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On The Money-ness Of Bitcoins
Submitted by Nikolay Gertchev of the Ludwig von Mises Institute,
Bitcoins have been much in the news lately. Against the background of renewed concerns about the integrity of the euro zone and the imposition of capital controls in Cyprus, the price of a bitcoin has tripled over the last month and reached more than $141 for 1 BTC. Are we witnessing the spontaneous emergence of an alternative virtual medium of exchange, as some would put it? This article offers an answer to this question by considering three aspects of the economy of bitcoins: their production process, their demand factors, and their capacity to compete with physical media of exchange.
The Production of Bitcoins
A bitcoin is a unit of a nonmaterial virtual currency, also called crypto-currency, by the same name. They are stored in anonymous “electronic wallets,” described by a series of about 33 letters and numbers. Bitcoins can travel from a wallet to a wallet, by means of an online peer-to-peer network transaction. Any inter-wallet transfer is registered in the code of the bitcoin, so that the record of its entire transaction history clearly identifies its owner at any single moment, thereby preventing potential ownership conflicts. Bitcoins can be further divided into increments as small as one 100 millionth of a bitcoin. The current outstanding volume of bitcoins is above 10 million and is projected to reach 21 million in the year 2140.
This brings us to the truly fascinating production process of the bitcoins. They are “mined” based on a pre-defined mathematical algorithm, and come in a bundle, currently of 25 units, as a reward for carrying out a large number of computational operations that aim at discovering the solution to what could be described as a randomized mathematical puzzle. The role of the algorithm is to ensure a declining progression of the overall stock of bitcoins, by halving the reward every four years. Thus, somewhere in the beginning of 2017, the reward bundle will consist of 12.5 units only. Also, the more bitcoins are produced, the harder are the randomized mathematical puzzles to be solved.
Bitcoins come about as the uncertain pay-off for an energy—and hardware—-consuming process that is extended through time. The per-time pay-off varies, based on the efficiency and sophistication of the more-or-less specific hardware used for the mining. Individual miners have started to pool their efforts, and this cooperation has tremendously reduced the uncertainty that each individual miner bears.
Due to this costly production process, bitcoins, although virtual, are constrained by scarcity. While a bitcoin has no material shape or content, the algorithm that generates it has been designed to replicate the competitive production of a scarce good. First, entry in the business of producing bitcoins is open to anybody. Second, the production process is capital and labor intensive, extended through time, and also uncertain. Third, production is subject to decreasing returns, thereby conforming to the generalized scarcity faced by acting individuals in the better-known physical world. Thus, bitcoins turn out to be the exact opposite of the “Linden dollars” of the Second Life “virtual world.” The latter are produced by a monopolist central authority, out of thin air, and without any other limitation but the very discretion of that same monopolist authority.
However, it is not their costs of production that bestow on bitcoins the status of an economic good. After all, scarcity is not rooted in the absolute quantitative limitation of something; it comes from the insufficiency of the stock of that something, perceived as useful in some regard, relative to the individuals’ needs. Hence, we must ask ourselves how bitcoins have come to be valued at all. This leads us to an analysis of their demand.
The Demand for Bitcoins
At their inception, bitcoins were created and first held within a “crypto-punk” community. It could then be safely assumed that they served the purpose of conveying a specific antiestablishment worldview. The first demand factor, initially for producing bitcoins, and then unavoidably but only indirectly for holding them, was rooted in their capacity to project a certain point of view. In a sense, bitcoins were comparable to an artistic medium of expression, such as music, literature, and painting.
Thanks to that initial source of value, bitcoins had a reference point that positioned them relative to other goods and services. From there onward, the technological features that characterize them led to an expansion of their demand. Bitcoins are imperishable. Storage and protection against theft or accidental loss come at a very low cost, as these are accessory services rendered by standard antivirus and back-up software. Marginal transaction costs are also practically zero, once the fixed cost of establishing and maintaining a network connection has been accounted for. All these aspects are common to real wealth assets. Thus, the second demand factor for bitcoins is explained by their capacity to store wealth at a low cost. From the status of a good which, as a “worldview-conveyor,” was largely used for personal enjoyment (and hence consumption), bitcoins evolved into an investment good that has become attractive well beyond its original crypto-punk community.
The growing investment demand also spurred the development of intermediary dealers in bitcoins. There are a number of exchanges where bitcoins can be bought and sold against currencies. Specialized online storage, presumably with increased security, has also been made available. Intermediation, though open to free entry, is likely to remain rather monopolistic, given the very low margins associated with transacting in and with bitcoins.
This latter aspect, namely the intrinsically low transaction fee, contributes to a third demand factor for bitcoins, namely as a means of payment. A number of online vendors, who are mostly specialized in web-related services and online sales of rather exotic items, accept final payment in bitcoins, not the least because of the guarantee for almost absolute anonymity. This last component of the demand for bitcoins is still nascent. After all, a very limited set of items can be purchased with bitcoins, and sellers still price their goods in dollars, euros, etc. The price is then converted into bitcoins, according to the prevailing exchange rate, at the final stage of finalizing the payment method of the transaction. Thus, while bitcoins do appear to serve as a means of payment, they are definitely not used yet for business calculation. This is most certainly attributable to their still very limited demand to hold as a means of exchange. Nevertheless, couldn’t they become full-fledged money in the foreseeable future?
Bitcoins as Money
Prima facie, bitcoins possess all the qualities required from a money (a generally-used medium of exchange). They are perfectly homogeneous, easily cognizable, conveniently divisible, storable at practically no cost, and imperishable. Also, they seem to be fully shielded from counterfeiting. In addition, because they exist as a consumption and investment good, they are appraised on their own, thereby satisfying the Misesian regression criterion for the free-market inception of a medium of exchange. However, in order to become a viable alternative to existing monies, bitcoins must generate a sufficiently large demand so that their usage becomes generalized. Without the certainty that they can be transacted for any other good in the economy, a demand to hold them as money could not develop. It is with respect to their capacity to become and remain commonly used that bitcoins suffer from a relative disadvantage.
Indeed, bitcoins are embodied in a specific and highly capital-intensive technology. They can become convenient enough for standard personalized transactions only if both parties of the exchange possess the necessary technology that gives access to bitcoins. Bitcoins can do the job already for internet-based impersonalized purchases, because the marginal cost of the exchange technology they go along with is already almost zero for those who possess it. However, the transposition of that technology in the physical world of common face-to-face shopping (getting a haircut, buying a sandwich, or purchasing vegetables at the local grocery shop) would imply extra costs. True, these costs would decrease progressively as portable smartphones with permanent internet access become more widely used, not only by buyers, but also by sellers. The key point, however, is that bitcoins could become a generalized medium of exchange only through the accessory use of other, specific and physical, goods in an economy that has reached a very high level of technological development. This is a tremendous disadvantage, for at least two reasons.
First, at any given moment, the level of technological development is not uniform for all individuals within the same (national) economy. While some have access to the latest technology in a given field of activity, others prefer to stick to older versions. This is definitely due to the cost of replacing existing capital goods, but also to individual preferences, and sometimes to personal wealth. Consequently, bitcoins could become money only at the point when the technology that embodies them becomes commonly used. We are not there yet.
Second, an economy in which the medium of exchange is dependent so much upon the widespread use of a specific technology would be extremely vulnerable. Technologies are not given; they are the result of individual choices with respect to capital accumulation and allocation that must be made time and again, and are subject to reversal. Then, if the medium-of-exchange-linked technology is abandoned, because for instance no sufficient savings are available any longer, the economy will have to find another medium of exchange. This transition phase might then involve significant disruptions in the structure of production. A technology-linked medium of exchange does not provide enough flexibility to economic relations and might be viewed as complicating, rather than facilitating, some actions, such as shifting from one technology to another. This is a significant drawback of any virtual currency.
In trying to understand whether the increased popularity of bitcoins is reflecting the emergence of a new money, we have actually come to a fundamental distinction between virtual and material media of exchange. The latter are technology-embodied and matter-independent; the former are technology-independent and matter-embodied. This distinction is not trivial as it emphasizes the great advantage that material money offers: it is good enough for anybody and at any time, and is independent from individual choices with respect to investment, allocation and maintenance of capital. Virtual monies could be programmed to reproduce some aspects of material, whether commodity or fiat, monies. However, they will always be dependent on specific capital investment decisions. The latter reduce their degree of commonality as well as of adaptability to changing economic conditions.
In conclusion, virtual monies, of which bitcoins seem to be the most perfected specimen up to date, do not allow acting individuals to manage the uncertainty of the future as well as material monies do. They could serve to intermediate exchanges among those who invest in the technology that creates them, stores them, and transfers them. Nevertheless, they could never achieve that degree of universality and flexibility that material monies carry with them by nature. Thus, on the free market, commodity monies, and presumably gold and silver, still have a great comparative advantage.
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rare colored diamonds
Yes it is sad because we still get your dipshit commentaries. Obviously this topic is well beyond you. Fine you don't like bitcoin....we get it.
And when the government declares an emergency and shuts down the internet, how am I supposed to get to my Bitcoins?
If I thought you really wanted to know, I might answer. But you just want to slap at the new thing.
That would never happen*
*Cutting the power is standard operating procedure for tyrannical governments in full panic mode.
Fucking lol. Yes, and given supply chains which require instantaneous communication to keep its 3-day inventory fed, good luck to you and your survival skills when that happens.
They can't nuke Bitcoin without nuking themselves.
Isn't it interesting how the bitcoin bubble is forming as gold and silver are approaching a bottom?
TPTB sure did scare out the "revolutionaries" hiding behind their computer screens trading metal ETFs. So they went into bitcoin instead and will soon be flushed out.
the bitcoin bubble
Yeah, kind of like the electricity bubble in 1890.
... and not to forget the internet bubble in 2000. A lot of stupid business ideas were rooted out, but internet is still there an that even bigger.
S&P > Gold right now, at least by the numbers. That would make a prett interesting article too. Hey mayhem, it was a pretty short nap actually.
You rang? I was busy selling paper stawks and buying up physical bullion. Seemed the thing to do. :D
http://www.zerohedge.com/news/2012-11-28/if-820-am-then-sell-sell-sell-g...
Page 2.
Nicely played. I plum forgot about that little exchange.
And I do declare that I feel extra happy for having added a dozen Krugs to the pile this morn.
<bow>
Good luck trying to hack gold.
Good luck trying to hack gold.
LOL... Tungsten!
You guys really aren't thinking very well lately.
Go back to your bitcoin forums where you're wanted.
Oh yeah because you're such an authority on who's allowed to post here.
It's great to see the rise of the bitcoin and I hope it can do something tangible in regards to dislodging the central bank fiats (though I really doubt that will happen), but I think I'll keep on buying silver and gold and sticking them in my safe just in case.
I think I'll keep on buying silver and gold and sticking them in my safe just in case.
Good. That's a smart thing to do.
I'd suggest that you learn about Bitcoin also, as I think it's a valuable tool, but I wouldn't tell you to abandon silver or gold.
Why is ZH pushing this crap?
Maybe because Tyler and those who aren't paid trolls think it matters?
Maybe because Tyler's business does very well out of these articles? Never saw a bitcoin article without lots of comments, and hence ad impressions.
And good luck to Tyler in that regard, i see no problem in wanting to make money.
ZeroHedge's bitcoin content sucks mostly.
Well, I think most anti-bitcoin arguments are lame. Usually you can apply a skeptic's logic of bitcoin to fiat also.
The US dollar is a 98% virtual currency. How many of those printed dollars actually exist? We are prettyyy reliant on the card networks. How about the Zero Hedge articles with the helicopters full of cash over Cyprus? Seems like it didn't take too long for things to degenerate there eh?
The "bias towards fairness" is absurd. No one, not even zero hedge, really takes a position on anything anymore. Tyler has no problem publishing an article about helicopters full of cash being flown into Cyprus and meanwhile criticizing bitcoin for being "too reliant on the network." Total, total hogwash.
Just look at how rapidly cell phones are being adapted in Africa. Cell phone adoption in North Korea, yes North Korea, has even exploded. The future is more technology, not less.
We have a future?
If only there were some alternative to the US Dollar or Bitcoins. Oh yeah, Gold and Silver.
The US dollar has existed for less than 3% of recorded human history, and the un-backed US dollar for less than 1%. How did the race possibly ever survive?
Newsflash, in case you just got back from Mars: Bitcoin is doing MORE commerce (exchange of goods & services) that PM. And I own far more PM than Bitcoin. You need to get out more. Or read more.
Interesting. To me, the whole point of accumulating gold and silver is they are not some alternative to the U.S. dollar.
If you own gold and silver, why would you even care if others own bitcoins, unless you're concerned about the dollar value of your gold? Is that it? Bit coin redirects dollars that would otherwise go into gold? But then your actual unit of value would be the dollar then, not gold, correct?
All I know is that my PHYZZ ain't going to vaporize, I can't say that about bitcoin.
Yes one can.
This is how it's clear that the bankers are no longer primary, they've lost the battles and the war.
Internet killed the bankers.
Lincoln avoid the bankers by printing paper. World today is avoiding them by using internet.
I bet, they'd wish gold standard comes back. They are regretting this so much.
"I bet, they'd wish gold standard comes back. They are regretting this so much."
More like they are loving people trading their currency for bitcoins while forgetting about gold and silver.
Seems like they've won a battle they've been fighting for a while in recent years in keeping people out of metals.
Gold & Silver going down while Bitcoin / Dow / Debt going up.
To quote Admiral Ackbar: "It's a trap!"
http://www.youtube.com/watch?v=dddAi8FF3F4
Check out brotherjohnf on youtube. His latest expose shows the shorting volume of silver tripled in the last couple of days. That is how they go the price below $27.
I dunno ekm, I can see a use for bits but I don't look at them as "money".
If the power goes out, I still have "money" to go to the store and buy ice. For me it seems, more of a vessel to hold what could be termed as "money" than anything else.
I see, I see. I am neither supporting nor going against bitcoin.
My main point of view is that changing bank accounts by simply typing on keyboards has made the bankers lose what actually matters the most: CONTROL.
When they had the gold, they had CONTROL. Now, who owns the internet?
edit: Who controls bitcoin? Yakuza?
Good points as always.
We see the same thing...the loss of centralized control of value, a good thing.
I am really neutral on it too, realizing it is not money, just a conveyance of it. There is the current aspect of hyperbolic "valuation" that argues against stability, stability being recognized as an integral part of money, that should be recognized by speculator and saver alike.
Its really the only reason I bother commenting on bitcoin threads...just as long as everyone can make informed decisions about their labor, I don't care how or what they exchange it for.
Without the internet, Bitcoins will be useless...
That's weakness, not power
Besides if the Hackers truly have created a parallel portal to the Internet?
I'd say that was power
Without the internet Wall St would be pretty much nothing
Bitcoin is open source and peer-to-peer. There are no controllers. That is the whole point of its value.
I can look at debt notes, 'currency', and think of them as debt money. If the power goes out, then I guess the currency is worthless and its time start opening the tins. I don't have to go the store.
It's all about the bitcoins.
Was reading the Probable Cause Affadavits from the Manatee Florida Sheriff's Department today. One report caught my eye. A Mr. Washington was soliciting investments in 'digital currency' last week and got $200 from one man. That man became suspicious and began pounding on the 'digital dealers' door wanting to know what had become of his 'investment'. The digital currency dealer did not open the door and investor became enraged and began to bang on the door and windows of his financial advisor threatening to kill him if he did not get his money back. Beware. Bitcoin's gone ghetto!
Ask yourself what you would accept for payment if TSHTF.
Bit coins or fiat?
You can be fairly sure that no one will offer to pay you in PMs unless you have something that they don't have. And what might that be exactly?
If you still offer trade settlement in BC well then you will suddenly have every Internet user as a potential customer.
Just saying...
If TSHTF how do people know if the blockchain has updated or not?
I wouldn't take either.
In a true SHTF scenario, neither bitcoins or fiat are going to be relevant. But food, clothes, clean water, first aid supplies, tools, liquor, soap, toilet paper, etc. etc. etc. will all be precious and barter-able. Too many risk finding out the hard way.
I keep telling them, buy EDIBLE gold.
Maybe 1000 Bottles of Goldschlager?
Ask yourself what you would accept for payment if TSHTF.
Bit coins or fiat?
You can be fairly sure that no one will offer to pay you in PMs unless you have something that they don't have. And what might that be exactly?
If you still offer trade settlement in BC well then you will suddenly have every Internet user as a potential customer.
Just saying...
I wouldn't take either. :-)
You will trade for skills that you do not possess.
As a provider of skills it is hard for other parties to take them away from you.
Trading skills becomes easier with some form of money, even if its not perfect money.
The USD is exhibit a...
I measure my skill in grams of silver.
We will get along just fine then
Instead of PMs being hoarded by the Central banks/PTB they will be forced into circulation and will gravitate toward those who can fulfil some useful need for society.
In short the world will be totally unrecognizable.
Will bit coin still exist?
No one knows the answer to that, but one thing that we do know is that mankind will continue to fashion more and more elaborate tools for himself and others to use, and one of these tools will be new kinds of money.
I've learned how to buy them low, sell them high and download them. That's all I needed to know.
You can all keep your fiat money instead, and try to trade your silver for goods on the internet...You will still be facing fiat without bitcoin. Bitcoin is a way of paying things first, then an investment, Its called, diversification...
I don't necessarily agree with the sentiment of the article but remember this. If I am in some 1st world turned 3rd world in a matter of days, capital controls in place no where to go to buy any gold or silver since I was joe slob deer in the headlights type, I managed to get some cash out but now the mauraders are out in full force looting everything not nailed down. Where is the safest place to store your money at that point when you don't have weapons to protect yourself. You put as much of it as possible into bitcoin or a similiar crypto-currency like litecoin (take your pick). It is beyond the grasp of all the immediate thieves and you can travel across borders without worrying about your money being confiscated. You can then turn them coins back into physical money in a different currency and you've better protected your money against a failing banking system like in Cyprus devaluing the paper to nothing making it worthless even if you did have it stored in your mattress. Bitcoin is most certainly a very eloquent short term solution for the banking meltdown 2.0 that is starting pick up again. Everyone can bag on it all they want but it provides a tool for economic freedom for the little guy and small money against the evil empire implosion going on. If vendors in these countries want to accept bitcoins, even better either way it has a real tangible value as ta emporary wealth preservation vehicle while the STHF and you are cut off from resources like gold and silver.
+1 Dewey...well reasoned! My only caveat with what you wrote is I wouldn't be so sure about going "across borders without worrying about your money being confiscated" if BC does catch on with the Lumpen...but certainly worth looking at for some fiat conversion (PM always #1).
Set up a few bitcoin addresses and offshore some of them online in the cloud or remotely on a trusted computer or network outside of where you are and shuffle the coins around like 3 card monte. You can move those coins fairly securely and outside of prying eyes by using vpn tunneling, redirectors, etc. I know there is no such thing as 100% secure but you can obfiscate and layer enough for the others to have to put in alot of work to penetrate through all it. By that time they do it the process could be reiterated and coins long gone. The situation and resources determine the best tools for the problems at hand, bitcoin most certainly is a valid and effective tool when wielded correctly in this not so hypothetical real world problem.
Just remember this in the traditional banking system you only have a small amount of banks in safe havens like Switzerland for example to play 3 card monte with concerning your deposits. Bitcoin now turns every ip4 and now v6 address into a potential safe haven bank for your deposit outside of grasp of the banks wanting to haircut your money to bail themselves out or control how much you can withdraw or spend along with fees for using your own fucking money since they hold it hostage. This becomes official currency and the value stabilizes once the nation states come on board and start issuing their own iterations backed by assets. We could in theory asset back this with what little hard assets all us small guys have if we can come up with something that we can agree on a. and b. agree on a basic value to use as a peg against. Then fuck them, dollars we don't need no stinkin dollars. There are other advantages to this shuffle as things get increasingly repressive that benefits the small guy and businesses on a local level deal with the same small guy as socialist noose keeps being tightened around your neck.
There's also a process of "cold storage" storing bitcoins offline. If you can keep the wallet number in your memory, it can never be stolen.
You can export the wallet to a file, encrypt it and email it to yourself. Then you can download the email where you want, such as with google mail, and use the file to sync a wallet. That way you can carry money over any international border without even needing a USB drive.
Good point, set up a second wallet on your laptop, travel to a free Internet Wifi hotspot and then power on your laptop to receive the transmitted coins. The records will show that the money only ended up at the hotspot. Be sure to wear a facemask one of those anti-drone hoodies. If the police question you, tell them you are merely syncrhonizing your bitcoin wallet in anonymity.
The author writes this twice. Bitcoins are very perishable. Once lost they are gone forever.
You can read bitcoin's own FAQ on the subject. Or prove it yourself. Buy a bitcoin, toss your encryption keys and/or the address holding the bitcoin, and that bitcoin is gone forever.
Well, technically, it's not gone, it's just inaccessible. Just as if you took your gold, loaded it onto a rocket ship, pointed it out into space and fired it off. The gold may not be perished, but it sure as hell isn't accessible. Admittedly, it's much more difficult to make gold inaccessible than bitcoin.... Unless you store it with a TBTF bank.
An easier way to get rid of your gold is put it in the rubbish bin. Usually vanishes after a week (8 weeks if your council is Labour).
Why not litecoin? Seriously. Is it the next best, up and comer in this digital currency realm??
Why not Google2?
Anyone can start their own Bitcoins business, this thing is just a big fad.
That's what my Dad said about the Internet---until he started to use it.
From what I've read and heard, it is very easy to transfer dollars to Bitcoins, but very hard to transfer the Bitcoins back.
Transfering Bitcoins to others Bitcoin wallets is easy. So in that way it works. But some vendors that accept Bitcoins charge 40% more if you pay in Bitcoin vs dollars. Some Bitcoiners don't care because they have seen the value of their wallet triple in a couple weeks.
Two weeks ago, you bought 10 bitcoins for $500, now they are worth about $1400. So paying more for the drugs or hookers actually costs less than it would have if you paid cash, based on what you originaly put in.
Speculators hoping to turn a fistfull of dollars into a wheelbarrow of dollars, beware. The strict withdrawl limits on most Bitcoin exchanges make it almost impossible to transfer a large amount of money out to a traditional bank account.
Although the transactons are anonymous, the information you use to transfer cash is not. You are givin your account information to an unknown entity with no way of tracking where your money actually goes. I wonder if the recent major hack attempts at many banks are the result of information transfered through the Bitcoin network.
Sure, when I make an online banking transaction, it is encrypted. But my computer itself is not. A keylogging trojan can easily record my input and send it to a hacker who can now access my account. Do you really know if the Bitcoin client is secure?
Hell, the entire block chain might have a master cipher that could download evry bank account ever used to transfer funds into Bitcoin.
Lex Luthor eat your heart out.
Bitcoin or crypto-currency in general atms. Give it time they will be exploding all over the place. Offline wallet on an usb stick plug it into the atm and transfer coins for cash or whatever the atm dispenses.
You are a treasure of knowledge.
I see people turn 100 BTC to €10,000 on bitcoin.de every hour or so.
'Do you really know if the Bitcoin client is secure?'
In terms relative or absolute?
1) Cabbiage Patch Dolls
2) Beanie Babies
3) Bitcoins
4) All of the above
Questions: Which of the above made people lots of money until the rug was pulled?
You don't have the benefit of hindsight to put BTC on the list. Even if you turn out to be right, you will only be right in the same way as a gambler may be right about betting on black.
While some have access to the latest technology in a given field of activity, others prefer to stick to older versions.
Fine. The banksters can have their money and humans can have theirs.
Then, if the medium-of-exchange-linked technology is abandoned, because for instance no sufficient savings are available any longer, the economy will have to find another medium of exchange.
Where's this guy been in a cupboard during the Cyprus theft by the banksters.
Dude there are already numerous versions of bitcoin. Download the source code and screw around with it however you like.
This guy pissed about falling gold and silver prices or what?
Has anyone stopped to think that maybe Bitcoins are a Gov psy-op created to trick us into accepting a cashless money system??? All the while we think we're stickin' it to the man, when were playing right into their plan...
Or maybe I'm being a bit-coinspiratorial....
Yes people have stopped and thought that. Then they stopped and thought about central bank currency in general and thought the same.
BTC goes up because fiat currencies go down.
Anyone can start a new bitcoin, we could have dozens of competing bitcoins. What we need is a bitcoin backed by gold, or some asset / capital.
You need at least a friendly crowd with more computing power than the competition from the beginning. When the first virtual currencies emerged, there was not much competition, bitcoin had no competition.
because price of gold is free of bullshit? everyone worried on the safety of bitcoins while central banks print billions of fiat out of thin air every month
I believe Peter Schiff created a debit card that is backed by gold. I think it would be a great mistake for BTC to be so backed though, as it would push BTC into the realm of the reserve currency, which would be a mistake given BTCs cryptographic limitations...eventually it will be cracked in real time by computers. BTC is good, but the party will not last forever, some day we will need BTC 2.0 with 4096 bit SSL 7.0.
Can you buy anything with gold or silver without an exchange besides with a private party which really amounts to barter?
The key to a Bitcoin wallet is as strong as the password that protects it. You could try to water board it out of me while you could kill me and take my silver (or fiat.)
Does fiat really exist anymore without the Internet?
What intrinsic value does gold really have besides a history of respect as a medium of exchange? IE it's mostly used for jewelry besides a tiny amount used in industry. It isn't consumed except in industry and more can be mined....
I like the idea of possibly having lots of wallets floating around the cloud to diversify risk. Costs involved with shipping/insurance against loss make that a problem for PM.
Just some brainstorming.....
that article failed to stress which currency isn't being manipulated
those austrian eco guys have to eat their shorts with all the talk of manipulation and now they run scared of bitcoins..why is that clown on the internet anyway he should be back horse trading and running a steel mill
If silver becomes less abundant than gold (above ground), then we will see gold used in applications that currently use silver. The reason it has no significant use is because silver performs slightly better and is cheaper, at the moment.
I read all this for what? I was hoping I'd learn something about bitcoin!
BitCoin is like any other fiat essentially anyone can make their own BitCoin.
The USA could issue bit coins backed by USD the ultimate irony LOL backing a virtualy currency with a virtual currency that appears physical.
Gold and Silver are elements they are not compounds. I will stick with govt fiats for currency and gold/silver/real estate for long term wealth. My target on these assets in real terms is 0%
My no 1 rule "don't be greedy"
"BitCoin is like any other fiat essentially anyone can make their own BitCoin."
you didn't even comprehend how bitcoins are mined did you?
the technophobia here in ZH is going parabolic
My no 1 rule "don't be greedy"
From axiom #1 comes theorem #2, "don't invest then."
so you use gold to pay for what? many points can be tossed at gold as not being useful in many transactions, true?
gold is a great store of value but it is getting manipulated.. why is that not part of this article? How can you say how great something stores value when it obviously isn't doing its job?
The great value of bitcoin is that it can be transferred over the internet. It is not a long term store of value because it is dependent on the encryption schemes remaining good. But it can be used for payments in ways that metals cannot. Until a matter transmitter is invented, gold will not have the same value in remote payments.
The way the world seems to be unfolding it is kind of a usefule in a couple of ways.
If the money flows into bitcoin then it flows not into precious metals.
People considering removing money from a bank and storing it at home under the mattress.
Useful for who?
If the money flows into bitcoin then it flows not into precious metals.
I do not agree. We are only a billionish total market value with BTC, silver is nearer 30 billionish, and gold 1500 billionish. There is a long way to go before BTC is causing stackers to sell.
Quantum Computing seems to be a technology that is on the near term horizon.
Could a Quantum Computer render a Bit Coin investment worthless over night?
Just curious
Depends on the power of their quantum CPUs. Quantum computers is not INFINITE computing, they speed SOME algorithims, not everything. If it becomes clear the QC or any or any other standard computer is breaking the encryption codes then every secure transaction will become compromised. Includes those of the banks, as bank database connections use standard asymmetric encryption. So if QC is threatening BTC day one, your bank accounts will be flushed on day two.
It is likely that we will see QC proof ciphers being used in SSL in the near future, using algorthims that do not optimize under quantum superposition.
The important thing is to keep an eye on one's investments at all times, and never vegetate. There will come a time when one should sell BTC.
My local fruit and vegetable market run by Mexican immigrants is 100% FRNs. You can't buy any food with a debit card or a BTC. When that changes I will take both a little more seriously. Those immigrants would probably take gold or silver but probably would not know the value very well. They may be fairly ignorant people but they produce food and lots of it.
I wasn't even wearing my tinfoil hat when I was reading zero hedge comments this afternoon and got a phone call from a 202 number.. No one was on the other end, and when I called back, I went straight to voicemail, not set up .
Happened last week too.
Anybody else getting mysterious 202 phone calls while reading ZH articles about BC???
Can someone explain to me how Bitcoins couldn't be evaporated at the flick of a Central Bankers wrist? Or how they couldn't be legislated out of existence when they become more than a nuisance to the Goldmen elite?
Google 'Bitcoin wiki'.
Great post, thankyou.
I really don't understand the knee-jerk animosity towards bitcoin on ZH. You would think that anything that competes with the monopoly control of fiat would be at least tolerated if not embraced. I see some distinct advantages of bitcoin over other mediums of exchange. Disadvantages as well. To use an analogy, it's looks to be a useful tool. To say that a hammer is extremely useful does not mean that a screwdriver isn't useful as well. It isn't a zero sum relationship.
I don't really have any use for bitcoin myself. Except maybe as something to tinker with. But I'm glad to see that it's out there. It seems to have some real advantages over fiat and PM's in it's extreme portability and anonymity. I see some disadvantages as well in that it doesn't seem to be all that great of a store of value, it's limited acceptance for purchases and it's susceptibility to forces majeure such as power outages. Comparing bitcoin to PM's is in my view a bit disingenuous as bitcoin really isn't designed to replace PM's so much as to compliment them.
I wonder if the people with guns, and pickup trucks full of bread in Zimbabwe, who sold to the staving people, enough to not starve for 2-3 grams of gold a day, would have taken bitcoin?
"Fiat money in extremis is accepted by nobody, gold is always accepted.”
- Alan Greenspan, Testimony before the U.S House Banking Committee, May 20, 1999.
Bitcoin may have its place some day in the main stream, but as insurance for extreme times, it will never be. Pysical money and electronic currency are not competitors, just different alternatives with different pros and cons.
http://www.telegraph.co.uk/finance/economics/9973094/Fears-for-virtual-c...
Are we seeing the emergence of an alternative virtual medium of exchange? Of course. It happens all the time. I don't understand why people are talking about bitcoin as something so new and different. It's not.
Bitcoin ...... where can i buy food, gas, hotel, airfare, clothes and day to day items with bitcoin.. Also Mt G (lost 1/2 mil) and another site were recently hacked.. Price swings and limited amount and were to acquire. Its too tech for most people and besides the feds are monitoring every transaction and i believe they have the code and the abilty to track down who is who. usa govt is desperate for $$$ and will eventually pounce on offshore accts and bitcoin. imho.
BC seems like twiddling your thumbs to create units of a medium of exchange. Might be a good medium in the marketplace for intangible goods, at least. And maybe services, like programming or other work product that can be delivered electronically.
Would have preferred to see goldmoney take off, but it's centralized model makes it vulnerable to government shut down and confiscation. bC does solve that problem via P2P approach, hard for governments to control.
I was originally skeptical of open source software years ago but techies proved me wrong on that, so I am gonna reserve judgment on BC.
Still, could it be mutated into an infinite number of copycats to open up unlimited creation of virtual money? If cracking doesn't work, dilution through multiple systems could still threaten it... Like the old days when each bank printed its own money...
Looks to me like bitcoin is just another bubble fantasy-soon to burst.
Last Monday I tried to "verify" my account on mtgox, the biggest BTC exchange. This morning I checked progress. Still 6000 people ahead of me waiting to be verified. Verification alows you to deposit larger sums of fiat ($5K?+) to exchange into bitcoins. There are probably 10,000 people behind me in the queue. That represents some significant cash waiting to buy BTC.
35 years ago, someone told me to send them an email. My first reaction was WTF is an email? Same with MP3s and text messages 15 years ago. I'm guessing right now, one in a 1000 people knows what a bitcoin is, but by next year that will change. Sure, BTC could be the myspace of digital currencies and be replaced by a facebook that usurps it, but the future is a cryptocurrency. Also, because such a large infrastructure has been built around BTC, it likely has staying power.
Here's some food for thought: https://www.privateinternetaccess.com/blog/2012/03/bitcoin-war-the-first...
a couple weeks ago even CNBC was saying "Why isn't Gold flying high?", meanwhile BITCOIN Tripled.....hasn't anyone considered BITCOIN is there to help remove capital that would be moving into the PM's....look at its Sponsorship, Look at the MSM assisting, now think about it. Can anyone, any entity remain masked, unknown given the ability to track anyone, everyone's email, phone, and especially money matters
The New Yorker has a great story in its upcoming issue about Bitcoin, the cryptocurrency still trucking along
after a glorious rise in value to $33 USD due to a spate of media-driven attention
Don't we all know th MSMedia is just a controlled extension of TPTB, and what have we been seeing, BITCOIN given a full blown Media Blitz trying to make it a well known entity, especially an Alternative to investing in Silver and Gold
behind and hyping BITCOIN you'll find, INHO, the same creators of GLD & SLV, looking to push these as a way to invest in Gold and Silver, instead of actually Buying the Physical
The fact that the MSM is splashing the name "BITCOIN", this alone should clue you in
Months ago
<<<a glorious rise in value to $33 USD due to a spate of media-driven attention >>>
NOW
the price of a bitcoin has tripled over the last month and reached more than $141 for 1 BTC
<<< the unknown Satoshi Nakamoto, the pseudonym of the inventor of Bitcoin >>>
the I.D. of this individual, in this day and age can only remain "Unknown" if TPTB wants to keep it that way
would it be a surprise to find a connection to a Bank hooked in to the LIBOR Scam
Well well... How about this...
Those who have majority of computing power verify the transactions... WTF? The ASIC machines are on the way so sooner or later someone with enough money will dominate since these can outperform those gaming rigs that are currently used as the computing power. So the question is.. who has enough money to buy enough ASIC machines?
I love many aspects of bitcoins, but creating an artificial mathematial problem just to decide who has majority of computing power is very very .... idiotic. I would like someone to calculate how much power is actually needed to verify those transactions (ie mine these bitcoins).
Bitcoin online currency alone is a FREAKING JOKE !! Video game money !! It can be manipulated in so many ways, that I cannot understand how has survived up to now.
What we really need is some kind of Gold/Silver electronic "bitcoin" system, with metals banks in major cities where you can take delivery of your money anywere if you wish to.
BS-bitCoin may showed us the way how.
"some kind of Gold/Silver electronic "bitcoin"" - more ETFs?
From the article:
Prima facie, bitcoins possess all the qualities required from a money (a generally-used medium of exchange). They are perfectly homogeneous, easily cognizable, conveniently divisible, storable at practically no cost, and imperishable. Also, they seem to be fully shielded from counterfeiting.
Currency... not money. You need electrically powered computing devices to acquire and use BitCoins so they are a currency for some but not for many. It is not MONEY.
Imperishable... right. Just wait until an EMP hits or a major grid goes down or you simply lose power in a region of the state you live in due to a storm. That currency will be inaccessible and unusable. While it may not be completely gone it might as well be. It relies on countless layers of technology to function.
"seem to be fully shielded from counterfeiting"... you can trust us.
I'll keep my phyzzz in silver, lead and blued steel thank you.
for those of you who've been pushing bitcoin, fuck you. fuck you and your propaganda.
http://www.youtube.com/watch?v=bem-MNh5g_c