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.
filc: #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.
#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.
I will concede that electricity and internet access is a requirement for BitCoins. However, only the merchants need these things since the consumers can utilize mechanisms similar to credit cards and banks for the day to day transactions if they desire or don't have the resources to manage their own digital wallet. I will admit that my current argument for BitCoins taking off is dependent on a first world infrastructure so let's use that as the context for our discussion.
filc: 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.
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.
I think it was earlier in this thread that it was established that BitCoins follow the regression theorem. The proposed currency does not need to have uniform value to all of it's potential users, it only needs to have value to some subset of it's users, the seed population. As I mentioned in the example using apples as currency, not everyone has to value apples for their commodity value. Only someone has to value apples for their commodity value in order for the regression theorem to hold true. In the case of BitCoins, there are people who value BitCoins for whatever reason so it meets the requirements for the regression theorem.
As seen by fiat currencies and as addressed by Mises, once a currency is established as money it no longer needs to have commodity value to it's users. It only needs to have a history of use that, as explained by the regression theorem, eventually leads back to the seed population's initial valuation.
It sounds like you don't agree with me on this point:
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
If everyone in the world except you used bottle caps as currency, would you begin to use them as currency as well? If the answer is yes then that means you have a collection size somewhere less than the world population. My guess is if two people in the world didn't use bottle caps you still would use them. I don't know where your personal line in the sand is drawn at, I am just suggesting that almost everyone has a threshold.
I believe that the number of people that will boycott a currency just for philosophical reasons is low. The reason for this belief is due to the current fiat money system. People use fiat money even though many of them understand it is terribly flawed. I use USD as a medium of exchange even though philosophically I disagree with the entire concept. Because it is accepted in enough places, I utilize it. The same can be seen with Visa/Mastercard. They are accepted in enough places that I will choose them over something like American Express or Discover even though American Express and Discover may offer lower rates, better rewards, etc. When it comes to currency, popularity matters.
Many people have American Express/Discover along side their Visa/MasterCards because they prefer the former when available but they will use the latter when necessary. The same can occur with BitCoin where you may have some BitCoins and some USD and you will use BitCoin where possible but USD when necessary.
filc: 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.
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.
Because gold, silver, stocks, etc. do not offer security, remote transactions, anonymity and distribution simultaneously. It is my belief that this is why those currencies have not beaten out fiat currencies to date, they do not offer those four attributes simultaneously.
filc: 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?
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?
80% of your wealth may be backed by gold and silver but my guess is that 80% of your daily transactions (grocery store, rent, utilities, movie tickets, luxury goods, airline travel, etc.) are not done in gold/silver. BitCoin can be your medium of exchange while you still use commodities as your store of value; this is not incompatible with BitCoins becoming a popular currency.
People would withdraw their holdings in commodities in exchange for BitCoins for the same reason I am guessing you do with USD, EUR or whatever currency your locality uses. To make day to day purchases like food, cloths, house, cars, etc.
Micah: BitCoin can be your medium of exchange while you still use commodities as your store of value;
Unfortunately there is nothing I want that are sold in BTC's. Furthermore if there was something I wanted it would be easier to use usdollars anyways. I have no reason to carry BTC's or increase my holdings therein.
This repetition is getting me exhausted.
Micah:o make day to day purchases like food, cloths, house, cars, etc.
Except that you can't. Chicken and Egg what comes first?
I'm not quite sure what you don't understand about the growth of a currency. Just because there is no one that offers goods/services you desire now doesn't mean there will never be anyone that offers goods/services you desire at some point in the future.
Person A accepts BitCoins in exchange for good/service A. Person B wants A so he has something to spend BitCoins on and therefore starts accepting BitCoins as well. Person C wants A and B so they start accepting BitCoins. Person D wants A, B and C so they start accepting BitCoins. Person E wants A, B, C and D so they start accepting BitCoins.
If the current BitCoin market has the collection of goods/services available [A,E] but in order for you to start accepting BitCoins the collection needs to be [A,Z], there is still nothing stopping the collection from growing over time until eventually it expands to the collection [A,Z].
You have indicated that this is a chicken and egg situation and I keep describing how it is not. The market already exists, it has already been bootstrapped. The chicken already exists and it can lay eggs. The only thing required at this point for popular usage is growth in the market size which may or may not occur. There is no logical proof that the market for the currency cannot continue to grow or will somehow stop growing.
Once again I am not claiming that it will necessarily grow indefinately, only that it has potential to grow indefinitely. As shown in the two tables previously it is entirely possible that there is a large enough gap in the spectrum of collection sizes for BitCoin to stop growing but that is unprovable.
Seeing that we are getting nowhere, I propose to split the OP question into as small pieces as possible.
E.g.:
1. Do you think that Bitcoins are attractive as means of exchange for black markets?
2. Do you think that Bitcoins are attractive as means of micropayments?
3. Do you think that, given enough users via #1-2 or other uses, Bitcoins may become a major payment mechanism (comparable to Visa/PayPal)?
4. What do you think are the ways for the government to stop its use?
5. Do you think that adding backing by commodity will provide additional benefit without any drawbacks?
Andris Birkmanis: 1. Do you think that Bitcoins are attractive as means of exchange for black markets?
Yes.
Andris Birkmanis: 2. Do you think that Bitcoins are attractive as means of micropayments?
Andris Birkmanis: 3. Do you think that, given enough users via #1-2 or other uses, Bitcoins may become a major payment mechanism (comparable to Visa/PayPal)?
Uncertain, but hopeful.
Andris Birkmanis: 4. What do you think are the ways for the government to stop its use?
Make using it illegal. It will still be used, but this will significantly limit it's growth potential.
Andris Birkmanis: 5. Do you think that adding backing by commodity will provide additional benefit without any drawbacks?
It is not possible to commodity back BitCoins. At best a company could exchange commodities for BitCoins at a fixed rate but this is not the same as backing, this is just selling a good.
filc wrote the following:
... Chicken and Egg what comes first?
Sorry Flic but this one is too easy ... it was the rooster of course!
In regards to AB's questions ...
1. Attractive for black markets? - not really since it isn't as liquid as say a silver dubloons shipped overnight across borders via DHL.
2. Good for micropayments? - sure if there was an established market of merchants and consumers, thats a big if.
3. redundant question with unlikely qualifying statements - yes, good luck on building a user base of over 300 million accounts.
4. government regulation? - covert stings of big traders perhaps, e.g. the gov secretly becomes a big player in the bitcoin phenomenom, after a ten year mission, they come with guns a blazin to their ten best clients whom they've gained the trust of?
5. Commodity benefit? - if you 86 the inflation and tie it to a commodity, I might be interested, but then how would you keep the storage of the commodity secure and decentralized?
I was an e-gold merchant and saw that as the true currency of the future, psst anyone wanna buy a low six digit e-gold account, but it was ahead of its time, perhaps bitcoin cuts a middle ground while the emperor's clothes fade. Once the man is standing naked though, I can't see it competing with other means of payment. In the meantime, I'm all ears, please sell me on the bitcoin!
We are the soldiers for righteousnessAnd we are not sent here by the politicians you drink with - L. Dube, rip
Micah71381: Andris Birkmanis: 1. Do you think that Bitcoins are attractive as means of exchange for black markets? Yes. Andris Birkmanis: 2. Do you think that Bitcoins are attractive as means of micropayments? Yes. Andris Birkmanis: 3. Do you think that, given enough users via #1-2 or other uses, Bitcoins may become a major payment mechanism (comparable to Visa/PayPal)? Uncertain, but hopeful. Andris Birkmanis: 4. What do you think are the ways for the government to stop its use? Make using it illegal. It will still be used, but this will significantly limit it's growth potential. Andris Birkmanis: 5. Do you think that adding backing by commodity will provide additional benefit without any drawbacks? It is not possible to commodity back BitCoins. At best a company could exchange commodities for BitCoins at a fixed rate but this is not the same as backing, this is just selling a good.
As you said I think we largely agree. And I really think that it is good thing what you do and try with Bitcoin. But I want to emphasize again be careful, because it is as Bob Murphy said today in his article about von Nothaus. Von Nothaus merely was a low-hanging fruit on the tree, and Bitcoin might be some branches higher, but don't underestimate the governments ability to climb. If push comes to shove they might even cut down the whole tree... Good luck!
@Micah,
You think I am confused on something, I am not. As someone who's never even heard of the regression theorum prior to this forum post I find that odd that you think I am the one who is mis-undertanding.
The truth is I agree with Mises and Menger in this regard, you do not. You have not made an attempt to critique or refute their argument. In fact you haven't addressed it at all. There is no need for you to continue and repeat yourself as if somehow you'd get a different response from me(Argument ad nauseum). Your graphs and charts logically do not apply to the issue I've raised. I openly agree to disagree with you.
A big chunk of my argument can be found here. It's only 50 pages. If your serious about this write a serious critique on Menger and on Mises and his regression theorum. Then go post it somewhere.
My original problem with the regression theorem was that it didn't hold up in all cases and I provided some example scenarios where that was true. However, after some discussion on these forums it was determined that these scenarios actually do match the regression theorem as long as you don't define "value" too narrowly.
A commodity, as far as the regression theorem goes, does not necessarily need to have consumable value and it does not need to have value to everyone. A commodity only needs to be valuable to someone and for any reason (consumable or not). Traditionally we look at gold as a commodity of value through it's use as a consumable luxury good (jewelry). The key here isn't that it's valuable for a specific reason but just rather that someone values it. Even people who aren't interested in gold for it's jewelry value can use it as a medium of exchange because someone else values it for a reason besides a medium of exchange.
BitCoins meet this requirement as well, just in a different way than gold. BitCoins have value to some individuals and the reason it is valuable to them is of no consequence. If you take the praexeology position on this matter what we can see is that some humans value gold and some humans value BitCoins. Trying to analyze why they value it goes against praexeology. Humans value them both and that's all that matters.
When it comes to building a currency the regression theorem asserts that someone has to value it at some point in history for non-exchange reasons. The regression theorem does not specify why they value it, only that they do. Since we can see that some people value BitCoins currently we can draw the conclusion that BitCoins meet the requirements of the regression theorem and can follow the path as described by Mises to becoming a popular medium of exchange.
Obviously, not everything with value will become a popular medium of exchange because it is the nature of a medium of exchange to gravitate toward a single most useful medium rather than spreading out across several mediums. There are situations of course where one medium of exchange has a desired property yet lacks a different desired property while another medium of exchange has the inverse state which is why we sometimes see multiple mediums of exchange in use.
I believe that BitCoins provide a number of attributes that make it a competitive medium of exchange. It does lack a consumable use like traditional commodity backed currencies provide and this may result in it's inability to become a prominent medium of exchange. However, that is a decision for the market to make whether lack of traditional commodity backing is enough to stop the growth of the BitCoin market or not and not something you or I can accurately predict.
tldnr
You never provided a case where it was even applied.
[edit]
Micah:this may result in it's inability to become a prominent medium of exchange.
So it now you concede that it is not likely to become generally accepted. Thanks for agreeing with me.
I would request you quote me stating that BitCoin will become generally accepted. My position has always been it is possible for BitCoin to become generally accepted. If you like I can quote several locations where you claim it cannot be genarally accepted.
I don't think I have even made claims that it is likely, only possible.
My argument from the getgo was that it will NOT, cannot, and has no potential to become generally accepted. You were the one engaging my claims. Not the other way around. Your the one trying to prove to me it's possible. I'm not putting words in your mouth.
As stated 100000 times over I side with the position as stated in the regression theorum.
See why BitCoins meet the regression theorem here: http://mises.org/Community/forums/p/9853/412316.aspx#412316
If you feel that the regression theorem doesn't apply to BitCoins after reading that post I would like to request that you explain why you feel that way so I can argue directly against your view. The last I can find you posting on this matter is when you claimed that BitCoins had no initial value outside of a medium of exchange therefore they don't meet the requirements of the regression theorem.
My argument against this line of thinking is that BitCoins do have value outside of a medium of exchange to some people. They do not have value to you outside of a medium of exchange. Gold has no value to me outside of a medium of exchange. This does not preclude gold from becoming a medium of exchange.
Maybe start a new post about BitCoin and the regression theorem? I would like to see that debate happen, but once a thread gets this long it becomes too unwieldy for most people to follow. (Since this forum doesn't allow for threaded comments, it would be a good idea in general to start a new thread whenever there is a tangent from the main topic after the first 2 pages.)
Why anarchy fails
No thanks.