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Introducing bitcoins

Home Forums Archive Infrastructure Introducing bitcoins

This topic contains 48 replies, has 15 voices, and was last updated by Avatar of Ken Sims Ken Sims 3 years ago.

Viewing 15 posts - 16 through 30 (of 49 total)
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  • #11860
    Avatar of tusavision
    tusavision
    Participant

    Intrinsic value behind USD is two fold.

    1. If you don’t have them: you got to jail. (taxes)

    2. You can’t buy oil in any other currency.(Last country which said differently was Iraq…)

    I’m glad you’re doing something. That’s usually better than doing nothing.

    The fact is, the crypto-anonymity gives bitcoins inherrent value to money launders, pirates, child pornographers, identity thieves, and drug dealers. It’s boogeymen bucks.

    There’s a fairly rich history of digital gold currencies being favored by bad people. E-Gold, Liberty Reserve, etc. The one thing all of them lacked was decentralized backends, which presented an attractive target to law enforcement.

    As long as you have black markets, any currency which offers security against government and liquidity has value.

    The keyword here being liquidity. It’s a you go first problem: bitcoins lack value because no one accepts them. The more people accept them in exchange for goods and services: the more valuable they become. The market cap is small making it easy to manipulate. The bitcoin exchange rate is therefore easily manipulated by accumulating large holdings, and then de facto adjusting exchange rates by giving discounts for payment in bitcoins. Of course: you’re then left with the same problem as the Chinese. Now that you have manipulated the value of your huge holdings: how do you cash out without inducing a market panic?

    Once the market is peaked: how do you “sell high” without crashing demand?

    Judging from my experience watching the financial markets: the answer is you spread rumors to inflate the value to compensate for you flooding the market. A smokescreen to conceal your efforts in other words. When you hear various “blue horseshoe” bullshit it’s usually a reverse indicator that it’s time to sell because after the pump: there’s always a dump.

    #11861
    Avatar of Ken Sims
    Ken Sims
    Keymaster

    caveden wrote:

    Ken wrote:

    There are two “value” meanings involved here:

    1. The actual usefulness of a physical substance. That’s what I’m talking about with intrinsic value. This doesn’t depend on anyone’s opinion. (Whether people actual use it that way does depend on opinion, but that doesn’t change how it can be used.)

    This is not value, this is utility at most. You may say that gold has intrinsic properties that make it useful for some stuff, but that’s not value.

    [/quote]

    Let’s go back to the dictionary, this time for value

    There are a number of meanings, one of which is: that quality of a thing according to which it is thought of as being more or less desirable, useful, estimable, important, etc.; worth or the degree of worth

    To stay with your terminology, this meaning could be summarized to say that utility is value.

    Basically you’re saying that that meaning doesn’t exist, and that only various other meanings of the word value are legitimate.

    When you start distorting the meanings of words, the whole discussion falls apart, which as far as I’m concerned, this discussion has.

    #11866
    Avatar of
    Anonymous

    caveden wrote:

    Carl wrote:

    The problem, as far as I can tell, is that nothing stops somebody from creating a P2P currency that competes with bitcoins.

    So the scarcity of bitcoins is sort of dependent on the ability and willingness of programmers to come up with similar or even better schemes. And they most likely will.

    Sure, nothing stops you from starting your own currency, inspired by bitcoin if you will. That’s the good thing of free software… who knows, maybe someone will have an even better idea one day.

    But in no way that could affect the scarcity of bitcoins, because your new currency wouldn’t be accepted by software that only deals with bitcoins. The digital signatures and cryptography assures that you cannot make your new currency pass as bitcoins. To create new bitcoins, you have to follow the protocol rules, and that includes respecting the inflation rate.

    [/quote]

    In the market for automobiles, only Toyota can make Toyotas. Ford cannot make Toyotas, yet Ford competes with Toyota, thus decreasing the value of Toyota’s products.

    The fact that a Ford is not exactly a Toyota doesn’t matter, because a Ford fills the same basic needs as a Toyota.

    Similarly a plethora of other P2P cryptocurrencies can be created on the same market that Bitcoins use. The fact that these currencies will not actually be Bitcoins doesn’t seem to matter that much. When there are hundreds of currencies to choose from, and new ones can be created all the time, the scarcity of any single currency will be either very low or meningless.

    In the it boils down to the fact that it is only information, an information is not scarce.

    At least that is what I think. time will tell, I suppose.

    #12694
    Avatar of naufrage
    naufrage
    Participant

    tusavision wrote:

    Intrinsic value behind USD is two fold.

    1. If you don’t have them: you got to jail. (taxes)

    2. You can’t buy oil in any other currency.(Last country which said differently was Iraq…)

    I’m glad you’re doing something. That’s usually better than doing nothing.

    The fact is, the crypto-anonymity gives bitcoins inherrent value to money launders, pirates, child pornographers, identity thieves, and drug dealers. It’s boogeymen bucks.

    There’s a fairly rich history of digital gold currencies being favored by bad people. E-Gold, Liberty Reserve, etc. The one thing all of them lacked was decentralized backends, which presented an attractive target to law enforcement.

    As long as you have black markets, any currency which offers security against government and liquidity has value.

    The keyword here being liquidity. It’s a you go first problem: bitcoins lack value because no one accepts them. The more people accept them in exchange for goods and services: the more valuable they become. The market cap is small making it easy to manipulate. The bitcoin exchange rate is therefore easily manipulated by accumulating large holdings, and then de facto adjusting exchange rates by giving discounts for payment in bitcoins. Of course: you’re then left with the same problem as the Chinese. Now that you have manipulated the value of your huge holdings: how do you cash out without inducing a market panic?

    Once the market is peaked: how do you “sell high” without crashing demand?

    Judging from my experience watching the financial markets: the answer is you spread rumors to inflate the value to compensate for you flooding the market. A smokescreen to conceal your efforts in other words. When you hear various “blue horseshoe” bullshit it’s usually a reverse indicator that it’s time to sell because after the pump: there’s always a dump.

    The value will come from how much you can buy with it, that is, and you can already buy some things with bitcoin. There is already several thousands of bitcoins exchanging each hour (and I’m not talking about us <> btc exchange, i’m talking buying goods, services,…

    So bitcoin already has some value.

    #12698
    Avatar of Distorted-Humor
    Distorted-Humor
    Participant

    For something like Bitcoins to be accepted you would need somehting or a basket of goods to back it up, even if it is not easily exchanged for said goods.

    For example, if I make DH Bitcoins, which I sell X amount of them for legal tender currencies, which then are used to buy gold, silver, or even other goods (Say art or gems or some other good) which backs the currency, say in a Swiss Vault. The contract could be that you need a million of DH bitcoins to Exchange it for the goods, so there is not a lot of small transactions, And if you want to avoid currencies — There is always Barter.

    #12702
    Avatar of shredder7753
    shredder7753
    Participant

    Distorted wrote:

    For something like Bitcoins to be accepted you would need somehting or a basket of goods to back it up, even if it is not easily exchanged for said goods.

    For example, if I make DH Bitcoins, which I sell X amount of them for legal tender currencies, which then are used to buy gold, silver, or even other goods (Say art or gems or some other good) which backs the currency, say in a Swiss Vault. The contract could be that you need a million of DH bitcoins to Exchange it for the goods, so there is not a lot of small transactions, And if you want to avoid currencies — There is always Barter.

    I agree. money has to be backed by a raw physical resource to be real.

    #12710
    Avatar of i_is_j_smith
    i_is_j_smith
    Participant

    shredder7753 wrote:

    I agree. money has to be backed by a raw physical resource to be real.

    Actually, “money” just has to be something accepted by both parties. It doesn’t have to be a physical resource. But the best type of money is one that is backed by a resource that has the best chance of being accepted by the most people from all possible markets. Hence gold.

    #13633
    Avatar of
    Anonymous

    by bitcoin. it does have unique properties giving it value. it is in a speculative bubble right now, but an ecosystem has grown around it. i originally pooh-poohed it, but now see a lot of value in it. there are some great talks on it and other alternative currencies and trading platforms at http://agoristradio.com/?cat=4 .

    #13703
    Avatar of Mad-Dog-Tannen
    Mad-Dog-Tannen
    Participant

    While I also am not entirely sold upon BitCoins, I do feel I have to speak out in their defense somewhat.

    First off, there are a few fallacies here that need to be addressed. The first is of intrinsic value, the argument over which I think is stemming from a lack of concensus over the definition of our terms. Keep in mind that when having a discussion from the perspective of economics, you must realize that the economists with which you are speaking will be using economic definitions – dictionary definitions do not suffice. Caveden is quite right when he says there is no such thing as intrinsic value in economics. Some may argue that there are materials or factors which, due to their attributes, behold an all-accepted value, and could therefore be said to be intrinsic, but that is not the same thing.

    A simplified, but apt example: Arguing in favor of the idea of intrinsic value is applying an objective, all-serving valuation to a certain material (lets say gold for this example). We are sailing your boat and you find a man on a deserted island. His food supplies are low, but he happens to have a very nice watch. We have a 1lb brick of gold, and a box of bread on your boat. We want this watch, and offer him the gold in a trade, based upon the idea that gold’s value is intrinsic and a pound of it is much more valuable than a box of bread. To this man, though, the gold is of quite little value, while the bread is of great value, and he demands the bread for the exchange. The point is that valuation is always subjective rather than objective, or more simply, that we all decide for ourselves how much something is worth to us. This remains true even when we accept other people’s assignment of value. For instance, an iPod may be advertised at 199.99, and you may decide that it’s value to you is exactly 199.99 and buy it. You may also decide that its value to you is only 175.23 and you do not buy it. It may be on sale for 125.00, and your idea of its value could be 250.00, and you buy two. You may not think in exactly these terms, but we all decide whether we value something enough to pay the asked price. We may even haggle it down to where we think the price (value) should be.

    The term “intrinsic value” seems to really only keep holding ground purely because people like to use it in reference to precious metals, eg gold, silver, platinum, etc. What caveden meant by saying that gold had utility value but not intrinsic value. Gold has many industrial uses, has use in jewelry and decoration, and has historically been used both as an investment metal and as a government backed currency / governmental guarantee to currency. All of these uses are, in economica parlance, utilities. The value, on the other hand, has varied a great deal over the years, even during times when the utility has remained unchanged. Thus, it is the utility which may be said to be intrinsic, but definitely NOT the value.

    Another issue which must be addressed is tusavision’s argument surrounding the use of alternate, non-governmentally controlled currencies and black market / illegal activites. By grouping bitcoins (as he calls them, boogeyman bucks) and these illegal activities, he is commiting the logical fallacy of cum hoc ergo propter hoc, or “correlation does not imply causation.” This is the fallacy where one groups two factors, such as the use of non governmental currencies by those engaging in illegal activities, to condemn one part of the equation with the other part. Just because black market individuals have used non governmental currencies to further their illegal activities does not mean that non governmental currencies CAUSE illegal activities in any way, and it also does not mean that non governmental currencies are in any way a FACTOR in illegal activities. A correct argument against this would state that illegal activites will occur regardless of the currency used to propegate them, and the correlation of bitcoins to these activities shows intillectual dishonesty. A further example would be to say that people use guns for murder, therefore guns cause murder. This is obviously untrue, as murders existed before guns of any kind were invented.

    The final point I would like to address is whether a currency need be “backed up” by a material or gurantee of value (ie, gold / government fiat). This is not the case. Money is is primarily a medium of exchange and secondarily a store of value. I say primarily a medium and secondarily a store, because the nature of a store of value is to hold the value till it can be exchanged for other value, thus making the medium the primary funciton. In this capacity, the medium of exchange, money needs nothing more than to be recognized by the parties involved in the exchange. For this recognition, money needs only to be partionable into segments, and to be accepted by concensus as a unit of exchange. Till this point in history people have used such things as gold or fiat currencies because they hold the widest concensus as being accepted as a unit of exchange, ie convenience, and because they were difficult to forge, ie security. To replace gold/silver or a fiat currency, any medium of exchange need only be able to emulate these two attributes. BitCoins do seem to have security, though I am FAR from being an expert in the matter, and BitCoins have a group of people for whom they are a convenient and accepted unit for exchange. Thus, they are as good as any other unit of currency. In fact, I would go one further and say that they embody the libertarian value of voluntarism, because nobody is forcing you to accept them; you can choose for yourself if they are right for you.

    And, my brain is beginning to get clunky. Im sure I messed up a few points, and I left some things out, but I’ll address those later. Time for a cigarette and some comedy.

    #13890
    Avatar of miscreanity
    miscreanity
    Participant

    emmettvm wrote:

    While I also am not entirely sold upon BitCoins, I do feel I have to speak out in their defense somewhat.

    Emmett, your points are spot-on. Thanks for the clarifications. Bitcoin is in a speculative phase which is a very dangerous point. There is massive potential and also major danger of overheating, then collapsing. Time will tell.

    Other than Bitcoin, there is Open Transactions and Ripple among others. Those are the ones I’m most familiar with right now. I’ll provide a very abbreviated summary of them:

    Bitcoin: Aggregate, decentralized and headless triple-entry accounting system held together by cryptography.

    Open Transactions: Bridge framework between traditional financial institutions and instruments (stocks, bonds, cash, checks, etc) and more recent systems, such as decentralized crypto-currencies.

    Ripple: Community/Social credit provisioning based on reputation and individual decision.

    Ripple may lend itself best toward smaller seasteads, while Bitcoin could apply well to those with a high population turnover and Open Transactions seems to be a good framework for economic linkage between various systems.

    There is also extensive debate about Bitcoin with particularly valuable clarification and points made in the comments at:

    http://fofoa.blogspot.com/2011/06/bitcoin-open-forum.html

    http://fofoa.blogspot.com/2011/06/bitcoin-open-forum-part-2.html

    http://fofoa.blogspot.com/2011/06/bitcoin-open-forum-part-3.html

    #13891
    Avatar of shredder7753
    shredder7753
    Participant

    wow – this discussion seems, admittedly, a little over my head. i took macro and micro econ but they’re pretty basic. i just want to know- could there be banks set up for bitcoins? obviously they wouldnt be government backed but a credible bitcoin financial institution sounds a lot safer than having just a file on my PC. take it a little further – if there were banks, then eventually there could be markets… then eventually there could be derivatives… then eventually the whole god-damn mess all over again!

    this idea of a whole new state of the art currency system does sound intriguing the more i thnik about it, but it will be cool to watch it mature, if successful.

    o shit i had a orgasm when i heard the software is open-source, damn that is cool!

    ____________

    My work

    “Leadership and do-ership are not the same thing”

    #13899
    Avatar of miscreanity
    miscreanity
    Participant

    shredder7753 wrote:

    … could there be banks set up for bitcoins?

    Hi shredder. There’s a good amount of sound economic theory behind Bitcoin. Also game theory, cryptography, network routing and others. All of the technologies have existed for some time, it’s the way they’re put together and interact that makes Bitcoin clever.

    The short answer to whether there can be banks is yes. The more in-depth version is that “banks” can exist, but they wouldn’t be the kind of banks we’re used to thinking of. Traditional banks hold your currency in an aggregate pool that is accessible on demand (other types of holdings are beyond this discussion for now).

    A “bank” for Bitcoin doesn’t store your currency. Instead, it manages the keys to your currency. This would be like a traditional bank keeping track of serial numbers on every dollar bill (sticking with USD for the example) you own. The currency itself does not really exist because it is a complete abstract, but that’s really no different from any other currency. The only difference is that other currencies have physical representations (bills, coins, certificates, etc).

    Functionality provided by exchanges and other means, such as through Open Transactions, allow for traditional banks to interface with Bitcoin and similar systems.

    I hope that cleared things up a bit. Otherwise, feel free to ask and I’ll do my best to explain to the extent of my understanding. If you’re up to it, the FOFOA links are particularly enlightening.

    #13900
    Avatar of i_is_j_smith
    i_is_j_smith
    Participant

    emmettvm wrote:
    The final point I would like to address is whether a currency need be “backed up” by a material or gurantee of value (ie, gold / government fiat). This is not the case.

    The reason to have a currency backed by a physical commodity is to offer the option of “easy exit” from the system. By having your currency backed by a physical commodity, particularly one that has universal acceptance (or as close to it as possible), it gives the holders of the currency the peace of mind that they can…at any time…”cash out” and leave your system for another. This keeps those that run the system honest…and is why every government in the world chooses not to do it.

    #13905
    Avatar of Mad-Dog-Tannen
    Mad-Dog-Tannen
    Participant

    I agree that this is a preferable scenario – to have a direct conversion to a commodity from a currency – but in reality, as long as the purchase of commodities with said currency is not banned, then the ability to “opt out” exists. The dollar may not be TIED to gold, but you can buy gold WITH the dollar, meaning you can move out of a dollar-based monetary system, so to speak. I know this is not quite what you meant, but it comes to an essentially similar end.

    Also, while it is nice to have a commodity backing for a currency – with the benefit of keeping them honest, as you say, which really is a serious benefit – it is not necessary for a currency, or even for a responsible currency system.

    #13910
    Avatar of shredder7753
    shredder7753
    Participant

    this FOFOA guy is a character. cant say i agree with anything he sas tho. unless he’s right about Nakamoto owning 25% of all the bitcoins. i doubt theres any truth to that because if they had to be mined, he would need a gigantic amount of compute power (larger than the worlds biggest supercomputer(in China)). or maybe he designed it so that every block released deposits 25% of itself into his own account? idk. clearly theres a lot more to understand about this. what i dont get is that there’s soooo much of this stuff now ($118M worth today) and theres nothing you can buy with it.

    let me talk about the mining for a second, as that is one thing i might really disagree with. since when has a currency ever been produced like that. it seems like the most ass-e-nine way ever to produce money. a bunch of personal private computers spinning their wheels doing nothing constructive creates actual real currency? WTF?! thats a bunch of bullshit. in other fiat currencies, a government administration releases money to banks which is then owed to that government, with interest. the government maintains control over the quantity.

    maybe this bitcoin thing is a pre-curser to a much better currency?

    so heres my scenario: the Arab Spring grows until the poor people of the world are united in one massive democracy. elected leaders put together a cabinet including a monetary leader in charge of a commission. that commission then releases currency based on the “secure” technology introduced by bitcoin. there is NO central private bank (for those who dont know it, the Federal Reserve is a privately owned bank, hence the reason why our country is fucked and poor Emmett could be left where he stands just like the 30,000 mf’ers stranded in Egypt by Mr. Bonaparte, the short Corsican). THEN the money is good. then it is tracked by all its citizens. everyone lives happy ever after?

    ____________

    My work

    “Leadership and do-ership are not the same thing”

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