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BitCoin Seen Through The Eyes Of A Central Banker
To us, the ECB's superficial, amusing take on BitCoin was merely a source of (Friday) humor. To others, such as Tuur Demeester, the ECB's report on "Virtual Currency Schemes" which was merely a confused attempt to validate the Euro by bashing a prototype electronic currency that others have written far more informed articles on, has far more profound insights into central banker mentality. We are skeptical: the ECB has far more existential issues to worry about than whether people will be paying for that house in Calabria with BitCoin (they won't; at least not any time soon), such as how fast until Spain and Greece run out of rehypothecatable and repoable assets, that allow the ECB to continue creating its own version of electronic money (in this case named Euro) out of thin air. But for those seeking more than what meets the central-planner's eye (because what better ploy than to divert attention from where it truly needs to be focused: such as Spanish bonds for example getting a 0% haircut instead of 5%), here are some answers to the question whether "the CB’s toolbox have what it takes to contain a private, decentralised cryptocurrency? Or: Bitcoin seen through the eyes of a central banker."
From Tuur Demeester: "The Gloom Of Central Banking"
On october 29th 2012, the European Central Bank published a 55-?page report titled “Virtual Currency Schemes”. With 183 references in the text, it seems obvious that specifically the fast growing peer to peer currency Bitcoin is under scrutiny.
Why in the world, one wonders, would an increadibly powerful financial institution bother to investigate what seems to be nothing more than a complex mathematical puzzle with which a bunch of whippersnappers send packages of bits and bytes back and forth to each other?
In what follows, I sketch an evolution of how central banks—the monopolists of the current fiat money paradigm—have dealt with the existence of online free market competition since 1996, and how they are now reacting to the sudden appearance of an enigmatic rival.
It turns out not only the ECB but also its more powerful and sophisticated Swiss godfather, the Bank for International Settlements, finds that it has genuine reasons to be on high alert.
Be warned that this is a subjective take on the issue. People from central bank and government circles will no doubt accuse me of being unbalanced and unfair in my interpretations and conclusions. So be it. My goal here is to scrape off the veneer of these reports and thus catch a glimpse of what may actually be happening behind the closed doors of Basel and Brussels.
Full report (pdf)
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no. in the same lights out crisis i would buy potatoes with cash or cash equivalents (physical notes, coins, pm coins). btc doesnt have cash equivalents; thus, when the power grid is out, you have no bitcoins; just like you would have no credit/debit in the current situation but at least you have cash which is linked to the dr/cr. what do you have w/ bitcoin when you local grid is out?
nobody is advocating that ppl don't hold some cash in hand here. the name of the game is long-term hedging against the fiat tsunami & kapital kontrolz
Physical bitcoin: https://www.casascius.com/
It is because they can exchange their bitcoins for any currency, buy a sack of potatoes, sell some the potatoes individually for bitcoins, eat a few of the potatoes and sell the rest for cash. And whenever the Troika tries to takeover a sovereign nation by stealing all of its money that nation instead say fuck you bernanke and begin using an international currency like bitcoin. And, if it so chooses it can establish its own Greek version of bitcoin within a month and then say fuck you bernanke.
huge assumptions. how do you do all that when your local power grid is out? at least in the current fiat system you have physical cash that is linked to your electronic debit/credit. the point being made here is that virtual currency that is de facto global currency is unworkable w/o the technology on which it relies; thus the need for alternate physical equivalents, hopefully pm coins.
Sooner or later, ALL business/financial transactions are gonna be encrypted, just to avoid the taxman. Further study of encryption and transaction protocols by everyone are warranted.
remember, remember, the fifth of november
I am a broken record on this topic but I think they should develop a currency tradable in an energy unit such as the calorie, joule or kilowatthour. It wouldn't be deflationary since there is a long way before we are limited in how much energy we produce, it is the only scientific measure of work or effort, which money is supposed to be, and everybody knows how to measure it.
I think they should develop a currency tradable in an energy unit
That's not a bad idea. Now, get up and make it happen.
Until "they" becomes "me," you are not free.
Good point. I do own a small power producing company. Maybe I'll start there.
central point of failure--> jailtime for you buddy
Already happening in some parts of New York City and New Jersey. What? you stockpiled gasoline? guess what? you are now the "richest" man around. Fuel was always part of an "emergency preparation kit" the last time I checked. Didn't these fuckers listen to bird bird?
Whenever I see our hyper-urbanized society choke on the top heavy supply lines that make it possible, it scares the shit out of me to think of a war or disaster bigger than this one. Sandy was fair sized but it isn't tough to imagine events that could be far more dramatic that could take some of these uber-densely populated places reliant on a huge stream of food, fuel and electricity and really turn them into a Snake Plissken playground.
Tonight's Blockbuster Movie "Disaster", is brought to you by Denial, Willful Ignorance and Irrational Optimism.
Bitcoins are a form of kiloWatt hours of electricity. The cost to "mine" them is directly related to the cost of electricity. If central banks or governments tried to get in on the mining, they would break the relationship and find it's unprofitable for them.
It costs KWh to make them but that doesn't mean they're magically tethered. In fact, when the ASIC miners hit the market, electricity cost will become irrelevant for a while as the capex for the mining rigs will dominate. And in the past, bitcoin has traded both well above and well below mining cost. They just don't track very well for a lot of reasons.
Furthermore, we are presently in the "high inflation" period for bitcoin, and that is going to slow. The BTC you can generate per KWh will continue to fall until eventually they are all mined.
I too will continue beating this drum until the idea percolates into mass consciousness. It's such an incredibly *obvious* idea at this point that I find it a bit surprising no one's managed to get it on the teevee yet.
I think the main barrier is science illiteracy.
The beauty of this approach is that it would really steer us away from foolish low EROEI sources of fuel like corn ethanol.
Science is difficult to control. It's DISRUPTIVE by nature. Best for the dominant power-institutions to keep people away from it. It seems the most popular approach these days is to make it seem frightening and dangerous.
(See also: Galileo's excommunication.)
Bitcoin is effectively that currency. It's value comes from the fact that "mining" bitcoins is compute-intensive, and those compute cycles actually cost money in terms of hardware are electricity -- energy.
The number of possible bitcoins is a fixed "resource" due to the nature of the math behind them, and it takes energy and equipment to mine them. This should sound familiar to those here as it has much in common with other commodity-based currencies (e.g. gold, oil). Bitcoin is synergistic with other commodities and is about as anti-fiat as it gets with an electronic currency. If Ben had to "print" bitcoins, he'd rapidly find himself needing the output of every power plant in the country to power compute engines.
BTC isn't without its flaws, but it's making an impact far beyond what you might imagine. This is well worth the read, and the conference discussed is likely where some of this central bank report came from: http://blog.bitinstant.com/blog/2012/9/15/brazil-and-the-global-payments...
This quote in particular should raise some eyebrows:
Sounds promising but I am a bit leary of currency based on a complicated algorithm that some plutocracy could potentially hyjack. Not to say it's happening, so please don't flame me.
Voting machines come to mind where some complex "AlGoreIthm" is used to add up the votes in elections and the software is proprietary. Holy shit if that doesn't scare you, that you need mysterious black boxes to add numbers that every other civilized country in the world does by manual humans counting ballots, what would?
In short, the more direct the link between the value of a currency unit and some other objective measure that can't be fiddled with, the happier I would be. This is why commodities are attractive. Energy is a commodity, but its value is related to physical effort.
The plutocrats can't hijack it because the btc miners would have to accept any change to the protocol. What the plutocracy will eventually do is buy up the btc and start mining. This is the new banking system. Sounds like a joke, just as linux and wikipedia sounded like a joke in their 3rd year.
That's one approach, but it requires a level of understanding that likely escapes the plutocracy at the moment.
I expect they'll outlaw it first. Obviously no one is concerned with the impossibility of enforcing such policy.
Yea they got another problem. They better hurry the fuck up! Soon there won't be enough new BTC to make any difference.
BitcheZ
You mean once 50% have been produced? As I understand it, the mining process is also the maintenance of the system, that keeps and maintains records of all the transactions. If this is correct, the miners are essentially a utility that will be required to exist, even once all the bitcoins have been mined into existence.
At any time, if someone threw enough paper money at it, they could become the dominant miner, making it too costly for others to maintain the system; in effect, the bitcoin system could potentially become dependant on a single large entity.
If the miners are only for introducing new bitcoins, and are not required for upkeep, then this may not apply.
Ya - mining is also the verification system - however, once all coins are mined, then the system allows for miners to charge for verification. Those with high capacity may charge more, if you dont mind it taking a while you could probably get it done for free or close to it.
I doubt it will ever fall under control of a dominant entity - the users have a vested interest in preventing that from happening.
The people who use the system will have an incentive to do mining, to help prevent abuse. Because private PC's are often left on - then its almost cost free to set aside some processing power to insure the systems integrity.
If you read Satoshi's paper, even if you get over 50% of the network, all the power you have is to double-spend the btc you already have. There are checkpoints in the transaction ledger (blockchain), and you can't rewrite history: those that had the btc will still have it.
And if you get that much computational power, your incentive is to profit from it. But in an brutal fiat attack they could get, say, 80% of the network, drawing immense worldwide attention to bitcoin (not only bitcoin nerds, but *all* of the tech world will be talking about it even if Murdoch tells his muppets to shut up). This shit will be all over Facebook & Twitter, if only because of the suspense.
Then you have to remember that 90% of the world just doesn't give a fuck about you. Maybe Putin will start buying bitcoin at that point, just to piss you off. Maybe Iran will take bitcoin for oil.
Also, there's litecoin and a whole host of others that would be next in line.
Bitcoin is antifragile. Like the hydra: kill one head, and two will rise.
All they understand is that BTC is NOT under their control, with no way of getting BTC under their control!
> just as linux and wikipedia sounded like a joke in their 3rd year.
A better parallel is the Internet itself. The Internet solved the problem of communication. Bitcoin solves the problem of currency.
Ah, the "cryptography is complex, so I don't trust it" response.
Do you trust your bank? They use cryptographic methods. So does your credit card processor, the swipe terminal at the local convenience store, the card reader at the gas station.
You also have a fear of things represented by charges on a magnetic medium or conducted through wires.
Do you fear your balance stored at your bank on their servers?
You can't 'touch' it either. Try to withdraw it all, and they'll give you strange stares - and if the amount is high enough, prepare some entries on a report to tell the government all about it.
You also seem fearful of manipulation, which is understandable seeing how the dollar and other currencies are tampered with daily. Bitcoin doesn't have that lineage, as its principles are hard-coded into the system, distributed world-wide. Nobody can change the rules after the fact, they can't create Bit-QE, make a Bit-TARP program, or establish a Bit Lane fund to bail out failed financial institutions.
I recommend a second look, it would be worth your time.
The fear comes from complex systems often fiddled with, leading to surprising results. A series of logical legal precedents can lead to illogical outcomes. It's like if you try to smooth a complex function by only looking at local gradients, it doesn't work unless you look at a variety of length scales. Inverting a matrix with Gaussian elimination and back substitution only works on large matricies if there is infinite accuracy (no truncation).
The thing is: there's no complexity in the protocol. Tried and true cryptography with two layers of security. P2P networking that people have been using for 10 years now.
This is how I see it. Computer science is taking over democracy. First was the pirate party. Then wikileaks. Now bitcoin & other crypto-currencies (most are scams). Next up is Open Transactions. Computer scientists are creating the building blocks for a republic. Soon we'll have more and more political parties tied to tech activism; it's just some years down the line (unless we go full totalitarian and WWIII).
BTW you have a great understanding about thermodynamics & economics. This is one of the things that makes me want to kill economists--their complete disregard for hard sciences, what is work, what is negentropy. I don't know if you've read Geoffrey West or seen his videos, but my guess is you'll appreciate them.
The Singularity approaches...
Speaking of which... here's a partial implementation. It's not quite what you're looking for, but it's a step in the right direction.
http://www.kilowattcards.com/
A quote from the site:
well proven strategy: embrace, extend, extinguish
microsoft invented this strategy, and tried to apply it to the internet.
Didn't work. Doesn't work in massively distributed systems, doesn't work when you need the agreement of some random guy (miner) in the phillipines or in russia.
I don't get the fact that seemingly smart people like Trace Mayer, Max Keiser and James Turk are talking about Bitcoin as a legitimate alternative currency despite all having definite biases and motivations. Seems like it could be a method of participating in some kind of currency revolt and I love the whole concept but the idea seems awfully sketchy to me. Now Money Squid indicates the NSA has cracked the encryption? Didn't one of the original developers, among others, get thousands of bitcoins "stolen" a while back? The price/value of these things looks as volitile as the bloody paper silver markets, is this the kind of thing rational people are putting their cash into? Is there anyone on ZH holding bitcoins? I don't like having spare cash in my credit union but it seems a hell of a lot safer than bitcoin. Am I completely off base and is this a viable currency after all?
The best place to answer some of your questions is wikipedia. There have been many bitcoins stolen, but it was in the "old-fashioned" way, similar to getting the password to your bank account of skimming your debit card. Someone got the passwords to bitcoin exchanges and shipped some coin out. The price has been volatile, but the trend has been upward so why complain? It is at 10.5 now and the highest it has been is upper 20s for a few months in the summer of 2011 so very few people are in the red.
The next few months hold significant changes for bitcoins so it will be fun to watch. The difficulty in "mining" new bitcoins is about to explode which may affect the price. I have been mining bitcoins for 18 months and have sold enough to pay for all the hashing power. I am sitting on some to see what happens in the next few months when the ASICs arrive. (I have one on the way) (hopefully)
I do appreciate you skepticism though. I am just dabbling in it for fun, I haven't sold my silver or anything. I think you left out the biggest risk, however: The government will have to fight back, since bitcoin UPENDS EVERYTHING THEY HAVE BEEN FIGHTING FOR SINCE 1913!
the good news is that they will start fighting back when market cap is over 10B. Since market cap is 100m, there's 100x upside. And since someone asked, yes, I have money invested in bitcoin (also have barbarous relics, just for tradition)
Precisely! CONTROL of the munny supply(s) is being challenged by extremely difficult to crack encryption. We'll know that BTC has won when Govt's start criminalizing their usage(s).
In my opinion - this is the ultimate form of money. It will be attacked in every way - its use is likely to be criminalized, and every other dirty trick will be thrown at it. Still - I can't see how they can stop it as things stand right now - as it becomes more successful it threatens banks, governments and the oligarchs - ultimately it has every potential to destroy them all. Something extremely radical would have to be done for them to defend against it - but I wouldn't rule out extreme methods.
Choosing Bitcoins is a revolutionary act - it is also potentially an incredibly profitable long term investment, I certainly own them - along with silver and gold. Silver (and gold) are medium term plays (2-8yrs) - Bitcoins will probably take longer - and I expect extreme volatility, however - there is every chance that Bitcoins will ultimately win the fight. If so, then the value of Bitcoins might be expected to assume the value of all currently traded currencies. So a valuation of say 100-200oz of gold per Bitcoin is the high upside target. This could possibly happen within 10yrs, though I estimate it would take far longer due to the intractable forces that will be arrayed against it - the downside potential is that it drops to zero (almost certainly due to the controllers finding a way to destroy it).
a potential valuation of 100 to 200 ounces of gold per bitcoin. gold is money because it is divisible. how will you buy a loaf of bread with bitcoin or will there be factions like milli- bitcoin or nano-bitcoin.
1btc is actually 100,000,000 units (called satoshis). And we can extend this easily, we don't do it now because it would waste needless bandwitdh.
So, if you want to send 1/100,000 of a $0.01, you can do that with btc, today.
Pardon the cut/paste, but it's just easier:
so where does one buy bitcoin. someone else said the price was currently 10.5 is that dollars, bags of potatoes, gold??
The 10.5 is currently the USD price.
The easiest way to get bitcoins is through a broker like bitinstant. You could, if you wanted, set up your own mining computer and try to mine for a block (which gets a "reward" of bitcoins.)
https://www.bitinstant.com/
various exchanges (Mt. Gox being a big one) will quote in multiple currencies, but it's pretty much totally open. There's sites that will basically hook you up with another person that will give you cash for bitcoins where you meet at a bar or whatever, for example. Check out some of the FAQs and youtube videos on it, it's a very interesting economic system, if nothing else.
Mt Gox offers buy/sell services in a range of currencies. https://mtgox.com/index.html
AS pointed out by others - its highly divisable.
With respect to its possible valuation range - if you were offered a $10 ticket, with a potential payoff of $250,000 (granted, it might be 20+yrs away). But today, the odds seem to be in its favor, why wouldn't you buy at least 1 ticket?
No....you are not off base.
It takes the US dollar years to lose a third of it's value. It takes bit coin only a day or so.....meaning, it's more volatile currently, and subject to speculators just like paper currencies. I would guess the dollar will see its value drop a third in a day eventually. Neither has any fundamental value.
ZH'ers will vote for a digital currency because alot of them are day traders....and are accustomed to "clipping" cheese, without ever really producing anything.
Cracking the encryption won't help you (after all, the code is open-sourced!). The NSA needs the keys to the encrypted messages. The only way to steal BTC is to determine any weak passwords a user is holding and exploiting said password. Choose a long enough password, and even the NSA will run up against the mathematical limits required to perform the vast amount of computations required to break a really long password.
I like it in theory, but I'm sorry. I like my money where it is. Safely at the bottom of the lake.
I too had a boating accident in the same day a hacker stole my bitcoins.
So you prefer your money to be at the bottom of a lake, stationary and discoverable - the "security through obscurity" defense, versus a system that enables you to 'bug out' with your money to anywhere in the world in an hour?
What a curious evaluation of risk and portability.
Dude, it's not really at the bottom of a lake that's just a ... oh hell, never mind.
Second, I'm already where I want to be when the SHTF.
Dead Canary, yes, I understand the metaphor - but honestly I think the "security through obscurity" strategy when it comes to anything valuable is just poor planning, however you execute your 'stacking' plan.
Best of luck to you in your stationary non-mobile hiding place full of dense metals.
Very interesting article. However as far as i understand assets wont exist without enforcing mechanism such as police or army. How is bitcoin enforcing the system?
All bitcoin holdings are recorded in a public ledger, aka "the blockchain". The integrity of the ledger is enforced by a novel application of cryptography, which makes it computationally difficult for anyone to change a transaction once it is recorded to the ledger. Read "computationally difficult" as "impossible".
If you wanted to change the rules so to speak (edit your bitcoin software to give you free coins), your coins would be rejected by the other participants of the system. You could make another crytocurrency of your own, but it wouldn't be compatible with bitcoin.
"computationally difficult"=winning the lottery every week in a row for 4 months
It's more like:
"
If we built a Dyson sphere around the sun and captured all its energy for 32 years, without any loss, we could power a computer to count up to 2192. Of course, it wouldn’t have the energy left over to perform any useful calculations with this computer. But that’s just one star, and a measly one at that. A typical supernova releases something like 1051 ergs. If all of this energy could be channelled into a single orgy of computation, a 219-bit counter could be cycled through all of its states. These numbers have nothing to do with the technology of the devices; they are the maximums that thermodynamics will allow. And they strongly imply that brute-force attacks against 256-bit keys will be infeasible until computers are built from something other than matter and occupy something other than space."
-- Bruce Schneier
+1 Though I didn't check out the link.
Bitcoin's Mojo would appear to be rising.
http://tradewithdave.com/?p=12962
Bit coin has been proven to be terribly flawed.
Even if the inter webs are not shut down.....it can be hacked
... he says hopefully.
Send me some Facebook credits.....and I will find some merit in your comment
Bitcoin is hacked.
http://www.theverge.com/2012/9/27/3418022/bitcoin-exchange-bitfloor-back-online-after-hack
It happened at least once, could it happen again?
Oh smiler03, I must smile like your namesake, because it seems you confuse the security of a transaction processor with the actual underlying protocol.
Let me offer up an explanation that will strike home.
If your local bank branch gets robbed, do you stop using dollars and credit cards?
If your credit card processor has a breach of user accounts, do you swear off all other cards as well?
Because that is what you are suggesting with this trading website and bitcoin. How absurd.
Hi Timm,
I probably am stupid because I don't see the analogy. If my bank or credit card issuer charges me for things I haven't bought then I have their guarantee as well as a Government backed guarantee that I will be reimbursed. If somebody "stole" my bitcoins, how would I get them back? I don't "trust" that I wouldn't be defrauded, am I missing something? I'll appreciate it if you can enlighten me.
Regards ;O)
Incidentally, I found several more "hacking" like incidents on the Wiki entry:
http://en.wikipedia.org/wiki/Bitcoin#Theft_and_fraud
That's like saying that gold is bad because it has been stolen or because of tungsten. Theft and fraud.
What a sack of shit.
That's like saying Christianity is good because a church gives some food to the homeless or because of salmonella. Theft and fraud.
GIGO
what does bitfloor's insecure wallet practices have to do with the bitcoin system? all it shows is that you should secure your wallet and not leave unencrypted copies of it lying around. oh and for the record its not the first time a stupid amount of bitcoin has been stolen due to insecure wallet handling practices, bitfloor is just one of the most recent. doesnt affect the fundamentals one bit - never has a bitcoin been 'stolen' without handing the theif the private keys whether by accident or as part of an inside job.
Ah, the "it will fail just because, uh... because" response.
Bitcoin relies on cryptographic methods, and is distributed worldwide via peer nodes that talk to each other constantly.
Your bank relies on cryptographic methods and isn't distributed worldwide, on a proprietary network that is slow and requires flawed humans to operate it.
If bitcoin was 'hacked', then your bank is 'hacked'. Everything that uses crypto would be 'hacked'.
Starting to see how that would be ridiculous and improbable?
Oh, and if any crypto method was compromised, bitcoin can change over rather quickly. How fast does your bank respond to intrusions and compromises?
Hint: Not very well, and they still have holes in their systems.
Ah, the "I am a total sell out for bitcoin hoe" response. Well done. Funny how you seem to have all the answers for Bitcoin's problems. Lemme guess, you put a shitload of money in just before it tanked now you're desperate to get the price up to sell off at less of a loss?
I pray to the gods for a collapse in price; market cap is 100m now, if it went back to 20m, god I could stack so much more btc.
I'm a bit embarrassed for you, Money Squid.
Emotional insults, honestly? How far do you think that'll get you here?
People actually read the comments on these articles carefully, and comprehend when someone is just attacking for no purpose.
As for BTC trading, I suggest you look into it yourself. I don't open my books to strangers, but if you need some kind of assertion, I can say that I'm just fine - and pretty satisfied with the adoption rate of bitcoin so far.
My personal suggestion is you divert a portion of funds into bitcoin before either the dollar devalues at an alarming rate, or other interests decide to increase their holdings.
NSA cracked the code. Hahahaha. Hilarious. If ANYONE cracked the code you'd see a price collapse similar to the one I covered here: Bitcoin Report Volume 8 - (FLASHCRASH) .Nope. The price is holding up just fine, check the Mt Gox Market Data
Welcome to the party Tyler. I guess a year late and a Bitcoin short isn't that bad. Time to start doing Bitcoin videos again.
Silver For The People
http://www.brotherjohnf.com/
The Bitcoin Channel
http://www.youtube.com/user/BitcoinChannel/featured
Blast it! It's NOT the code that gets cracked, it's weak passwords. The source code is available for all to read and try to exploit, but without my passwords/keys, knowledge of the algorithms WILL NOT help you!
Good to have Tyler's supportive coverage. A look back at BTC-related comments on ZH shows a lot of ignorant responses made by others.
Even if the ECB, Wired, and The Economist beat ZH to the punch, at least ZH never did bitcoin the disservice of trashing it.
A three year chart does it for you.
Bitcoin has already gone thru it's hyperinflationary cycle
It's just that the "techie" cheerleaders here were probably already involved before the spike in June of 2011 and didn't get burned in the Bitcoin bubble....ala dotcom insider sell-off
AgShaman, you don't seem to be making sense - anything that goes through a hyperinflationary period usually ends up worthless and non-tradable.
Bitcoin is trading in increasing volumes and on a constant trend of adoption, so your statement can't be correct.
Usually....or because you say so? Now you are just being silly.
I think my statement is correct....the charts do not lie. Even if bitcoin survives and trades range bound from $10-11 for the rest of it's existence....the moment in time I speak of did still happen.
When it's exchange rate fell from $30 to $3 in 2011....it should've required 10x more bitcoins to make the same purchase as two months prior....that's 1000% inflation in few months time.
I consider this a hyperinflationary event....do you?
Set your personal feelings aside...or bring forth the lesson I'm missing in what constitutes hyperinflationary.
You seem to think I want bitcoin to fail miserably.
I'm just trying to bring the facts that I'm perceiving
I pulled this piece on BitCoin. I already had a pretty good understanding of how it works.
How To Use Bitcoin – The Most Important Creation In The History Of Man | Libertarian News
I learned some good new usefull info.Re; security,merchants that deal in it ect... Hope it helps. I personally, do not trade BitCoins, just like to be educated about how they transact.
I like the title of that article - and if Bitcoin actually does what it says it does, then I would agree - there have been no other inventions that surpass it (though because computers are required - perhaps they count as well :P ).
The only reason not to go all in BTC - is because I think it will take longer to wind up speed than silver, and because I'm not yet ready to fully trust it - for it to take off, it needs to break the trust barrier, which requires performance over time.
Even though I understand the printing technology behind the production of FRNs, I'm STILL forced to acc ept them, even though I have zero faith or trust in them.
The Great Implosion™ will be the game changer that forces the Ignorati to re-evaluate their faith in FRNs or other fiat munny.
I have a suggestion for those that want to continue stacking Precious Metals versus using bitcoin.
Have you considered doing both? What I mean is, convert fiat dollars into bitcoin, and use bitcoin to transfer funds for various purposes, not holding a balance long-term.
It will enable you to make a transaction any time, and you don't have to keep a balance if you don't trust the future prospects of bitcoin. With the existing network of bitcoin transaction processors, you may even develop trading partners that accept bitcoin to ship you coins or bars.
Best of both worlds, PM's in your hands and rapid global transactions handled by bitcoin - not on record for prying eyes via ACH and SWIFT/IBAN systems or various three-letter agencies that might want to know who has lost faith in fiat.
Hell, if you could bankroll it - why not become a gold trader and cut out the other middlemen using conventional payment systems? Clearing transactions in about an hour versus days sounds pretty sweet to me.
So....then I can use bitcoins to buy ounces of gold and silver?
Thanks, what an excellent idea for anonymity...when can I start?
Well, most people use Google to find what they want - perhaps start there?
I'm sure you're alluding to anonymity in taking physical delivery - that problem has its own pitfalls, but it certainly hasn't stopped people from doing personal trades.
I was being sarcastic....and referring to the stupidly ridiculous premiums associated with making gold and silver purchases using bitcoins.
A 20% difference or more in fact vs using cash (which, contrary to the uninformed, can be accomplished with secrecy)
Bitcoin and federal reserve notes are the same animals, not sure which of the two is worse. It's funny to me how people who believe in real money can still be brainwashed into thinking that digital currency can be an alternative. Get out of digital while you still can...
How the hell are they the same animal? One can be printed ad infinitum and one is strictly limited in supply. There will never be more than 21m Bitcoins (each divisible to 8 decimal places) in existence. FRN's can be, and regularly are forged whilst, to date, not a single Bitcoin has been forged nor is one likely to be forged in the future.
If you actually believe that - then you have totally misunderstood BTC. BTC has ALL of the properties of gold - it is insanely good money - potentially the best - the one thing it doesnt have, is physicality.
The way I see it - gold and BTC are equivilent, and each has its one singular unique vitue - gold is physical, BTC is virtual. That allows gold to exist regardless of conditions, and it allows BTC's to be instantly transferred over any distance. To me - the vitues of each are equivilent - and in every other way they are equivilent.
BTC has ALL of the properties of gold
Impossible. In fact you admit this later in the comment, contradicting yourself. Understand that digital currency has no intrinsic value, just like paper currency. If I'm smart enough I can make a new Bitcoin alternative tomorrow. There is no limit, in theory there can be many more bitcoin alternatives than dollars. Inflation is not a phenomenon invented or created by government, it can exist outside government just as well. That's why the free market came up with gold as the best solution to the money problem. This is not a coincidence, people seem to not get that.
TWSceptic, yes - you could make an alternative crypto-currency - but you are tragically ignoring the size of the existing bitcoin network.
Put simply, nobody would know what your currency is, and subsequently, no one would participate in your network. These 'votes' by node processors is what makes the network what it is - each node participates and secures the electronic ledger via computationally intensive cryptographic methods.
So, while you may be able to make as many copies or 'forks' of a crypto currency, you'd be overshadowed by the existing users of the bitcoin network. It would be up to you to convince people to participate in your network.
The 'inflation' you speak of using multiple 'forks' of cryptocurrencies seems to underscore your misunderstanding of how the system works.
Sorry, despite your best efforts you can't duplicate 'printing money' as well as the Federal Reserve can.
That is why gold rules the physical domain, and bitcoin will rule the virtual domain.
You can count on that.
I didn't contradict myself, you just don't know how to read a sentence. "ALL of the properties of gold ... except physicality". Same sentence.
Gold does not have this so called 'intrinsic' value you ascribe to it - perhaps you are a Keynsian or follow some other equally misguided ecnomic philosophy. Nothing has 'intrinsic' value, the only value that anything has, is value that is imputed to it by human beings. Thats one of the basic tenets of Austrian economics, and I tend to think its correct.
Gold has value because human beings selected it as being the economic good with the highest marketability, a good that basically everyone wanted and could be exchanged for any other good. Thats why gold was valued, and because of its other monetary properties (those 'monetary' properties which I referred to above when speaking about BTC and gold) - divisbility, easily recognized, portability etc - BTC has these properties in spades.
Yes, its true - BTC can be destroyed more easily than gold, but gold can be stolen more easily than BTC, and its easier to pass off a tungsten coated bar than it is to pass off a fake BTC.
That sentence made no sense, you might as well have said "I have all of the properties of an atheist, except I believe in god". It has none of the properties of gold, no exceptions.
It's more correct to state that it has almost all properties of fiat money. BC is more dangerous than $ and I predict many will lose a lot of their wealth because of it.
FWIW, there does appear to be Phyz Bitcoin:
http://upload.wikimedia.org/wikipedia/commons/1/19/Bitcoin-coins.jpg
http://upload.wikimedia.org/wikipedia/commons/d/d5/Bitcoin-coin2.jpg
Looks like the second image might actually have the encrypted information on it that give a BTC its value -- the first image looks like a handful of slugs.
Central Banks would be underestimating things if they believed any one technology is in the process of undermining them. This is a spontaneous arising of a multitude of technologies that will bring them down.
Once a unique item exists in the open no need to pay those terrorist degenerates any longer. Fuck You Bernanke
The future is but one solar flare away........
Oh my, the "global catastrophe" response.
You'd have bigger problems, but I'm amused your worst case failure scenario for bitcoin means the whole planet would be electrically dead. Perhaps you're trying too hard?
For what its worth. Solar flares are usually regional, like the Carrington event in 1859 (US & Europe) and Canada in 1989. It is known that huge solar flares could theoretically wipe out transformers that would take years to replace, not necessarliy everywhere at once.
So, I guess we're agreed that if something took out a major portion of the network, then it would route around the damage? That is what happened in 1989, didn't it?
Thanks, you've just shown how all the nodes on the other side of the planet would've kept the bitcoin network humming along, safe and sound.
Decentralization really makes a lot of sense in that respect, doesn't it?
Should I sell my gold when some retard tells me about asteroid mining?
no, it should be when some retard tells you about a kind of bacteria that poop out gold, or perhaps the fact that certain nuclear reactions can produce fresh new gold from other materials. :D
The ECB isn't worried about a currency with a valuation of just a $100 million -- but it will finally be a blip on their operational radar when bitcoin reaches a valuation of $10 billion. That's not really all that difficult for a currency that can be used everywhere on the globe -- from Tennessee to Tanzania.
With that level of increase, your 2 bitcoins purchased today for under $25 would then be worth the same as an ounce of gold, as the supply of bitcoins occurs at a fixed rate regardless of demand.
Will your future self regret you not picking up a few tens of dollars worth of this commodity if these concerns by the ECB do end up becoming reality?
Wow, disappointed to see this on ZH and even more disappointed to see the gullibility of so many regular posters whose opinions I normally respect. Tell you what, send me your USDs (which I will take and exchange at the LCS) and I will gladly send you some Duke Dogs to do with as you see fit. Let's replace something intangible with something even more intangible and derived from absolutely nothing.
I suspect many of the original founders/owners of this ponzi scam are are especially busy on ZH today. Will give me a great opportunity however to add to my list of posers - thanks for that at least.
You know what's really interesting?
It's interesting that you think so highly and above everyone of yourself that you are willing to dismiss opinions of several as you put it "many regular posters whose opinions I normally respect" without even doing any research or having any experience with the object of discussion just because of some of your own preconceived assumptions based on highly limited knowledge in this particular field of computer science.
I wonder where the world would be today if everyone did the same.
Hazek - in my opinion you totally nailed it.
My initial gut reaction to BTC was total indifference - the initial info I had didn't show me any difference between BTC and say FB cash. However, when someone explained to me it was encrypted, unbreakable and had a fixed limit - then I got real interested and researched it myself.
People tend to get stuck in their paradigms - its why the world is now controlled by a handful of people - time for people to go do some solid research on BTC imo.
I usually dont like to tlak to people - the reason is simple, if I wanted to hear their opinion I could just turn on the TV and get it direct from the people who gave it to them.
In order to understand BTC, you have to have knowledge of several things:
1. Crytpography, i.e., information-hiding.
2. Information theory and its relationship to munny.
3. Transaction protocols.
4. Mathematics behind exponential functions.
5. Computational power and the limitations of it.
See anything on that list that does NOT require a large amount of thinking? Once any given member of the Ignorati is able to exchange an amount of BTC for a cheeseburger, the Banksters will have lost!
Duke Dog - haha, nice, the "make up my own currency" response coupled with "I'm afraid of virtual representations of value" strawman.
No thanks, I'll stick with bitcoin, its expanding network, the security of a global peer-to-peer decentralized system.
You can stick with your green paper that is subverted daily, thanks to the federal reserve and fractional reserve banking practices.
Don't worry, when the time comes I'll give you a good quote on converting paper into bitcoin, I'm not one to hold a grudge.
Timm, apologies for putting this here, it could be anywhere but I just thought of it...
So many things over the years which were seen as impossible or will last forever have turned out not to be. The German Enigma code, the Higgs Boson, the age of the Universe and similar. Howabout a future chip which could run a trillion times faster than a supercomputer? Just curious.
The bitcoin developers have work even on science-fiction quantum computing breaking down elliptic curve crypto (if it happened today, the 2nd layer of protection--hashing of public keys--would still hold strong). Cryptographers are paranoid people--and they know what they're doing.
I don't know much about crypto, but whenever I see someone ask about using faster computers the response usually goes something like... "Assume you have the smallest, fastest chips theoretically possible, and you use them to build 10000 computers each the size of the sun. You should be able to crack it in a bazillion years."
That's not to say the algorithms can't be broken some other way, but they're usually pretty confident about brute force attacks.
Smiler03, I can only nod and gesture at this point - because it has become readily apparent that any posts you have on the subject are only to go further and further out on the branch of improbability.
Please, if you don't like bitcoin - don't participate. I'm sure we can accept the loss and move on.
language is intangible, happiness is intangible, an orgasm is intangible.
I agree that the gold rise is about to happen, with all that's going on. But if you study bitcoin, you'll see that it's a complement to PMs/real state/farmland.
Stuff on the internet starts as a joke. Linux, Skype, Wikipedia, google.stanford.edu, dropbox, etc. Even zerohedge applies.
Here's why:
http://en.wikipedia.org/wiki/Disruptive_innovation#The_theory
Bitcoin doesn't have a state of the art military to back it's currency.
Now if bitcoin had a "marines" or a "navy" or "airforce" or "army", then bitcoin may have a chance.
What are they going to do? Eradicate every single peer across the entire globe? Because that's what would need to happen to shut down Bitcoin..
Your response is pedestrian.
The infrastructure of Bitcoin would be dismantled.
The example of the military is a metaphor of might. If you think the US government would let bitcoin compete, then fair enough.
I think the US government would use its ability to eradicate bitcoin if it ever posed a problem.
1. your argument also applies to gold
2. do you realize that the 16-year old sons of the generals and politicians are playing with bitcoin internet-money as we discuss here? do you realize that politicians can be bribed with bitcoin and they only react to situations, meaning that bitcoin's price will grow 100-fold to at least 10Billion market cap before they wake up? Do you realize that people all over the world are mining and using bitcoin?
Prepare yourself for awe if you open this in google chrome: http://www.weusecoins.com/globe-bitcoin/
Aahhh, I don't have Chrome...Thank God.
http://www.weusecoins.com/
Good Q&As at that site.
better http://HowToBitcoin.info/
Ah, a variation on the "what is it backed by" response with a bit of the "military rules the world" straw man.
What you are really talking about, orangegeek, is the capacity of a government to enforce laws by using force.
That is why bitcoin is superior to physical, constrainable, and most importantly confiscatable mediums of exchange.
There is no 'central server farm' to shut down, there is no single person to subpoena, there is no regulatory body that can constrain transactions just because they don't like them (say, donating to a cause that they find objectionable).
So really, what you're saying is - you'd prefer to use a transaction system and currency that can be blocked, modified at will without your consent, and in extreme circumstances - taken from you by force.
What a curious need you have. I prefer freedom, thanks.
Curious need? Careful with the pre-judgement.
If you are of the opinion that the US Government is open to competition from bitcoin and is willing to roll over and co-exist with bitcoin, then that's cool.
I am of the opinion that the US Government would crush bitcoin if it ever posed itself as a threat.
And by the way, TT, you have your freedom through the threat of violence. This is common understanding of why the US military exists as it does. This ceases and there goes your so called freedom. Think about it.
And yes, the US government has managed to build itself a business by selling its arms to its allies and yes even its enemies sometimes.
The propaganda machine has really won you over.
You are born with your freedom. Ask any kid playing soccer in any slum in the 3rd world. They don't have the mighty us mission accomplished military and propaganda machine--they have true freedom, not an illusion of it.
orangegeek, it seemed to be curious you'd prefer a system that has explicit control over what you do.
As to your point that any government would sit by and not try to 'compete' or as you suggested 'crush bitcoin' - no, I don't expect them to wake up to the possibility until it is too late. If they draft laws to criminalize bitcoin, then they have already lost.
They could do it right now, if they really wanted to -- but like most large systems, they are slow to realize when something has replaced them.
The music/entertainment industry tried to crush torrents, and have failed miserably - even with substantial government support.
They've tried to stop physical possession and transport of drugs, and have failed. And that must really hurt, because if you have to carry something on you, you'd think they could devise a way to cut off physical transport and trade.
So, for all those reasons and more - I don't see how the outcome will favor a large and ponderous government that barely understands how the internet works.
As for my freedom - I'm well aware of what I have, and the history it is built upon. That is why I support bitcoin in the first place - because financially we're all in the biggest prison ever built.
Time to undo the shackles, turn the green paper chains into highly portable and FREE bits and bytes.
I agree with Stacker12321's comments that it makes a good medium for exchange, so why not use it if it suits your purpose. I haven't yet, I want to learn more about it. I DO NOT think it is a reasonable means to store wealth, however.
If it's good enough for criminals, it can't be that bad.
It's intended to be a CURRENCY, and currencies have never been a very good way to STORE wealth.
...and the next guy is going to criticize bitcoin for not being a good currency because it acts more like a store of wealth. Go figure.
Gold and Bitcoin are natural Allies in the war on the money powers ... monetary freedom
Already good places to trade gold for bitcoin AND bitcoin for gold ... they are readily convertible (and anonymously so if you are careful)
Coinabul
BitcoinCommodities
CryptoXchange
There is a wall of scared money looking for a home outside the Eye of Sauron monitoring of digitally-tracked fiat that the money powers have recently erected in preparation for the captial controls now being rolled out.
The price is right now at (or near) an intermediate low, I am conservatively expecting a ~300% gain from here in the next 12 months, here's some cred:
- have been long gold from 1996 (yes a little too early).
- have linux/computing experience of over 25 years (since days of assembly code)
- have advanced degree in mathematics and high-performance computing
- was an original poster on kitco, USAgold, longtime libertarian, one of first readers of ZH
- been "researching" bitcoin since dec. 2010, writing code for the next network layer to go above
Zero-hedgers, do yourselves a small finacial favour, wake the fuck up, bitcoin is the real deal ... and the beginning of monetary revolution.
GET INTO BITCOIN NOW!
(the root has spoken you will only hear this once).
PS: btw who here knows if Tyler Durden and ZH is a Peter Schiff run operation?
I suspect that many Zer0-hedgers have already started to accumulate their piece of the bitcoin block chain. Being like China however, they just don't want to announce that fact yet.
http://HowToBitcoin.info/
The governmetn and central bankers have nothing to fear. Two words: Gresham's Law. As long as they force shit on us, shit will prevail.
Sorry BTC.
However, never underestimate the power of the underground economy to undermine the mainstream economy. BTC is possible because of black and grey markets. Governments directly cause grey and black markets with prohibitions, regulations, taxation and other types of bullshit interventions. Considering the rate of increased bullshit intervention and the stress already on the mainstream economy, BTC could be the straw that broke the camel's back, as it were.
(Was that too technical?)
Imagine if Iran and other to-be-sanctioned countries started using BTC to get around TPTB?
I'm going to set up a Tor Hidden Services page that buys sells Iranian oil for BTC.
Oh and, if you are not utilizing PGP encryption, why the fuck not?
de b7 26 43 a6 99 85 cd 38 a7 15 09 b9 cf 0f c9
c3 55 8c 88 ee 8c 8d 28 27 24 4b 2a 5e a0 d8 16
fa 61 18 4b cf 6d 60 80 d3 35 40 32 72 c0 8f 12
d8 e5 4e 8f b9 b2 f6 d9 15 5e 5a 86 31 a3 ba 86
aa 6b c8 d9 71 8c cc cd 27 13 1e 9d 42 5d 38 f6
a7 ac ef fa 62 f3 18 81 d4 24 46 7f 01 77 7c c6
2a 89 14 99 bb 98 39 1d a8 19 fb 39 00 44 7d 1b
94 6a 78 2d 69 ad c0 7a 2c fa d0 da 20 12 98 d3
I just logged on to add my two bitz:
I find bitcoin intriguing, and I look forward to using 'dysphemistic' in a sentence.
i had to look that one up too. same. :D
Bitcoin was created by NSA to allow Stellarwind to crack encyption algorithms, 1024bit takes only few minutes.
yeah, sure. This guy here--> http://blockchain.info/address/19StxPcpGtY4vcqLNoU76hBfKUwhUR7Xst
...has over US$100,000.00 in that address. Why don't they crack it and crash the price and kill the thing?
A 1024 bit string can contain 1.3079421638632078538609985886761e+181 combinations, assuming that each 1 byte character had 26 possibilities (lowercase alpha characters only) . If a massive group of CPUs (or more commonly GPUs) could process 3 billion instructions per second, and each instruction was the generation of a new string with a different combination (lets say, increment current character position by one), in one year it would have processed 94,608,000,000,000,000 (that's 94.6 quintillion) 1024 bit strings.
To process all possible strings, it would take 1.3824857980965751879978422423855e+164 years. A few minutes indeed ;)
(unless my math is off, which I don't think it is)
Bitcoin network “horsepower”
- December 2009: 0.008 Ghash/sec
- December 2010: 103 Ghash/sec
- December 2011: 8,303 Ghash/sec
- September 2012: 19,284 Ghash/sec
Number of transactions, by year- 2009: 219
- 2010: 117,385
- 2011: 1,842,138
- 2012: 4,964,513
Bitcoins sent, by year- 2009: 35 trillion BTC
- 2010: 1,925 trillion BTC
- 2011: 29,497 trillion BTC
- 2012: 60,896 trillion BTC
Bitcoin value ($USD), by year- July 2010: $0.04 (first exchange quote)
- January 2011: $0.30 (pre-bubble)
- January 2012: $5.26 (post-bubble)
- September 2012: $11.70
Users: Difficult to estimate, but probably over half a million at this point. 2 year price chart - http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25zvzlLastly: http://HowToBitcoin.info/
Well, I have to thank those imbeciles at wired. I started buying after reading that piece of crap.
When Mua'd Dib stated that "He who can destroy a thing, controls a thing," he was only half-right. The thing in question only allowed control as long as it (the Spice) was in existence. Once something irreplaceable is forever lost, so is the control. In the case of a monetary system, it can be destroyed and replaced more than once. Hence destroying the current system, while in no one's interest, will happen again, but the (encrypted!) key is to ensure that the next monetary system is IN NO ONE's CONTROL!
No one will be interested in destroying the next monetary system (assuming they survive The Great Implosion™!), because of the disruption(s). With NO control, other than the laws of Mathematics, BTC could end up being the final monetary system, much to the dismay of the Banksters!
i have been using bitcoins for about a year.. it's easy to use and secure. i don't like using my bank account number or credit/debit card number to do online transactions, so bitcoins is a great solution.
look at it this way.. bitcoins are for internet transactions, cash is for real-life transactions and bullion is for saving.
it's just a p2p currency for internet transactions. don't worry, it's not trying to replace FRNs or p.m.s
.. geez
It's more than that. It is a "crypto-currency". It can not, for all intents and purposes, be traced. Just be sure to tumble your BTC.
+
One of the major points in the central banking report is that the ECB has now linked bitcoin to the Austrian school of economics, which does not even itself recognize that linkage.
See: ECB: "Roots Of Bitcoin Can Be Found In The Austrian School Of Economics"
http://www.forbes.com/sites/jonmatonis/2012/11/03/ecb-roots-of-bitcoin-c...
Bitcoin is untaxable. Government can't tax the flow and they can't tax the stock (by inflation). If Bitcoin is widely adopted, government will have to settle for user fees (e.g. passports, postage) and taxes on the importation, sale, and ownership of physical goods.
Government would be downsized perforce. There'd be no long prison sentences, just flogging or hanging depending on the crime. Rope is cheap. Likewise our military might be downsized to just homeland defense and nuclear missiles.
There would be no goodies like free health care, food stamps, Social Security, disability, low-interest student loans and home mortgages, subsidies for PBS, and such. Low-skill immigrants would be sent home so that our poor can have jobs. Prices would adjust to reflect true supply and demand, i.e. what people want and can produce instead of what politicians think they ought to have.
This is why the existing bitcoin system, like gold, will never become a substitute for a national (or world) currency. If the current trend towards concentration of wealth into fewer and fewer hands, looks bad, this trend would become much worse if the existing bitcoin system were to replace existing currencies.
A modified form of bitcoin that would make it slightly less anonymous, would allow its use as a national (or world) currency. This would allow taxation to be integrated into the bitcoin system, increasing recirculation (while still not increasing the overall supply). I discuss such a system on my PieEconomics blog.
The existing bitcoin system could co-exist with a national bitcoin model, so people could still have the option of complete anonymity.
When TSHTF Biticoin is toast. IT only exists as long as the oilgarchs let it. There no freedom in Bitcoin. Paperless fiat is all it is.
Anyone who thiks that its anonaymous and secure is naieve to the point that the CIA is all up in your shit and yes the transactions are being whatched. the sooner that you learn that EVERYTHING on the internet is being monitored the better. Bitcoin is no exception.