http://www.technologyreview.com/comp...619/?p1=A1&a=f
Whatcha reckon?
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http://www.technologyreview.com/comp...619/?p1=A1&a=f
Whatcha reckon?
Interesting from a security standpoint, but disastrous from an alternative-currency standpoint. Having a currency that deflates from the start with no actual oversight will probably eventually collapse. It would be neat if this kind of security helped enable e-commerce transactions, but it seems to have been designed by a smart computer scientist (and not a monetary expert).
That part's actually a good idea, I think. The biggest problem with any alternative currency is going to be adoption, and by working to ensure that money will become more valuable over time, they've added a motivator to help encourage early adoption and success. I think a bigger problem is how limited this system is in scale. Since there'll never be more than 21 million bitcoins in existance, that means that the number of people who can actually use the currency is inherently limited.Quote:
Originally Posted by Dreadnaught
The whole idea of the system is pretty interesting, though. Seems like a concept out of a sci-fi novel.
I see a large potential for fraud simply because its anonymous in nature. How do I know that a thousand people buying and selling bitcoins are in fact not sock puppets for one malicious individual?
Presumably the actual available balance is verified in the process, so at the very least you won't not get paid.
I don't think you understood what I was saying. Is something popular if only one person likes/uses it? Now is something popular if a thousand people like/use it? What if those thousand people are actually just one person?Quote:
Originally Posted by Dreadnaught
Would that work with the hardware requirements?
If it's just one person pretending to be a thousand, he'll still have to do the work of a thousand bitcoin earners, right?
http://en.wikipedia.org/wiki/Bitcoin
Hmmm, no taxes?
Also:
Quote:
The total number of bitcoins is programmed to approach 21 million over time. The money supply is expected to grow as a geometric series every 210,000 blocks (roughly every 4 years); by 2013 half of the total supply will have been generated, and by 2017, 3/4 will have been generated. As it approaches that mark the value of bitcoins could experience systematic price deflation (increase in real value) because of the lack of new introduction. Bitcoins, however, are divisible to eight decimal places (giving 2.1 x 1015 total units), removing practical limitations to downward price adjustments in a deflationary environment.[14]
Seems more trouble than it's worth. One person wouldn't make a thousand clone accounts to con a single other individual out of fantasy money. :noob:Quote:
Originally Posted by Illusions
I hadn't seen the part about the decimal places. Though moving "to the right" in decimal places is still pursuing increasingly fractional values. Unless my 9AM math is significantly worse than my [bad] 9PM math, it still looks like deflation to me...
Sounds pretty stupid to me. What's the point in a 21mn limit?
Why not just concentrate on real currencies security?
The idea of a deflating currency is inherently stupid. Why would anyone buy anything with a currency that was guaranteed to increase in value if you just held onto it? It would just make sense to hoard the currency rather than use it.Quote:
Originally Posted by Wraith
The bigger problem is getting people to want it at all.Quote:
Originally Posted by wiggin
Actually, no. Getting people to adopt a currency is tricky but possible if it has advantages over other currencies (more secure, easier, whatever), and this has the added advantage of having a built-in community who'd be interested in using it. But a deflating currency - in fact, a currency which has no possibility of inflation - is doomed from the getgo.Quote:
Originally Posted by Wraith
hmmm, re. deflation, at least it'll be slow and steady and predictable. this is very curious. no-one thinks this will replace any established currencies. but it's a very interesting experiment. what's the bitcoin economy at right now? something like 36 million USD? subserved by a very powerful distributed supercomputer. most sinister
one interesting perspective is that this is an attempted solution to a political problem eg. that governments and the world bank exert such control over financial transactions. atm you can't tell visa to not allow bitcoin payments. paypal can't confiscate your bitcoins. governments can't tax it or directly meddle with its value.
unlike the liberty dollar, this may be difficult to bust on legal grounds
Predictable deflation is the exact opposite of what you want. That means you are guaranteeing people holding this currency a 'value' return if they just hold onto their cash indefinitely. That's a fantastic deal, and people will take it.Quote:
Originally Posted by Aimless
probably, but at the same time people want to be able to spend money. what if i have a computer and am part of a mining pool but have little in the way of "real" income? this would be a way for me to buy stuff :o i might eventually buy a holographic computer rig for 0.004 bitcoins.
wraithy might sponsor this site with a mining pool :P
In theory the deflation predictability is mitigated somewhat by more people joining the currency for more things. But it would probably be overwhelmed by the main deflationary drivers built-in to this idea.
you have like two quadrillion units in the system... :confused: do you know of many currencies involving a quadrillion of anything? :P
moreover, you won't be hitting the 21 million bitcoin limit anytime soon.
Aimless: the article says $40 million in value of total bitcoins, not 40 million bitcoins.
----
The most important problem (towards adoption), assuming the reporter got it right, is that currently 6 million bitcoins are already owned by someone... presumably those with powerful computers or those who made it by selling "tea" and website design services. Having 28.5% of the coinage already in the hands of about .00001% (or smaller) of the world population is not going to lead to huge companies trying to get bitcoins now for real goods...
TL;DR: It's like saying "Ok, these 500 guys are trillionaires, now sell them tons of stuff and get some of those trillions".
I know I'm not going to convince you, but I think the deflation solves a bigger problem than it causes. Security/ease of use is meaningless unless people actually want the thing on its own, or it has some government backing it. It doesn't matter how secure or easy it is, normal people aren't going to use it if nobody will ever take it off their hands. And no government's going to back it. Planned deflation goes a long ways to solving the problem: there'll be people who will accept it as currency due to an expected increase in value, and they'll be motivated to become evangelists to secure their investment. This still isn't a secure investment; it working out depends entirely on adoption. And sooner or later, people are going to want to exchange their investment for goods, services, or real money, which should keep things moving. I'm not saying there are no problems with planned deflation, I just think it's better than a currency stillbirth, or hyperinflation due to slow adoption and loss of faith.Quote:
Originally Posted by wiggin
I think this is a problem in itself. I don't think it's going to sit well with people, psychologically. People are accustomed to most currencies being in a certain range of value, but I don't think anyone's going to like seeing that they have a current balance of $0.0000032 bitcoins, even if that's the equivilent of a thousand dollars.Quote:
Originally Posted by Aimless
BTW: http://bitcoinwatch.com/
Uhm, yeah? If you valued total extant dollars in pennies (the smallest unit of exchange), then M2 (which is one measure of the dollar supply) is about $9 trillion, or about $0.9 quadrillion units. M3 would be a bit over a quadrillion pennies.Quote:
Originally Posted by Aimless
In Japan, there are about 700 trillion yen sloshing around.
The point is that a quadrillion units isn't particularly large or particularly small, it's just reasonable. But if the worth of the unit is miniscule, why would you care how many there are? In fact, I think a very good case could be made to get rid of the US penny for precisely that reason, even if the potential number of exchangeable units decreased by quite a bit.
This is a Catch-22, Wraith. If no one is trading the currency since it will always increase in value, you won't get many new adopters. Adoption of a currency needs it to slosh around. It needs to be used and accepted as a common method of transaction. Deflation disincentivizes use even if it may give some people an incentive to grab a bunch early on.Quote:
Originally Posted by Wraith
The only thing worse than a deflating currency is a deflating currency that every expects to continue deflating indefinitely. This leads to a spiral where more and more people hoard and fewer and fewer people actually use the currency as a medium of exchange. In real currencies, governments can force people to use this currency since they're the only game in town (and they can always change deflation forcibly into inflation if need be, say by taxing deposits). But here there's a guaranteed depreciation. That's a monetary disaster. Oh, a stable currency has its adherents, but a deflating one? I can't think of a single economist who would advocate that.
What makes you think governments can't tax it?Quote:
Originally Posted by Aimless
Er, overexcitement mostly. But then again, it's pretty anonymous, and it isn't even recognised as valuable property as far as I can tell by any government. At best profiting from bitcoins would be like some sort of capital gain, in which case you'd pay taxes upon "selling" them. But as you know, I don't know jack about this sort of thing :p
Just found this. As it relates to this thread: bitcoins are being used for the drug trade.
Thanks for the thoughtful replies :)
Bitcoins don't really constitute a currency at the moment. They are virtual assets. Some people seem to value them primarily for their possible utility in buying/selling illicit substances. Others seem to value them primarily for their potential future worth (brought on by deflation and high demand). There's probably a third category, those who who're not particularly invested in the economy's future but who're involved because they're curious and because involvement is fairly undemanding.
Virtual assets that aren't backed by governments or by gold, well that's neither new or particularly crazy. There are contexts in which virtual assets can be valuable to many people. A number of MMORPGs feature virtual assets that can be bought and sold for real money. Zynga's facebook games make real money from selling virtual assets. Facebook itself seems to be fairly committed to the "Facebook credits" scheme.
I think virtual assets are interesting because they're part of a portion of our lives that isn't totally dominated by traditional economy. They represent our leisure time. Our interest, our enjoyment, our geeky passions, rather than our salaried labour. Things that money can't (or won't) readily buy.
Can we think of any context in which bitcoins--or something like them--would be legitimate valuable assets rather than overvalued fiction?
I think perhaps there may be some use for an asset that, in a real sense, represents a great deal of processing power. Can you think of uses for such an asset? For example, a large number of different projects that want access to a powerful distributed supercomputing system could jostle for processing time by offering bitcoins. There's nothing to say that this virtual economy has to be based only on "gold". There are many different precious resources in the real world, and I imagine there could be many different precious hashes.
Any ideas?
Apparently drug dealers like them. And the value of bitcoins has surged with the attention.
See the fourth sentence in my previous post, as well as Wraith's post preceding that.
So my hypothesis that bitcoin value can increase through increased popularity proved true, but now will anyone answer my question as to what keeps someone from using sockpuppets, due to the inbuilt bitcoin buyer/seller anonymity, to drive up their own bitcoin holdings before dumping them for a massive profit?Quote:
Originally Posted by Dreadnaught
I just read in the newspapers that at the current value of bitcoins and with the Swiss cost of electricity it doesn't pay off to do the calculation to gather bitcoins. You probably would need some computer farms in countries with cheap electricity.
http://www.geekosystem.com/first-major-bitcoin-theft/Quote:
I then left another virus scanner running and went to sleep. When I woke up I check my bitcoin wallet. I leave the client running to help the network, and I notice -25,000 (and a transaction fee) gone
It was only a matter of time.
A good sign. Bitcoin is acquiring more and more of the characteristics of real money :o