What is with the bitcoin obsession?

[low preference guy]

Bitcoin has no intrincis value, gold has no intrinsic value, petrol has no intrinsic value. Value is subjective.

It seems weird to cite Mises to then justify yourself with marxists theories.

i think he means non-monetary value.

 

[hugolp]

There is nothing in their nature to make them desirable.

If this is the case, why are people using it, and you have to come to a Bitcoin thread to promote Pecunix?. Btw, Pecunix is a centralized system, with the gold deposits in Switzerland so they are subject to government intervention exaclty like e-gold. The only thing going for Pecunix is that its small and did not had success so the government has not deem necesary to invervene. That could change and Pecunix has nothing different from e-gold to stop it.

There are a wide variety of digital money ideas that could work, superficially similar to BitCoin, for instance cryptographically traded rights to computer cycles or to bandwidth on network nodes. In fact, micro-payments for access could solve problems such as e-mail spam and denial of service attacks. See, the thing valued need not be a tangible asset such as gold, but it does need to have some conceivable value.

I think you are very confused as what value is.

First, computer cycles or bandwith are horrible for backing a currency as they are not scarce at all.

Second, Bitcoin does not violate Mises regression theorem, because some people were valuing bitcoins before they were used as money. Probably not how Mises expected, but ahtat is because he could not imagine such a currency, but bitcoins were valued when they were not used as money.

 

[Kludge]

ATTN: MTGOX USERS WHO HAD THEIR INFO STOLEN! Ignore messages from MtGox stating your account's been blocked. The email address is masked. Most email service providers will note the message is not from who's stated, and usually include it's from msk4.imhoster.net, for instance, when you open the email address. Do NOT click the links!

Cheers!

 

[helmuth_hubener]

Bitcoin has no intrinsic value, gold has no intrinsic value, petrol has no intrinsic value. Value is subjective.

It seems weird to cite Mises to then justify yourself with marxists theories.

Value is subjective, but value is not just a meaningless word whose definition is subjective. I perhaps did not express the idea very well; intrinsic may have been the wrong word. The idea is: the money must have been first valued by people in and of itself, not just valued because of its anticipated future purchasing power as money. It became money because it was so widely desired by such a large number of people that it was more and more commonly used as a convenient intermediate good in multi-stage trades. In those multi-stage trades, the budding money is valued by the trader that day because he anticipates it will have "purchasing power" to get him what he really wants tomorrow. First, however, it is a good of some sort valued by people in and of itself, as a good, not for any anticipated purchasing power.

Second, Bitcoin does not violate Mises regression theorem, because some people were valuing bitcoins before they were used as money.

Is this actually true? Because you're right, this would mean it would not violate the regression theorem. That's if people were valuing the BitCoins as BitCoins, in and of themselves, not valuing them for their anticipated purchasing power once the system was up and running. I suspect they actually were valuing them because they anticipated they would "become money" in the future, thus they were already using them as store-of-value money, even if they could not yet be used as means-of-exchange money. After all, what were they going to use them for? Why would they value the Bitcoins in and of themselves? I'm not saying it's impossible, value is indeed subjective. Perhaps they have some non-monetary application or utility I am unaware of. Perhaps these people you speak of valued them because they wanted to enjoy their mathematical beauty on their computer, like buying a great painting to hang on your wall. As I said, though, I suspect they valued them for their monetary value, that is, for their anticipated purchasing power, that is, for the same reason people value dollar bills. However, that is merely what I suspect and I am not at all familiar with BitCoin history, so I could be wrong. Please feel free to educate me!

If this is the case, why are people using it

Speculation, the hope that it will work, a variety of reasons. They seem to me to share a lot in common with unbacked "local currencies" like Ithaca Hours. The bitcointalk.org Intro page concurs with me:

"Because bitcoins are given their value by the community, they don't need to be accepted by anyone else or backed by any authority to succeed. They are like a local currency except much, much more effective and local to the whole world. " -- https://bitcointalk.org/index.php?topic=7269.0

These local currencies are ultimately worthless slips of paper, unbacked by anything whatsoever, and are utterly dependent on "the community" to "give" them value. Any ongoing redeemability that Ithaca Hours-type currencies have is more akin to a game or an experiment that the users enjoy than any real hope of becoming an actual widely-accepted money. Unfortunately, I see BitCoins as occupying the same hopeless position as Ithaca Hours or as Murray printing up his famous illustrative "Rothbards". And even the above introduction to BitCoin agrees. Now Murray always said no one would accept fiat Rothbards if he were to print some up, but actually I might buy a Rothbard, if only for joke and sentimental reasons. A whole indie market could develop for them. We could all meet in Auburn and have a huge bazaar once a year where you can buy products for Rothbards. But ultimately, Rothbards will never become money because they have zilch commodity value. They're utterly worthless, in and of themselves. Likewise BitCoins, as far as I can tell. Again, feel free to educate me!

and you have to come to a Bitcoin thread to promote Pecunix?

I meant no offense. The two just seem related in my mind. They are both digital currencies. I figured people interested in one digital currency might be interested in learning about other digital currencies and digital currency generally and probably many have never heard of Pecunix, loom.cc, nor e-cache.

I know about digital currency. I was a major part or running an exchanger a while back. I've done research and reading on them. I've tested various currencies. I've used them for real-life economic transactions. I have significant value stored in them. By bringing up Pecunix I was merely trying to point people to a system I find useful and to be a promising development for the prospect of a free and anonymous digital market. I think most BitCoin proponents here like it likewise for its potential as an enabler of a free and anonymous digital market.

Btw, Pecunix is a centralized system, with the gold deposits in Switzerland so they are subject to government intervention exaclty like e-gold. The only thing going for Pecunix is that its small and did not had success so the government has not deem necesary to invervene. That could change and Pecunix has nothing different from e-gold to stop it.

Pecunix has many things different from e-gold to "stop it". Not all governments around the world are equally interested in seizing gold. Some have a vested interest in being seen as a safe repository for gold. Not all governments are equally willing to go along with what other governments want them to do. Not all governments are equally willing to go to war or otherwise attack governments which will not go along with what they want them to do. By avoiding having any aspect of their business tied to, jurisdictioned in, or in any way related to the United States, they avoid the worst threat. In this, they are quite a bit different than e-gold. I see a difference. Do you?

Pecunix definitely is a centralized system, however, which does have definite drawbacks. Understanding one of these drawbacks (potential government attack) and disliking it, you may prefer a decentralized system such as loom.cc . In Loom, everything is private, including transactions (which are public in BitCoin). Or any one of a number of anonymous cash-like digital currencies. Read this issue of DGC Magazine to learn what's available:
http://issuu.com/dgcmagazine/docs/digital-gold-currency-magazine-special-2011

First, computer cycles or bandwith are horrible for backing a currency as they are not scarce at all.

They most certainly are scarce, in the economic sense.

 

[hazek]

LOL Dr. White just mentioned Bitcoins in his opening statement at Ron's hearing

http://mfile.akamai.com/65722/live/reflector:36166.asx?bkup=36167&prop=n

 

[hugolp]

LOL Dr. White just mentioned Bitcoins in his opening statement at Ron's hearing

http://mfile.akamai.com/65722/live/reflector:36166.asx?bkup=36167&prop=n

I know!!! Bitcoins have been mention in an official hearing of the USA congress. Its amazing.

For anyone interested they are mentioned starting 20 minutes 30 seconds after a list of posible competing currency list.

 

[helmuth_hubener]

LOL Dr. White just mentioned Bitcoins in his opening statement at Ron's hearing

http://mfile.akamai.com/65722/live/reflector:36166.asx?bkup=36167&prop=n

That's excellent!

 

[hugolp]

The idea is: the money must have been first valued by people in and of itself, not just valued because of its anticipated future purchasing power as money.

Why? You keep repeating this in different forms but never justify it.

Who are you to judge why people value things? Its not the role of an economist to judge what are valid valuations and what are not. If people value something, then it has value. "In and in itself" is just a clever way of saying: I will personally decide which valuation I deem acceptable and which valuation I dont deem acceptable. But that is not an objective economic analisys. Your personal valuations are fine when you have to decide in live, but should be left aside when giving your opinion as an economist (and this is specially true if you are an austrian economist).

Speculation, the hope that it will work, a variety of reasons.

I buy the food for my cat with bitcoins, Ive bought socks, computer hardware, music, etc... with bitcoins. People buy stuff with bitcoins daily (including the famous Silk Road). Whether you like it or not and want to admit it or not, bitcoins are being used as money, as means of exchange. And the shops that accept bitcoins are growing daily.

So, bitcoins are being used as money. Thats a fact. So either Bitcoin does not violate the Mises regressiom theorem or the theorem is wrong. (I would like an answer to this)

They seem to me to share a lot in common with unbacked "local currencies" like Ithaca Hours. The bitcointalk.org Intro page concurs with me:

"Because bitcoins are given their value by the community, they don't need to be accepted by anyone else or backed by any authority to succeed. They are like a local currency except much, much more effective and local to the whole world. " -- https://bitcointalk.org/index.php?topic=7269.0

They are similar to those currencies in that they are not certificates, yes. Sorry, I dont understand how this is relevant or what you were trying to imply. A gold certificate system is similar to those currencies because they are all centralized, as opposed to Bitcoin that is different from them all in that sense.

[Ive seen later what you are trying to imply]

These local currencies are ultimately worthless slips of paper, unbacked by anything whatsoever, and are utterly dependent on "the community" to "give" them value. Any ongoing redeemability that Ithaca Hours-type currencies have is more akin to a game or an experiment that the users enjoy than any real hope of becoming an actual widely-accepted money.

Again, its not the job of a real economist to judge. One has to try to be objective, otherwise you are not being an economist. These currencies that you personally deem worthless are being used as money in their communities. Its 100% fine that you personally think they are worthless and dont want to use them, but you as an economist have to acknoledge the fact that they are being used as means of exchange wihtin a certain group of people and therefore are money within that group of people.

For example, Rothbard explains how the USA government, when it invaded Philipines, tried to impose gold coins as money as a first step to impose their dollar gold-exchange system. The natives refused to use the gold coins, got rid of them as soon as they could and kept using silver as money like they had done always. The fact that these people had not choosed gold as money, and then refused gold as money when imposed, means that gold is worthless as money? No, it means that particular community, that particular market, choosed silver as money and not gold. The fact that you or anyone else refuse to use Ithaca hours, bitcoins (or rothbards) does not mean they are not money for other people.

As long as there is a group of peole using something as means of exchange, its money. By definition, and that is independent of your personal valuation.

Unfortunately, I see BitCoins as occupying the same hopeless position as Ithaca Hours or as Murray printing up his famous illustrative "Rothbards". And even the above introduction to BitCoin agrees. Now Murray always said no one would accept fiat Rothbards if he were to print some up, but actually I might buy a Rothbard, if only for joke and sentimental reasons. A whole indie market could develop for them. We could all meet in Auburn and have a huge bazaar once a year where you can buy products for Rothbards. But ultimately, Rothbards will never become money because they have zilch commodity value. They're utterly worthless, in and of themselves. Likewise BitCoins, as far as I can tell. Again, feel free to educate me!

If you feel that way you should not hold bitcoins or use them. I can tell you they are very useful in this Internet era, but if your believes tell you that, then Bitcoin might not be for you. I pesonally think your attitude is similar to the believers on fiat currency, that argue any currency not imposed by a government will never work, therefore refuse to look at any of the useful characteristics of other types of money. But again, its your choice. Bitcoin is a voluntary currency and nobody is forced to use it.

Btw, Rothbards would have been money for as long as they were used as means of exchange (during your Auburn market). When the market ends they would have stopped being money.

Pecunix has many things different from e-gold to "stop it". Not all governments around the world are equally interested in seizing gold. Some have a vested interest in being seen as a safe repository for gold. Not all governments are equally willing to go along with what other governments want them to do. Not all governments are equally willing to go to war or otherwise attack governments which will not go along with what they want them to do. By avoiding having any aspect of their business tied to, jurisdictioned in, or in any way related to the United States, they avoid the worst threat. In this, they are quite a bit different than e-gold. I see a difference. Do you?

You are talking about Switzerland, the country whose banks opened the data of their clients to the EU and the USA govs. According to you this is the country that does not go along with what other governments want them to do?

Pecunix definitely is a centralized system, however, which does have definite drawbacks. Understanding one of these drawbacks (potential government attack) and disliking it, you may prefer a decentralized system such as loom.cc . In Loom, everything is private, including transactions (which are public in BitCoin).

Loom is not decentralized.

Btw, if you want a gold certificate system you should look at Open Transactions.

 

[rhelwig]

I know!!! Bitcoins have been mention in an official hearing of the USA congress. Its amazing.

For anyone interested they are mentioned starting 20 minutes 30 seconds after a list of posible competing currency list.

Is this video available somewhere? I'd love to see the list of competing currencies quoted.

 

[helmuth_hubener]

Why? You keep repeating this in different forms but never justify it.

Because that is what the regression theorem says! It seems you are not as familiar with this as you might be. Here's a write-up on the regression theorem: http://mises.org/daily/1333

Who are you to judge why people value things? Its not the role of an economist to judge what are valid valuations and what are not.

I have failed to communicate effectively enough and a gross misunderstanding has ensued. I apologize. I am not passing judgement on what is a "valid" reason to value things. I, and Mises, merely distinguish between two reasons for valuing a thing.

* One, it may be valued as a commodity. That is, valued for its use directly (or "in and of itself"). A man valuing a painting because he wants to hang it on his wall, or some grain because he wants to make bread and eat it.

* Two, it may be valued as a money. That is, valued for its exchange potential. A man buying a painting because he knows absolutely everyone wants it and he can easily resell it, or, more likely, some grain for the same reason.

That is two different reasons to value something. I do not claim one reason is "wrong", that would be preposterous. But the reasons are different and understanding the difference is essential to understanding the regression theorem.

So, bitcoins are being used as money. That's a fact. So either Bitcoin does not violate the Mises regression theorem or the theorem is wrong. (I would like an answer to this)

I would contest this fact. I do not think Ithaca Hours nor BitCoins really qualify as money. They are not the most widely accepted medium of exchange. Thus, they are not money. Neither is gold, by the way. Neither is e-gold or Pecunix or Liberty Dollar or Phoenix Dollar or WebMoney or PayPal. They are all used by groups of varying size, but none is universally accepted in any community and thus cannot be considered money.

The reason the regression theorem is relevant is that the above (gold, e-gold, Pecunix, Liberty Dollar, Phoenix Dollar, WebMoney, PayPal) could become money because there's at least a link to a commodity if you go back far enough (e.g. Paypal <- dollar <- gold). With Ithaca Hours and BitCoins, there is no such link and thus no possible chance that they will ever become money, in my opinion. There's an upper limit on their spread and success due to their being worthless fiat never linked to any commodity. If they ever did become money, if there were ever 7 billion BitCoin users, or 300 million American users, or even 100,000 Billings, MT users, then at that time Mises' Regression Theorem would be disproven and we'd all have to step back and question some of our fundamental assumptions about human nature as we try to understand why all these people have chosen to give up a more-marketable good for a less-marketable one, one, in fact, with no conceivable commodity value (other than the theoretically possible sentimental/decorative/mathematical beauty value I mentioned earlier). Until then, it's just a large monetary experiment.

Btw, Rothbards would have been money for as long as they were used as means of exchange (during your Auburn market). When the market ends they would have stopped being money.

I would claim they are not money, that part of the definition of money is to be universally accepted, or at least overwhelmingly commonly accepted.

In a broader sense, yes, anything ever used as an intermediary good is money. Grain can be money, pillows can be money, any commodity. Even any worthless thing can be money as well in this broader sense: casino chips can be money, bus passes can be money, computer hashes called BitCoins can be money. But they cannot be the money. Does that make sense where I'm coming from?

You are talking about Switzerland, the country whose banks opened the data of their clients to the EU and the USA govs. According to you this is the country that does not go along with what other governments want them to do?

No, I'm talking countries in general. Switzerland is unlikely to allow gold vaults to be violated. Panama is unlikely to hand over financial information. Have encrypted servers in a couple different countries like Malaysia and New Zealand and server-seizure risk becomes minimal. Etc. GoldMoney and Pecunix have been operating for many years before and after the e-gold raid, yet have been left alone. For one thing because they discourage HYIPs from using their system, which are legally dubious to the USA and which were what the vast majority of the e-gold spends always were.

Loom is not decentralized.

The value stored is. You can have one guy with one gold coin here, another guy with another gold coin there, etc. The server is in one particular location, yes. The downsides to that are virtually non-existent in my opinion. Have a couple, or even several as the system grows, mirror servers in amenable jurisdictions, and where is the risk? Everything's encrypted, so no data will be forthcoming to any government seizing a server.

Btw, if you want a gold certificate system you should look at Open Transactions.

Yes, I know about them. They are covered in the DGC magazine issue I linked to.

 

[helmuth_hubener]

A google search for HYIP BitCoin yields almost a million hits, by the way. I just pass along that tidbit to give you an idea of what is most likely fueling the BitCoin market, just as it fueled e-gold before it.

 

[hugolp]

A google search for HYIP BitCoin yields almost a million hits, by the way. I just pass along that tidbit to give you an idea of what is most likely fueling the BitCoin market, just as it fueled e-gold before it.

So you mean that a more successful currency has more hits with another term than a less successful currency. Wow, who could have guessed. And obviously in your world it means its a proof of what its fueling Bitcoin, 100% guaranteed, pure science. Speculating with anyother crypto-currency is as easy as speculating with Bitcoin, so there has to be something more to Bitcoin (that thing you can not or dont want to figure out).

 

[hugolp]

Is this video available somewhere? I'd love to see the list of competing currencies quoted.

The video is in Hazek link.

 

[hugolp]

I hope you are not doing it on purpose but you have changed the issue on discussion and answered to a different thing that what both you and me were saying previously. Hopefully you just got lost and its not a discussion trick to appear right. Let me explain:

Because that is what the regression theorem says! It seems you are not as familiar with this as you might be. Here's a write-up on the regression theorem: http://mises.org/daily/1333

I have failed to communicate effectively enough and a gross misunderstanding has ensued. I apologize. I am not passing judgement on what is a "valid" reason to value things. I, and Mises, merely distinguish between two reasons for valuing a thing.

* One, it may be valued as a commodity. That is, valued for its use directly (or "in and of itself"). A man valuing a painting because he wants to hang it on his wall, or some grain because he wants to make bread and eat it.

* Two, it may be valued as a money. That is, valued for its exchange potential. A man buying a painting because he knows absolutely everyone wants it and he can easily resell it, or, more likely, some grain for the same reason.

That is two different reasons to value something. I do not claim one reason is "wrong", that would be preposterous. But the reasons are different and understanding the difference is essential to understanding the regression theorem.

But we were not discussing about the value of Bitcoin as money. We were discussing about the value of Bitcoin before being money. You have changed the argument as if I was saying that the value of Bitcoin is money therefore it does not violate the regression theorem and therefore I dont know what the fuck Im talking about (which would be true if that was what I said). Problem is thats not what either you or I said before.

Your own words:

That's if people were valuing the BitCoins as BitCoins, in and of themselves, not valuing them for their anticipated purchasing power once the system was up and running.

Now you are against entrepreneurship? How can an austrian be against entrepreneurship and judge that the value of Bitcoin for entrepreneurs is worse or better than other valuations?

You are indeed judging one value better than the other, and thats not what an economist should do. My point stands unanswered.

Btw, Bitcoin had value to entrepreneurs of the Bitcoin project because they believed that it could create a better monetary system and in general help having a more free economy that would create a better system. You insunuating that it was because they wanted to become rich is false in general. Very few people were specting Bitcoin to have such a quick success. If you go to the archives of the first forum you can read about why they were using and mining them. Note that people were using scarce resources to adquire bitcoins when they were not money yet (they were not accepted anywhere), means that for this people they had to have some value previous to being money. You can see in the forums how people were giving away hundreds of bitcoins to other people, paying 10.000 bitcoins for a pizza, etc... Thats what you do when you spect it to skyrocket in price in a year? No, people were in Bitcoin because they believed (and believe) that it can help create a better monetary system and a better system in general.

I would contest this fact. I do not think Ithaca Hours nor BitCoins really qualify as money. They are not the most widely accepted medium of exchange. Thus, they are not money. Neither is gold, by the way. Neither is e-gold or Pecunix or Liberty Dollar or Phoenix Dollar or WebMoney or PayPal. They are all used by groups of varying size, but none is universally accepted in any community and thus cannot be considered money.

Answered later on.

The reason the regression theorem is relevant is that the above (gold, e-gold, Pecunix, Liberty Dollar, Phoenix Dollar, WebMoney, PayPal) could become money because there's at least a link to a commodity if you go back far enough (e.g. Paypal <- dollar <- gold). With Ithaca Hours and BitCoins, there is no such link and thus no possible chance that they will ever become money, in my opinion. There's an upper limit on their spread and success due to their being worthless fiat never linked to any commodity. If they ever did become money, if there were ever 7 billion BitCoin users, or 300 million American users, or even 100,000 Billings, MT users, then at that time Mises' Regression Theorem would be disproven and we'd all have to step back and question some of our fundamental assumptions about human nature as we try to understand why all these people have chosen to give up a more-marketable good for a less-marketable one, one, in fact, with no conceivable commodity value (other than the theoretically possible sentimental/decorative/mathematical beauty value I mentioned earlier). Until then, it's just a large monetary experiment.

You dont need to repeat your interpretation of the regression theorem. I get your interpretation and Im explaining to you why its wrong.

I would claim they are not money, that part of the definition of money is to be universally accepted, or at least overwhelmingly commonly accepted.

This is an important part:

You can have the definition of money you want. And we can play with your definitions if you want to. But your definition has a big problem: it is too vague. Whats a widely accepted medium of exchange? Who judges "widely"? How universal it has to be? If an island starts using something as medium of exchange is it not money because its not in the whole world? So basically you are saying that the currencies of some small asian country (f.e.) is not money because there is not enough people in the world using it? To me is nonsensical to say its not money when people are using it as a means of exchange. And lets get crazy (Krugman style), is the planet Earth universal enough? Maybe not even the the dollar or gold have ever been money because the alliens were and are using something else.

Do you see the problem? Your definition is vague and allows whoever is using it to play with the vaguety to asses or deny something as money if it suits him/her. Having a strict definition of money much less subject to interpretation allows for more clearer discussion. If something is being used as means of exchange it is money. It makes no sense to decide if something is performing a function by how many people use it for that function. Either its performing that function or it is not.

My point stands unanswered.

In a broader sense, yes, anything ever used as an intermediary good is money. Grain can be money, pillows can be money, any commodity. Even any worthless thing can be money as well in this broader sense: casino chips can be money, bus passes can be money, computer hashes called BitCoins can be money. But they cannot be the money. Does that make sense where I'm coming from?

See above.

No, I'm talking countries in general. Switzerland is unlikely to allow gold vaults to be violated. Panama is unlikely to hand over financial information. Have encrypted servers in a couple different countries like Malaysia and New Zealand and server-seizure risk becomes minimal. Etc. GoldMoney and Pecunix have been operating for many years before and after the e-gold raid, yet have been left alone. For one thing because they discourage HYIPs from using their system, which are legally dubious to the USA and which were what the vast majority of the e-gold spends always were.

The encrypted servers is not really a problem. The problem is the storage of gold. Its fine that you think Switzerland will never allow its gold vaults to be violated. The same though the clients of the banks in Switzerland about the data of their bank accounts. Yet, they ended up giving it to the EU and USA govs. I dont think its a risk a currency that would go against the USA dollar can survive.

The value stored is. You can have one guy with one gold coin here, another guy with another gold coin there, etc. The server is in one particular location, yes. The downsides to that are virtually non-existent in my opinion. Have a couple, or even several as the system grows, mirror servers in amenable jurisdictions, and where is the risk? Everything's encrypted, so no data will be forthcoming to any government seizing a server.

Even if you start decentralizing a lot who keeps the assets, the risk is obviously counterparty risk. If its already risky to trust one party to keep your assets, imagine having a distributed network of people that can be anonymous. How can you trust such a thing?

Backing and decentralization dont mix together. (And this is another reason why gold works great as money, because its not backed by antying its decentralized).

 

[helmuth_hubener]

You are indeed judging one value better than the other, and that's not what an economist should do. My point stands unanswered.

Hello, hugo!

I'm sorry, but you have failed the reading comprehension test. I have no reason to continue offering my expertise and insight to you since it only agitates you and accomplishes nothing. No hard feelings. Let's both work to elect Ron Paul and have a great time doing it, agreed?

For any other BitCoin users here who read this, my analysis of the situation is this: e-gold was a HYIP currency. The "gold" part of it turned out to actually not be important to its users, the HYIP industry. Someone looking back at the history figured this out, and created an e-nothing currency. It still serves the purpose just as well, which is to allow folks to waste their money in pyramids without anyone's getting arrested. In both currencies there is a libertarian contingent of users as well who are excited because the currency could allow people to stop paying taxes and sell drugs, etc., without anyone's getting arrested. But the driving force is this appetite Americans have for HYIPs and the need for the existence of some online currency willing to look the other way as they play their delusional game.

An important lesson will be taught by BitCoin, just as it was taught by e-gold. Try not to lose too much money.

 

[hugolp]

Hello, hugo!

I'm sorry, but you have failed the reading comprehension test. I have no reason to continue offering my expertise and insight to you since it only agitates you and accomplishes nothing. No hard feelings. Let's both work to elect Ron Paul and have a great time doing it, agreed?

Now I see you have no intention of having a rational debate. You just come here to through baseless accusations and promote your interests.

 

[Kludge]

Hello, hugo!

I'm sorry, but you have failed the reading comprehension test. I have no reason to continue offering my expertise and insight to you since it only agitates you and accomplishes nothing. No hard feelings. Let's both work to elect Ron Paul and have a great time doing it, agreed?

For any other BitCoin users here who read this, my analysis of the situation is this: e-gold was a HYIP currency. The "gold" part of it turned out to actually not be important to its users, the HYIP industry. Someone looking back at the history figured this out, and created an e-nothing currency. It still serves the purpose just as well, which is to allow folks to waste their money in pyramids without anyone's getting arrested. In both currencies there is a libertarian contingent of users as well who are excited because the currency could allow people to stop paying taxes and sell drugs, etc., without anyone's getting arrested. But the driving force is this appetite Americans have for HYIPs and the need for the existence of some online currency willing to look the other way as they play their delusional game.

An important lesson will be taught by BitCoin, just as it was taught by e-gold. Try not to lose too much money.

Worth noting there's a pretty big list of innovative merchants accepting BTC. Food, PMs, jewelry (I'm having a fantastic piece made up by a fellow in Thailand right now), drugs, games, coffee, and it's extremely liquid thanks to people now offering up instant no-fee conversions to gift cards to retailers such as Amazon. Plenty of us (myself included) also have a strong preference for selling in BTC exclusively. There's a market backing it up. Payment is extremely convenient, is somewhat difficult to trace, is dramatically more safer than giving out a CC# (no need to worry if public Bitcoin keys are leaked), hides revenue and assets from gov't, and permits such services as Silk Road to function. There's a strong market functioning with BTC, and there will continue to be no matter how low BTC goes (until a better e-currency takes its place).

 

[helmuth_hubener]

Now I see you have no intention of having a rational debate. You just come here to through baseless accusations and promote your interests.

At the moment, I don't have any interests in any e-currency. I do have holdings, which will be unaffected by whether more or fewer people use the same currency as me. It's not as if I'm an investor or principal in Pecunix.

Rational debate (or discussion, which was more what I was trying to have) requires reading comprehension. One can only go so far before one gets frustrated.

I trust that my analysis, as one with years of experience and expertise in the field, will be valued by others lurking on the thread though not by yourself.

~~~

Kludge, there was a market for real products with e-gold also. You could buy music downloads, phone cards, debit cards, anything from Amazon, coffee, etc., etc. The main LDS DVD store accepted e-gold, remarkably, and so I was able to buy Harry's War (good anti-IRS movie, BTW) with e-gold. There were a bunch of vendors I'd discover occasionally that accepted e-gold. Many of them were accepting it for ideological reasons, no doubt (libertarians who thought there ought to be a gold currency). But the market was not as large as one would expect given the millions of dollars of daily spends that occurred. Where is all this volume coming from? those of us in the industry asked ourselves. What accounts for all these spends? The answer was, it was generally concluded, HYIPs.

I think that likewise, for a $32 million dollar economy with a $3 million dollar a day trade volume the number of vendors in the BitCoin sphere is too low. The volume of economic activity occurring from people buying coffee and jewelry does not seem to me to account for the velocity of the BitCoins changing hands, though it is more difficult to determine exactly how many real spends are occurring on BitCoin than it was on e-gold.

It's clear to me that what the market demands, what a large number of people really want, is a way to run and participate in HYIPs. It turned out that the "gold" part of e-gold really offered no advantage or added customer satisfaction to the market, but to the contrary had major disadvatages (most notably in the end: seizure). Some clever entrepreneur applied a correct analysis to the situation and rolled out a currency that gave the market exactly what it wanted: the ability to run HYIPs.

 

[Kludge]

Kludge, there was a market for real products with e-gold also. You could buy music downloads, phone cards, debit cards, anything from Amazon, coffee, etc., etc. The main LDS DVD store accepted e-gold, remarkably, and so I was able to buy Harry's War (good anti-IRS movie, BTW) with e-gold. There were a bunch of vendors I'd discover occasionally that accepted e-gold. Many of them were accepting it for ideological reasons, no doubt (libertarians who thought there ought to be a gold currency). But the market was not as large as one would expect given the millions of dollars of daily spends that occurred. Where is all this volume coming from? those of us in the industry asked ourselves. What accounts for all these spends? The answer was, it was generally concluded, HYIPs.

I think that likewise, for a $32 million dollar economy with a $3 million dollar a day trade volume the number of vendors in the BitCoin sphere is too low. The volume of economic activity occurring from people buying coffee and jewelry does not seem to me to account for the velocity of the BitCoins changing hands, though it is more difficult to determine exactly how many real spends are occurring on BitCoin than it was on e-gold.

It's clear to me that what the market demands, what a large number of people really want, is a way to run and participate in HYIPs. It turned out that the "gold" part of e-gold really offered no advantage or added customer satisfaction to the market, but to the contrary had major disadvatages (most notably in the end: seizure). Some clever entrepreneur applied a correct analysis to the situation and rolled out a currency that gave the market exactly what it wanted: the ability to run HYIPs.

That's definitely a valid concern, and I've brought it up too, either here or on a BTC forum. There's over $10m USD being bought and sold for gov't currencies every month and we don't really have numbers to say how much of a productive economy is functioning on BTC. BlockExplorer gives a lot of stats, but they don't have a stat to exclude BTC going in and out of currency exchange markets, and that'd be impossible to find out, so while it's telling us that hundreds of BTCs are being moved each time 50 BTC is created, it doesn't give us any idea how much of those hundreds in transactions aren't money shuffling or money going to a currency exchange account. Silk Road probably does tens of thousands of USD worth of business a day, the jeweler I'm working with for trade-ins and getting a couple rings made up probably does a couple tens of thousands in business a month in BTC. The coffee dealer I buy from probably does a few thousand a month (based on a guesstimate when I asked for his revenue stats back in June when he started up and I offered to buy). Other than that, http://bitporium.com/ and http://www.bitcoinworldmarket.com/default.aspx do a lot of business, as well as those offering no-fee exchanges of BTC to gift cards and Steam purchases, but I have no way of guessing their revenue stats -- then there's the slew of people doing person-to-person sales on forums and elsewhere, which I have no idea what amounts to. If I had to guess, I'd say there's about 1/3 the amount of BTC being traded on currency markets being used in a productive economy, but the bulk of that guess is pulled out of my ass. However, with BTC low (mining's not nearly as profitable as it was) and a finite time for BTC to inflate (we're currently in the highest rate of inflation, with BTC production essentially being halved in a few months), many, many more people are setting up shop to accept BTC for production.

BTC's volatility (which, while nowhere near the rollercoaster we rode when BTC soared to over $20, is still too far all over the place for many to feel comfortable accepting it) is the greatest problem... It might be interesting to see a collection of the largest miners essentially set up a central bank (now loan markets are being introduced to BTC, what better time?) to try keeping the BTC volatility in check, but they'd have to be insane (and quite rich -- I'd guess $500k USD minimum would be required) to do it. They could ask the merchants, loan-sharks, and miners for USD contributions (in return for shares in the "bank") or loans to attempt controlling BTC's value relative to other currencies and getting that power out of speculators' hands. Buy BTC when it gets too low, sell (from the miners' collective cache of BTC in the "bank") when it gets too high. Ideally, they would disband once all the BTC has been created which ever will, with the final stockpile of currencies distributed to shareholders.


Yes, I just suggested introducing an opaque central bank to BTC with the sole intent of artificially controlling its value. On Ron Paul Forums. Coincidentally, you could replace all my use of the word "bank" with "cartel" and it'd still fit fine, especially because miners would head up the "bank," making up a large share of BTC production and then essentially controlling output.

 

[helmuth_hubener]

BlockExplorer gives a lot of stats, but they don't have a stat to exclude BTC going in and out of currency exchange markets, and that'd be impossible to find out, so while it's telling us that hundreds of BTCs are being moved each time 50 BTC is created, it doesn't give us any idea how much of those hundreds in transactions aren't money shuffling or money going to a currency exchange account.

BitCoin Days Destroyed is supposedly a more accurate measure of BitCoin velocity. Unfortunately (and I'm not mathematically stupid) I look at the graph here or the table here and have no real idea what it means, or at least how to convert it into "quantity of spends per day". Do you have more understanding than me?