How To Use Bitcoin – The Most Important Creation In The History Of Man

[gnome]

Well I wouldn't say it wouldn't allow for it. The problem is the more the economy grows, the more fractions the bitcoins will need to be split into, and once again the primary activity seems to be enriching those that started it or got in early when you could still earn whole bitcoins at a time just by running your computer. In fact, holding bitcoins in reserve while this goes on only accelerates the process by reducing the pool of bitcoins in circulation.

If I've fundamentally misunderstood something about how this all works, please tell me more.

In fact, I'm starting to wonder if this won't serve as a good case study as to the flaws of the gold standard too.

[IMST]

Originally Posted by The_Animus

Could you explain in more detail why it would not allow for economic growth?

Yes. If there's a maximum amount of money to be had that is kept fixed, the economy will not grow. Would you like me to show you why this is using legos?

[Beelzebuddy]

Originally Posted by The Central Scrutinizer

I didn't bother to read the article (ts;dr), but I took the liberty of reporting your post as a Rule 6 violation.

Oh, is that where this thread went? I had nearly concluded that michaelsuede took my "then you should be hoarding them yourself" comment to heart and deleted the thread.

Quote:

the primary activity seems to be enriching those that started it or got in early

Yeah, that's a concern of mine as well. Luckily it's avoidable in the long term - you can always establish other cryptocurrencies using similar means. If bitcoin catches on among the libertari, the new one'll have infrastructure in place to support fast adoption.

Personally I'd like to see one with inbuilt inflation, where coins decrease in value over time. What's that "ideal" inflation rate economists always cite? Something like 3%, innit? Set it to that. That would encourage investing and discourage hoarding; you'd "save" your money by loaning it out again ASAP.

Sharecoin? Lendcoin?

[Almo]

Originally Posted by Beelzebuddy

Which I think is fine - for reasons I won't bother to elucidate here, the introduction of an internet-only currency scheme would come at a net benefit.

Lol.

[Almo]

Originally Posted by The_Animus

You mentioned enforcing its acceptance as legal tender. If I own a business and decide I only want to accept bitcoins and refuse to accept dollars, are you saying the government has the ability to force me to accept dollars?

They do. That's the definition of "legal tender."

ETA: I see someone already answered. Sorry.

[Random]

Looking at this bitcoin stuff, I can see how it would work, although it has problems (the money supply can only be increased through deflation is the biggest one to my mind). I just don’t see why a currency backed by obscure math problems on people’s home computers is superior to one backed by the full faith and credit of the US Government. Of course, I have that same question with money backed by shiny lumps of metal.

[UndercoverElephant]

Originally Posted by michaelsuede

Libertarian News reports:




The article goes on to explain how to use the new currency and why it is superior to all other currencies in existence.

This will change the face of the planet.

This has to be a joke.

When the **** hits the ***, what do you really want bitcoins? I think I'll stick with gold.

[Beelzebuddy]

Originally Posted by Random

I just don’t see why a currency backed by obscure math problems on people’s home computers is superior to one backed by the full faith and credit of the US Government.

Only cash has the US Government's backing, and cash can't be used on the internet. Instead people use Visa and PayPal, which are backed only by Visa and PayPal, both of which will pull their backing at the drop of a hat and make you eat the loss. The biggest problem for small e-businesses is fraud: people using stolen credit cards to buy things, or buying things and then issuing chargebacks. This is especially bad on the seedier side of the internet, where fraud is so rampant that legitimate business is effectively impossible.

Bitcoin transactions can't be easily faked or recalled once sent, which clears up all of that.

[h.g.Whiz]

Originally Posted by The Central Scrutinizer

I didn't bother to read the article (ts;dr), but I took the liberty of reporting your post as a Rule 6 violation.

I took the liberty of reporting your post that contains a copy of his post that you reported.

[psionl0]

Once people start writing their IOUs in bitcoins you will have fractional reserve banking and a boom/bust economy similar to gold standard days.

[paulhutch]

The Currency That's Up 200,000 Percent

Quote:

The best performing currency of the past year isn't Brazil's real, up 15% versus the U.S. dollar, or Australia's dollar, up 27%. It's the Bitcoin. A year ago one was worth half a penny. Thursday morning it hit $10.50. That's a gain of more than 200,000%.

[The_Animus]

Originally Posted by IMST

Yes. If there's a maximum amount of money to be had that is kept fixed, the economy will not grow. Would you like me to show you why this is using legos?

Yes, please show me. However, if you intend on demonstrating this by building something with legos and then running out of blocks I'd suggest you not waste your time.

We don't build things out of paper dollars. We use dollars to trade for materials such as wood or concrete, which we can readily make more of.

A maximum amount of money would just mean that prices would slowly go down over time and the value of that money would increase.

[gnome]

Creating an incentive to save instead of spend... wouldn't that create a depression?

From the article above:

Quote:

Forster began charging 75 Bitcoins for each pair in February and has since had to lower the price to 5 due to extreme appreciation in the currency's value. "I wish I had kept all of them," says Forster, who traded his Bitcoins on the way up for cash and web services.

[sadhatter]

Originally Posted by michaelsuede

I wouldn't call a new 256 bit cyphered peer-to-peer currency "reinventing the wheel"

I would call our current dollar a reinvention of fractional reserve banking, which has been around since bankers learned they could issue more paper than they actually had gold in reserves.

Again, if your going to just say some other cliche that has little to do with what i said, why even quote my post?

I wouldn't be surprised if you had wordpad open with your talking points and were just copy and pasting with minor changes to make yourself not sound like a bot.

How about addressing the fact that your new product simply is a bigger pain in the *** to use? Or do i need to simplify the premise for you?

[Myriad]

My question is, will the value of bitcoins be indexed to other current Internet currency standards, or will there be a floating exchange rate?

I'm curious because I'm currently heavily invested in WoW gold pieces, and might want to diversify.

Respectfully,
Myriad

[UndercoverElephant]

Originally Posted by Myriad

My question is, will the value of bitcoins be indexed to other current Internet currency standards, or will there be a floating exchange rate?

I'm curious because I'm currently heavily invested in WoW gold pieces, and might want to diversify.

Respectfully,
Myriad

You're thinking of selling gold to buy bitcoins???

I'll buy your gold...

[Almo]

BitCoin even admits on their site that it's based on a deflationary model. That encourages saving, and discourages capital investment. That's why the Fed targets slight inflation.

Well, that was my understanding anyway. I wish drkitten were here.

[The_Animus]

Originally Posted by Almo

BitCoin even admits on their site that it's based on a deflationary model. That encourages saving, and discourages capital investment. That's why the Fed targets slight inflation.

Well, that was my understanding anyway. I wish drkitten were here.

Many people assume a deflationary model is automatically bad. However, if you look at Japan, which for a long time was the 2nd biggest economy in the world, and has been responsible for much innovative technology, this concept is disproved.

Deflation only really encourages saving if there is large deflation over short periods of time. Someone isn't going to put off buying a shirt because in 2 months they might save $.50.

Just like massive inflation is bad, so is massive deflation. Just like minor inflation is fine, so is minor deflation.

[carlvs]

Originally Posted by Beelzebuddy

... The result can be, imo, used to power an economy on the far side of the internet - where resides darknets and anonymous networks like Freenet, tor and i2p. Currently the only real economic activity going on there heavily involves drugs and stolen credit card info. Bitcoins might give it some legitimacy.

In practical usage, that means using bitcoins for the purchase of money/goods/services will be made illegal as soon as drugs dealers and money launderers find enough bitcoin users to run their respective operations at a noticeable rate...

Well, according to this Wired Article, apparently one Drug-dealing site already has moved to this currency:

Quote:

Sellers feel comfortable openly selling hard-core drugs because the real identities of those involved in Silk Road transactions are utterly obscured ... As for transactions, Silk Road doesn’t accept credit cards, PayPal or any other form of payment that can be traced or blocked. The only money good here is Bitcoins.

(though the frequent use of products from this site may explain some of the views the OP has been posting on this site - and don't get me started on all the conspiracy, 911 "Truther," and psudo-science site links on his libertariannews.org page... )

[Puppycow]

Originally Posted by carlvs

Well, according to this Wired Article, apparently one Drug-dealing site already has moved to this currency:

(though the frequent use of products from this site may explain some of the views the OP has been posting on this site - and don't get me started on all the conspiracy, 911 "Truther," and psudo-science site links on his libertariannews.org page... )

Interesting. I was just about to post this article myself. Maybe these bitcoins do have a use after all.

Quote:

To purchase something on Silk Road, you need first to buy some Bitcoins using a service like Mt. Gox Bitcoin Exchange. Then, create an account on Silk Road, deposit some bitcoins, and start buying drugs. One bitcoin is worth about $8.67, though the exchange rate fluctuates wildly every day. Right now you can buy an 1/8 ounce of pot on Silk Road for 7.63 Bitcoins. That’s probably more than you would pay on the street, but most Silk Road users seem happy to pay a premium for convenience.
‘It kind of felt like I was in the future.’

Since it launched this February, Silk Road has represented the most complete implementation of the Bitcoin vision. Many of its users come from Bitcoin’s Utopian geek community and see Silk Road as more than just a place to buy drugs. Silk Road’s administrator cites the anarcho-libertarian philosophy of Agorism. “The state is the primary source of violence, oppression, theft and all forms of coercion,” Silk Road wrote to us. “Stop funding the state with your tax dollars and direct your productive energies into the black market.”

However, I fear that when an article about this appears in Wired, it's not going to be too long before it gets busted up.

[Almo]

Originally Posted by The_Animus

Many people assume a deflationary model is automatically bad. However, if you look at Japan, which for a long time was the 2nd biggest economy in the world, and has been responsible for much innovative technology, this concept is disproved.

Deflation only really encourages saving if there is large deflation over short periods of time. Someone isn't going to put off buying a shirt because in 2 months they might save $.50.

Just like massive inflation is bad, so is massive deflation. Just like minor inflation is fine, so is minor deflation.

My understanding of Japan's situation is that they are having problems because of their deflation. It has not proved that deflation is ok. And you should note I said nothing about people buying shirts. I said capital investments, like building factories.

[carlvs]

Originally Posted by Puppycow

However, I fear that when an article about this appears in Wired, it's not going to be too long before it gets busted up.

Actually, that seems to had been the consensus in the comments section of the article - however some postings that suggest fighting back by sending "packages" to innocent parties make me kind of uneasy...

[stevea]

Originally Posted by Sceptic-PK

Of course they do. Either you accept the mandated currency of your nation or the government closes your business.

WTF???? Maybe in some goosestepping nazi nightmare. No - that's ridiculous and merits the 'fascist lunacy' misunderstanding award. If I want to set up a shop that only accepts krugerrands of looneys or firewood in exchange I can do so. I can even issue private currency (with come restrictions) and demand it's use.

Printed right on the US currency is states "This note is legal tender for all debts public and private". That does not mean that all contracts involve an exchange of local currency. It means that any financial debt is payable currency. We can agree to exchange any particular items or services - it does not have to be dollars. Now if you fail to supply your half of the exchange then a court may award me some amount of dollars, but that's after a contract breach.

Of course a barter exchange (as someone has already noted) does not relieve the tax burden.

[gnome]

Originally Posted by Almo

My understanding of Japan's situation is that they are having problems because of their deflation. It has not proved that deflation is ok. And you should note I said nothing about people buying shirts. I said capital investments, like building factories.

Exactly. Why start a company and make jobs in order to profit, when you can profit simply by stuffing the money under your virtual mattress and waiting?

[ApolloGnomon]

So there I was, thinking "why would anyone really wanna use Bitcoins?" Then I came across this:

Underground Website Lets You Buy Any Drug Imaginable

Quote:

Sellers feel comfortable openly selling hard-core drugs because the real identities of those involved in Silk Road transactions are utterly obscured. If the authorities wanted to ID Silk Road’s users with computer forensics, they’d have nowhere to look. TOR masks a user’s tracks on the site. As for transactions, Silk Road doesn’t accept credit cards, PayPal or any other form of payment that can be traced or blocked. The only money good here is Bitcoins.

http://www.wired.com/threatlevel/2011/06/silkroad/

[TubbaBlubba]

Originally Posted by Puppycow

Interesting. I was just about to post this article myself. Maybe these bitcoins do have a use after all.



However, I fear that when an article about this appears in Wired, it's not going to be too long before it gets busted up.

There's something too awesome about this - The new, high-tech libertarian currency... Backed by the entire wealth and credit of the drug industry!

[lomiller]

Originally Posted by The_Animus

Many people assume a deflationary model is automatically bad. However, if you look at Japan, which for a long time was the 2nd biggest economy in the world, and has been responsible for much innovative technology, this concept is disproved.

Certainly Japan flirted with deflation during their “lost decade” but it isn’t called Japans lost decade because their economy was thriving...

[UndercoverElephant]

Originally Posted by paulhutch

The Currency That's Up 200,000 Percent

PONZI PONZI PONZI PONZI PONZI PONZI....

I think these people who are getting excited about bitcoins are completely insane.

This "currency" is backed by absolutely nothing, and is totally dependent on the complex infrastructure of the modern industrialised world. It's exactly like gold, except for when everything goes screwy (and its looking well dodgy right now) you are left with....a file on your PC worth precisely nothing at all. "Virtual gold"....no thanks. It's like "owning gold" where you pay somebody else to store the actual physical gold whilst you hold on to a piece of paper. Great while The System is still up and running but absolutely useless if you think it is going down. And it *IS* going down.

Fools and their money are easily parted. If you want to buy drugs from some online website then sure...use bitcoins. If you want to preserve the value of your wealth against hyperinflating paper currencies then buy gold. Seriously...these people are bonkers.

[Sceptic-PK]

Originally Posted by stevea

WTF???? Maybe in some goosestepping nazi nightmare. No - that's ridiculous and merits the 'fascist lunacy' misunderstanding award. If I want to set up a shop that only accepts krugerrands of looneys or firewood in exchange I can do so. I can even issue private currency (with come restrictions) and demand it's use.

Printed right on the US currency is states "This note is legal tender for all debts public and private". That does not mean that all contracts involve an exchange of local currency. It means that any financial debt is payable currency. We can agree to exchange any particular items or services - it does not have to be dollars. Now if you fail to supply your half of the exchange then a court may award me some amount of dollars, but that's after a contract breach.

Of course a barter exchange (as someone has already noted) does not relieve the tax burden.

Oops sorry, I was confused with businesses trying to create competing currencies.

[michaelsuede]

There are two types of deflation.

One type is where the value of money increases because the productive capacity of the economy has increased.

More goods in circulation while the supply of money remains constant means the value of the money goes up (ie, prices come down). This is what we see happening in technology markets where there is very little State intervention.

This is entirely normal, healthy, and beneficial to consumers.

The other type is due to defaults in a fractional reserve ponzi scheme.

Which, depending on who you happen to be, is generally considered to be a bad thing by Keynesian economists. I on the other hand argue it is simply bankers getting wiped out when their criminal debt pyramids collapse. So I personally see both types of deflation as a good thing.

[Beelzebuddy]

Which type of deflation happens when someone with a great deal of purchasing power corners the market on the currency, thus forcing deflation and making their exorbitant wealth even more exorbitant? 'Cause that's what people tend to worry about with bitcoins, here.

[gnome]

What Beelzebuddy said, plus I suggest even your first option is not necessarily beneficial because it encourages hoarding over investing. (I'm using "hoarding" here to mean 'keeping without using')

Does anyone know what the initial conditions of the bitcoin exchange were?

Did everyone start at zero when "mining" and transaction validation began?

What if the first accounts were given an initial supply--and if so, how large was that supply?

[michaelsuede]

Originally Posted by Beelzebuddy

Which type of deflation happens when someone with a great deal of purchasing power corners the market on the currency, thus forcing deflation and making their exorbitant wealth even more exorbitant? 'Cause that's what people tend to worry about with bitcoins, here.

Think really hard about what you just said.

If a person buys up bitcoins and drives up the market, it is impossible that they have profited from the bidding up of the coins.

If they were to sell all of the coins, they would make no profit.

Keeping everything else constant, prices would fall by exactly the amount they drove up if they were to sell the currency. Only if prices go up after the person had finished buying (unlikely) would they make a profit if they were to sell all of those coins.

Your argument makes no sense, since logically speaking, it could be done to any stock in the stock market.

[Beelzebuddy]

Originally Posted by michaelsuede

If a person buys up bitcoins and drives up the market, it is impossible that they have profited from the bidding up of the coins.

If they were to sell all of the coins, they would make no profit.

And you like to think of yourself as an economist? This is operating in libertariland, right, where the markets are infinitely flexible and everyone acts with perfectly-informed rational self-interest?

[michaelsuede]

Originally Posted by Beelzebuddy

And you like to think of yourself as an economist? This is operating in libertariland, right, where the markets are infinitely flexible and everyone acts with perfectly-informed rational self-interest?

If I can see why driving up a stock by buying it doesn't actually get me any profits, and the rest of the entire world can see why doing so does not actually generate any profits, I think you are the one who operating in krugmanland.

If what you suggest actually worked, we would see every penny stock in the stock market explode in value overnight as everyone rushed out to buy up cheap stocks to make "profits"

Clearly such actions would be ridiculous.

[Random]

Originally Posted by michaelsuede

If I can see why driving up a stock by buying it doesn't actually get me any profits, and the rest of the entire world can see why doing so does not actually generate any profits, I think you are the one who operating in krugmanland.

If what you suggest actually worked, we would see every penny stock in the stock market explode in value overnight as everyone rushed out to buy up cheap stocks to make "profits"

Clearly such actions would be ridiculous.

Yeah, you can’t really make a profit yourself by buying up stocks, gold, bitcoins, or some other commodity and then selling them on your own. The way to do it is to quietly buy up the commodity at a low price, then convince a bunch of other people to buy up the commodity, raising its price. Heck, once the price goes up you can use the fact that the price has gone up to convince more people to buy driving up the price even higher. Then you quietly sell off the commodity that you bought at a lower price.

Pump and Dump^WP

[sadhatter]

So instead of stock market ******** making a killing by screwing over other people, we have internet business ******** making a killing by screwing over other people.

Your libertarian utopia brings a tear to my eye, it is just so awesome and perfect. Not at all just a different group of idiots trying the same thing.

[Aepervius]

Isn't bitcoin anyway a bit of a pyramide scheme ? The initial people had to do very few work to generate them, the more people come in the more CPU is needed for 1 bitcoin, and the one from early adopter is worth. As time pass and new bitcoin are generated, the new comer have to give disproportionally more CPU power to get the same amount of "money".

That is how I see it at least.

[lomiller]

Originally Posted by gnome

What Beelzebuddy said, plus I suggest even your first option is not necessarily beneficial because it encourages hoarding over investing. (I'm using "hoarding" here to mean 'keeping without using')

Agreed. It doesn’t matter if deflation is created by a general increase in productivity. If the purchasing power of my money drops when invested and rises when I keep it in my pocket I’m not going to invest it and will hold off on any purchase as long as possible.

When everyone does this (as they should) all that extra productivity means is that there are more goods sitting around un-purchased so their value drops even more and no reason to invest in new productivity gains because the there is already more then you can sell.

[BenBurch]

Senate hearings into bitcoin appear to be on the table.