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.
BTCs are a little more anonymous than exchanging commodites. The participants dont have to meet directly, or through agents to facilitate the exchange.
filc: Liberty Dollars are no centralized. They don't try to be a one all medium of exchange. The beauty of gold is that any mint can make their own coin. The value of the currency isn't in how the coin is minted or by whom it's minted in. It's valued in weight of gold/silver/copper. It doesn't matter who made it or whos face is on the cover of the coin. Secondly, all commodity base currencies are decentralized. In fact I don't even know how you could have a centralized currency short of fiat. Finally all commodity based currencies are every bit as anonymous as BTC's are. BTC's are only as anonymous as to two parties exchanging coins behind closed doors.
Liberty Dollars are no centralized. They don't try to be a one all medium of exchange. The beauty of gold is that any mint can make their own coin. The value of the currency isn't in how the coin is minted or by whom it's minted in. It's valued in weight of gold/silver/copper. It doesn't matter who made it or whos face is on the cover of the coin.
Secondly, all commodity base currencies are decentralized. In fact I don't even know how you could have a centralized currency short of fiat.
Finally all commodity based currencies are every bit as anonymous as BTC's are. BTC's are only as anonymous as to two parties exchanging coins behind closed doors.
I directly addressed this more in depth in my previous post but I want to stress it and address it again. Commodities are either not remote or not decentrtalized. You cannot have a remote decentralized commodity. You can have one or the other but not both. This is the key. It's not possible to fully decentralize commodities without losing the remote aspect to them. The cost of trust is too high a barrier to entry to allow for truly decentralized commodity backed remote currency. Either the auditing agencies are somewhat centralized or the storage facilities are somewhat centralized. You cannot have a remote commodity backed currency that fully decentralizes.
If you believe otherwise, I am eager to hear how you propose such a thing. I would love to be proven wrong here because I can see a huge advantage to a commodity backed currency that has the other 4 key attributes.
Micah71381:Commodity backing requires central stores of such a commodity therefore they cannot be decentralized. Either you physically trade the commodities (gold coins) which results in lack of the remote attribute along with the requirement of printing (centralized) or you centrally store the gold in a 100% backed digital currency (centralized). This is why you cannot create a commodity backed currency that is anonymous, remote, secure and decenttralized.
Thats the equivilent of saying Safeway is my centeralized produce deliverer. Your conflating a business with a centralized organizer.
I can pick and choose which security funds or commodities I hold and trade with. I can pick and choose which banks I choose to deposit in. I'll likely choose ones that already have built in remote transaction mechanisms. Like any main bank, master/visa, ect...(These institutions already exist and already have the infrastructure to perform what your arguing.) There is no central authority involved.
Micah:Centralization gives the government a head to cut off if they want to tax or destroy the currency.
Your conflating centralization(Government centralization) with currency providing angencies? There is nothing in the delivery of a commodity based currency that mandates it must be centralized. Historicaly it has not been centralized and just because we move to the digital age doesn't mean it has to be either.
MIcah: BitCoin makes the money exchange anonymous. It doesn't force people to behave anonymously.
This statement makes no coherent sense. Those people who want to transanct anonymously already voluntarily do so. Force never comes into the equation. No one is forcing you to transact anonymously with regular currency should you desire to so. So as I repeat again Bitcoin's offer no real advantage here. Furthere more you've yet to prove that such an attribute is even widely demanded for.
Micah:the point of anonymity is that I have the choice to remain anonymous if both parties agree to it.
This is already possible with existing currencies and candidate currencies.
Micah:The second problem is that you assume there is no desire for anonymity. I know people who live off the grid and use cash only.
Incorrect. I said it is not widely demanded for. Not that there is no demand at all. People who live anonymously have already had the means available of them to remain anonymous and have been employing those means for generations.
Drug dealers for example have been employing anonymous trades for centuries.
liberty student: BTCs are a little more anonymous than exchanging commodites. The participants dont have to meet directly, or through agents to facilitate the exchange.
Yes I've conceded this point. What I wanted to state was that s oftware cuold easily be created to perform the same action for trades of different currencies. There is no reason why I cannot anonymously purchase from a website with my digital gold backed coin.
The feature is not an attribute gifted to bitcoins alone. Any currency could employ this practice given the technological means to do so.
[EDIT]
Furthermore any two parties who want to trade anonymously are perfectly capable of doing so absent software/technology. This practice has been going on for ages in exchange of information/ransoms of sorts/ect.....
filc:Yes I've conceded this point. What I wanted to state was that s oftware cuold easily be created to perform the same action for trades of different currencies. There is no reason why I cannot anonymously purchase from a website with my digital gold backed coin.
Well, the gold account would have to be settled in meatspace at some point, unless you're talking about trading gold within a single institutional framework. BTCs aren't limited to one framework for settlement because there are no physical goods to settle.
filc:Furthermore any two parties who want to trade anonymously are perfectly capable of doing so absent software/technology. This practice has been going on for ages in exchange of information/ransoms of sorts/ect.....
Absolutely. I didn't claim it was unique to BTC, just a feature. Digital is not meatspace and a currency not tied to a meatspace commodity has enormous potential for some niche transactions.
@ filc
Thanks.
@ Micah71381 and Andris Birkmanis
The question of the thread is, if Bitcoin is the currency of the future. As I said and it also seems you admit you cannot use it to exchange mass amounts of goods currently, because it would stop the convenience of being anonymous and therefore Bitcoin users would be taxable and tangible by government’s justice. So under the current regime it will never be the currency of the future, as long as there is a government who claims the monopoly for money Bitcoin better stays small and hidden and forms a special black market for bits and very low amounts of goods/services!
And in the other scenario, in which the market can decide itself which money it wants, the facts speak for commodities because then you don't need decentralization and anonymity any more.
Finally my answer to the question of the OP only can be: It is extremely unlikely.
liberty student:Well, the gold account would have to be settled in meatspace at some point, unless you're talking about trading gold within a single institutional framework. BTCs aren't limited to one framework for settlement because there are no physical goods to settle.
Yes it would be up to the institution I deposit with to protect my privacy and offer the means to anonymous transactions. And I agree with the point that BTC's have made this feature far more convenient.
The issue is that it's a feature that, I argue, is not widely in demnaded. It is not sufficient enough to justify major investment into BTC's which would ultimately lead BTC's to a generally accepted medium of exchange. I still agree with Menger that a single BitCoin must offer some type utility prior to it's function as a medium of exchange. I see no other reason beyond hobbyists to want to hold BTC's.
All of these wonderful feature sets are great for bitcoins if bitcoins were a generally accepted medium of exchange. The issue ofcoarse is that they are not and getting them to that point is difficult when a bitcoin offers no other incentives to hold them.
This is the chicken and egg paradox I was hiting at Micah.
filc:The issue is that it's a feature that, I argue, is not widely in demnaded.
Gold is not widely in demand. Libertarian ethics are not widely in demand. Personal freedom is not widely in demand.
But some of us demand all 3.
filc:It is not sufficient enough to justify major investment into BTC's which would ultimately lead BTC's to a generally accepted medium of exchange.
The worst thing that could happen to BTCs is to get popular. Anyone who is getting into them to speculate on their future value is going to be very disappointed because the minute they become very popular, they will become illegal and an enormous BTC risk premium via the state will emerge.
filc:I still agree with Menger that a single BitCoin must offer some type utility prior to it's function as a medium of exchange. I see no other reason beyond hobbyists to want to hold BTC's.
I think you're overly invested in what BTCs are not, instead of what BTCs are. I agree, they will probably never be money proper. But that doesn't mean they don't have utility. In an increasingly decentralized world courtesy of the digital revolution, catering to niches, whether it is gold bugs, neoconservatives or digital currency advocates yields more gross utility than trying to establish standards.
I'll admit, monetary theory is incredibly boring and pedantic, at least to me, and I probably don't have your grasp of the more intricate details that would prevent BTCs from becoming ubiquitous, but I don't think they need to become ubiquitous to function as a form of money. Yen is money in Japan, but it isn't money in France.
filc: Micah71381:Commodity backing requires central stores of such a commodity therefore they cannot be decentralized. Either you physically trade the commodities (gold coins) which results in lack of the remote attribute along with the requirement of printing (centralized) or you centrally store the gold in a 100% backed digital currency (centralized). This is why you cannot create a commodity backed currency that is anonymous, remote, secure and decenttralized. Thats the equivilent of saying Safeway is my centeralized produce deliverer. Your conflating a business with a centralized organizer.
Ah! I see the problem.
When I say centralized I don't mean planned, I mean the opposite of distributed. Back in the early days of the internet, before peer-to-peer networks like Gnutella, BitTorrent, etc. pirated software was hosted on servers and then any number of people could download the software from that server. The problem with this was that the government would constantly shutdown these servers which would significantly hurt the pirates since they had to find a new place to host the software and go through all the overhead of moving the software to the new server.
Eventually people came up with the idea of decentralizing the software by allowing users to download from other users. This is when software piracy really took off because the government no longer could shutdown the hosts. It is the difference between stopping a bear from bothering you and stopping a swarm of bees from bothering you, the bear is an easy target that can be killed by "cutting off the head" so to speak whereas the swarm of bees requires you kill every individual bee in order to be effective. If you leave one you are still threatened by the "swarm".
When I talk about "centralized" currency I simply mean that there are limited number of "hosts" of the currency. Because there are a limited number of "hosts" the government has something to target. A distributed system has an unlimited number of hosts and adding new hosts has negligible overhead costs. Just like with BitTorrents, the government has nothing to target. The only effective way to takedown the network is to take down all of the users. As long as a single user remains the network survives.
I am not suggesting that there is a single authoritative figure when it comes to any other currency, I am simply stating that commodity based currencies cannot be truly distributed. The overhead required to gain consumer trust is prohibitively expensive for a distributed system which results in a finite number of "heads" that can be targeted by the government.
filc: MIcah: BitCoin makes the money exchange anonymous. It doesn't force people to behave anonymously. Those people who want to transact anonymously already voluntarily do so. Force never comes into the equation. No one is forcing you to transact anonymously with regular currency should you desire to so. So as I repeat again Bitcoin's offer no real advantage here. Further more you've yet to prove that such an attribute is even widely demanded for. Micah:the point of anonymity is that I have the choice to remain anonymous if both parties agree to it. This is already possible with existing currencies and candidate currencies.
Those people who want to transact anonymously already voluntarily do so. Force never comes into the equation. No one is forcing you to transact anonymously with regular currency should you desire to so. So as I repeat again Bitcoin's offer no real advantage here. Further more you've yet to prove that such an attribute is even widely demanded for.
You keep forgetting the simultaneous part of my statement. Yes, anonymity exists with any in-person transaction. No, anonymity does not exist for remote transactions. This is a crucial point and cannot be left out in any argument against BitCoin. Secure, anonymous, remote, distributed simultaneously. Leaving off the simultaneously of that statement completely changes the statement.
filc: Micah:The second problem is that you assume there is no desire for anonymity. I know people who live off the grid and use cash only. Incorrect. I said it is not widely demanded for. Not that there is no demand at all. People who live anonymously have already had the means available of them to remain anonymous and have been employing those means for generations.
Again, you are taking half my argument and not the whole thing. Yes, these people can remain anonymous. However, they are severely limited in the types of transactions they can make. It is very difficult to amass wealth in cash/commodities because of the high security overhead cost. It is difficult to make online transactions using cash/commodities only as well.
Also you are mistaking lack of supply for lack of demand. When given the choice between ease of use and anonymity many people choose ease of use (bank vs cash). However, there are currently no options that provide both ease of use and anonymity. You are arguing that people can use cash right now for anonymity but the problem is that cash is not easy to use. Users are required to choose one or the other, they cannot currently have both. BitCoin allows them to have both ease of use and anonymity at the same time. As I mentioned previously, simultaneity is essential to the BitCoin argument. You can't separate out the various attributes of BitCoin and argue them independently, you have to argue them as a collection because you get all four attributes simultaneously.
filc: Drug dealers for example have been employing anonymous trades for centuries.
Right, and you cannot complete these transactions remotely. You have to carry around a bunch of cash and someone can shoot you and take your cash. With BitCoins I never have to meet in person and if I do, they would have to torture me for the money since killing me won't get them the "something I know" part of the security (capture is much more difficult than killing). I can see black market dealings providing a big chunk of users to BitCoin once there are enough goods/services available to them to make dealing in BitCoins worthwhile. In fact, the number one deterrent for me entering the drug trade is not being able to accept remote anonymous payment. Western union is currently how it's done but that requires a large number of fake IDs in order to pull off (Western Union is not anonymous).
Micah you are going off on so many side tangents I simply cannot spare the time to respond to every nuance. (Most of which are not important)
The issue is how bitcoins become a generally accepted medium of exchange. Meaning I can go to safeway and transact with it. This is the chicken and egg paradox I am referring to.
If we can just focus on this one thing and avoid lengthy 1000+ wordy responses I would be super ecstatic.
Also Skylien raises an excellent point as well that deserves consideration.
filc: Micah you are going off on so many side tangents I simply cannot spare the time to respond to every nuance. (Most of which are not important)
See, this is the problem I have with you, Flic. Not that you have a different perspective, but that you are quick to dismiss the viewpoints of others as simply not worth your time to respond. If you don't have the time to address the arguments of others, then you are not having a discussion, you are simply trolling. If you honestly don't have the time, and are not making excuses as I would expect considering the amount of time that you have spent here already, then don't respond at all.
The issue is how bitcoins become a generally accepted medium of exchange. Meaning I can go to safeway and transact with it.
Why is that the issue? The basic question, "Is Bitcoin the currency of the future?" doesn't require that Bitcoin be the only, or even domamint, medium of exchange to be "yes". Is the Internet the marketplace of the future? If the answer there is a general yes, then Bitcoin can be the "currency of the future" (or something very much like it) without ever gaining common use as an in person currency. Despite this, Bitcoin actually is expected to become an in person trade currency by many on the Bitcoin forums, including myself; as Bitcoin is better suited to "mobile payment infrastructure" than Visa or PayPal. There is already a Point-of-Sale system in development by a group in NYC, and another working in Portland, OR.
It's not about you.
skylien: The question of the thread is, if Bitcoin is the currency of the future. As I said and it also seems you admit you cannot use it to exchange mass amounts of goods currently, because it would stop the convenience of being anonymous and therefore Bitcoin users would be taxable and tangible by government’s justice. So under the current regime it will never be the currency of the future, as long as there is a government who claims the monopoly for money Bitcoin better stays small and hidden and forms a special black market for bits and very low amounts of goods/services! And in the other scenario, in which the market can decide itself which money it wants, the facts speak for commodities because then you don't need decentralization and anonymity any more. Finally my answer to the question of the OP only can be: It is extremely unlikely.
I don't know if I stated it in this thread or another one but even if BitCoins were taxed through some system such as the VAT which doesn't rely on individual reporting but rather only corporate reporting BitCoins still have the advantage of having predetermined and limited inflation which is a huge advantage (in my opinion) over a government controlled currency. Also, BitCoins still remain anonymous unless the government requires corporations to ID people on all transactions. As seen in the current US market, businesses will not require for ID unless the government forces them to. They will often request ID for marketing reasons (grocery store club card, etc.) but anytime they are able to legally complete a transaction without ID they will allow you to do so.
It sounds like we agree that the government will squash any competing currency it is able to, just like they squash any piracy they are able to. However, as seen with distributed software piracy the government is powerless to stop it, just like they would be powerless to stop BitCoins. The controlled and limited inflation alone makes BitCoin attractive over government controlled fiat currencies in my opinion and it's distributed system makes it immune to government regulation (as currently defined). Obviously the government can do whatever they want such as "a war on BitCoins" but that is a whole lot more expensive to the government than a few raids on alternative currency mints/banks. Also, the propaganda required for a war on BitCoins is not as easy as the propaganda for the war on drugs and the war on drugs even with all that propaganda is difficult to maintain.
The argument for BitCoins rising to the top comes from a statist perspective. In an anarchist society BitCoins do not present a significant advantage over alternatives unless BitCoins are already established as currency, in which case there is no need for commodity backing. Even in an anarchist societ I believe that a distributed system is a huge boon, I do not think it is as necessary as a stateless society. Though, distributed does prevent monetary takeover by government should the state return.
MoonShadow:It's not about you.
Who is it about?
filc: The issue is how bitcoins become a generally accepted medium of exchange. Meaning I can go to safeway and transact with it. This is the chicken and egg paradox I am referring to. If we can just focus on this one thing and avoid lengthy 1000+ wordy responses I would be super ecstatic.
I am willing to focus on this particular point for the time being and I will attempt to be less wordy where possible, though I am hesitant to leave points out.
There is currently a BitCoin market. It is small but it exists. There is almost no barrier to entry into this market (overhead costs are minimal). Because there are goods/services that can be purchased with BitCoins, any person who sees a large enough collection of goods/services available in BitCoins can easily start accepting BitCoins as payment (along side another currency). As more people accept BitCoins, the collection of goods/services available in BitCoins increases. This increase in available goods/services results in more people willing to enter into the BitCoin market.
If we assume that every person on the planet has a certain "collection size" (number of goods/services available in a given currency) required for them to be willing to participate in that currency and we also assume that every person participating in that currency increases the collection size of that currency then we can conclude that the only barrier to mass participation is if there is a significant gap in collection sizes somewhere in the population spectrum.
If there are 5 people on an island:
In this example there is no gap in the required collection size that would result in a maximum collection size short of the entire population. The first person requires no one else, the second and third person require only one person thereby increasing the collection to 3, the fourth person joined the bandwagon at 2 bringing the collection to 4 and the 5th person joins once all the other 4 are in.
This is an example with a gap resulting in a permanently limited collection:
In this example the collection will get up to 3 people but the 4th and 5th people will never join in because they are both waiting for the collection size to grow by one more.
I believe the first example is the real world case, but this is unprovable. It sounds like you believe the second example is the real world case, which is also unprovable. This is why I think that BitCoins are possible, but not guaranteed.
Micah71381:There is almost no barrier to entry into this market (overhead costs are minimal).
That is a very easy assertion to make for someone who lives in a first world country. BTC's on the other hand are not nearly as accessible outside 1st world countries. Or for that matter outside of the internet in general.
Yes there is a BTC market community no one is disputing that.
Micah:This is why I think that BitCoins are possible, but not guaranteed.
But the 2nd and 3rd and 4th person must be interested in the currency. So far only hobbyists, people who misunderstand or reject the regression theorum, and people who don't want value in their currency are interested in BTC's. It's more of a novelty rather then currency.
My neighboring thread explains a digital currency that is built from market demand. People demanding the currency because it has prior utility. If your argument is that BTC's will gain traction then Gold, Silver, Stocks, and many other items are already waaaaay ahead of you as far as volume of daily transactions. If it is only true that BTC's will just "gain traction" over time. Then why won't gold just "gain traction"? Why won't Silver just "gain traction"? Especially considering they already have a head start.
So back to the main point. I see no reason why anyone, aside form a hobbyist, would want to increase their holdings in BTC's and withdraw their holdings in dollars or commodities.
80% of my wealth is backed in gold and silver. Why should I move that wealth into BTC's?