|
Neil McCauley: |
We want to hurt no one! We're here for the bank's money, not your money. Your money is insured by the federal government, you're not gonna lose a dime. Think of your families, don't risk your life. Don't try and be a hero! |

|
Butch Cassidy: |
What happened to the old bank? It was beautiful. |
|
Guard: |
People kept robbing it. |
| Butch Cassidy: | Small price to pay for beauty. |

|
John McClane: |
Why'd you have to nuke the whole building, Hans? |
|
Hans Gruber: |
Well, when you steal $600, you can just disappear. When you steal $600 million, they will find you, unless they think you're already dead. |

|
Cobb: |
What is the most resilient parasite? Bacteria? A virus? An intestinal worm? An idea. Resilient...highly contagious. Once an idea has taken hold of the brain it's almost impossible to eradicate. |
– "Inception" (2010)
|
Jimmy Dell: |
I think you'll find that if what you've done for them is as valuable as you say it is, if they are indebted to you morally but not legally, my experience is that they will give you nothing, and they will begin to act cruelly toward you. |
|
Joe Ross: |
Why? |
|
Jimmy Dell: |
To suppress their guilt. |
– "The Spanish Prisoner" (1997)
"Is it true that you shouted at Professor Umbridge?"
"Yes."
"You called her a liar?"
"Yes."
"You told her He Who Must Not Be Named is back?"
"Yes."
"Have a biscuit, Potter."
– J.K. Rowling, "Harry Potter and the Order of the Phoenix" (2003)
I hold it that a little rebellion now and then is a good thing, and as necessary in the political world as storms in the physical.
– Thomas Jefferson (1743 - 1826)
I really can't think about kissing when I've got a rebellion to incite.
– Suzanne Collins, "Catching Fire" (2009)
In the day we sweat it out on the streets of a runway American dream.
At night we ride through the mansions of glory in suicide machines.
Sprung from cages out on Highway 9,
Chrome wheeled, fuel injected, and steppin' out over the line.
– Bruce Springsteen, "Born To Run" (1975)
So few want to be rebels anymore. And out of those few, most, like myself, scare easily.
– Ray Bradbury (1920 - 2012)
Every act of rebellion expresses a nostalgia for innocence and an appeal to the essence of being.
– Albert Camus, "The Rebel: An Essay on Man in Revolt" (1951)
I used rebellion as a way to hide out. We use criticism as fake participation.
– Chuck Palahniuk, "Choke" (2001)
One of the first Epsilon Theory notes I wrote, and the one that really put this effort on the map, was about the modern meaning of gold. “How Gold Lost Its Luster” argued that gold today is not a currency or some sort of store of value; instead, it is an effective insurance policy against central bank error. That’s an Important Thing, just not as important as it used to be or as its more ardent proponents would have you believe. Today’s note is about the meaning of Bitcoin. Not its technical construction or its formal market interactions, but the behavioral WHY that gives Bitcoin its ultimate value. I caught a lot of flak for “How Gold Lost Its Luster”, and I expect some multiple of that for this note. So be it. The core tenet of Epsilon Theory is to call things by their proper names, even if that’s not the best way to make friends here in the Golden Age of the Central Banker.
Like gold, Bitcoin is neither a currency nor a store of value. Bitcoin is the cautious expression of a rebellious identity. Using Bitcoin is an effete act of rebellion, a weak signifier of resistance like wearing a hoodie or getting a tattoo that’s well covered by your work clothes. Bitcoin is fashion, more than a fad but less than lasting. Now fashion can be lucrative and fashion can be fun. Fashion is one of those intersections of art and commerce that I personally find fascinating (go ahead, quiz me on “Project Runway”). But fashion is not an Important Thing. Sorry, but it’s not.
As for the blockchain technology that underpins Bitcoin and is trumpeted as both an Important Thing and the Next Big Thing in every venture capital conference of the past two years, it’s a modern twist on the “technology” of the letter of credit. Color me unimpressed.
Strong words. Let’s dig in.
Bitcoin’s greatest attribute – its independence from every manner of organized social control – is also its fatal flaw. Bitcoin is a bearer bond. We all know what a bearer bond is, because we’ve all watched heist movies like “Heat” and “Die Hard”. Bearer bonds are the MacGuffin of choice for so many screenwriters because they side step all of those annoying plot questions when it comes to the logistics of stealing cash ($600 million in $100 dollar bills weighs more than 6 tons) or fencing stolen goods. By definition, there’s no registered owner of a bearer bond. If you possess it, you can trade it for value without your trading partner worrying about whether or not you are the “rightful” owner.
Bearer bonds have a very similar legal foundation to a bank letter of credit, where the bank will release the contracted funds to anyone who presents the documents required by the letter of credit, regardless of whether or not there was fraud or theft associated with the underlying real-world transaction or sales contract. This so-called “abstraction principle”, where the bank is only responsible for validating the documents defined in the letter itself and has no responsibility for validating the underlying transaction, is what makes a letter of credit work. The abstraction principle limits the liability of the letter issuer when faced with an unscrupulous beneficiary (the person receiving cash from the issuer) and places that liability squarely on the applicant (the person giving cash to the issuer in exchange for the letter). For those who are interested in such things, the abstraction principle is a fundamental concept in German common law and has lots of interesting twists and implications. I can just imagine some clever merchant guild master of the Hanseatic League coming up with this idea in the 13th century and transforming international commerce for the next 1,000 years.
The abstraction principle is Bitcoin’s fatal flaw. If I possess the private key associated with a Bitcoin address, then I can trade that Bitcoin with any counterparty for value without the counterparty worrying about whether or not I am the “rightful” owner of the Bitcoin. The private key is the only “document” required to satisfy the abstraction principle at the legal heart of Bitcoin, and so long as that document is not forged (which is what blockchain is very good at preventing) then the Bitcoin issuer has absolutely zero liability to any party in a Bitcoin transaction, including the “rightful” owner of the Bitcoin. ALL of the liability associated with unscrupulous presentation of the documents associated with a beneficiary claim on a Bitcoin credit rests with me, the rightful owner of that Bitcoin. I have absolutely zero recourse if my private key is lost or stolen. I am, to use the technical texting acronym, SOL.
As you might imagine, banks don’t go out of their way to inform you of the liability assignments associated with the abstraction principle, and neither do Bitcoin service providers. It’s not that they hide any of this, but they also know full well that the legal principles surrounding letters of credit and Bitcoin are entirely foreign to our common experience. They know full well that our behavioral expectations in this regard are almost entirely determined by our experience with credit cards and cash accounts – two bank-issued products underpinned by radically different legal principles.
Credit card issuers have made a simple deal with the US government. Bank issuers can charge outrageous fees and rates of interest on their revolving loans, but they do NOT enjoy the protection of the abstraction principle on the underlying transactions made with these loans. If someone steals my credit card, then my maximum liability is $50. Period. The bank will undoubtedly try to shift a portion of the liability onto the merchant accepting the stolen “document”, particularly with a card-not-present transaction, but it is illegal for the bank to push more than $50 of the liability onto me, no matter how careless or stupid I was in losing the keys to my revolving credit account. This is why credit card issuers are so quick to freeze your account when you go on vacation and start charging in person (card present) in a new locale. They couldn’t care less about “looking out for you”. It’s entirely an effort to limit their liability at the expense of your convenience.
It’s a little more complicated when it comes to your cash accounts, because any nation’s currency is, in effect, a form of bearer bond. Neither the cash in my wallet nor the cash in my checking account is registered to me, and whoever possesses those physical cash bills can trade them for value without the transaction counterparty worrying about whether or not the possessor was the rightful owner of those bills. That’s not to say there are no limitations or liabilities associated with cash acceptance by a transaction counterparty – this is the entire purpose of anti-money laundering (AML) regulations and other capital controls – but on a fundamental level the abstraction principle is in effect here, as the currency issuer bears zero liability if my “documents” (the cash bills) are lost or stolen.
Or at least that’s the way it was back when Butch Cassidy and the Sundance Kid were out robbing banks. Whether Butch and Sundance stole cash or gold nuggets from the vault made absolutely no difference to the owners of that cash or gold. Whatever you had on deposit with the local bank was almost always uninsured, recoverable only if you put together a posse and got your money back from Butch and Sundance directly. Some banks maintained “blanket bonds” that would insure accounts from fraud and theft, but far more often these provisions were honored only in the breach.
That all changed with the Banking Act of 1933 (establishment of the FDIC and deposit insurance), the Banking Act of 1935 (essentially all banks under FDIC jurisdiction), and the Federal Deposit Insurance Act of 1950 (codification of our current system). Now obviously these laws and the entire notion of deposit insurance came out of the massive spate of bank failures associated with the Great Depression, not because we were overrun with bank robbers, and even today the FDIC does not directly insure deposits against theft and fraud. But with the FDI Act of 1950, the FDIC was empowered to require regulated banks (which means essentially all US banks) to maintain sufficient blanket bond coverage to make cash account holders whole (up to FDIC limits) for almost any source of loss. More importantly, for the past 60+ years the FDIC and every other organ of government has promoted the idea that, without exception, no one can lose a dime in an FDIC-insured account. Our government has well and truly become an insurance company with an army attached, to use the phrase popularized by Paul Krugman, and nowhere is this set of behavioral expectations more solidly ensconced than in the cash deposits of US banks. It’s no wonder we all have a soft spot in our hearts for the plucky thieves in bank heist movies. Whatever they’re stealing, it’s no skin off our collective noses.
There’s one more piece of legislation relevant to our story, and that’s the Tax Equity and Fiscal Responsibility Act of 1982. This was the final nail in the coffin for the issuance of corporate and municipal bearer bonds in the US, as it eliminated the corporate issuer’s tax deduction for interest payments and the muni purchaser’s federal tax exemption for interest received. Both tax advantages were preserved for registered bonds, of course. I say of course because the US government, regardless of political party (the 1982 Act was in Reagan’s first term), has been trying to eliminate bearer bonds for a looooong time. Why? Because the US government believes that bearer bonds are at best a gift for criminal enterprises and at worst actively subversive. Whether this belief is right or wrong (and I think it’s mostly right), the notion that the US government will do anything to help a modern twist on the bearer bond under ANY circumstances is absolutely ludicrous.
So where does that leave us? It leaves us with an extremely elegant credit instrument that is almost immune to forgery or government registration, but because of this immunity it is permanently trapped by the abstraction principle within the world of bearer bonds and letters of credit. As such, Bitcoin is the apple of every criminal’s eye. Every modern day Butch and Sundance, every Neil McCauley, every Hans Gruber is trying to steal your private key. Some will succeed through violence and intimidation. More will succeed with words rather than guns, using what cybersecurity experts call social engineering. If you’ve never seen David Mamet’s “The Spanish Prisoner”, now would be a good time.
And because Bitcoin is hated by governments, it’s all on you to maintain the security of your private key. There is no insurance here, either directly through deposit insurance or indirectly through a blanket bond required of federally regulated banks. There is no “forgot your password?” button to push here, no regulatory or enforcement agency that will vouchsafe a service provider.
For some, the constant liability risk generated by the abstraction principle is – as Butch Cassidy said – a small price to pay for beauty. But for anyone with a serious amount of money who’s not in a criminal enterprise, this is an intolerably risky legal no-man’s land. Look … there are good reasons why bearer bonds have gone the way of the dodo. Are they illegal? No. Do they have an insanely poor risk/reward profile as a central part of any investment portfolio? Yes.
So why is Bitcoin popular, at least on its appropriately small scale? Because it IS beautiful in its technological conception and execution. Because it IS independent from and mildly threatening to the Powers That Be. Because it IS associated (albeit indirectly and at a safe distance) with criminal venues like Silk Road. Bitcoin projects an identity of technological sophistication, bad boy savvy, and a healthy suspicion of Big Government in a safe, palatable manner. That’s an identity that many people (including me) find attractive and would like to take on. It’s an identity that mainstream corporations that sell to those people, like Dell and Microsoft, would like to take on. Bitcoin is a fashion statement. I don’t say that to be pejorative. I say that as high praise. It’s a brilliant marriage of art and commerce, and that’s a lot. Unfortunately that’s not enough for some.


How is the govt auctioning off so many bc's if they hate them. Shouldn't they run a magnet over the flash drive they're stored on instead?
http://www.usmarshals.gov/assets/2015/dpr-february-auction/
Bitcoin as fraudulent as the Euro.
Gresham's Law applied to Bitcoin makes it clear that Bitcoin is the worst of the available options. Without even examining how weak it is without the internet.
n-n-n-nattering nabobs of n-n-n-nihilistic negativism!
In paragraphs 5 & 6 Mr Hunt attempts to distill BTC down to one of its many attributes. After this he then argues against BTC based on this inadequit reductum. He conveniently mentions the blockchain, but only in passing and without a discussion of the essentials of what a "trustless system" is really about ... it is a distributed system, not a thing. Transactions are publicly vetted and propogated. Unlike his analogous "letter of credit" there is no hidding ANY transactions when the blockchain is used to validate.
I do appreciate Hunt's historical awareness. I also see he hasn't quite "got it" as far as the en toto reality of BTC as a system. Maybe he will get it later.
Cash and gold work with exact same principles, the bearer has full ownership.
So why is this a problem for bitcoin but not gold. It is a feature of both systems, not a bug.
Because bitcoin can not be validated without the internet, and that makes spoofing it that much easier without internet access. That means you don't really own it, but have simple rights to access and use of it with certain conditions being met... That means counterparty risk.
The security concerns alone, and how you transfer payment without getting scammed is more than enough to make any sane person stay away from it.
It's amazing how every year we have to cover this same idiotic conversation over and over again. Bitcoin hasn't changed, and the argument has not changed. Virtual currencies are just as dangerous as fiat currencies. It's not the fiat or virtual portion that is the problem, it's the CURRENCY portion that makes it an unsuitable means for the basis of a sound economy. It's not fungible, and thefore leads to immoral situation where the long time holders can benefit greater than the future earners despite the same holding.
Let's not even go into the simple fact that no one has a clue who is behind Bitcoin. I won't go into the Gresham's Law validation of it being the worst currency out there either. It stands that the USD is still better than Bitcoin, even with the nonsense going o with the dollar.
Been happily using Bitcoin for 100% of my company's internal and external payments for 20 months. Bitcoin hasn't changed, solid as ever. For me, at least, bitcoin is a breeze to use and I couldn't imagine going back to 20th century style payments. Fuck guv't issued scrip and fuck the banks.
NidSter, how do you address Gold/Silver/Real Estate in regards to the "immoral situation where the long time holders can benefit greater than the future earners despite the same holding" ? Evil hoarders the whole lot of 'em!
Bitcoin: Good for transferring your wealth, bad for storing it.
I am Chumbawamba.
The data of the past 4 years begs to differ.
I don't blame you. Not many here can comprehend progress and have no insight of bitcoin's history nor willingness to learn.
The internet will dissapear the same time the water pipelines dissapear.
The internet will disappear when the Feds decide it's an inconvenience to their plans. Right now the amount of intelligence they can gather from it is far more valuable than the directed control of information that runs through it disrupting their plans/agenda.
It's ok if you kids can't understand strategic roles of infrastructure and warfare. It fine if you can barely understand economics. It's not fine that you are here assuming that I am attacking something and assuming that I don't understand bitcoin.
I was mining bitcoins before it broke above a dollar. I understand the technology and the reasoning behind it. I also understand that the technology is how they caught the owner of the Silk Road. "They" have acess to anything and everything that travels through these pipes.
They being the intelligence networks that work for the banks. If you think your transactions are secure, then you are more gullible than you think.
oh boy, the mighty fed that controls the internet, get real and get some education.
I'm not the kid, I used the internet when my government used the kill switch 15 years ago, there's no kill switch for the internet, there a re always protocols that work. Cables are in the ground already.
They don't need a kill switch, they own the servers already chief. All telecomms go through the same six servers in the US. They own those servers, and just turn them off to shut down the public internet for good.
You won't be contacting anyone anywhere, because there will no way to send or receive across regional lines.
Even if you aren't a kid, you're knowledge level of the internet is that of a child. Your knowledge level of what the government is capable of doing when it's back is against the wall is even worse.
They can't pull all the wires from the ground, yet alone interfere with the wifi globaly. They can keep all the servers, there's plenty of them. For instance, did you know that you dont need the IANA for internet TLD to work, there's namecoin now.
Where's fonestar to clear the air??
I see him comment over at coindesk.com.
I miss his pity and prescient comments; he was a true brawler at fight club.
Had a word with him on gplus, he's still alive. :)
If you own the private key, you have the power over it's bitcoins, the rest is just math and it's implementation. Sure, there is counterparty risk to a certain degree, which is true for gold and cash as well, but it's negligible compared to bank deposits, certificates and other paper.
Because bitcoin can not be validated without the internet, and that makes spoofing it that much easier without internet access.
Incorrect. Bitcoin can be validated without the internet just fine. It's the transaction broadcasting that gets difficult. Difficult but not impossible. Since a transaction is only around 350-400 bytes you can send it to someone who will relay it using analog radio or even morse code.
That means you don't really own it, but have simple rights to access and use of it with certain conditions being met... That means counterparty risk.
You make the mistake of believing that bitcoin is some kind of file or thing you have ownership rights on. It's not. It's an entry on accounting ledger. How can one own that? What you own is private keys needed to unlock the transaction referring to past entry in said ledger. It's called blockchain. It's an invention. Like calculus. Then the whole discussion about rights is beside the point. No one grants the right to fiddle with blockchain but the key holder - it's a peer-to-peer network and I don't need anyone's blessing to do whatever the hell I want with my UTXOs (unspent transaction outputs used as next transaction inputs).
The security concerns alone, and how you transfer payment without getting scammed is more than enough to make any sane person stay away from it.
Escrow? Multisignature escrow? Pooled multisignature escrow? Or, alternatively, escrow smart contract executed directly on the blockchain? Pick your choice. It all depends on how much are you willing to spend to secure your transaction.
It's not the fiat or virtual portion that is the problem, it's the CURRENCY portion that makes it an unsuitable means for the basis of a sound economy
Currency is an application of bitcoin's blockchain. The most basic one. Please care to tell me how notarization services available on blockchain are not suitable for sound economy. Or share issuance, or smart contracts for that matter.
It's not fungible, and thefore leads to immoral situation where the long time holders can benefit greater than the future earners despite the same holding.
You got that totally wrong. The above is true for proof-of-stake coins. Bitcoin uses proof-of-work algorithm. It actually hurts long term miners if they don't catch up with network difficulty target.
Let's not even go into the simple fact that no one has a clue who is behind Bitcoin.
Let's not even go into the simple fact that no one has a clue who Pitagoras was. Yeah, let's scrap trigonometry altogether. Or better, let's scrap the internet because it's DARPA's invention. See the idiocy of this statement? The creator of bitcoin has no more power over the network than the next person. It's distributed, not hierarchical, baby.
I won't go into the Gresham's Law validation of it being the worst currency out there either. It stands that the USD is still better than Bitcoin, even with the nonsense going o with the dollar.
It is until it isn't. Bitcoin is already more stable and transparent than half the shittiest currencies in this world. It's not going to overtake USD in this decade. Perhaps it never will. But it will help those living in places screwed up by inflation big time.
thank you for such a sound reply. we need better education in this segment as most people tend to come out with quick conclusions.
NidStyles is correct. Bitcoin is great because it uses math. It is fatally flawed because it uses the Internet and Binary code.
The crypto-currencies reach a bubble in 1.5 years, then they are un-minable for all but the nearly insane.
And then, you can exchange cash that could be used for Gold or Silver for a "key" that is easily stolen.
Not to mention the exchanges are infected, raided, or shut down as often as a bad whore house.
Bitcoin has a known issuance schedule. If sufficient miners drop out, the mining difficulty rating goes down. It's never happened. That doesn't mean it couldn't. If the number of miners drops sufficiently, the network becomes insecure because the cost to achieve a rogue dominating network of miners drops out of prohibitive range.
The number of miners is equivalent to the difference between bitcoins worth and the energy (time & power) required to mine as well as the availability of minable bitcoins.
If energy costs go up, less people mine, because more miners are inefficent and as more and more bitcoins are mined, less and less exist, so the situation you describe will never happen. It wont happen because miners only stop when it becomes pointless to mine and it becomes pointless to mine when too much has been mined (or btc's r worthless).
Anyways, BTC are great for instantaneous transfers only, end of discussion. Only if the gov and banks would simultaneously switch to btc would it become a reserve currency.
btc's are absolutely nothing like bonds. They hold no indebtedness and pay no interest, and aren't tied to tangible assets. IMO, the price of btc's is equivalent to the volume of btc transactions with OTHER currencies. If the volume drops, then so does the price. There really are very few people nowadays that go and buy btc's to hold onto. The time for that has long passed.
Hunt gets one thing right, Bitcoin acts like Bearer Shares, but his conclusions from this observation are very short-sighted. While I could argue all night (and have) about the functionality and value of Bitcoin, I'll cut to the chase on my disagreements with Mr. Hunt.
1. What's wrong with Bearer Shares? We still have them, they are called cash, but we carry less of them due to security risks, so we put all of that trust with a bank. And what have the banks done with our trusted deposits? Squandered them in a self-made casino apparatus that shoulders all of the losses and none of the gains on each and every depositor in the system. If Bitcoin has a value, it's that it is NOT tied to this very system of entrusting our money with banks. Sure you can put your trust in the FDIC, some of the rest of us would rather have our Bitcoins in bearer form, thanks, even if Butch and Sundance might find us and try to steal our Bitcoin - first they would have to know we have any Bitcoin, unlike a bank, we don't advertise.
2. Bitcoin enables multi-sig, which means we can program our Bitcoins to require 2 of 3 or 5 of 7 or however many signatures we want to effectively move those Bitcoins. This works like a trust. Trusts require trusted 3rd parties like law firms. All the world's wealthy use trusts today (Trusts have not disappeared like Bearer Shares). Bitcoin let's you choose who you want to trust and they don't have to be hot shot lawyers who charge $500 per hour and thousands per year to renew, your trusted signatories can be whoever you want. If you don't want to trust anyone but yourself, you can be the only one with the private key. Alternatively, you can put your private keys in a safe deposit box so even you don't have the private key. Or you can use a brain wallet and memorize the private key in your head.
3. If only the Bitcoin skeptics could just get over seeing the "price of Bitcoin in USD" they could finally understand the value of the "blockchain technology". The price of Bitcoin is easily the part of the puzzle that throws most people for a loop because they instantly equate that to "value". Mr. Hunt alludes to the fact that the blockchain part of Bitcoin might be extra interesting, but completely glosses over the details while he discards Bitcoin as something between a fad and a trend. Whether or not Bitcoin lasts as a currency matters not, the blockchain technology cannot be un-invented. Blockchain technology can be used to replace entire segments of business, including accounting, legal, and financial. Blockchain is to accounting, legal and financial what basic robotics was to auto manufacturing. Even if Bitcoin fails, there are 500 other blockchains out there right now that ALL work, and value can move among and across any of them, relatively quickly, and without requiring permission from any gatekeeper. Regardless of the "price of Bitcoin" the net wealth stored in crypto currency is going in only one direction. The world was freer when Butch and Sundance roamed anyway.
Again, I could go on all night...
A year ago this comments section would have been 5 pages long already, filled with utter stupidity, ignorance and vitriolic BS about what a joke BTC is.
Since then Bitcoin has proven all the clowns and lord knows how many calls for the death of Bitcoin on their face wrong.
Well, well... This article is crap and we haven't even hit a page yet.
BTC, BTChez.
Bitcoin is freedom.
ZH is the wrong forum for Bitcoin stories anyway. Everyone here seems too focused on the "tribe", "zion", and all the other bullshit for any real discussion. Just a bunch of ex-financial bigots busy expanding their underground bunkers.
Bitcoin will outlast ZH, so there is that at least.
Once you have some bitcoins and/or some altcoins, once you have something spendable, people will spend it. I like the faucets for that. There's even a sort of multi-wallet / faucet combination that puts in a bit of coin every day called qoinpro.
https://qoinpro.com/1a9c0b090819089035bd7fe1733b2bd7
I use mine for the occasional dogecoin that wanders my way. Even if you're a bitcoin critic, I don't understand why you wouldn't sign up for something like that.
Well said.
"Like gold, Bitcoin is neither a currency nor a store of value."
I stopped reading after this...
+1000 on this. Any argument after this statement colors it glitter.
I encounter the "gold-like" comparison, at virtually every bitcoin associated website I come across.
I'm yet to find a precious metal site that compares gold to bitcoin.
And it makes sense. When selling old crap on e-bay and craigslist, people often try inflating the value of merchandise by saying it's in a "like new" condition. No dealer sells a new car by comparing it to a well used clunker, nevermind an imaginary one.
By the time a well established incumbent starts comparing itself to the upstart, it's already dead man walking with the upstart long ago already stealing mindshare and marketshare from the incumbent.
Gold will survive but market participants would do well not to imitate dinosaurs who ignored upstarts.
More fraudulant. At least fiat currencies have the reputation of a sovereign to stand behind them. Bitcoin has...bits. The ultimate ponzi.
Oh my god NO! Supply and demand, buyers and sellers determining a price! PONZI!!
If you see economies as nothing more than a game, there is no objective difference between trading "currencies" or bitcoins or WorldOfWarCraft credits.
None of us can get into the minds of any body who trades currencies.
<<More fraudulant. At least fiat currencies have the reputation of a sovereign to stand behind them. Bitcoin has...bits. The ultimate ponzi.>>
If you do not like Bitcoins, that is fine. Do not play that computer game. Nobody is losing if you do not have fun with it.
Sovereigns have resources (at least until they sell them all off to private interests...but which can be reclaimed, in that case). Bitcoin has nothing but electrons, ie, zero collateral value.
Only for those that don't understand what a pnzi is.
First they sell you the bitcoins, then they run the magnet over your HD later.
This is not how it works. You cannot just delete bitcoins. There is no bitcoins on your hard drive. Most zhers would be blown away had they glossed over some basic technical details of blockchain.
Sure, try to explain that to a few billion people in Asia or Africa. It's like trying to explain electric current: "You can't see it, but I swear it's there. Most people would be blown away had they glossed over some basic technical details of electricity". See money, before it's used as money has to have value in the first place. Comparing BTC to gold because it can't be duplicated at will makes no sense whatsoever. How about the other 50+ cryptocurrencies? Are they also 'as good as gold' because they can't be duplicated? Spot any fallacies here? Furthermore if you can't explain it to a 6 year old, I wish you good luck trying to persuade people. Explaining to my grandmother how to send a simple sms was a real challenge. If you need an instruction manual for money, chances are people won't trust it.
It's like trying to explain electric current: "You can't see it, but I swear it's there. Most people would be blown away had they glossed over some basic technical details of electricity"
Your point being what exactly? That it's not going to work because it's hard to grok?
See money, before it's used as money has to have value in the first place.
Precisely the way around. It has value because it's used as money and fulfils the characteristics money has to have. Feathers and shells were used as money not because they had value but because they were transactable. So was salt. And then gold. And then bitcoin when after being used for 9 months in 2009 it started to have value. Its value was an emergent property stemming from its utility.
Comparing BTC to gold because it can't be duplicated at will makes no sense whatsoever. How about the other 50+ cryptocurrencies?
Well over 1000+ at present, but it does not matter anyway. They lack Bitcoin's utility and transactability.
Are they also 'as good as gold' because they can't be duplicated?
Well, let me reverse that argument. Is, say, Indium as good as gold because it cannot be duplicated? Indium is used for different purpose than gold, so are altcoins. Most of them is going to die of starvation in transacted volume. Those which survive will serve different purpose - like Ethereum (powering the blockchain-based contract resolution platform) or Florincoin (used for blockchain-based persistent information storage). Yet others will be build on top of bitcoin blockchain (like Colorcoin, Counterparty or Mastercoin) to act as share certificates and tokens of non-monetary value (i.e. as transactable access control artifacts).
Furthermore if you can't explain it to a 6 year old, I wish you good luck trying to persuade people.
How do you even begin to explain the Internet to a 6 year old? Do you start with theoretical OSI model? Or do you just straight to TCP/IP. What about application level protocols? How is session maintained across different app level protocols? Are you trying to imply that thorough understanding of a technology is requisite in order to use it? Of course not. Bitcoin is very easy to grasp in practice. You show me a QR code of your bitcoin address, I scan it, type amount and hit Send. Two seconds later you hear a ka-ching on your mobile and 10 minutes later your newly transferred bitcoins become spendable.
Explaining to my grandmother how to send a simple sms was a real challenge.
It's ok. Not everyone has to use it. But those who hold some beliefs on it should at least give it a try. You can paste me your bitcoin address if you want to so you can play around. I'll be more than happy to send you some of this magic internet money.
If you need an instruction manual for money, chances are people won't trust it.
I would argue with that. If people see that 10, 15, or 20% of their money is lost in Western Union fees they will go the extra mile. It's a matter of balance - convenience of using known procedures with old money transmitter vs saving made at the expense of time and effort needed to learn new tricks.
Feathers and shells were transactable, but more important they were rare at the time and so was salt for that matter. My point is different cryptocurrencies, just like other currencies, can be created at will. I agree that the blockchain as a technology offers endless possibilities. To me, BTC is an excellent conduit to transfer wealth, but certainly not to store wealth. People tend to forget that BTC only exists in the monetary plane, not in the physical plane...that's where the rubber meets the road. The fact that you need salesmen and an instruction manual to promote a monetary invention raises a few questions, that's all.
Pardon me if I am being ignorant, but if you delete the key to a wallet then have you not effectively deleted those bitcoins? How can they ever be recovered?
Since there are a finite number of BTC, in theory any government set on destroying it could simply print enough fiat to buy all of the coins and delete the keys. Those bitcoins would then be gone - no?
They wouldn't need to buy them all publicly, they could just start amassing them and disguise their actions by creating 10s of thousands of new wallets. It would look like the currency was taking off, then on day they'd all disappear.
Of course after that, they'd just go roundup all their fiat through relatively easily traced fiat transactions. Follow that up by taking down a few bad actors (black economy) and quite easy to demonize it to the masses.
You're not ignorant. You are spot on re deleting keys, none the less the bitcoins (as annotated on the blockchain ledger) would still be there. Stuck forever. (This was partially the reason new operator, OP_RETURN, was introduced in Bitcoin script - to release lost, sometimes intentionally, bitcoins from expensive memory pool). They cannot be recovered. Another way to lost bitcoin is to send them to address that does not have private key. Still, they are not deleted in strict sense. They're just stuck in the network forever with no one ever being able to use them.
This is why you DO keep backup copy of a private key. I keep my keys encrypted with additional passphrase and spread in several locations - at home, in the office cabinet, at my folks' place.
Since there are a finite number of BTC, in theory any government set on destroying it could simply print enough fiat to buy all of the coins and delete the keys. Those bitcoins would then be gone - no?
They are finite upwards, but also infinitely divisible. Removing large pool of currency units would baloon the price of remaining ones. Then we would just move the decimal place like we did last year - most people don't transact in bitcoin, instead milibits are used (1/1000th of a bitcoin, like mimimeter is 1/1000 of a meter). Microbits are next in line.
But then they could unintentionally trigger strong market signal "all aboard bitcoin ship" and it would yield the opposite result making now miniscule bitcoin economy to explode. That wouldn't be the first time they completely failed to grasp unintended consequences of their actions.
You can only mine in units of 1BTC though right? Herein lies the theoretical problem...
You also have huge soverign risk. What if tomorrow the current powers have had enough and outlaw mining bitcoin due to environmental or some other created concern. Because you can trace it thru the bloc chain - wouldn't it be easy to locate the miners and shut them down?
Look call me an old fashioned Gen Xer, but I've never gotten this. To function as a useable currency it relies on the internet and interconnectivity of processing power. That can be too easily shut down.
And then what is that bitcoin saved in a vault worth if there aren't enough computers solving the bloc chain for any potential trading partner to verify if you haven't already sold it 3 times that day?
I don't know. Too complicated. No internet or power and there is effectively no bitcoin (and I don''t mean the internet disappears a la Mad Max - I just mean the government clamps down and outlaws the computational work it takes to maintain its velocity)...
Bitcoin is not a solution for no internet no electricity scenario. I mean you could try and be successful calculating sha256 hashes pen and pencil way and broadcasting transactions via ham radio but it wouldn't be worth the effort. In a state of complete social decay that would inevitably ensue after power outage for few days you wouldn't probably acheive much more with precious metal anyway. After all food would be the most sought for good and - I imagine - it wouldn't have a price. Food would be the ultimate currency.
I wouldn't welcome living in such setting.
On the other hand, if you choose to travel north/south/east/west long enough you may reach a place where electricity and internet are on. And there your bitcoins would be worth something again.
You can only mine in units of 1BTC though right? Herein lies the theoretical problem...
Technically, all monetary units in Bitcoin blockchain are integers. Each individual unit is called "satoshi" and 100,000,000 satoshis form 1 bitcoin (100,000 satoshis = 1 milibit, 100 satoshis = 1 microbit). 50 bitcoins was the original reward for minig a block (the purpose of mining is not the reward, it's the compound computational confirmation provided to secure the transactions and make them historically immutable, reward is just an incentive), and it halves every ~4 years. Currently, we're on year 6 of bitcoin and the reward is 25 bitcoins (2,500,000,000 satoshis). Eventually, the blockchain reward is scheduled to decrease to 1 satoshi in year 2140 and miners will be mining entirely for transaction fees.
If necessesity arises, a change in protocol can be made to accomodate smaller denominations, but it's a lengthy process and changes in core protocol must be accepted by vast, vast majority of users (not just miners).
if there aren't enough computers solving the bloc chain for any potential trading partner
Network difficulty retargets every 2 weeks. If the average block time is less than 10 minutes, the difficulty goes up, otherwise it goes down proportionately. If 1/4 of entire global hashing power was to go off-line (say, we have 100 EMP events across whole Europe) the block time would go down from 10 minutes to 15 minutes, then the next retargeting date would be in about 3 weeks (worst case scenario), and then the network would retarget and return to normal 10 minutes/2 weeks operation reflecting actual hashing power of the impaired network.
Alternatively, you can always accept unconfirmed transactions. I do that for amount less than 100 eur in bitcoin.
The thing is each coin can be divided down to 1 million fractions of a coin, (21 quadrillion bits) or 100 million fractions of a coin (2100 quadrillion satoshis) which is enough to be useable for transactions. Destroying a bunch of bitcoins is the opposite of inflation and would make the remaining coins more valuable. So that would be an own goal for governments.
Bitcoin evolves everytime something 'goes wrong', eg regulation, hacks, silk road seizures, auctions, unforseen limitations in the protocol etc. Each of these challenges so far, (and there are more coming), change bitcoin but haven't killed it(so far).
If one country eg the US decides to clamp down completely, it would have the opposite effect to what was desired, kind of like napster and the music industry. It would take a successful 100% global clampdown for it to be completely 'eradicated'. To continue this metaphor, anything less than complete eradication, and it can resurface in a different, stronger form, kind of like a bacteria that was only half treated with antibiotics.
Selling them allows them to keep the price supressed. Wiping those wallets would have the opposite effect.
Naw, they can keep moving the decimal over to keep it supressed, just like they have been doing since it's inception.
wut? Here's a tip for math challenged individuals: a millibitcoin is exactly 1/1000th of a Bitcoin in the same way a millimeter is 1/1000th of a meter.
This is nonsense. What do decimals have to do with anything here?
How is the govt auctioning off so many bc's if they hate them. Shouldn't they run a magnet over the flash drive they're stored on instead?
Bitcoins are not just some files you can delete. It doesn't work like that. Bitcoins are entries on globall accounting ledger distributed across all participants and secured by compound processing power of 800+ top supercomputers combined. Good luck deleting that.
This reminds me, anyone heard from Fonestar?
Bitcoin will fail due to volatility. Over 100k businesses accept it but sell almost immediately for fiat. This means the more BTC is used as a transactional currency the more it will decline. (This is in addition to the 10% inflation via new coins that are also sold almost immediately to meet expenses, in a bear market this has a much larger effect than the stated inflation.)
The solution is stable BitAssets by BitShares (The 4th largest crypto-currency.) Where a few hundred percent of BitShares collateral is used as backing in market that matches people who want a stable asset like BitUSD or BitGold and people who want to take a leveraged position on BitShares.
The system has allowed BitUSD to maintain dollar parity for over 6 months and remain backed by over a few hundred % collateral even in the crypto market decline.
2015 is the year of Decentralised Stable BitCurrencies and BitCommodities. That's will chahge this game, not just volatile crypto-currencies like Bitcoin by themselves. (Bitcoin is also slow and requires centralized third parties like BitPay to process transactions, BitShares takes 5 seconds.)
Bitcoin also can be controlled or threatened through the entry points like the major exchanges whereas the BitShares exchange is completely Decentralized.
Don't say I didn't tell ya.
Every Neil McCauley... OOPs my bad. Wrong CityBank trader.
Shitcoin is a bad solution to a big problem.
Very well said
I think this is another pump and dump article.
Whatever, it works just fine for my needs. Stick to YellenBux or weighing out gold shavings if that's what best fits your needs.
do you have an alternative?
American and British spies hacked into the world’s largest sim card manufacturer in a move that gave them unfettered access to billions of cellphones around the globe and looks set to spark another international row into overreach by espionage agencies.
The National Security Agency (NSA) and its British equivalent GCHQ hacked into Gemalto, a Netherlands sim card manufacturer, stealing encryption keys that allowed them to secretly monitor both voice calls and data, according to documents newly released by NSA whistleblower Edward Snowden.
The breach, revealed in documents provided to The Intercept, gave the agencies the power to secretly monitor a large portion of the world’s cellular communications, which experts said violated international laws.
Mark Rumold, staff attorney at the Electronic Frontier Foundation, said there was no doubt that the spy agencies had violated Dutch law and were in all probability violating laws in many other territories when they used the hacked keys.
“They have the functional equivalent of our house keys,” he said. “That has serious implications for privacy not just here in the US but internationally.
http://www.theguardian.com/us-news/2015/feb/19/nsa-gchq-sim-card-billion...
Wow is that the big leak they promissed. Thanks for posting!
Bitcoin is like Linux. People use it because it appears to be vaguely countercultural, but in reality no one gives a shit.
I'm using ubuntu as we speak. Linux is a great as a second O/S alternative. Linux is disorganized and pathetic compared to Apple and windows.
Linux needs to define itself. I have to use technical commands in the terminal to download every thing i want to do.
Sudo everything> gets old. I don't want to read command line all the time. I'm capeable of learning anyhting. I don't wan't to write computer code.
Linux is fucked up, when it comes to user friendly. It's nice to know 2 operating systems, and I can navigate linux. It's a pain i the ass for Non gEEKS.
Command line is freedom. Learn this little command line thing, freedom is not for free.
Amen and Preach it Brother!
Freedom is not free, it requires effort, knowledge, patience and dilligence.
Once acquired, it becomes a priceless and precious thing!
I like everything about linux. Except actually using it. i have it installed as dual boot on my laptop but I almost never boot into it these days. It feels clunky to me and although it appeals to the geek in me, it doesn't appeal to the user in me. Perhaps if BEOS had become opensource early on in its life it would have been a way better option for modern computing.
We use the Jesse opsys here, and granted we dont own cellphones or use any 'apps'. Nor do we 'game' although I will admit I miss my windows-dependent games <Civilization IV is the one I love and miss>. But, it's okay ... I've just taken up more productive hobbies in place of it.
Linux is a fair alternative to windows, and I am not the geek in this family. Hubbs is a systems analyst and programmer, and I will admit I fought hard when he suggested leaving windows behind. I was wrong and he was right, I am very happy to be independent <as much as we are allowed to be> of Microsoft and Bill Gates.
Maybe try some of the simpler opsys that Linux offers? I was VERY reluctant and even suggested we use ubuntu because it might work better for my game. In the end, I really don't miss the game or even have time for it now that I've moved on to other things to occupy my time.
EDITED TO ADD: Hubbs is very dilligent and stays on top of updates which you have to do if you are of a mind to abandom windows and welcome Linux into your life. Jesse works very well for us and I would reccomend it to anyone <and I personally have to family and friends>.
you can game on linux a hell of alot better now with steam. while its still behind on supporting a huge amount of games it making huge leaps and bounds week by week i will say 1-2 year on its present course and you may not need windows for gaming any more...
Just a limited sample size, but I have installed Linux (Mint) on the laptops of 4 very non geek friends over the last two years - because they were so frustrated at being charged to re-install Windows every now and then.
I warned them up front that there would be some programs (esp games) that would not work. I did it so my informal support effort would decrease. It did.
In two years, only one serious problem - and that was when the hardware died !!
So my non geek friends (builder, bus driver, rubbish man, plasterer) now love Linux. It cost them zero, updates for free and just plain never breaks. What is not to like.
I have used Linux for everything almost exclusively for over 5 years. I refuse to use the command line. It is for operating systems that were not completed and geeks who want to dick around with their computers more than use them. Command line is not necessary at at all, even for installing the OS. I have used LinuxMint lately.
Linux is free. I like free.
But at least you can see the source code and know the NSA didn't put in any backdoors
Try doing that with Windows or Apple. Sure it's fancy and easy to use but smart people don't care about fancy, they want secure.
If you are still downloading everything in the terminal, I suggest you take a basic Linux course or do some research online.
Mostly irrelevant. Linux won. It's everywhere. In everything. The only place it isn't dominating is the shrinking PC desktop market and it will win there too as revenue collapses and the big guys abandon it for greener pastures.
Pure economics in action.
Linux. Learn it.
I am eengineer informatic in france, no more job in microsoft IT in french riviera, everyone switch to linux ...
You were using Linux when you posted that comment. ZeroHedge is hosted on a Linux server.
http://toolbar.netcraft.com/site_report/?url=Zerohedge.com
As is nearly every other website on the net.
Everyone who has an Android smartphone or tablet is also using Linux.
http://en.wikipedia.org/wiki/Android_%28operating_system%29#Linux_kernel
Doesn't bitcoin presume that we will continually have electric power?
Only if you want to use it for trade of any kind. You can write the private key down on a piece of paper (or memorize it, if you're good at that sort of stuff).
Still, it's computer-based when you want to transact and is subject to all those flaws, including theft if it's stored anywhere hackers can get to it.
Several years back I bought some bitcoins just so I could understand a little of how they worked (I wrote about it on ZH at the time). I rode the wave up from $60/btc to $800/btc and sold out most of it (also posted on ZH, nearly real-time). It was freaking me out how fast it was going up, so I bailed.
That I missed the peak around $1100/btc was irrelevant because I used a MtGox account. Wow, what a mistake! I was probably one of the last people to get (most) of my money out of that place before it went 'poof'. A month later MtGox was GONE. They went down with my original $500, but I pocketed the profit.
I did a couple transactions with BitCoin in that time and it worked OK but it was... it was just stupid. NO WAY its ever going to be used for anything in the real world in its current form. No way. A faux asset that was speculated on for a while and then crashed. Now even the speculators wont touch it- too easy to have it stolen from the kinds of 'accounts' they are used to using for their game.
"Still, it's computer-based when you want to transact and is subject to all those flaws, including theft if it's stored anywhere hackers can get to it."
yup, it's a fail on privacy right there... i guess there is gonna have to be something electronic for those who want to use modern tech (someform of on line transacting system) but also a cash type system for people like me who don't like the idea of having my private transactions scrutinized by 3rd parties- hopefully straight up gold and silver coin or mini bars, whatever.
Don't old farts presume that there's no other way but to fall back to the dark ages?
Bitcoin is not my cup of tea but gold is. Why?
Women worship gold and have probable control over 50 % of that in existence. Since they control 100% of the vaginas, it is not some nebulous, fiat debt figment. Somehow, I suspect that Bitcoin can be subverted. It is much more difficult to destroy the metal's allure.
Gold may not be currency but it damn sure is BLING, if nothing else.
Still stacking.
Show the ladies something shiny and of value. They seem to be hardwired to like it, it is in their DNA.
That is very true about women and shiny objects. They also like sparkly objects such as diamonds which I hate because they are comparitively worthless. Guys like gold too though. There is just something about gold you have to love. I tried the bitcoin thing out but it is not for me. I think it is an interesting concept but I see all sorts of potential problems. If someone wants to have a go with bitcoin then they should have a go. As long as it is not my money I don't care what you do with yours.
Please, tedious libertarians, by all means put your estate into Bitcoins.
Bitcoin has counterparty risk. Period.
Exactly!
Counterparty risk = dependent on access to the internet/electricity.
Wrong ... that is not counter party risk. It is systemic risk. A big difference. The entire system has to fail before you have a problem. Counter party risk is where the action of a single (counter) party can cause you a loss of value.
Eg. Gold has no counter party risk, but is still has systemic risk. In the unlikely event, that human society (as a system) no longer trusts gold, it loses all value
Same goes for Bitcoin.... the system it relies on is the same (as gold) 'trust' of the society that use the system, and the technical bits that operate it, (Computers, elecricity and communications lines)
So there is risk with Bitcoin - systemic risk, but no counter party risk.
Well said, thanks.
In the unlikely event, that human society (as a system) no longer trusts gold, it loses all value
But you forgot to give an example of something that doesn't any carry systemic risk in itself... otherwise the statement is meaningless.
Cybersecurity.
Not only that, but it can be created digitally by computers, just like credit and the banking system. I heard 95% of currency is now digital. Bitcoin may offer ease of use EVENTUALLY if it is widely accepted and implemented.
But it has plenty of cryptocurrency competition. There are all kinds of cryptocurrencies. The Gov can shut this down quick, they can also approve one of their liking, one they can control. Same ole story. If I'm not mistaken Bitcoin is not a tangible asset.
Cryptocurrency Proliferation Inflation .... CPI !
Bitcoin its created and distributed at a rate and manner which depends on a public mathematical formula which cannot be altered unless you change the protocol and the majority of the network accepts the change. Otherwise you just have another altcoin.
Central banks create credit at a rate that you are supposed to decipher from Yellen's mouth dribble....
The two seem rather different to me...
Nice article. It was very enjoying to read it. Too bad you clearly don't understand the topic.
Crypto-anything doesn't work when the NSA has undermined every technological form of security known to man. You'd have to create your entire system from the ground up, including hardware, BIOS, operating system, and applications, in order to have just your own node secure. Anything that comes from a third party has to be assumed to be already compromised before you buy it.
Bitcoin is good for niche markets .... like ISIS, drug cartel, paying bribes and ransom !
And small international software engineering shops like mine. Also Dell, Microsoft, Expedia, etc..
“As for the blockchain technology that underpins Bitcoin”
answer: The cryptography is both the strength and weakness of bitcoin. Can you say NSA?
“its fatal flaw. Bitcoin is a bearer bond.”
answer: All money is a pay to the bearer instrument. Money is an unconditional promise to pay to bearer upon demand. This promise actually has its roots in law. Bitcoins promise is not law, but cryptography and scarcity.
The nature of bitcoin is that other monies seek it out, to then buy it because it has perceived scarcity value. Bitcoins have to be mined into existence and hence can never flex to the volume needs of a real economy.
Yes, other monies seek bitcoin out, so it can be used outside of a nation’s borders, therefore bitcoin is an international “merchant” money similar to gold. It is modeled on Gold, as it has to be mined into existence.
“Bearer bonds have a very similar legal foundation to a bank letter of credit, where the bank will release the contracted funds to anyone who presents the documents required by the letter of credit”
Letters of credit are something like a bank check. It is tri-party, one person issuing the credit, the other receiving, and the bank as intermediary. A bearer bond is pay to the bearer, a two party agreement. Letters of credit were also used to overcome usury prohibitions in the upper middle ages, especially with the Templers, as they could be maneuvered to pay “more.” A bearer bond must pay its face value after maturity. Yes, a bearer bond has interest due at maturity, and regular money does not "mature."
‘clever merchant guild master of the Hanseatic League coming up with this idea in the 13th century”
Referring to abstraction principle, where bank has no validation principle. The Hanseatic league worked with money only. No credit. If I loan you a lawnmower I’m a lawnmower creditor and you are lawnmower debtor. When you return the lawnmower, our credit/debt contract has vanished into nothingness. It is the same with credit as money. When it returns to the ledger, it vanishes. Actually, the usury passes thru to banker. But, in general, when the principle is drawn down, the money disappears from existence.
For example, in a Sovereign money system, most of the money supply is NOT CREDIT. It doesn’t reflux to the ledger for destruction. Therefore, a real money system is not abstract like CREDIT, but instead is wealth money. www.sovereignmoney.eu There is no abstraction and no validation needed as the money itself is not CREDIT.
In a sovereign money system, money matches wealth and the bank will charge you fees for storing it, the same as if you stored jewelry in your safety deposit box.
Hansa were Wendish towns that protected its merchants in foreign ports by negotiating special privilege. At its height in 1450 there were 180 member towns. From about yr 1400 on, the league was at war with the bankers, particularly the Italians, who in turn learned banking from the Jews. Credit bankers ended up holding a large amount of the coins formerly in circulation, as usury on intangible ledger credit was paid by precious metal coins. (Bankers use mismatch of types and swaps as part of their magick con. Example, ledger numbers grow and make demands that are not matched by actual money in circulation.) This grabbing of metal money out of the supply meant that Hansa towns had their money supply collapsing due to Credit Banking. Creditor bankers were also causing prices to inflate and deflate.
So, the Hansa were NOT abstract. Bankers use an abstract form of money….credit.
“ It leaves us with an extremely elegant credit instrument”
Bitcoins are not credit. Credit as money has a mirror in a debt instrument. Bitcoins are mined into existence and are permanent. There is no counter in a debt instrument. Words matter, so a bitcoin is most emphatically not a credit instrument.
My addition: A proper money supply will have a large amount of wealth money that can then satisfy both transactions and savings needs without usury. Some credit should also be present, but it needs to follow good monetary science (meaning no private banker credit). Bitcoins do not meet the test of good money as their volume is not in proportion to the needs of industry, nor do they channel into productivity. Gold in the past was deflationary, and Hanseatic League fought depressions, especially as their Gold supply was grabbed by Credit Bankers.
I have a simpler synopsis ... 6 words.
You can't take it with you.
What exactly are you trying to accomplish with bitcoin?
You can store bitcoins in your brain to pass through any border/metal detector. http://www.coindesk.com/how-to-create-a-brain-wallet/
Just make sure the brain wallet is randomized. If you use a line from a song or a poem or anything that was ever published you can kiss your coins goodbye as hackers have databases full of those. So make it a set of completely random words (harder to memorize of course), then the chance of your coins being stolen is smaller than your chance of being sucked into a black hole.
It might have had a better chance .... if it wasn't so self serving to the creators .... if they had just given 95% to a wide spectrum of financial players !
Exactly. Why is this never mentioned? CIA Ponzi!!!
Unlike the Federal Reserve handing out Federal Reserve Notes to insiders, there is no central issuer of Bitcoins. They are earned through Proof-of-Work mining. Bitcoin has always been open-source software and publicly presented on discussion boards. The mining network has always been open to anybody anywhere anytime to connect and compete with others to earn bitcoins. Perhaps you have a problem with the open competition part? The mining network is currently clocking in at 356,667,447 GH/s, you have to provide computational power and compete with everybody else to earn bitcoins, boohoo.
Actually, Obama has signed a EO. They are pressing for NFC money transactions. If anyone is worried about cyber theft, just use cash. Same with your banking card. Request for the one without chip.
http://www.whitehouse.gov/the-press-office/2014/10/17/fact-sheet-safeguarding-consumers-financial-security
Blackberry BB10 users, swipe down, settings, network and connections. Right beneath VPN is NFC. If you chose to use it, make sure to turn off after you’re done. That includes all other phone manufactures with this built in technology. I only know how to navigate around on my BB Passport. Can’t help with other OS.
No chart: No read.
For a mentally challenged individual who cannot read. I don't partake in bitcom exchange.
http://fiatleak.com/
https://bitcoinwisdom.com/
Yet another moron opened his mouth about bitcoin before he even understands it.
Fiat banking systems are systems of ledgers. They don't care if you steal the cash, but they would defend their ledgers (at least when they weren't fraudulent enterprises) to the death.
Bitcoin is an international ledger that is secured by a strong P2P filesharing network that can be fully accessed electronically. This makes it more liquid than gold, and just as world-pervasive.
The only limitation to bitcoin right now is network capacity. Currently the network is limited to ~3-6 transactions per second depending on transaction size. They're slowly evolving the technology to allow greater numbers. Once they hit a 300-500 transaction per second capacity, I'd wager anything that this perfectly adequate international ledger will start taking off.
All wager that as well. Based on executing your transaction, how much have you lost?
https://bitcoinwisdom.com/bitcoin/calculator
What's that? I can't hear you wiith your foot stuck in your mouth.
/sarc
I mentioned in many posts previously that bitcoin wouldn't scale and 3-6 tps is ... laughable ... I explained also why this is the case. The only way to get it to 300-500 tps is to get rid of the "P2P filesharing network" "flood fill" nature of Bitcoin. Cut the number of transaction processors down to just one or two.
One of the things I find amusing about the humanity is how often people will throw themselves wholeheartedly head first at a brick wall. The harder the wall the harder they hit it, with the assumption that if they just smack their head against it that little bit harded eventually they will make it through. MOAR HARDERER head needed. When you point out to them that the wall is brick, and their head is not they just get upset at you and claim you don't know what a brick or a wall or a head is or how their head being slightly pointed will easily get through it where another's rounded head wouldn't. Oh and that you should be hitting your head against their wall to help them get through it, if necessary jumping at the wall from a great height and you're a traitor if you don't.
Reality is algorithms have built in mathematical limitations.
Global Currency Bitcoin last price: $243 BTFD
Well, the risk/reward on that BTFD looks OK compared to an S&P500 or US treasury BTFATH...
The Q99X2 like Bitcoin because it looks like them.
Well, oops. I bought one of these around 2001 or so. I paid $90. I found one for sale on a dealer site yesterday that I have done lot of business with and even there it is $490 plus shipping. I have never seen anyone with another one. It is especially fun to show to Russians because they had no idea that they even made those coins. The ten chervonets was a Soviet attempt at a trade coin but it did not work out so well in practice. How I ended up with one blows their minds because they are so are proud of their history. This is another way that gold coins are a good investment. They are educational and Russians tike pride in being educated. I can't do something like that with Bitcoin.
For me, coins are about history and are evidence of what has been going on in financial systems over the last couple of centuries. Bitcoin can't do this for me. I like the concept of bitcoin and I like that it pisses off bankers and the IRS but it is not for me. There is a always a coin or a note, no matter what country, that I can pull out and ask, "Explain what this is then?". I have all of the documentation to support as well. This has been my way of turning people, one or two at a time, against their respective central banks.
Well I'm shocked Tyler where is the doom and fearmonguering on this one, the Fed talking about issuing its own crypto currency: http://yro.slashdot.org/story/15/02/19/2059233/fedcoin-rising
Once this happens......ouch!!!
So glad Bitcoin stories have died down to one or two per month!
I own my home, have gold and silver and cash in banks, and some bank notes, and no shares. I think buying some Bitcoin is Not a bad idea.
If you had a $1million cash to secure, what are you going to do?
I would NOT buy $1m gold and silver..govt regulations can ruin you all too easy. Capital Gains tax, VAT, GST...limits on ownership...simple govt law changes to owners or traders, can make a mess of your security in bullion. This is why I only keep 20% in gold and silver bullion.
Keeping the rest in cash in banks put you at risk if your bank gets into trouble...and you will never know until it is too late. So I have my cash spread between banks, though if one goes under the probablyall will. And then there is bail ins.....
This is a dilema...placing your money in places to keep it safe...return of capital, not just return on capital.
Cash, gold, silver, bank notes.....and I think something in Bitcoin is not a bad variation....so I am going to look into that.
ALL the options have risks associated with them, are easily controlled by govt regulation. Bitcoins risks we know now...but cash under the bed, cash in a bank? Also not 'safe as a bank'.. gold and silver..too easily ruined by govt regulation as well...
The only other option is to buy shares in gold miners with low debt.....BUT have to wait for the big market crash first...as all shares will dive when that happens.
I don't own bitcoin, but may.
I think some of the opposition to bitcoin has become irrational and pavlov dog like, almost religious opposition.
I think it is a valid alternative place to put some money. But like all the options I wouldn't be putting everything there.
Owning bitcoin is easier than you may think. If you can install a bitcoin wallet app on your phone and paste me your address (long string of letters and digits starting with 1) I can zip you some milibits across no problem.
The best way to have an opinion on Bitcoin is to try it out.
Did anyone seriously think bitcoins were a good idea? I mean this was almost as bad as tulip mania. It was one of the most obviously stupid bubbles in history.
Patience, grasshopper.
Bitcoin is a good idea for what it is. It's not what a lot of people (most of them bitcoin owners) seem to think it is though.
Tulip mania was much bigger. Bubbles happen in any asset. Bitcoin I think has almost fallen back to the point of usefulness.
Give it another year and the volatility will mostly be gone and Bitcoins can become genuinely useful.
Nice article. Albeit truthful that the Private Key is THE one thing required to obtain one's Bitcoin balance associated with the specific address it applies, it doesn't emphatically state why a holder of Bitcoin must do whatever they can to keep it SECURE! Instead, an argument of Bearer Instrument status is given, which I agree is logical.
So what if that makes it a Bearer Instrument? Unlike Fiat Currency issued by the unaccountable Fed Reserve and printed to oblivion as we're watching history repeat itself, Bitcoin is presently coded to never mint or allow more than 21,000,000 total. To this point in time, over 12 million have been mined.
Now let's compare this against the Government and their ability to change their minds on a whim. Worried about abstraction principle arguments? How about these business people who either lost money or paid out a boatload to the IRS for so-called structuring charges which of course were bogus, but their almost-unanswerable and nearly-unaccountable bureaucracy didn't care about the actual ownership. It may be apples and oranges to some reading this, but I see something rather sinister when comparing these, and this is where Bitcoin gives the perverbial middle-finger to the Establishment. The cryptocurrency is strong enough with enough acceptance that more and more attempt to experiment with using it as a sole means of exchange. This remains impossible with most in the USSA due to taxes. Fiat money remains legal and valid to pay tax with, no matter what government agent tells you otherwise, even if you pay it with just unrolled pennies! (God, I miss those cartoons on TV where old ladies did exactly that at their bank - but a Penny was still a Penny then!)
I was part of the Bitcoin mining in late '09 and early '10 when a simple 166 Mhz single-core processor could still mine 'em. It's not the only cryptocurrency I've dabbled in either. What the author seems to leave out is that today's Bitcoins are proof of work, requiring significant resources to resolve. I don't agree at all that the "abstraction principle" is even a flaw with Bitcoin. It depends on one's mindset. After all, the author doesn't mention how to guess a bitcoin private key is nearly worse than trying to isolate a single atom out of this Universe. It's estimated there are 10x80th power the number of atoms in the whole known Universe. In Bitcoin under the SHA 256 algorhythm, a private key can require 10x77th power to crack. How many lifetimes will it take even the Almighty NSA's supercomputers to hash out even ONE?
Finally, it's not just a little more complicated describing cash. It's far more complicated in my opinion. If cash is stolen and you receive FDIC insurance, does that stolen cash automatically become null and void? Although these Fed Reserve Notes are individually identifiable, and the NSA would be quite suited to track each and every one to determine a TRAIL, ([knocking] HELLO!!) does this necessairly mean the stolen booty becomes null and void? I don't think so. When one is made whole, the entire total should hold less value, a necessary evil of inflation. This isn't the case with Bitcoin. You lose it, indeed you're SOL, but it doesn't impose inflation in regard to other BTC holders.
Has no understanding of value.
Writes an article about it.
Another BitCoin commercial? Again, its a conveyance FOR money, not money itself.
But digging deeper:
"There’s one more piece of legislation relevant to our story, and that’s the Tax Equity and Fiscal Responsibility Act of 1982. This was the final nail in the coffin for the issuance of corporate and municipal bearer bonds in the US, as it eliminated the corporate issuer’s tax deduction for interest payments and the muni purchaser’s federal tax exemption for interest received. Both tax advantages were preserved for registered bonds, of course. I say of course because the US government, regardless of political party (the 1982 Act was in Reagan’s first term), has been trying to eliminate bearer bonds for a looooong time. Why? Because the US government believes that bearer bonds are at best a gift for criminal enterprises and at worst actively subversive."
Because a criminal gang always seeks total dominance. It matters not whether the money in question was derived legally or illegally (just another tool for law enforcement as they say...lol) what matters is the gang in question is aware of the transaction!
Your SIM cards have been compromised kiddies, proceed with caution ;-)
"Beverly said that after being contacted by The Intercept, Gemalto’s internal security team began on Wednesday to investigate how their system was penetrated and could find no trace of the hacks. When asked if the NSA or GCHQ had ever requested access to Gemalto-manufactured encryption keys, Beverly said, “I am totally unaware. To the best of my knowledge, no.”
https://firstlook.org/theintercept/2015/02/19/great-sim-heist/
Here's a bitcoin commercial... https://www.youtube.com/watch?v=uLxhI81Flvk
I have been reading about bitcoin for the last year. Here are 5 criticisms I personally had and changed my opinion about over the last year:
*Bitcoin can be hacked and stolen. Bitcoin the protocol has never been hacked. The websites set up around it have, and up to 0.5 billion in one go has been lost by such a website - less than the banking hack last week and much less than the 190B annual fraud levels in regular currencies. Scammers gonna scam. There are ways to not have your bitcoin stolen - keep the Bitcoin and hence the private key in your possession(not on someones website where they control the keys), password protect it and keep copies.
*Bitcoin is dependant on electricity and the internet so can be switched off. Yes it can theoretically be switched off, but the blockchain, (the bitcoin ledger) is copied onto tens of thousands of computers accross the world, it can't be deleted that is a fundamental design of bitcoin. So if these are switched off, when they are switched back on, everybody is where they were before and it continues. Switching off the internet or electricity could at worst pause bitcoin.
VISA, mastercard and all banking accounts, trading accounts and 1 quadrillion of derivatives are dependant on electricity and internet so if they die, so does traditional money. A world in which this is an issue is going to be very very shit, so yes guns gold and ammo win over bitcoin if you really think this is coming. FYI bitcoin transactions have been done over radio and traditional communications systems.
*It can be manipulated and 'printed' for bitcoin to change from its set plan of 21 million coins only, it would be neccesary for all of the bitcoin miners to agree on this. There are thousands of miners, with computers distributed all over the world, making transaction fees from keeping the network going. These miners computers are together more powerful than the top 500 supercomputers added together. Even google couldn't out-process them. It is in their interests not to allow extra bitcoins to be minted as then bitcoins wouldnt be worth what they are worth, so good luck convicing them to allow a change to the protocol.
*its a bubble and a scam that will ultimately crash like the tulips. Yes bitcoin looks like a bubble and behaves like a bubble, but then after each of its 3-4 crashes it has come back stronger. Nobody really knows what the future holds for it. But at its rate of growth and refusal to die(bitcoinobituaries.com) I would say Bitcoin will be described in 5 years as EITHER
The biggest scam in history,
The financial version of the Titanic,
or the idea that changed finance completely.
*Its not scarce like gold because there are hundreds of cryptocoins so its value is ultimately zero. There are thousands of other cryptocurrencies (litecoin, darkcoin etc), there will be likely millions, anyone can make their own today on coincreator.net but each one will have a value based on what its rules are, who created it, who controls it and ultimately who trusts it. VISA, Mastercard & Nation states will likely create their own coins eventually, and each will have a 'market cap' based on this. Hard concept to get your head around at the moment I know but so was email and the internet not that long ago.
Bitcoin may not be the game changer coin, but it is the pacemaker today. It has many flaws, for example only being able to process 7 transactions per second compared to visas 2000 average transactions per second. A smarter/faster/more transactions per second coin may be the one that we are all wishing we got into in 5 years time, or bitcoin may continue to evolve and overcome its hurdles.
Small correction: to change the protocol, majority of the nodes have to upgrade. Not all nodes are miners.
With Bitcoin I can even buy something from Iran (The famous shoemaker who accept BTC as payment) try that with FIAT or even Gold.
Venezuelan use more and more this to develop their business and mainly just to survive they can borrow BTC with foreigner, far more better than their crappy VEF and their socialist economic system.
This is first time since the dawn of humanity that a guy created a system that is censorship resistant for financial transaction and I don't even speak about bank secrecy implication !
BTC may not be perfect but its not useless as some people try to make us believe !
BTC (and it's evolution) will have a place in the future.
I don't understand why some libertarians and anarchist hate it, BTC was build to be libertarian and "free markets" in the first place...
Sorry, I don't understand...
Bitcoin...for stupid people that didn't do well in math.
A fool and their money are soon parted.
Those "get rich schemes" are just that....a scheme.
My guess is the average Bitcoin fanboy has 100 bitcoins.
100 bitcoins is $24,000 at the current exchange rate. Your guesstimate is off but if the average user had 100 coins then there would be around 140,000 bitcoin users. Side note, lately there has been an average of just under 100,000 bitcoin transactions each day.
I like the concept for short-term transactions. IE, money in --> transaction --> money out. It's a giant FUCK YOU to the system and TPTB.
As a store of value, it remains to be proven over time and I'm not sold.
The four strikes against Bitcoin:
First, Bitcoin mining is illegal. Do the research, bitcoin mining has all the legal elements of prize, chance, and consideration which makes it a lottery (see for example http://www.blankrome.com/index.cfm?contentID=37&itemID=2300 ).The mining computers necessary for Bitcoin's ongoing operation are legally no different than networked slot machines under US State laws. Instead of "three cherries", your mining rig is trying to produce via a random process a "crypto hash" with a set number of continuous zeros. Hey, who cares that your winning computed crypto "hash" file is no better whatsoever in supporting Bitcoin holders / the blockchain than the trillon trillion other valid crypto hash files calculated and immediately tossed in the trash by losers. Be the first to calculate a valid crypto "hash" solution that ALSO coincidentally contains an irrelevant bunch of leading zeros and win a prize! Running a bitcoin mining operation in the US as an individual or business entity is an illegal lottery and its proceeds (mined Bitcoins) are subject to confiscation at any time by State Attorney Generals. Their press release could come at any time...
Second, current bitcoin mining exponential growth is unsustainable. The key graph at https://blockchain.info/charts/hash-rate?timespan=all&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address shows that mining Bitcoin currently takes 300,000,000+ GHash / sec of computer power to keep this ponzi scheme going. Take for example a modern mining rig like a Butterfly Labs Monarch ( http://www.butterflylabs.com/monarch/ ) that costs $850 and uses 490W to produce 700 GH/sec of hash power for mining Bitcoins. If the entire Bitcoin mining ecosystem were Monarchs (which it isn't, it is a mix of equipment mostly less efficent and already obsolete compared to Monarchs), then there's 300,000,000 / 700 = 428,571 Monarchs out there at an installed infrastructure cost of 428,571 * 850 = $364 million dollars. This installed base of mining computers currently generate 25 Bitcoins / hit * 6 hits / hour * 24 hours / day = 3600 Bitcoins / day (currently worth $244 each at this writing, see http://coinmarketcap.com ) for a total of $878,400 per day. If Bitcoin rates were roughly stable (ha!) this would be around $320 million per year. The average annual return on a mining rig is thus currently below its average cost so the current Bitcoin mining ASIC arms race and its exponential growth cannot be funded. That's why the super-mining union CEX.io has already pulled out: http://www.coindesk.com/cloud-mining-suffers-hash-rate-plateaus/
Third, Bitcoin mining is hugely wasteful and inefficent. There's only 6 * 24 * 365 = 52,560 winners per year in the Bitcoin lottery that injects new coins into the Bitcoin ecosystem (inflation!). With 500,000+ mining computers out there, 90+% of them will run all year and never get a hit, all the while sucking up at least 500,000 * 850 = 425,000 KWh per hour of electricity. At 15 cents per KWh average, the current Bitcoin system is burning at least $64,000 per hour / $560 million per year in electricity.
Finally, Bitcoin mining is unnecessary. Instead of 500,000+ competing "Proof of Work" (PoW) mining computers in the back room supporting Bitcoin behind the scenes, second-generation cooperative "Proof of Stake" (PoS) cryptocurrencies like the pioneering NXT can field the infrastructure necessary to support a vast population of coin holders with only a tiny network of a few hundred $35 10W Raspberry Pi 2 toy educational computers ( http://www.raspberrypi.org/raspberry-pi-2-on-sale/ ). Such PoS networks cooperate solely to support coin owners instead of primarily competing for miner prizes, making them far more cost-effective and efficent. Bitcoin is a dinosaur that cannot evolve to achieve this crucial advantage.
Bottom line: The current Bitcoin system has at least $364 million in sunk infrastructure costs and burns at least $560 million a year in power. The ONLY source of "income" to support this burden is (1) appreciation of the existing 13.8 million Bitcoins and (2) mining of 1.3 million new Bitcoins per year. Do the math - these numbers just don't add up to a stable system that's gonna work.
Four strikes, and Bitcoin's out.
This guy watches too many movies.
"I have absolutely zero recourse if my private key is lost or stolen."
Exactly - Bitcoin is almost digital cash. Going a step further, Darkcoin is true digital cash - anonymous, instant and non-refundable.
"no one can lose a dime in an FDIC-insured account"
If you beileive that, you've never heard of counter-party risk.
The US government is the biggest counterparty risk anyone has ever seen.
"Our government has well and truly become an insurance company with an army attached"
How do we pay for that army? DEBT.
Here's an intersting chart for you:
https://research.stlouisfed.org/fred2/graph/?graph_id=212047&category_id=
It's the amount of US debt per privately-employed citizen.
It passed $150,000 per person this year.
And it's doubling every generation.
You think we'll ever be able to pay that off?
You know what happens when you can't pay off the debt? DEFAULT.
And what happens when your counterparty defaults?
That "no one can lose a dime" becomes everyone loses every dime.
Bitcoin is fashion, more than a fad but less than lasting
It made me smile. My guess is that you were sure it was a fad long time ago, but still see it lasts. Seeing that it is fading, you try to find a new word for it, for justifying the contradiction between your vision and the reality.
I made the same mistake when mobile phones came up thanks to Apple. But mobiles were not a fad, and mobiles are not fashionable. They unlocked new business and opportunities that are nowaday part of our landscape wherever we look.
Bitcoin is a bearer bond
It is not. A bearer bond is a contract of the issuer with the holder. The issuer accepts to exchange the bonds under some conditions against a fixed value of another goods fixed in advance. (most likely a national currency or commodity)
Whether bearer bond were exchanged as money is out of the point.
With Bitcoin, there is no obligation of the issuer (miners) to redeem a fixed value of money against it. It means you don't have to trust the issuer. (unlike bearer bonds)
Bitcoin is more similar to Gold, as with gold, the miners can't tell you at which price you will exchange it against another currency.
However, the interesting thing is that banks and companies can emit bonds on the Bitcoin network, secured by your private key, and you can transmit them to other addresses.
All finance instruments can be exchanged on the bitcoin network, exchanged mondially, and secured by your keys. (Gold certificates, shares, ETF, and money substitutes)
Whether insured services will keep care of your keys for you is a matter of time. Such service is both technically and profitable.
Now that I understand the implication of Bitcoin on the technical side and see its potential benefits on lots of industry I will tell you that : This is only the beginning.