10 posts


Some observations:

1. People don't believe in it. People are scared of the law or think that it's a pointless currency as it isn't backed by force nor commodity. But as the market for it grows, it would be like not believing in using the already-established currency. Money doesn't care if you believe in it or not. If a bunch of people do care and accept it as a medium of exchange, it effectively is one.

2. Difficulty of exchange. For now, people have a bit of a learning curve. Devices and new methods will come out to facilitate exchanges and make it easier to trade btc for products and services. It is boundless in the black markets and is growing on the markets on the web. (See silk road and even wordpress)

3. Cracking the code. There might be a flaw in the implementation of the bitcoin system that might open the system to failure. As it grows, we're more likely to find he hole(s) in the system. But on the flipside, the longer it lasts, the more confidence we have in it's robustness.

The strongest things going for bitcoins is that they're on a decentralized system and it's pretty much impossible to forge purchases or bitcoins. It is also an inflationary currency, but there is a built-in cap in the system of around 21 million btc. Mining coins is getting harder with time. As we approch 21 million coins, we'll start facing a situation where the currency is decreasing in quantity. This isn't really preferable or sustainable from an economic viewpoint, and we might see the value decrease as we are able to produce less.


On point one, I think users will become good at evangelizing for it. As soon as more sites start putting a bitcoin button next to their paypal button, others will take notice. Amazon is developing its own coin which will make digital coins a household concept. People are attempting to install physical bitcoin ATMs around the world.

I found this method of evangelizing especially amusing

On three, I think some markets and exchanges will have to be casualties to hackers and governments before they will really get their shit together. Tor can be attacked a number of ways, it is not foolproof. I think system's fundamentals are sound, but the peripheral services are vulnerable. Theoretically the US government could claim they intend to prosecute everyone handling them for money laundering. If they are going after file sharing I'd imagine they could pursue this in a similar manner. The greatest threats I think are to the reputation of digital currencies.

US govt seeks to regulate large bitcoin transactions ( > $10,000 USD)

The strange part about the currency is that the transfer of coins is irreversible although every one can be tracked through the system. I think this could create a unique type of physical theft (someone makes you empty your bitcoin wallet on your iphone, how would you prove this later?). Numerous hackers have also successfully stolen bitcoin wallets.

While there are 21 million bitcoins, they can be divided down to 8 decimal places, so I don't see that number in itself becoming restrictive. Although bitcoin has the critical mass right now there are other digital currencies which users can and will their business to.

Overall in the early stages it has characteristics of a speculative ponzi scheme. I think this will be much less true as the markets grow and the actual economy grows (which it is). Currently a great deal of people are simply hoarding bitcoins, I really dont think the trading volume is that high on the exchanges. Right now its value is going parabolic.

Also the developers admit that the other year they gave a presentation at a venture capital company called In Q Tel at their request. This company is an arm of the CIA. I think governments control most large black market operations. I think digital currencies could have fascinating implications for asymmetrically fueling insurgencies, protests, and riots. Imagine telling a group you will give them bitcoin for attacking a facility while you watch them from a drone to verify and tipping them during the process. Most of Iraq's insurgents and Mexicos narc0 killers are guys paid piecemeal to make an attack.

2 examples of cia involved at high levels in drug trade.

Overall I'm unfamiliar with austrian economics which seems extremely relevant to this experiment. The bitcoin community denies it, but I think bitcoin is in a near-term deflationary spiral

acknowledging the concern--

'Deflation: When Austrians Become Interventionists' (PDF)

That last link seems especially relevant although I have not read it. I'm not much for economics.


Good post.

In the strictest Austrian sense, bitcoin is and will always be inflationary so long as the amount of them in existence continues to grow. I do believe it will get to a point where the lack of inflation makes btc too difficult to come by, making it less effective as a medium of exchange in that velocity will be too low. But this doesn't preclude it from becoming a store of wealth in the way gold is one today.


More Bitcoin news:

This Pizza Cost $750,000

World's First Bitcoin ATM in Cyprus

el greco
Bitcoin, impressive but flawed by Anthony Migchels on May 18, 2012

Team Zissou
That's not the Austrian definition of money. The Austrian definition of money is the commodity in universal demand. Historically, because of their fundamentals, the market has used precious metal as opposed to, say, banana peels. But if dried-up banana peels could power nuclear reactors, then banana peels could certainly become money. Bitcoins are easily transferrable, divisible and relatively scarce but ultimately depend only on the fact that people are willing to exchange valuable goods and services for them. Compared to the euros that can be sucked out of your account when the Troika wishes, they're a next best alternative. That's why the value of bitcoins is appreciating relative to euros. The fact that gold fluctuates in value relative to other goods is a feature, not a bug. Fiat currency--all money--does the same thing. Non-Austrian economists think in fixed terms instead of relative or fluid terms because they work with mathematical models, which are just a snapshot of events.

Paper or even electronic digits can be money but only insofar as they are accepted in exchange. In theory this can work fine. The real economy, the one backed by savings in the form of prior production, will continue humming. The government acts as a barter clearing house, issuing chits "backed" by all goods and services available for exchange. In practice, the temptation to inflate is just too strong, and powerful interests can seize control of the money-creating apparatus to enrich themselves. This exogenous seizure unhinges money from the supply-demand curve, which results in malinvestment, a diversion of capital from the real economy to the false economy.

"Mises was a jew so all this stuff is wrong!" Far too many people don't understand the Austrian position, and refuse to try to understand it... the author of that article would fall into that camp.

Niccolo and Donkey
el greco Heiligen SteamshipTime Sam Spade Broseph popfop

Bitcoin Is Now a Billion Dollar Industry


A tremendous thing happened in the weird world of bitcoin on Thursday. For the first time in the currency's history, the total value of all bitcoins in circulation topped $1 billion.

That's right: A billion bucks, right out of thin air. That's oversimplifying things a bit, but we'll get back to that. (By the way, if you still don't understand how bitcoin works, read this .) For now, let you jaw drop — watch the drool — and start wishing you'd bought a bunch of the cybercurrency way back when the exchange rate was less than $5, because on Thursday it zoomed past $95 per bitcoin. Just to rub that in: if you'd invested $500 in bitcoin about a year ago, which is probably less than one month's rent for you city dwellers, you'd have nearly $10,000 worth of stuff today. That's about a year's worth of rent. Stings doesn't it?

In a way, this is just a microcosm of our financial system as a whole. Haters love to point out how bitcoin just appeared out of thin air on January 3, 2009. It was a pet project of Japanese mathematician Satoshi Nakamoto . Or rather, bitcoin was created by some talented coder slash economist slash enigma using what's probably a made up name. Nakamoto had an axe to grind, too. The basic idea was to create a currency that exists independent of any state government. "The root problem with conventional currency is all the trust that's required to make it work," he wrote in an essay about government-backed currencies . "The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve."

Over the course of the next four years, though, bitcoin proved that this virtual currency was just as capable as complex financial products like derivatives when it comes to producing wealth from nothing. Bitcoin's value first exploded in the summer 2011, when Gawker's Adrian Chen wrote about a website called Silk Road , where you could buy any drug you wanted with bitcoin. The value of the virtual currency spiked and then settled down. (See the chart below.) The currency sort of waved for the rest of 2011 and most of 2012, sometimes dropping down to a couple bucks per bitcoin. But then a weird thing happened earlier this year. Bitcoin exploded.


Exactly why bitcoin has skyrocketed in value these past couple of months is up for debate. It's up 152 percent this month, and nobody's really sure why. A lot of people think that the crisis in Cyprus and the situation in Spain to blame, but some have a more sober read. As Quartz's Zach Seward argues, it's nothing but a good old fashioned bubble . Basically the currency is surfing on a wave of hype that's bound to come to an end, sending the exchange rate tumbling onto the beach with sand in its teeth. On the eve of bitcoin's billion dollar milestone Seward writes :
Frankly, the legend of bitcoin is an extraordinary one, and one day it might be just that: a legend. If skeptics are correct and we are witnessing a bitcoin bubble, then we'll mourn it's demise as we would the death of a video game character. Sure, some people will lose money. But many of the people who've been mining bitcoin — that is, creating it from thin air using powerful computers — will simply lose a little pride.

But if this value holds, this could be something big.

This is also an amusing correlation -- google trends interest versus bitcoin price . These pictures are a month old, but interest and price have remained parabolic.


Various attributes in chart form on blockchain

Price charts on different exchanges

Although not as valuable as a few houses that are for sale, a porsche has to be the most amusing thing i've seen.

Only 437 BTC!

Also, thanks for the welcome, I've lurked here infrequently for a year and was researching bitcoin when I saw this thread.

Niccolo and Donkey