namely...
Durability (does not decay, nor is it consumed in any normal process)
Fungibility (any amount is comparable to any other)
divisability (cutting it into smaller measurements does not harm it)
portability (can I put a decent amount of value in my pocket?)
Recognition (Joe Average has seen it before, knows what it is, and can generally tell that it's not fake)
However, a currency is a unit of measurement, said another way, it's a number and an abstract measurement of value, but it is not value unto itself. Oftentimes, as is the case with every fiat currency on the planet, a currency is a debt instrument, that identifies that the issuing institution owes the bearer something.
A gold coin, with it's fine weight printed upon the face of itself, is both a money and a currency. Which is why a gold coin issued by a government is both a legal tender of the value on it's face, while also having a monetary value independently of the face value, which is normally higher than the face value these days. The unit of measurement is what is devalued in inflation, not the monetary value of the gold itself.
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 mistakingly thought it was more liquid when in fact it wasn't.
Micah: So in the US the USD is the only money whereas in Japan the Yen is the only money.
All of that changes when your understanding of money isn't constrained by the concept of states. These objects are money by decree.
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?
filc: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.
To be clear, gold, silver, and copper are not different currencies or different "moneys". It is all just money. Goods are priced in each as a root currency, not as proxy currencies.
MoonShadow: 8) Bitcoin will not hit the 21 million coin mark, ever. It won't even hit 99% of that mark within my lifetime, but cannot hit 21 million bitcoins because that is a log limit. Ever approaching, but never reaching. However, the 21 million is actually 2,100,000,000,000,000, because the client currently hides the divisability of a bitcoin from the user by arbitrarily placing a decimal point in the middle of a 64 bit integer, resulting a bitcoin with a divisability to 8 decimal places.
As an aside, I believe that the 2.1 quadrillion limitation to the BitCoin is actually pretty significant. There is currently around 1 trillion USD (M0). These are divisible down to .01 which means 100 trillion divisible units of money in the US alone. Add in the money supply of all the other countries in the world and I don't see it being hard to reach quadrillion divisible units. We can argue that you can't actually buy anything with a penny and nothing is actually divided down to pennies for value reasons (marketing reasons do though) but I would say divisibility down to a $0.25 is pretty reasonable these days which still leaves us dangerousnly close to the limit of the BitCoin. Add in future population and economic growth and the price of goods is potentially limited by the divisibility of the currency. That is, a gumball costs the equivelant of $1 not because it's worth $1 but because that is the smallest unit of transaction.
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 mistakingly thought it was more liquid when in fact it wasn't. Micah: So in the US the USD is the only money whereas in Japan the Yen is the only money. All of that changes when your understanding of money isn't constrained by the concept of states. These objects are money by decree. 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.
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?
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.
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. Nonsense. Bitcoin has to conform to what money is, not the other way around. Money is a human invention to facilitate indirect exchange... this goal stands above and beyond any technological implementation. Bitcoin is just one of many contenders to fit the bill. <sigh> You sound like my freshmen students. For an anarchistic capitalist, you echo the fallacies for state capitalism fairly well. | Post Points: 5