Guest Post: What Every Libertarian Should Know About Bitcoin

Tyler Durden's picture

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

Tom Woods Talks Bitcoin... Fantastic Interview

Soon, whether via Bitcoin or whatever comes next, it will be possible to strip banking away from bankers, and money away from governments.

 

From a recent article in the Spectator titled “How Bitcoin Could Destroy the State”

Support for Bitcoin amongst Austrian economists is growing by they day and in this interview, the highly admired and respected Tom Woods, discusses Bitcoin with Erik Voorhees of Bitinstant (a popular, rapid way of converting fiat into BTC).  This interview very poignantly addresses many of the layperson’s concerns about it that I have heard over the past several months.  Remember, despite the price rise, Ben Bernanke is still creating the equivalent of 75 Bitcoin markets every month with his money printing.

This worth every single minute of your time.

 

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Careless Whisper's picture

What happens when some pimply faced kid figures out how to hack bitcoins and create a few digits? pfffftt. I'll stick with g.o.l.d. 

Bennie Noakes's picture

Yes, Bitcoin could destroy the state. Or the state could destroy Bitcoin. I wonder which it will be...

Check out Instawallet: https://instawallet.org/

They seem to be having some problems right now. I'm currently getting this message:

Down for Maintenance

We have detected a security breach. Services are temporarily suspended until we have thoroughly investigated the situation. We will resume services as soon as possible.

Please do not send funds to your address for the time being.

Stay tuned for further updates, thank you for your understanding.

SafelyGraze's picture

some people *still* seem to be unclear about how bitcoin works

obviously, you wouldn't want to invest in some sort of digital black box you don't understand.

but still.

it's not rocket science.

Maybe this will clear things up. If it's not crystal clear after you read this, maybe bitcoin's not for you.

The steps to run the network are as follows:

1) New transactions are broadcast to all nodes.
2) Each node collects new transactions into a block.
3) Each node works on finding a difficult proof-of-work for its block.
4) When a node finds a proof-of-work, it broadcasts the block to all nodes.
5) Nodes accept the block only if all transactions in it are valid and not already spent.
6) Nodes express their acceptance of the block by working on creating the next block in the chain, using the hash of the accepted block as the previous hash.

Nodes always consider the longest chain to be the correct one and will keep working on extending it.

If two nodes broadcast different versions of the next block simultaneously, some nodes may receive one or the other first.

In that case, they work on the first one they received, but save the other branch in case it becomes longer.

The tie will be broken when the next proof-of-work is found and one branch becomes longer; the nodes that were working on the other branch will then switch to the longer one.

ok, that pretty much wraps it up.

plus, it's all open source.

the intrinsic value and security of bitcoin should now be obvious to every investor.

 

eatthebanksters's picture

What happens if the world economy shits it pants and the internet goes down?

XenoFrog's picture

If the shit goes down and the Feds have to bring down the hammer, the energy grid will be the first thing taken out to prevent communication over the former US states. Bye Bye bitcoin

Bunga Bunga's picture

If energy grid is taken out, you can say good buy to almost everything. I hope the NPPs have enough diesel to sustain the power outage.

Ahmeexnal's picture

To each his own.
Linux fanbois cheer Bitcoin, spend all day on SecondLife, FaceBook and playing Gods of War, think gold is a barbarous relic.

Seems like the elite have done a good job at dumbing down a niche crowd.

Spoofing servers is the oldest trick in the book. Virus in your USB stick and wave your wallet goodbye. There is a counterparty and you don't even know what his name is.

Let them rejoice in fake binary money (same as bits on a bank's computer). I prefer protons and neutrons, tightly packed in an atom, as in 47 protons and 79 protons (with their respective neutrons each).

icanhasbailout's picture

I'm keeping all my money in tulips.

Ahmeexnal's picture

In two lips? Or in two sets of lips?
Hmmm....there's an idea.

redpill's picture

Of any group, libertarians would know god damn well what lengths the state would go to crush an alternative currency. And to think such a currency that relies on something so vulnerable to the state as the Internet could overturn the international banking cartel is simply naïveté. The state could and would crush it overnight if it posed a real threat. To believe otherwise is to fatally underestimate your enemy.

Lore's picture

Fascinating. This is more fiat than fiat -- the Mandrake Mechanism writ large, creating a bubble of NOTHING. 

"In the 1940s, there was a comic strip character called Mandrake the Magician. His specialty was creating things out of nothing and, when appropriate, to make them disappear back into that same void..."

NO WONDER THERE'S NO COUNTERPARTY RISK.  HA! HA! HA!

The speaker is deeply conflicted. This is a scam, and an awful lot of people are going to get burned.  I guess you have to witness a MLM pyramid or some other con in order to recognize such things. Central banksters aren't accumulating BitCoins. This is just another parlour trick -- convincing the children that nothing is something. 

Someday, sheep are going to get tired of being sheared, but not this day, apparently.

gold-is-not-dead's picture

It is interesting to see how bitcoin polarized the ZH crowd.

The visionaries of the new market VS the preparers for the old market collapse.

Market likes visionaries, and rewards them, not preparers.

Acet's picture

"It is interesting to see how Ben Bernanke's Dried Turds polarized the ZH crowd.

The visionaries of the new market VS the preparers for the old market collapse.

Market likes visionaries, and rewards them, not preparers."

 

Your "argument" could be used to defend a market of trading using Ben Bernanke's Dried Turds. That's because it's not an argument, it's just an ad hominen attack.

 

Lore's picture

I suppose you also endorse carbon offsets.

"Visionary," my ass.

gold-is-not-dead's picture

If you think I'm pro-nwo you should stop using mushrooms and get to the gym... Mens sana in corpore sano...

 

Lore's picture

You're a poor judge of character.

fonestar's picture

Interesting to see how you can ONLY buy silver or buy Bitcoin.  I mean you couldn't possibly own both of them.  And of course to be a real silver stacker you must hate bitcoin and believe that all new technology is from TPTB and branded with the mark of the beast LMAO!

BTW, Bitcoin does not rely on the internet to store your wallet and the grid and the public internet is not going down.  Not a chance.  America is not the center of the world and it does not control the internet.  USG and others can make all the stupid fucking laws they want against the mighty Bitcoin, they are POWERLESS in the end.

defencev's picture

The idea that the government cannot go after any kind of digital currency is totally ridiculuos. The vulnarable point is exchanges and the government can simply ban the selling digital currency for their own currency in their jurisdiction. Then to exchange your bitcoin for real money (pardon for the terminology) you need to have the offshore (regular money )account which is easily controllable. The alternative is "to meet somebody in cafeteria" (good luck on that one). Another point is that buying and selling whatever are taxable operations (with capital gains and losses) and if you do not pay taxes on that just remember that your transactions are (forever) publicly available.  It is false to assume that operation of the bitcoin network s tantamount to working inernet:it requires very substantial computer resources (would you be willing to wait several hours to verify the validity of your bitcoin payment, say, on gas station?).

I frankly getting tired with growing security measures imposed by regular banks (especially, in places like HK and Singapore)

and they are not doing this just to waste their resources. The assumption that such an open and complex system as bitcoin network gives you a safe way to transact and preserve value is just simply wrong.

I would not touch this bullshit with 10 feet pole.

terryfuckwit's picture

Bollucks most bit coiners are also into metal that is why we relentlessly keep telling you about it....and Tyler shows real spine by giving the tech a fair hearing.....

dark pools of soros's picture

the dinos here who wish for another gold rush are blindly missing on the new ASIC shovels that are booming AT THIS VERY MOMENT

 

last i talk about it

 

 

Bunga Bunga's picture

A nerd using Windows and a USB stick, LOL. 

Acet's picture

Please, spare us the ignorant bull.

You are conjoining at least 3 different kinds of people in there, hacker-types (in the old-fashioned sense of the word), online chronic socializers and gamers.

I do agree that a nice little virus or trojan would make a great way to steal Bitcoins, not to mention that it's certain that mainstream Operating Systems like Windows and Mac OSX have weaknesses and backdoors which are known by (and probably been put in place at the behest of) large governmental entities. Not only that, but there already are criminal groups with their own hackers (the nasty black hat -type ones) who for money will use phishing and keyloggers to get bank access and credit card codes from the ignorant and I bet they will move into Bitcoin stealling as soon as it's worth their time.

By the way, that Linux you mentioned has far fewer viruses and much lower danger of state-sponsored backdoors than the mainstream close-source Operating Systems, so it would make for a better platform to keep one's Bitcoins.

That said, as one of those (long, long, long time) linux fanbois (maybe fangeezer is closer to reality) with quite a bit of know-how in the IT Security sphere (bit of a white-hat here), I'm sticking to physical PMs for long term wealth preservation. As it so happens, my expertise in Economics and Finance (I also worked in that Industry) is also making my Ponzi-scheme senses tingle when it comes to Bitcoin.

Abraxas's picture

The Unabomber wrote an essey on this (in prison). He argues that the entire modern civilisation is built on one thing only: electricity. Take that one out and we are back even further than the dark ages, because we don't have an infrastructure for the dark ages' economy (blacksmiths etc.). 

Matt's picture

The Grid is not everything, eliminating all electricty would be difficult. Or to look at it the other way, there are many ways to produce electricity.

BLOTTO's picture

Only ancient things are of real worth and value... things the Universe made, not man.

.

Nothing New Under the Sun,

History is just repeating itself...

BLOTTO's picture

Not to mention, who's the shady designer behind this bitcoin?

.

A Troll? Shill? CIA? Zuck?

Or a good guy for the benefit of the people?

Silver Garbage Man's picture

Imagine if it is CIA, how easy it would be to Cyprus them. The protesters wouldn't know where to go.

Abraxas's picture

BINGO!!! You wouldn't even know who to complain about. The fact that nobody is certain where this thing originated is making me feel queasy.

mumbo.jumbo's picture

it's one of the most important features of BTC that it's irrelevant who created it, and that only the math behind it is relevant.

if you're planning to kick a dragon, then you better do it in the dark. once you're seen, you quickly turn into breakfast.

actually, if we get to know who made BTC in the near future, then it will discredit the abilities of the person, or the group, to a large extent.

ebear's picture

"it's one of the most important features of BTC that it's irrelevant who created it, and that only the math behind it is relevant."

What's relevant here is Godel"s Incompleteness Theorem.

http://en.wikipedia.org/wiki/Gödel's_incompleteness_theorems


irishlink's picture

Read the protocols to the wise men of Zion and that should make everyone wonder who really is behind this. There will have to be a replacement for all currencies. Just as Cyprus was a template for bringing down EU debt maybe bitcoin will serve as the new world currency instead of SDRs. What better way to fool the sheep. A Trojon horse indeed??

Long_Xau's picture

Actually, it would be impossible to confiscate other people's coins. For anyone.

Unless of course they broke several standard, very widespread cryptographic algorithms and decided that the best thing to do with their new-found discovery is to monetize it by first making another breakthrough, the innovative Bitcoin protocol, a very elaborate protocol, publicize it, implement it, help it start, wait 4+ years for it to grow and then decide it is a good moment to finally cash out whatever they can exploiting their initial discovery. Something tells me someone with such a discovery would either: 1. earn a lot of respect by publishing his initial discovery (and then maybe get on to making the other innovation - the cryptocurrency, but with a working, reliable cryptographic algorithms and earn a shitload more respect on top) or 2. attack some existing system that uses the same standard cryptographic protocols and monetize that. All of this looks extremely unlikely.

Learn the basics.

nmewn's picture

In my limited research, "Satoshi Nakamoto" could be Neal King, Vladimir Oksman or Charles Bry...or all three...they applied for the patent.

A patent on a "currency"...I'll leave that right there, with all its implications.

I'll state again for the record, I'm not opposd to anyone using the credit system known as bitcoin...but its not money. Its designed to be spent not saved. There can be no expectation of "savings" relying on a third party in this world. I have zero problem with off the banker controlled grid private transactions just realize what it is.

Its not real money.

TomJoad's picture

I have just invented a new and better medium of exchange, I am going to patent it and call it "BUBBLECOIN!" Beat a path to my door.

One World Mafia's picture

EXACTLY

The guest on Wood's show CLAIMED other digital currencies are controlled and managed by central parties.  What's to stop an infinite number of digital currencies from coming out that work like BitCoin and without being managed by a central party?  Unless he could patent the entire concept, and the guest mentioned nothing about that, the answer the guest gave sounded like rehearsed obfuscation.

Matt's picture

And how, exactly, would you convince millions of people to invest millions of dollars into hardware to accept your knock-off currency, especially if it provides no benefits over the established bitcoin?

One World Mafia's picture

The realization that there's nothing to stop other digital money from diluting value, that it's not safe from that, is what would make me stay away from it.  It may get to where a lot of people put a lot of money into it before that realization hits and the bubble pops.  Too much uncertainty for me.  As far as I know the only way digital money could guarantee no competition is if that was mandated by govt, what people are fleeing from.

What's to stop lots of people from trying to get on to the next big speculative money?  If BC was $1600 an ounce and gold was $101 an ounce now, we might be talking about the big rise coming in gold.  Another digital coin at a near zero price sounds like free money.

Likstane's picture

WTF? How can a bitcoin weigh anything?  I thought a bitcoin was ethereal and transitory.  Your last sentence caused a Mt.Gox sized pain in my cranium.

Matt's picture

People can speculate and gamble on whatever they want; the question is, how do you get people to build currency exchanges and payment processing systems, and get retailers to accept your new coins?

TraderTimm's picture

@nmewn

And in the same breath, if you knew the individuals or individual that created bitcoin - you'd be pointing out some human flaws in their character - just to make some hyberbolic point against bitcoin in general. No wonder he disappeared, I wouldn't want to talk to you either.

lewy14's picture

@nmewn, tt has it exactly right.

Furthermore it doesn't matter who 'Toshi is at all. The integrity of the system isn't dependent on character, it's dependent on math.

There is, in effect, a billion dollar "honeypot" - if the math is crackable, we'll soon know. [Hint: this is damn unlikely.]

Would I personally bet half my net worth that the math is uncrackable? Yes. In fact it's more secure than the banking system.

Does this mean it's a store of value? No. In this you are correct; BTC is no store of value. Just a unit of exchange. Still a useful thing.

The current price of BTC means that "miners" are hard at work. 

Since bitcoin mining is computation and computation is electricity, bitcoin values should arb out to the price of electricity - bitcoin is effectively "energy backed currency".

The liquidity situation is so horrible (right now terribly overbought) that the store of value thing just doesn't work. When it gets to a trillion and there are deep and liquid exchange markets, it may serve as a decent proxy for a pure energy backed play. But that's a long way off.

Further the level of comments in this thread leads me to believe that bitcoin will have a very tough row to hoe, given that almost nobody understands it well enough to even criticise cogently.

OpenThePodBayDoorHAL's picture

There is NO WAY I would have any of my money in something that some guy can just CREATE out of THIN AIR with just a few clicks of his mouse

Oh, wait...

And especially if it was stored somewhere where it might be just stolen.........(um like a bank account?)

well, at least I want there to be something like GOLD backing up the value of the money

(crickets chirping....)

NOW

If only they hadn't FINANCIALIZED and FRAUDED the PMs with their rehypothecation and leasing and naked shorting and paper gold issuance schemes...

 

Urban Redneck's picture

"In fact it's more secure than the banking system."

That betrays objectivity.

The funny thing about traditional money is that can't actually disappear (aka be Corzined), since it never really goes anywhere.  

However, since there are very few people who understand this, it makes Corzining someone else's money quite simple.

So can a bit coin disappear?    And if not, why not?   And if so, then why is it "more secure" than the banking system?

Matt's picture

All of your money is in your own "vault". You are the weakest/strongest/only link as to whether someone can steal/vanish your money.

nmewn's picture

@ TT & lewy,

I've made my point. Its not money. I've also said here and elsewhere that it could be useful in certain situations, just like a debit or credit card.

But just like those two things (lines of credit or debit) I prefer credit over debit as once someone gains access to your debit they can unload your account into their pocket.

As opposed to real money, where they would have to unload my BODY into a dumpster before they would even have a chance to take it.

Its not money.

Tjeffson's picture

As Karl Denninger puts it: "A negative-coefficient "mining" system (designed to get exponentially harder as more is produced until it reaches effective infinite effort for each unit of return -- e.g. exhaustion) is inherently backward.

Productivity improvement makes the generation of sustaining wealth easier. What this does is redistribute at the outset a grossly-larger proportion of the whole to a few people.

Gee, sounds an awful lot like our current crooked, rigged system!"  

 

It's a pyramid scheme.   The sheer number of ways it can be hacked, taxed, regulated, shut down etc makes it insane to put real money/wealth into it.  If you still believe that the Central Bankers and Governments of the world will let you get away from their monetary systems, then I've got some ocean front property to sell you in Iowa. 

terryfuckwit's picture

Honestly how the fuck can you explain to you people what man what pseudo name , what team doesn't,t matter a damn every line of code is transparent. If your dog can optimize the block chain that improvement will be adopted by the community. You fuckers are so used to smoke and mirrors the concept of transparency cannot be explained to you ...I give up......!!!!!