Friday, June 17, 2011

Bitcoin Open Forum - Part 2


I have to apologize in advance to any of you that have money riding on Bitcoin right now. I'm really not trying to slam it. And in all fairness, I only discovered this YouTube guy a couple hours ago on none other than the Bitcoin forum itself. Thank goodness for open source, because it enables us all to evaluate what we're being sold and told, with everything and all arguments on the table, right? I found this guy to be very watchable and entertaining. No, he is not a Bitcoin advocate. Neither am I. I'm not even a gold advocate, FWIW. I am an observer, and I try to share my observations with you. And I thought these YouTube vids were well worth observation and discussion.

Coming to this Bitcoin discussion as a skeptic, I thought this guy was absolutely hilarious! I have watched all of these videos all the way through, and as I watch more, I may add them to the bottom of the post. Mixed in with the humor he makes some really great points. So get yourself comfortable. Some are only a minute long while a couple are 11 or 12 minutes. I think you will be quite entertained all the way through the 40 minutes it takes to watch them all. And if not, if this post makes you uncomfortable because you have money riding on Bitcoin, please consider this a great opportunity to debunk the #&@% out of this guy in the comments. I'm sure my regular readers will keep you honest. ;)

Sincerely,
FOFOA

















87 comments:

Wejn said...

Comments...

(oh, and: first. ;) )

Motley Fool said...

New forum so reposts and comment subscriptions.

Motley Fool said...

Re : Bitcoin

I like the idealism. As Aristotle said, bless them.

Unfortunately bitcoin will fail.

I will give two quick reasons.

Firstly government doesn't like it. The standard propaganda will be sufficient to make it illegal, ie. child porn, crime, drugs, tax evasion. There are already two us senators calling for it to be made illegal.

The second quick reason. Consider, if you have two media of exchange, one inflationary one deflationary, which one would you prefer to Spend? That's right, the inflationary one.

This means in the long term, people will prefer hoarding them to using them due to their limited issue and hence increase in value. Which implies that predominantly it will compete as store of value. With gold.

My money is on the big fish to prefer gold to digital bits. :)

Still, bless the idealists. :)

TF

Motley Fool said...

@Neverfox

It is my sad duty to inform you that anarchism is a unworkable idea.

Not that I agree with our current overarching governments, I think they can be cut down to about 1/100th the size.

We do have a use for governments though, unfortunately.

Peace

TF

Wejn said...

@FOFOA,

The guy might be entertaining but he doesn't get the bitcoin fundamentals.

I skimmed thru the whitepaper and source few weeks ago. Thanks to that I [sadly] know orders of magnitude more about BTC internals than he does.

Just watching the third video -- about 4 minutes in -- is painful for anyone who has at least some background on bitcoin.

Now, I'm not saying that bitcoin is viable when it comes to monetary theory. I don't feel I'm an expert in this area (and will gladly leave that discussion to others, more experienced in economics).

But this guy's lame attempts at debunking bitcoin thru the opennes of its source and/or specific algorithms (ideas) behind BTC (hashes are here like forever, therefore nothing new) shows how clueless he is.

I would actually recommend most of the people to stick to the economic/monetary aspect of bitcoin when trying to debunk it. Since you're very unlikely to find fundamental flaw in the IT area of bitcoin.

Btw, in your previous post you talked about BTC sounding a bit like pyramid to you. Hmm, could you please tell me how that aspect (bigger advantage to early adopters) squares out with holding gold pre-freegold (early adopters) vs. post-punctuation (late adopters)? Kinda feels like pyramid, no?

Sgt. Iria said...

As amusing as the videos are, they show a deep lack of understanding of what the technology and approach is. Personally I think this fella has found his calling as I think I snorted my coffee at one point.

However the technology is founded on some principled mathematics, its finding tough to calculate numbers, just like in the early days people panned for gold and over time it became more difficult to find and source, the mathematics behind these numbers works on the same principle.

As for the claims of hacking et al, well yes I have no doubt that this unregulated environment is poorly policed, just like the early gold mining settlements I imagine people will be stabbed, shot and robbed (metaphorically of course!).

The fear of the unknown (as demonstrated by the videos) is interesting, the network protocols are 'peer to peer' and open source (which means its a proposed standard (as defined in the source code) which can be viewed by anyone and anyone can run the network (not some demonic central power, like a central bank or anything...).

The idea that hard work is needed to 'earn' the digital medium of exchange, is really a function of the mathematics and its relationship to current technology. The requirement to generate more bitcoins with a diminishing return on computing power has resulted in some serious technological leaps to help solve this, i.e. using bigger more efficient computers and grouping them into large pools of computing power. Just like modern technology has advanced to get gold from strange and difficult to mine places. I don't get his response to this.

The view that it will be made 'illegal' is interesting, as in the past governments have confiscated gold and prevented its use as an alternative to fiat. So I fully expect the same to happen with Bitcoin. My understanding of the border-less Internet is that it will be as difficult for this to happen as stopping porn. Not impossible but I'm guessing difficult.

I think Bitcoin is as much about belief as it is its design and implementation. A large bunch of people have decided they need something else, this project may not get off the ground, because of prejudice, ignorance, design, governments ... who knows. But I go know one thing, this many people wanting to do something about fiat is worth taking not of.

Neverfox said...

Thanks for the videos, FOFOA. I'll have to watch them later and, who knows, maybe "debunk the #&@% out of" them. :)

@Motley Fool,

It is my sad duty to inform you that anarchism is a unworkable idea.

Well, shit!

Peace

That's going to be tough with states in the picture.

I don't want to derail this topic with political philosophy. But I'll "debunk the #&@% out of" your minarchism over at my blog or over at the Forums of the Libertarian Left if you want to stop in.

Neverfox said...

Wejn and Sgt. Iria get it.

DP said...

"."

Jeff said...

The anonymous currency of choice is truly untraceable suitcases of physical cash. Ask any drug lord. No electricity or computer required. Or since you are on this blog, you could use physical gold.

Texan said...

Wejn,

You are thinking that gold has a value only in currency, when in fact currency only has value in how much gold it can buy. Gold is the only store of value across cultures and time. It is the first " money", all concepts of money that have been used since then are simply derivatives of gold.

In other words, something cannot appreciate against itself.

There are plenty of technical reasons as well why gold is not a pyramid (there is no sponsor, there is no requirement to recruit people, there are no payments made up the chain, etc) but at it's most basic, gold is a pretty much universally viewed SoV.

Maybe bit coin will evolve into a SoV for cryptoanarcists everywhere, but I highly doubt it will ever go beyond the fad phase.

Sgt. Iria said...

Jeff, I agree. Today most people would settle for cash or gold. But that's because most people have established a value to these worthless bits of paper or lumps of shinny stuff because you can take it off grid. However I wonder if in the brave computer dominated future some people will place value on some incredibly large complex number, because It can be moved in fraction of a second, or encrypted beyond reach or sent around the world faster than the guys in swat vans can show up.

Even if the men in black did show up your horde can be hidden in a photograph or put in a safe so difficult to open even governments would find it difficult? Its a funny old world, ask the Inca, they walked around with this shiny stuff on thinking it looked good under the sun, or the drug lord who rolls his paper up to suck white powder into his nose. Assuming technology and networks form a part of the future then strange as it may seem, large complex numbers may be the new shinny stuff.

Wejn said...

Texan,

First off, the part about "pyramids" was about something different (asking why did fofoa draw the link "btc = pyramid" just because early adopters get disproportionate benefit; which is, btw, the same thing with physical gold revaluation. In both cases your purchasing power goes up).

Second, at this very moment I value gold only by the things I can exchange it for. And let me tell you, in this day and age you can't go very far bartering gold for something (literally nobody on the street knows how to "price" it). You have to step through currency.

Thus it matters very little that the value of gold might very well be different than its current price in $, EUR, CZK, CHF or ZAR. If you want to use the gold now, you have to go with the existing bids in your local currency.

Which is about the same with bitcoin.

Of course, I haven't said anything about long-term SoV (or the disconnect between value of Gold and PoG) in my comment, or did I?

Furthermore, I don't see anything about appreciation against itself there.

And I don't really care about bitcoin being MoE or SoV; I don't have the slightest stake in it. I just don't like hearing nonsense arguments (entertaining or otherwise) used to debunk something.

From IT point of view bitcoin is as bleeding edge as it gets (and also fundamentally very well designed). As for the economic aspect... well, that's why others are here for, right?

julian said...

Hello All,

Off Topic:

@ Motley Fool

Re: your position on anarchy (free market voluntary interaction, aka stateless society)

Jeffrey Tucker Interviews Gerard Casey:

http://www.youtube.com/watch?v=IWbLSZbsMj4&feature=channel_video_title

Jeffrey Tucker interviews Gerard Casey, Associate Professor of Philosophy at University College Dublin, Ireland, and discusses the Rothbardian view of the modern State.


The relevant bit is when GCasey makes the case for the trend of human social progress, which is leading toward statelessness.

He explicitly says that in some years' time (200? i can't remember) people will look back on this "Era of Nation-States" from the perspective of FreeMarket-driven social order.

Anyway, getting rid of all government but 1/100th, is like getting rid of all made up gods except one, "because we need something to worship, unfortunately."


On Topic:

bitcoin bitcoin bitcoin

gold

gold

fiat in unrestricted amounts

gold

bitcoin

i will collect my thoughts and share some later


kindly,

julian

DP said...

Julian: Anyway, getting rid of all government but 1/100th, is like getting rid of all made up gods except one, "because we need something to worship, unfortunately."

Hi Julian,

I'm not in the habit of disagreeing with your comments. I do not think a world with 0/100th of current government would be a better world. TBH, even 1/100th would be taking a good thing somewhat too far, IMO [worth what you yadda yadda...].

costata said...

Hi DP,

"..even 1/100th would be taking a good thing somewhat too far, IMO.."

That line cost me a sip of a fine wine ejected through my nose.

DP said...

@costata, the cheque's in the mail buddy. Sorry about that! :-)

Jeff said...

I skimmed the long BTC post linked by FOFOA. A couple of things stood out:

1. Some bitcoiners are calling for a 'bitcoin bank'. Apparently even web anarchists find being unable to do anything when robbed by hackers too unnerving. Coming soon; bitcoin fractional reserve banking. Heh.

2. Someone posted a link to an article which says:

"ST. LOUIS, June 15 (Thomson Reuters Accelus) - Exchanges that have facilitated trade in a fledgling digital currency known as Bitcoins are offering to help U.S. law enforcement track suspect transactions, after two senators charged that the operations aided drug traffickers and money launderers."

Yep, the bitcoin exhanges are happy to sell out the bitcoin anarchists in order to avoid being shut down by governments everywhere. It seems between hackers and rule enforcemnt bitcoin is about to become safe, boring, and regulated. Either that or go extinct.

Bitcoin anarchists, don't look back. The system is gaining on you.

DP said...

Bitcoin: Fictional Reserve

Michael H said...

OT, but this is and 'open forum':

via GATA,

"...Eric de Carbonnel of the Market Skeptics letter (http://www.marketskeptics.com/) has assembled a extensively researched two-part video about the ESF and has posted it at YouTube, where each section is about nine minutes long. De Carbonnel concludes that the ESF has been the nexus of U.S. government covert operations throughout the world since World War II -- gold market rigging is but a small part of the ESF's work. De Carbonnel notes that the agency never has been investigated by Congress..."

http://www.youtube.com/watch?v=2ssrcD5GdPQ&feature=player_embedded

http://www.youtube.com/watch?v=ImuVUab6WW0&feature=player_embedded

MH: This may be more relevant to the 'open letter to Ron Paul'. The interesting thing is that de Carbonnel says that something essentially like FOFOA's plan was carried out in the 1930's when the ESF was formed: gold was confiscated, transferred to the treasury, then revalued, and the capital gain was used as the seed funds for the ESF.

If de Carbonnel is correct, then who's to say what the ESF has done with the gold (in terms of accounting entries, etc. -- not the physical) since then?

Jeff said...

Michael,

Here is Eric de Carbonnel calling for mass starvation to kill millions in 2009.

2009 looks to be a humanitarian disaster around much of the world...Global food Catastrophe

The world is heading for a drop in agricultural production of 20 to 40 percent, depending on the severity and length of the current global droughts. Food producing nations are imposing food export restrictions. Food prices will soar, and, in poor countries with food deficits, millions will starve.

http://www.marketskeptics.com/2009/02/2009-global-food-catastrophe.html

jkjkjkjkjkjkjkjj said...

So, when are we going to see a bitcon derivative market? ;)

Why would anyone use bitcons? Drawback are evident, what would be the advantage(s)? The only one I see, is that it's 'supposed' to be limited, I am no crypto expert, and have no way to verify this. So we have a 'currency' of limited amount of which what, 25% or more are held by a few people and which is deflationary?

You might as well get some Facebook shares...

No, I still prefere PMs.

Ramon said...

Without something of an infrastructure, gold would not exist as a MoE. There would be no means of extracting it, let alone refining and minting. However, sufficient infrastructure has existed to utilize gold for thousands of years. How long has electrical power been around as part of our infrastructure? What about computers?

The new infrastructure of electricity and now computer networks has isomorphisms with those that have been established for millennia. The entire concept requires a radical perspective shift in order to grasp these similarities and how they arise.

In regard to decentralized crypto-currencies, it becomes as bizarre and sci-fi as it gets. Bitcoins are effectively "willed" into existence by strength of collective participation of those in the network. That isn't to say they manifest without effort, just that they are an emergent property of the combined operation of the cryptographic algorithm and triple entry accounting.

Discussing this topic almost crosses into the realm of metaphysical, simply because the mere notion of such an abstract coming to have value seems to be in direct contradiction with established reality. Yet going deeper into the structure to understand the algorithms and ingenious manner in which the pieces are combined leads to just such a conclusion.

The real barriers to adoption of crypto-currencies, Bitcoin in specific, are social awareness and fundamental integrity of the encryption algorithm. Other than this, they will eventually come to be used regularly - there is no stopping this, just as there was no stopping BitTorrent or the Internet.


Critical reading in order to understand decentralized crypto-currencies and the surrounding concepts:

Bitcoin whitepaper

Bitcoin FAQ

Open Transactions FAQ

Open Transactions Wiki

Triple Entry Accounting whitepaper

Ramon said...

@ julian:

Gerard Casey's suggestion is similar to that of Linda & Morris Tannehill in The Market for Liberty as they argue a feudal serf might have difficulty even contemplating a democracy, yet we now view the fuedal era as archaic.

The 1/100th bit is pure genius. I hope you don't mind my stealing it.


@ Jeff:

There already is effectively a Bitcoin "bank" inasmuch as there can be one within a crypto-currency ecosystem. One of the main ones is called MyBitCoin. Other than that, the traditional concept of a bank simply is not possible without incorporating an additional layer such as that provided by Open Transactions.

Exchanges situated outside of US jurisdiction will have less incentive, if any, to assist in tracking. Those that refuse to even attempt to do so will gain a reputation for maintaining anonymity. The sensationalism only acts to scare off the unaware for the time being. This is like trying to hold water with your hands.


@ DP:

Fictional Reserve... lol.


@ jkjkjkjkjkjkjkjj:

Open Transactions provides a bridge between traditional financial instruments and decentralized crypto-currencies.

I've mentioned before that Bitcoin and OT are complementary to each other, and together they are complementary to real assets, especially precious metals.


@ Neverfox:

4 out of 11 posters getting it is a pretty good starting ratio. It's just a matter of time for the rest.

Michael H said...

Jeff,

Are you saying de Carbonnel is not a trustworthy source? (Serious question, no sarcasm; you did not specify in your post)

I have not read / watched anything from him besides these videos and the previous 'fed is selling treasury puts' video.

While his video shows all his sources, there is a chance the quotes are cherry-picked and his conlusions are not warranted. Still, his viewpoint (as far as FED-watching, at least) is novel enough to warrant consideration, IMHO.

Michael H said...

Jeff,

One observation regarding your post.

When you write "Here is Eric de Carbonnel calling for mass starvation to kill millions in 2009. ", it can be understood in two ways:

1. He is predicting mass starvation.
2. He is advocating for mass starvation.

There is quite a difference between these two interpretations, and the second one makes de Carbonnel seem like some kind of monster.

Jeff said...

Ramon,

A few web anarchists will always stand outside the law, but that does not an alternative to the dollar make. Either bitcoin will be regulated or relegated to the equivalent of the drugs and guns black market, irrelevant.

Your claim that bittorrent or the internet can't be controlled is absurd. Instead of sharing a Lady Gaga album, which doesn't upset Uncle Thug, try sharing some Al Qaeda propagada or child porn. Then tell us how bittorrent can't be controlled.

Every new development and people start saying 'This is it! Singularity!'.

Michael,

de Carbonnel has a bit of a credibility gap, no? Or did millions starve in 2009 and I missed it?

And Y said...

I LOVE this guy!!!

jc said...

I believe bitcoin is a first step of change in the new evolution of money. It may have just enough properties and happen to coincide with a global revolution which will help give way to new monetary paradigm. I wouldn't store much value in them myself but it may be worth buying into a token of high potential change.

Greenie said...

here comes conflict gold from World Gold council.

http://www.zerohedge.com/article/forget-blood-diamonds-here-comes-conflict-gold

Ramon said...

As funny as Rawdog is, the information he relays is misinterpreted and in may cases outright false. There are misunderstandings of everything from cryptography in general (one-way computation, game theory applications) to the manner in which open source software is developed (forking, protocol interoperation, etc.) to techniques for securing anonymity (proxies, VPN, etc.).

His statement that the technologies used have been around for some time is accurate; they have matured and are well understood. However, it is not the mere fact that they have been around for a while that is significant; rather, it is the way in which they are being used to interoperate with each other and other established infrastructure, in particular distributed peer-to-peer ecosystems via the internet.

You could look at a Rubik's cube, laugh at its simple blandness and call it a bunch of plastic blocks with different colors. Outside appearances are deceiving. It is the design based on earlier techniques that makes it a truly sublime puzzle. Yet how many can describe the math behind it?

"... currency cannot be anything but what government says it is."

Zimbabwe should be a thriving, dominant world power by that reasoning. I want to cry.

"... that energy is wasted!"

An understandable misconception, as this can be a difficult notion to get past. Any system of checks & balances requires some effort to keep the overall balance. The effort put in does not generate any observable result because it simply acts to maintain stability through verification. Without it, Sybil attacks and the like would rapidly cause the entire system to fail. Thus, the energy is protective, not wasted.

"... there's an unlimited - an infinite amount of Bitcoins."

By consensus, we agree upon value. This is the basis of trade, the mechanism of price discovery by way of negotiation. With an established limit of 21 million units and the majority of installed clients agreeing upon that limit, any claim on more is rejected by the majority. That is why control of more than 50% of the aggregate processing power for the entire Bitcoin ecosystem is a potential threat; it could change the network's perception of that 21 million unit limit.

jkjkjkjkjkjkjkjj said...

I also just read the article about conflict gold, first guess would be that gold prices would go up on the public market. Second step would be the creation of laundromats,ie smelters, making clean gold out of conflict gold.

I quickly flew over "Open Transactions", it sounds very complex and geek. What do I do with my 100 CHF bill? Put it in the shredder connected to my OT account to transform it into an electronic token;)? Or do I first have to by bitcons on some kind of market place by wiring money electronically? Well here goes the anonymous part.
Nobody asks me where my 100 CHF bill comes from, it's totally anonymous, it's recognized at least all over Europe, I can go into a shop and get PMs for it, I can swap it for a fee into EUR or USD without showing any identity.

The only limitation is to transport more than 10'000 EUR worth of cash in the EU without some kind of justification where the money comes from.

How do you address the connection between the 'real world' money, be it USD, CHF or whatever your employer pays you, legally or maybe not so legally in cash and those new methods?

sorry for my stupid identifier 'jkjkjkjkjkjkjkjj', I was trying several methods to connect and got enraged when trying it for the n'th time I just hit those keys, and that was the time when it worked.

DP said...

@jkjkjkjkjkjkjkjj: You've gotta love computer, eh? Great when everything's working perfectly, but...

Ramon said...

My train of thought tries to define how an existing idea is formulated and what is necessary to achieve the concept in question. Here are some (not all) necessary pre-existing conditions...

Written language: Without pattern recognition, direct signaling communication (verbal, gesture, etc.) and symbolic representation, written language wouldn't exist.

Gold as currency: Without market exchange, mining infrastructure and valuation consensus, gold trade wouldn't exist.

Bitcoin (and crypto-currency in general): Without electricity, the internet and a peer-to-peer ecosystem, Bitcoin wouldn't exist.

In drawing upon the similarities, the requirements for creation of new technologies and techniques can be established. This is a gradual progression, building upon prior advances. Peer-to-peer network dynamics are difficult enough for most to understand; they get the concept of using these networks to share files, but they don't grasp the underlying structure.

Biology is reasonably familiar to most people. Take the human kidney. It operates primarily based on filtration and pressure differentials. Hormonal signaling via the endocrine system provides a means of adjusting blood pressure (supply) and other aspects based on feedback signals (demand) from the kidney.

Blood clotting is a cascading process wherein multiple triggers (triple entry accounting, redundant hash verification, etc.) are required to achieve a desired effect. These biological mechanisms and processes are very similar to the way the internet, P2P ecosystems and crypto-currencies interoperate. They build upon one another, developing an aggregate functionality that is greater than their individual potentials.


@ Jeff:

The very US-centric view you present certainly holds true under the jurisdiction of an authoritarian/totalitarian regime during a relatively short term. However, expanding out to human generations, and further to multi-generational cyclic patterns, waves of progress most certainly overcome any government's resistance as surely as a persistent tide erodes even granite. The imperceptible change over short time frames must not be construed with immutability, especially as technology continues to develop at an ever-accelerating pace.

New paradigms come about not as a result of one particular advancement, but a cumulative progression until a threshold is reached. Then, with sufficiently broad awareness and acknowledgement (not necessary in-depth comprehension), it becomes so overwhelmingly compelling that it supplants former standards. There are pattern similarities at every stage of advancement, so what we are seeing now has correlations with historical precedent.

As for regulation... government can exert influence over secondary and tertiary factors (particularly transitions that occur when switching between a new technology that can't be directly tracked to a known technology that has existing methods of control in place), but trying to directly attack torrent networks has effectively proven near-futile. It is a cat & mouse game in which government is playing catch-up from a long distance. This is akin to inferring the existence of a planet orbiting a distant star (the new tech) by observing that star dimming as the object passes in front of it (extrapolation based on a known element).

Trying to pinpoint instantiation of a singularity event is like attempting to figure out exactly when you became infected with influenza. It is entirely impractical outside of a general range.

I do appreciate your counter-points. If you have time to do so and a technical inclination, I recommend exploring distributed network operation and how identity-obscuring methods effectively mask any ability to obtain even a real IP address, let alone the actual individual using it at the time.

Ramon said...

My train of thought tries to define how an existing idea is formulated and what is necessary to achieve the concept in question. Here are some (not all) necessary pre-existing conditions...

Written language: Without pattern recognition, direct signaling communication (verbal, gesture, etc.) and symbolic representation, written language wouldn't exist.

Gold as currency: Without market exchange, mining infrastructure and valuation consensus, gold trade wouldn't exist.

Bitcoin (and crypto-currency in general): Without electricity, the internet and a peer-to-peer ecosystem, Bitcoin wouldn't exist.

In drawing upon the similarities, the requirements for creation of new technologies and techniques can be established. This is a gradual progression, building upon prior advances. Peer-to-peer network dynamics are difficult enough for most to understand; they get the concept of using these networks to share files, but they don't grasp the underlying structure.

Biology is reasonably familiar to most people. Take the human kidney. It operates primarily based on filtration and pressure differentials. Hormonal signaling via the endocrine system provides a means of adjusting blood pressure (supply) and other aspects based on feedback signals (demand) from the kidney.

Blood clotting is a cascading process wherein multiple triggers (triple entry accounting, redundant hash verification, etc.) are required to achieve a desired effect. These biological mechanisms and processes are very similar to the way the internet, P2P ecosystems and crypto-currencies interoperate. They build upon one another, developing an aggregate functionality that is greater than their individual potentials.


@ Jeff:

The very US-centric view you present certainly holds true under the jurisdiction of an authoritarian/totalitarian regime during a relatively short term. However, expanding out to human generations, and further to multi-generational cyclic patterns, waves of progress most certainly overcome any government's resistance as surely as a persistent tide erodes even granite. The imperceptible change over short time frames must not be construed with immutability, especially as technology continues to develop at an ever-accelerating pace.

New paradigms come about not as a result of one particular advancement, but a cumulative progression until a threshold is reached. Then, with sufficiently broad awareness and acknowledgement (not necessary in-depth comprehension), it becomes so overwhelmingly compelling that it supplants former standards. There are pattern similarities at every stage of advancement, so what we are seeing now has correlations with historical precedent.

As for regulation... government can exert influence over secondary and tertiary factors (particularly transitions that occur when switching between a new technology that can't be directly tracked to a known technology that has existing methods of control in place), but trying to directly attack torrent networks has effectively proven near-futile. It is a cat & mouse game in which government is playing catch-up from a long distance. This is akin to inferring the existence of a planet orbiting a distant star (the new tech) by observing that star dimming as the object passes in front of it (extrapolation based on a known element).

Trying to pinpoint instantiation of a singularity event is like attempting to figure out exactly when you became infected with influenza. It is entirely impractical outside of a general range.

I do appreciate your counter-points. If you have time to do so and a technical inclination, I recommend exploring distributed network operation and how identity-obscuring methods effectively mask any ability to obtain even a real IP address, let alone the actual individual using it at the time.

jkjkjkjkjkjkjkjj said...

@DP
I earn my living with them, that's why I prefer to keep my earnings physical ;)

At least here people understand that a store of value and currency as exchange media are two different things. In other forum, people want to have both in one and hope bitcon is the solution, ie store of wealth and exchange media.

I personally don't need other exchange media, especially if they are not accepted as widely as today's major currencies, and concerning a store of wealth as bits on a HD, forget it.

So, can anyone summarise in one sentence what the advantage of bitcon is vs CHF/EUR/USD/ZWD as an exchange media?
All major currencies can be traded electronically, wired worldwide, I can 'protect' myself with calls and puts on Xrates. I am running a business, why should I accept bitcons as a payment method? Just because "I believe"?
Well that's not enough for me.

mr pinnion said...

I still cannot see why a new fcoin(fantasy coin) start up, say by google , would not crash bitcoin.
Till that question is answered, i dont even need to think about putting money in it.

Regards
Ozzy

Ramon said...

@ jkjkjkjkjkjkjkjj:

I was amused by your name, I thought you were just really, really, really kidding.

I just read that bit about conflict gold as well. So far, it reeks of being another asinine attempt to do-good that will only cause more problems. It reminds me of boycotting efforts that are well-intentioned but based on misnomers alongside conflation of correlation and causation. Atomically, gold is gold, so I see the legislation as just an arbitrary designation based on geopolitical biases. AKA - bulls417.

OT definitely is heavy on the math and such. The tech being used is established and mature. Many of the principles already are in place at proprietary financial institutions, aside from the headless decentralization. Companies are understandably loathe to relinquish control over infrastructure.

Yes, you would be exchanging one asset for another by either method (sans shredding). OT allows for traditional financial institutions (banks, credit unions, etc.) to interface with decentralized crypto-currencies such as Bitcoin.

One example would be making a cash deposit at a branch bank and specifying it be transferred to a crypto-currency address. Another could be by trading an asset/good or service on an exchange (bypassing traditional banks) for crypto-currency. In practice, banks will use your deposit to perform the latter method, effectively acting as an agent on your behalf.

The usage is almost exactly the same as current MoE. With crypto-currencies, there is no direct analog for physical medium without exchanging for a tangible asset (gold, printed currency, etc). As mentioned by Neverfox, there are certain benefits that do not exist with physical media.

As an aside, banks have actually become markets and arbitrate exchanges within their own constructed ecosystems - hence the term "market maker". Nearly every financial instrument in existence is negotiated either between institutions or within their own environments, as in a financial walled garden.

Paper currencies still have serial numbers. There is no simple method for keeping records on transaction history, though. Exchanging currencies for a fee is analogous to crypto-currency purchase. And yes, there are ways to maintain anonymity.

Because of the ability to adhere to anonymity from virtually anywhere, there is no issue with limitations on transporting physical currency across borders. There are myriad methods of circumventing equivalents of the "Great Firewall of China".

With the connection between physical and virtual, as long as the network exists, you can access your electronic currency. This is because distributed networks are an emergent property of the telecommunications infrastructure. It is suspected that the brain works in a similar fashion; decentralized and seemingly redundant, resulting in very high resiliency.

Making the transfer between physical and virtual is again based on market principles. Initial high volatility will moderate over time as the virtual counterparts become more widely adopted, leading to a relatively stable supply/demand exchange rate between existing currencies and virtual. For instance, a 10 point drop in an equity valued at 100 points total is 10% while that same 10 point drop in something like the S&P @ ~1270 is under a 1% fluctuation. Humans are very sensitive to magnitude changes; not so much incremental variations.

Obviously, disruptions will occur in various forms, but the overall integrity is unlikely to be so catastrophically compromised that it all comes completely crashing down. Again, so long as the telecommunications network is functionally operational, the accompanying services reliant upon it will remain available.

jkjkjkjkjkjkjkjj said...

@Ramon:
if I can summarise in a few words: OT provides a mean to transfer anonymously money from one country to another, that is, IF the bank doesn't record your identity when exchanging currency for crypto currency.

As far as I understand, this is the only advantage of OT compared to a SWIFT transfer, or am I missing something?

How long will any government allow this? Some government like Sweden are considering a ban on cash, I don't think they will allow anonymous purchase of crypto-currency in a swedish bank soon.

On the other hand, if a government bans something, there will be a black market, but only if it's something people want. As long as there is cash (paper currency), I don't think OT/bitcon has a standing chance. The day all major governments stop printing paper cash and making cash transactions illegal, then this might take off. It would have to be all major governments, else people would go to a focal point like EUR, CHF or USD... (when Yugoslavia broke down, DM was king, anyone new what Deutschmarks look like and what they were worth).

Ramon said...

@ jkjkjkjkjkjkjkjj:

Impressive and admirable. Glad to know you're being smart about it by using other forms as stores of value. In a sense, a means of exchange is an immediate time-scale store of value. I believe that is where much confusion stems.

First, I'll clarify what I'm thinking...

Fiat currencies (FCs; USD, EUR, etc.) as well as decentralized crypto-currencies (I'll call them DCCs; I consider them distinct from fiat) are ideal for short-term transactions. Daily, weekly, even yearly. IMO - beyond that, they have the potential to fluctuate too much.

Hard assets, especially precious metals, act as long-term stores of value. As we know, they don't lend themselves to immediate transaction for various reasons.

Here's where things can get a little crazy. Everything owned by everyone can be securitized. Not just real estate and various loans packaged by banks, but everything that everyone owns down to that package of new underwear you finally broke down and bought after the last pair became crotchless.

DCCs provide the means to realistically access all assets as securities in addition to those currently part of the credit markets. Hence all tangible assets and credit become effectively equivalent via convertibility through DCCs. Because there is no central control, there is no way to manipulate or game the system without absolutely monumental effort that could take place early on or somewhere way down the line (perhaps by some radically disruptive technology or enough of a collective consensus that is swayed or tricked into relinquishing sufficient individual asset control [the same situation as today]), but not while the system is healthy and mature. That, of course is again reliant upon the fundamental integrity of the cryptographic algorithm used.

Before the reactionary reflex kicks in after seeing "securitization", consider that DCCs are fully transparent as opposed to the secretive labyrinths that contemporary banks manufacture. Every transaction is exposed to every participant. With full, universal disclosure comes an unprecedented clarity in price discovery.

In summary: DCCs (including Bitcoin) provide enough abstraction and transparency to facilitate completely open tangible asset exchange as readily as in the credit and forex markets. An added bonus is that decentralization removes central points of failure, so DCCs are actually more secure than traditional financial instutions and instruments.

Ramon said...

@ mr pinnion:

It is better to think of damage done to Bitcoin in terms of "infected" or "undermined" rather than crashed. DCCs are becoming very much like biological systems.

First, Bitcoin has an established base that have a vested interest in that system. Even if Google were to implement a direct rival, it would need to gain the kind of traction that Bitcoin already has built over the past two years. That's certainly possible, but it doesn't mean that the two can't coexist. In fact, it would be to the big G's benefit to interoperate with the Bitcoin network.

Any entrant utilizing the Bitcoin protocol would have to overwhelm the majority of the existing network and replace the existing software clients. Even for Google, that would be a significant undertaking and the return would hardly be worthwhile (long-term vision of control might be tempting, but alternatives to the dominated network could easily be established, thoroughly negating benefits of the takeover effort). By the time the network is of a size to make it benificial/profitable to Google, it would be virtually impossible even for the big G and their other services would suffer greatly while the takeover effort commenced.

I am not advocating the use of Bitcoin as a SoV, especially not during a speculative growth phase. Early adopters who see potential and calculate the risk/reward ratio to be positive will jump in. As the platform matures, its utility as a MoE will grow. From my perspective, that would be the time to keep a steady, significant amount in Bitcoin tokens ("accounts" is a term that is antithetical to headless DCCs; you probably wouldn't call the cash in your pocket an account).

As it stands now, jk has the right idea: use the Bitcoin system to generate steady revenue while storing excess in proven stores of value.

For you, this protects the electronic assets you generate using the real hardware you've invested in. For Bitcoin, your continued participation facilitates further growth and draws additional participation as awareness increases. As Bitcoin grows, any new problems will be dealt with; if not, you've made some profit (at the very least, the computer hardware you bought has paid for itself entirely or partially). The larger Bitcoin gets, the more stable the system and greater your electronic asset security at the expense of your existing computer hardware generating a commensurately decreasing return.

Texan said...

Wejn,

It's crystal clear how you value gold. That was my point, gold isnt valued by the " giants" the way you value it. China and other CBs aren't buying gold for purchasing power, they are buying it to own as much of it as possible before there isn't any left for sale at a bargain price. It's a land grab.

Second, there aren't " early adopters" for gold. It may be somewhat fashionable among the " disposable income elite" of the world to buy some gold here and there, but total worldwide investment demand doesn't even absorb 30% of total annual mine production. Most gold is already mined, and already held, and has been buried away forever. Ergo there is no pyramid for gold.

There are other dissimilarities as well, which I hinted at, but I can tell of you really think gold is a pyramid, or if you think bit coin is not? It might be helpful if you could explain why bit coin is NOT a pyramid, and I am still waiting on anyone to explain what the advantage of bit coin is versus fiat. Ie, why bother?

Ramon, competition is not good for currencies. See the US in early 1800s, among other places. In fact, it's a total disaster.

Ramon said...

@ jkjkjkjkjkjkjkjj:

Yes, that is one of the methods. When holding an account, you surrender some or all of your anonymity depending on the jurisdiction and geopolitical stability of the region.

My view of the pseudonymous OT method is that it operates similar to a reverse proxy. I interpret the pseudo-anonymous transfer as follows:

You create an account with a proxy service that stores your asset. That proxy then projects a singular face out to the financial world. When a transaction is requested from the proxy, it internally verifies the request by cryptographic means based on a key it receives in the external request. If there is a matching key associated with your account, the transaction is approved and the funds are withdrawn from the account associated with that key. This allows external requests to what appears to be a pool account, thus protecting your identity outside of the proxy.

From what I know of SWIFT transfers, this is the primary benefit. This is one method of three, the other two including a fully anonymous means and the other a fully identifiable link as with traditional accounts.

No aging government will take kindly to complete anonymity. Newer ones do not often have the ability to enforce compliance and therefore grudgingly allow it. Some governments, particularly smaller ones like those currently associated as tax havens, will provide these services to encourage investment with them.

In reality, there won't be much difference in this from what wealthy individuals and large corporations have been doing for decades to protect their assets from arbitrary government taxation. The difference is that it will now be accessible enough for the vast majority of the world's population to make use of their methods. What this means is the decreasing relevance of the current crop of banks, transaction processors and even the nation-state.

I agree that other currencies will fill gaps as well. However, with the proliferation of global mobile internet access, using paper currency becomes less attractive than before - still useful, just with a convenient and secure alternative.

Besides, if it is mandated that USD is the only currency to be used in the US and the act is enforced by police or military, it will become very difficult to access alternate currencies. Unless all internet access were completely shut down, DCCs will still be accessible.

Compare Yugoslavia and its dinar with the world and all paper fiat currencies. With no alternatives, the least offensive paper money would win. Instead, we have precious metals and now DCCs true successors.

In the meantime, the powers-that-be will fight tooth and nail to maintain the illusion that their respective economies are fundamentally sound while lashing out indiscriminately at every threat, perceived or otherwise.

Anonymity will be absolutely critical for anyone using stable currencies (gold, silver, Bitcoin, etc). Physical assets can be confiscated, so it is wise to keep them outside of an authoritarian regime. In order to make use of those assets from within one of these inwardly hostile regions, Bitcoin is an ideal solution. In this manner, Bitcoin can effectively be backed by gold out of sheer necessity.

How long any of that takes will depend on how quickly and how bad things get. I suspect sooner rather than later with Greece about to effectively default.

Ramon said...

@ Texan:

You're absolutely right, the big/smart money is grabbing as much real wealth as it can as fast as it can before fiat devaluation accelerates.

Again, you're correct in that there are no early adopters in the typical sense today. What of the California gold rush? While not early adopters in the sense alluded to, prospectors did get in early on a profitable trend. There is currently a widespread effort to increase precious metal extraction at existing mines and develop new methods in order to capitalize on what is seen as a coming/continuing boom. As far as I'm concerned, the mindset is equivalent.

The string of 19th century American currencies included national and regional fiat competing against precious metals, not so much each other. Inflation by official printing and rampant counterfeiting rapidly debased most of the paper monies. The competition was not amongst the paper currencies, but of paper against metal, the metals having stood the test of time. The same situation is present today with multiple national currencies seemingly in competition while really all acting the same against real assets.

If gold and silver were not fungible, the situation would've been very different. Bitcoins are fungible and share the core properties of the precious metals. Yes, there are certain risks and no, they cannot be handled physically. There will probably be unforeseen difficulties as well, which is more than enough reason to not keep all of your assets in BTCs (you should never keep all of your wealth in one form and/or location). At the same time, the benefits make it well worth testing the waters, even if only dabbling with mining.

Keep in mind that an investment of USD$20 in the Bitcoin economy in February 2011 would be worth about USD$400 today. Would you feel slighted if that experiment lost half its value? How difficult would your life be if you put in USD$20 today and the entire Bitcoin system failed? How well off would you be if you put USD$20 into Bitcoin today and the USD were debased into oblivion over the next few years?

The risk/reward potential is marginal at best. This is why early adopters adopt early. They see great potential for minimal risk. The more time and effort they invest, the more risky it becomes. Thus, they diversify.

A few dozen to a couple hundred Bitcoins could do wonders for a diversified asset portfolio, considering the Bitcoin network participation is rapidly increasing. Regardless of whether the end-point is stable or not, a much larger percentage of the population would need to start using it for a real bubble to form. If you've been in for a while, losing 50% of 1,000% gain is still 500% profit.

Now, let's say there are 10 competing crypto-currencies. If I put USD$20 into each of them and none of them take off, I'm out USD$200. If only one of them catches on the way Bitcoin has so far, I will have doubled my initial investment. If crypto-currencies become highly adopted, my initial investment of USD$200 could easily blow up to several thousand percent or more. My risk? Miniscule and diversified.

You could look at it another way, perhaps by considering 10 different gold standards. Which one will succeed and which will fail? Is one gold standard more likely to be adhered to than another? Will XYZ country renege on an offered certificate redemption option? Solution: again, diversify. As I mentioned in a previous post, there's an added bonus that you are contributing to the overall integrity and security of the system you're participating, making your investment that much safer.

Of course, it's still up to you, I'm just looking at it from as reasonable a perspective as possible.

FOFOA said...

New video from Rawdog at the bottom of the post.

Also, I discovered the relevance of the repeated sock reference. Mencius Moldbug mentioned it here:

"I think the probability of Bitcoin succeeding is very low. I would not put it at a million to one, though, so I recommend that you go out and buy a few bitcoins if you have the technical chops. My financial advice is to not buy more than ten, which should be F-U money if Bitcoin wins. Or, of course, you can invest in those alpaca socks.

Here is the problem with Bitcoin: the tank, I think, will pop. This is not due to any technical fault in Bitcoin's algorithms or economics. It is due to a political fault in our society, which is that we're governed by dumb people…"


And I'm guessing that alpaca socks are the flagship symbol of the burgeoning Bitcoin economy because they are highlighted in Bitcoin basics here as an example of the many (?) real world products that you can already buy with your Bitcoins. So that explains the socks!

mr pinnion said...

@RAMON

I must confess i dont understand fully the gubbins of the system you described from 3 rd paragraph down.
But this...
"First, Bitcoin has an established base that have a vested interest in that system. Even if Google were to implement a direct rival, it would need to gain the kind of traction that Bitcoin already has built over the past two years.

I would asume the 'base' is mainly the public investors with bcoins.
I would also asume they remember how much their bcoins went up in value in the startup faze.It pays very well to be an early adopter of the system does it not?

So when google starts gcoin, all the public that missed the huge gains in 'value'? in the early days of bcoin will make damn sure they dont make the same mistake again,(being so skeptical)and jump straight in .Many who got in bcoin late will sell and buy gcoin.
As a result, all will see bcoin start to loose 'value'? and at the same time see gcoin gain 'value'.
This in turn will make more loose hands in bcoin sell/swap for gcoins till they are both the same 'price'.

Same sort of thing happens in gold and silver investers.Silver goes on a tear and people sell gold to enjoy the ride in silver and then it may work the opposit way.
Now the thing is... there is a big difference in gold and silver.There made of different stuff for a start.Also theres not another precious metal start up such as gilver to take value away from them .
Seems to me that bcoins are identical to gcoins in the fact that there both fcoins(fantasy coins).
Then others start up their versions of fcoins and everyone keeps jumping ship to 'get in early'.

The huge gains that are made at the start up stage are the thing that will scupper the whole fcoin system.

Regards
Ozzy

Shell Game said...

Hi FOFOA,
Thank you for initiating the BC discussion, I've been wanting to know more. Now, it seems, I know all I need to know! ;-)
- Dave

jkjkjkjkjkjkjkjj said...

For the moment, I still see bitcons as a penny stock which some hope will be worth dollars (what you will be able to buy with those $ in 2-3 years, no idea), and not a currency, especially not for 'bad times'.

When the going get's tough, ie government cracks down, currency control (like East Germany had, and in lesser extent France at some point) and other tough measures (illegal to own/use PMs, strict border controls) start, you will get black markets, and they won't be on the internet.

Let's say I want to buy a good bottle, which I can't find at any store, because my monkey currency emitted by my monkey country is not accepted by Scotland for a bottle of laphroaig and customs cost would be exorbitant anyways. What will I do? Walk around with my Iphone in a dark street and exchange bitcons for a bottle someone smuggled in?
I don't think so, either I organise somehow to get some fiat which is still accepted internationally and which I can stuff in my underpants or a piece of PM or something else that has intrinsic value which I can hand over in the dark of the night in a back alley...

Concerning a gold standard, there is only one: physical Au, agree this doesn't leave much room for diversification ;)

Neverfox said...

I practically want to bow out because I don't think I could do a better job than Ramon. Dude is kicking ass in explaining this. It almost reminds me of FOFOA talking about gold: an observer first and foremost, with sharp insight and a sane perspective.

Some of the reactions have puzzled me because I didn't know this was "convince me I should sell all my gold right now and buy BTCs" forum. I thought it was going to be a discussion about the potential for DCCs.

A word on government crack down. It's all fair enough to speculate on the potential threat if you need to come up with a strategy for your portfolio. But as an anarchist, I'm also look to the end of states and that's a reason for BTC. It's the idea of counter-economics:

"Counter-establishment economic activity (counter-economics — a.k.a. “the black market”) is the only tool that can eventually build institutions of security and law independent of state control. In the mean time, it makes peoples lives better for themselves here and now....

Because counter-economics focuses on making peoples lives better here and now, it’s something useful that people can incorporate into their lives, yet it lays the groundwork for eventually laying the state low."
- Brad Spangler

If you aren't pissing off those who want nothing more than to crush a free society, you're doing it wrong.

Ramon said...

@ mr pinnion:

"I must confess i dont understand fully the gubbins of the system you described from 3 rd paragraph down.
But this...
"

Decentralized crypto-currencies defy conventional analysis and wisdom, so it can be difficult to get the concept at first; give it time. Much of that part was based on the technical underpinnings of the system. If you'd like, I can try to explain it differently.

"I would asume the 'base' is mainly the public investors with bcoins.
I would also asume they remember how much their bcoins went up in value in the startup faze.It pays very well to be an early adopter of the system does it not?
"


Yes, I'd consider the base as the current investors, miners and users of the Bitcoin system with a balance >฿0.


"So when google starts gcoin, all the public that missed the huge gains in 'value'? in the early days of bcoin will make damn sure they dont make the same mistake again,(being so skeptical)and jump straight in .Many who got in bcoin late will sell and buy gcoin.
As a result, all will see bcoin start to loose 'value'? and at the same time see gcoin gain 'value'.
This in turn will make more loose hands in bcoin sell/swap for gcoins till they are both the same 'price'.
"


If Google's crypto-currency is incompatible with the protocol used by Bitcoin, then yes, that is a very probable scenario.

Yes, a rapid increase in participation would probably occur.

Assuming the only the two currencies (Bitcoin and G-coin) and a fixed amount of wealth invested in either, yes, BTC would decrease in value relative to G-coin.

The situation you described is classic arbitrage and you're right, that is almost guaranteed to be what would happen if Bitcoin investors were to start switching to G-coin.


"Same sort of thing happens in gold and silver investers.Silver goes on a tear and people sell gold to enjoy the ride in silver and then it may work the opposit way.
Now the thing is... there is a big difference in gold and silver.There made of different stuff for a start.Also theres not another precious metal start up such as gilver to take value away from them .
Seems to me that bcoins are identical to gcoins in the fact that there both fcoins(fantasy coins).
Then others start up their versions of fcoins and everyone keeps jumping ship to 'get in early'.

The huge gains that are made at the start up stage are the thing that will scupper the whole fcoin system.
"


Yes, the gold-silver ratio is currently a massively profitable arbitrage trade. This is actually an excellent time to switch from mostly gold to mostly silver, silver now being cheap relative to gold. Rhodium, palladium and platinum are starting to gain investor interest of late, but still have marginal inflows by comparison.

The fantasy issue aside, yes, BTC and G-coins in the sense of this discussion would be equivalent and each new startup would likely see an initial "burst" of interest.

I'll have to make this post a 2-part issue... see my next comment.

Neverfox said...

See also:

Brian A. Dominick. "An Introduction to Dual Power Strategy"

Kevin Carson. "Building the Structure of the New Society Within the Shell of the Old"

Ramon said...

Part deux.

Now we need to take into consideration the difference between comparing one distributed crypto-currency (DCC) against another, and comparing DCCs outside of a vacuum. Inflows and outflows of wealth, individual participation and relative valuation against other forms of financial instruments must be taken into account. The results of which will be similar to any other financial structure.

As one financial instrument shrinks, the wealth that moves out of it will flow into other instruments. Outflows from USD, a massive pool of liquidity, will end up in every other asset class. Wealth (owners of it) will seek out a range of growth opportunities from the most secure to the most speculative.

It is reasonable to assume that some of this outflow from USD will wind up in BTC and/or G-coin. Some will choose one over the other, some will choose to diversify into both, some will avoid them entirely. Even if 1/10th of 1% of USD-denominated wealth were to go into either of two DCC options, that could be hundreds of millions of dollars. Now consider all of the other currencies being debased, all of the real assets that are devaluing (e.g. overproduction of motor vehicles, housing). The numbers rise quickly and of course, early adopters stand to gain the most.

As the best options are narrowed down (e.g. holding AUD right now offers the highest interest rate return of major nations; high return, high security - still a depreciating currency compared to precious metals), more money will flow out of the undesirable instruments and into the more appealing destinations. Irrespective of whether Bitcoin or G-coin end in calamity, they offer an out that has many benefits with fairly well-defined dangers. They add another possibility for diversification and will attract capital to a certain extent so long as financial turmoil endures.

With each new DCC, the initial inflow will be smaller in magnitude than prior offerings. Look no further than new social networks. At first, they were novel and interesting. Now that they've become fairly commoditized, new variants don't make much of a splash. Until a radically improved and/or different alternative is introduced, that will remain the case. Arbitrage will continue to act as an equalizing factor in maintaining ranged exchange rates among assets.

Remember, any port in a storm. My own assessment strongly suggests the technical foundation is strong, despite room being left for progress (wallet encryption, improved user interface, better mobile integration, etc). In light of the above, I think Bitcoin has a long way before it tops out.

Texan said...

FOFOA,

Latest RD video had me rolling!

Many thanks, for everything.

Ramon said...

@ Neverfox:

Quite a compliment, thanks!

Agreed entirely on reasons for using Bitcoin.

Prior to the American Revolutionary War, regional currencies had been outlawed by the British, yet the colonists continued to use them. The parallels to today and what seems to be coming soon are chilling.

Excellent links. Coincidentally, I just read this:
“Stay and Fight”: Is This Realistic?

Wejn said...

Oh, I just had an epiphany. One of the very few flaws of bitcoin is that douches like Rhodie from those vids won't be able to get the concept. Like ever.

I have no idea how can anyone suffer thru his videos in their entirety. Just boggles my mind. And I thought radical silverbugs were way outta line, with all that conspiracy theory bullshit. Hm. They seem like bunch of reasonable people to me now, having seen few of Rhodie's videos.

In all seriousness, I don't understand why would you revel in this fofoa. Wow. Just wow.

Jeff said...

Anarchists and marxists; we have a little of everything on this forum. If you believe the state is going to disappear but your complex cybermoney will be viable and valuable in these circumstances, you have abandoned reality and exist in a creation of your own minds. Had I known you take such views seriously I would have saved my responses.

I think the final comment on the last thread, by 'Crack' says it all.

Wejn said...

Texan,

I don't think gold's a pyramid. And I don't think bitcoin's one either.

As for benefits, might as well be seashells for all I care. The benefits are inherent from the protocol (anonymity, controlled inflation, irreversibility of transactions, etc). The flaws are too (controlled inflation -> no way this is going to lubricate economy, anonymity -> govts, with their meddlesome paws, won't leave it alone).

julian said...

Hello All,

Great Discussion.

my thoughts,

Bitcoin, the brand, the currency itself, is not going to be the one

it is like what a sony walkman is to audio tech historical timeline

things come before and after

it may be trailblazing in its own rights

but the reason i think it won't become money of wide economic use is because

1: fiat - it is not fiat, and the guys controlling guns and goons get to tell what will be, and humanity's critical mass wants it that way

So perhaps this is still a premonition of the potential of human monetary systems, specifically transactional currency

but as things stand, if people hypothetically are using this breed of technology as money, it's through government dictum, not free market enterprise

in free market, this technology (or beyond) would most definitely be used

but not as ultimate down to earth store of wealth

(yes, gold is only valuable in a life systems that creates economic value)

and gold has not yet been surpassed as such, (wealth token)

even in a widely digital currency economy, absent any form of regulation (aka bureaucrats with guns n goons) i believe a use for paper media would remain, however minuscule

heck, we could even go with brain chips, that send signals by thought/intent for transactional means

(we'll potentially already be using that tech to operate viewing screens, computers, etc)



Regarding Bitcoin,

it doesn't do anything the fiats we already have don't do. Arguably, it does less (buys less), so it is less effective than our curren(t)cy, and is less efficient. Arguably.

Bitcoin is not the first step in the direction of our monetary future

it is yet another step (but an important thing is that it is a private step, and gives a good example to follow. it also gives us some learning experience as an economic society, and much food for thought regarding money/media of exchange)

digital transactional means already exist, they are a previous step

and even a step has sequence (parts)



Additionally, Bitcoin doesn't quite do what gold does, which is exist in the physical plane that is often mentioned here, as opposed to the fictional wealth plane

(yes, apart from instrumental value, money/wealth is a concept, so the commodity itself is valueless (again, unless through its instrumental value), therefore gold itself is valueless apart from any known/unknown instrumentality) (gold's value is begotten by man's economic value creation) and even the instrumental value is ultimately based on a relative individual's interests, not an absolute standard (Co2= plant food, human waste; o2 = human food = useful, plant waste, aka byproduct))

Bitcoin exists in the electricity plane

too volatile and vulnerable for long timeline

gold sits like a buddha - very still


Bitcoin is arguably good for forex-like trading(BTC?!)


Kindly,


Julian

Ramon said...

In my mind, the crypto-currencies are here to stay in some form or another, just as nation-states will be with us for a long time to come. Therefore, entertaining the possibility that they'll wink out of existence without accompanying eradication of the majority of mankind is not a worthwhile assumption to me. Again, Pandora's Box. So what about going in the other direction?

Maybe it's the wine, but I was thinking about Bitcoin's 21 million unit limit. If or when the limit is reached, and there is hypothetically little to no incentive for the holders of all Bitcoins at the time to increase the quanitity nor engage in significant transactions outside of the Bitcoin system including all variants that adhere to the Bitcoin protocol, yet the decentralized crypto-currency defines what is viewed as the best option for means of exchange, I think it's likely that entirely fresh DCCs will form from the ground up.

That was a ridiculously long sentence. It made sense while I was writing it. Wait... okay, I understand it again...

Under that assumption, will the Bitcoin system and subsequent systems stratify?
Will there be fringe interaction and transaction, or will two or more systems tend to merge?
To what extent; partial with distinct separations or fully unrecognizable combination?
Is there going to be a trend toward transactional unit specialization, meaning that some will be algorithmically formulated to best suit certain sectors of an economy?
Will we find a limit to the range of diversity, or will the fractionation of the monetary system lead to correlated differences in related divisions of societies?
Would those changes occur because of monetary system influence or society itself?
How would these developments be viewed by society, leadership and other elements?
What else will be created in this pseudo-metaphysical realm?
Are there extreme positive or negative implications?
Can this get any more confusing?

If I drank wine more often, I might scare away even more sane people. Thank goodness the markets are closed (except the Bitcoin exchanges).

Midnight Gardener said...

@ Jeff,
Re: Liberty Dollar conviction, me thinks you are mixing apples and oranges. Just because a criminal government can convince 12 government worshipers that something is illegal does not make it so.
Regarding BitCoin, I had been trying to figure it out and got a real boost in my understanding from this blog and the comments, thanks all. If I had to earn BTC for food with my net connection and use limits I would starve.

Since I'm not about to sell any gold to buy BTC, I guess I'll continue to mostly use FRN for exchanges until all the government worshipers realize that anarchy could never possibly be as destructive as history has shown with governments. They even wrote and/or approved the version of history we are taught that proves the point. Go figure.
Hmm, I just remembered it is time for me to pass some of my dreaded FRN off to FOFOA.
MG
“If men are good, you don’t need government; if men are evil or ambivalent, you don’t dare have one.” — Robert LeFevre

Diamond Jack said...

After much consideration, I'm sticking with moonshine.

But launching a new currency is hard, especially for the unfocused.

I just keep drinking those green smoothies, now made in my new Blendtec. Like mining for btcs with a 368.

Cheers

Tyrone said...

If you're watching Rawdog, then you must watch Cory...

Bitcoin Bandits

He has a number of other bitcoin videos. He also has videos WITH Rawdog.

Derrick said...

In your recent piece on Bitcoin you said:

'In all fairness, another analogy I should point out is that one of the criticisms of Bitcoin is that the "early adopters" come out way ahead. Just like our victim above (up until Monday at noon). And this is not too far off from what some say about Freegold."

Is that not unfairly harsh criticism given that we're going back to gold as our wealth reserve? We're not going back to Bitcoin.

This means that the "gold option" was available to all. It was always on the table. The choice was for each man to decide for himself when he wanted to cash in his chips for gold.

There are no genuine "early adopters" with gold... they're all long dead!

All very different from how the Bitcoin model works, eh?

FOFOA said...

Hello Neverfox and Ramon,

So it sounds like supporting (investing in or working for) Bitcoin is more about taking an activist role in an anarchist revolution against the government and the fat cat bankers than it is about finding the best way to protect your savings, amirite?

Ramon, you wrote: "Even if 1/10th of 1% of USD-denominated wealth were to go into either of two DCC options, that could be hundreds of millions of dollars."

The total market cap for all Bitcoins in existence right now is about $103 million. (Link) If it is true that Satoshi Nakamoto has a quarter of the 6.5 million bitcoins in existence, then he alone holds $26 million. What about those other six project developers along with Satoshi. What is their combined share? 40%? 50%? Do you think that the potential you cite for an inflow of hundreds of millions to a present market cap of $103 million makes it more or less likely to be adopted as a currency? Answer = Less.

Moldbug does a good job explaining this principle here:

"One metaphor for monetization is that of a storage vessel, like a battery for electricity or a tank for compressed gas. When people buy into the currency, they are charging the battery and compressing the tank. When they sell out, they are discharging the battery. When new currency is created (perhaps by alchemists) without a buy-in, the tank has sprung a leak. Etc. The charge, or the pressure, is simply the market capitalization of the entire present (and discounted future) monetary good. […]

Thus a correct, second-order strategy to pick a winner has to consider the monetary pressures across the whole path to complete monetization. If the leak will reverse direction halfway through the process, the process cannot complete and should never start. If large price increases in a commodity would cause a stockpile blowout, the walls of the tank are too thin. The whole premise of monetary restandardization is that the new currency will be stable and permanent. […]

However, because silver was fully demonetized in the 20th century and gold was not, the market capitalization of the gold stockpile is 60 times the capitalization of the silver stockpile [FOFOA: and 73,000 times the capitalization of Bitcoin]. Thus, comparable volumes of gas are pressing in to the gold tank and the silver tank, but the silver tank is 60 times smaller. It is actually surprising that silver has not risen faster and harder.

But this present advantage is also silver's long-term Achilles heel. The silver tank, being so much smaller, cannot take this kind of pressure. It will almost certainly explode. I have personal advice for those playing the silver market: bring your steel balls. If you buy into a bubble when it's small, and get out before it pops, you can do quite well. […]

Here is the problem with Bitcoin: the tank, I think, will pop…"


(cont)

FOFOA said...

2/5

Gold is the only super-tank. It can absorb any flow the world throws at it without popping. It is stronger than all the pressure that is possible because of its uniquely large stock to flow ratio. And also the fact that the large stock is held in extremely strong hands that I like to call Giants and CBs. These Giants are the real-world producers and titans of today and yesterday, including a lot of really old-money Giants. Here are the bitcoin giants:

Satoshi Nakamoto
Gavin Andresen
Martti Malmi
Amir Taaki
Pieter Wuille
Nils Schneider
Jeff Garzik

Do you think these seven hands are strong enough to hold? $26 million can buy a lot of socks, that's for sure, but if you cash out into that competing currency called dollars it can also buy yachts and other fun things like coke and hookers. How about when Nakamoto's share is at $50 million. Will he still hold firm to his Anarchist convictions? How about $100 million? At what point do you think he will sell out for that other competing currency that buys jets and cars and cool stuff? Please read these two lines over and over again until they finally sink in:

"Thus a correct, second-order strategy to pick a winner has to consider the monetary pressures across the whole path to complete monetization. If the leak will reverse direction halfway through the process, the process cannot complete and should never start."

What you want in a medium of exchange (and yes, in a store of value too) is stability and potential permanence. I think this guy at least gets that concept. But since perfect stability in both (MoE & SoV) is impossible in the real world, the perfect solution for the world we actually live in today is a non-hard currency that declines slowly in value with a counterbalancing wealth reserve that slowly rises in value. This is Freegold. It is not Bitcoin or Bitcoin plus Freegold.

In comparing Bitcoins to gold, I think there is one characteristic in which Bitcoins outshine even gold, and I'll bet that we can all agree on this one (except maybe Terry). Bitcoins truly have no value outside of being either a medium of exchange or a store of value. Hoarding them will never directly and physically infringe on the natural rights of others nor impede the flow of physical inputs to industry.

One of the reasons gold is money is that, of all the physical elements that meet other monetary requirements, gold is the one that comes closest to achieving the perfection of this monetary property that Bitcoin achieves, being completely worthless aside from its monetary uses. Bitcoin is truly an artificial, purely symbolic currency, which makes it, you guessed it, just like all the fiat currencies in the world today. Except there is one big difference: Bitcoin has a limited supply!

What this means in practical terms is that Bitcoin is a hard currency. And remember, hard means difficult and inelastic. Today Bitcoin is trading as an asset backed only by the speculation that eventually it will be sufficiently accepted and adopted as a medium of exchange. Let's be clear about this. Today Bitcoin is not widely (or sufficiently) accepted and adopted as a medium of exchange. Today it is a speculative asset backed by nothing more than being a neat idea mixed with a little misguided hope and speculation. As strictly a medium of exchange, today, Bitcoin is redundant and superfluous.

(cont)

FOFOA said...

3/5

Wejn,

I'm sorry I have offended your sensibilities in some way. I believe you said you have no stake in Bitcoin, so I'm curious what it is then. I think I get Bitcoin enough to see some big flaws, and I think Rawdog does too. And I also think that some of the things you call inherent benefits are actually major flaws. I understand roughly how the coins come into existence, how they cannot be faked or counterfeited, how transactions are verified and secured in a decentralized way. I can even imagine how this may be a model for some untethered digital currency far in the future. But I doubt Bitcoin will be it, because it is a hard currency, and that's not what we want as a society.

Perhaps someday there will be a crypto-currency that is decentralized but not hard. That could work well with Freegold, but it is unlikely to ever be adopted unless we called it a dollar or a euro. Bitcoin will not be adopted because it is hard. If you could make it into an easy money (unrestricted in volume), get the dollar to coopt it as its new base, then you might be on your way to the likely adoption of a digital, untethered, decentralized crypto-currency.

But then it's still lacking that physicality that we, as a society, demand. When things start to go bad, we like our physical cash. We want that physical fallback, in case things go bad. I don't need to be a computer scientist to understand these things. And I don't need to embrace a concept or be an activist to understand it is simply a part of the reality in which we live.

We, as a society, like the physicality of our base money, whether we realize it or not. We also like having a central authority in charge of it. For example, if your house burned down and you had a shoebox with $500,000 cash in it, you can take the ashes to your local Fed and if they can verify your claim in the ashes, they'll reimburse you with brand new cash. They do this all the time. I used to know someone that worked in that particular capacity. There are many other benefits as well, to both the physicality of base money and the centralization of an authority that can print and manage that base money, and in some cases reverse the effects of loss through theft or other causes.

It is my contention that all the problems that emerge in this type of centralized system that we have today, are rooted in the fact that we save in the same units we transact in. In other words, it's our own fault, all the problems. By saving in financial products denominated in that same unit, we lend precious support to those that would abuse their control over it to gain advantage. It is my contention that all those problems are actually only mere symptoms of the disease, and not the disease itself. And yes, those problems are cut off at the root with Freegold. Freegold doesn't so much stop the bad printing as it simply renders it useless, or at least self-defeating.

I know we (in our precious metals online community) complain a lot about central planning. But I think, as a society, we do demand it. I don't personally, but I can recognize that "we" do (can you see the difference?). Of course central planning is often wrong, it is stupid by design (see here) and it always blows up, and in the end, as savers, we hate it when it blows up. We think it would be much better if we just had a totally free market system whereby no powerful entity could meddle in our business. I agree. But as a society, as a tribe, that's not what we want. We want a powerful central figure we can run to and complain, and to point the finger at when things go bad. We don't want to be all on our own like allinvain.

(cont)

FOFOA said...

4/5

So what we (savers) actually need is a monetary refuge from the bad effects of that which the tribe demands. And this refuge, physical gold, is actually decentralized, private and anonymous just like Bitcoin. And it is enacted in a decentralized manner, by the choice of the saver. And I believe that in choosing to save in gold, we'll remove the exorbitant privilege that we've always in the past given to that central figure.

In the same way that Real Bills are non-inflationary, so is good credit. Bad credit is inflationary and frivolous government spending leads to systemic malinvestment. But Freegold will expose both of those for what they are. The price of gold will rise if the banks engage in bad credit or the government gets out of control. And when things go bad, the savers will be automatically protected from the political effort to socialize the losses (which always begins as soon as big losses happen). There will be a healthy competition between the paper realm and the physical realm (gold) to attract our savings. Our savings will only go into the paper realm if it is being respected by the central figure.

But for the transactional currency, we actually want exactly what we have right now. A physical monetary base that can only be produced by only one entity (preferably in a transparent way, more like the ECB than the Fed) and a credit system that is capable of both healthy expansion and contraction.

In other words, I think Bitcoin tackles the wrong problems. It's like a doctor that sees only the symptoms and doesn't understand the disease. And even though it treats a few of the symptoms quite elegantly, I don't think that this is what we as a society want in our transactional currency. So I don't think it will ever be sufficiently adopted in that role, or the other. You don't have to like a particular outcome in order to see it. And if you are an activist promoting some change that's not very likely in the absence of your activism, you may be hanging out at the wrong blog.

Why is Bitcoin like a Ponzi or a pyramid? For the same reason gold is not. See Moldbug's tank analogy above. Most Ponzi schemes do not begin with the intention of being a Ponzi scheme. Some do. But most are just misguided strategies that get out of control and end in a stampede to cash out. I believe this may have even been the case with Bernie Madoff.

Wejn, I'm not engaging the merits of a crypto-currency here. I get it. It's a pretty cool idea if you could make one that was "easy money" rather than hard money like Bitcoin did, and just let it be the medium of exchange (SoV on short timelines). But I still think it fails to monetize in our lifetimes for a number of reasons.

This gets a bit deep, but the concept of money is just that, a concept. It is almost literally just a word that we know and relate to money. Dollars. When I write a check for $28 at the grocery store and take $28 worth of food home, no actual dollars will ever change hands between me and the store. This is the way it has ALWAYS been. I didn't get that until I had read the Gold Trail at least three times.

(cont)

FOFOA said...

5/5

We think in terms of dollars, therefore dollars are our money. This is the Misean Regression I discussed in The Return to Honest Money. The most likely path for Bitcoin to monetize would be for a major global meltdown to wipe out the present concept of money. In other words, to wipe out the shared knowledge of price ratios between all real things. Then a barter good like gold would begin to rebuild this knowledge base from the ground up, and if Bitcoin became the symbolic currency valued by gold holders for its qualities, it could then establish a reliable and stable Bitcoin-gold market.

But you can't just shoehorn a new symbolic currency into a failed paradigm and expect it to be adopted and fix the paradigm. It simply doesn't work that way, hope, speculation and neat ideas notwithstanding. You can't just look at Bitcoin through the dollar lens and describe how it's better than the dollar. It's not about that. It's not about Bitcoin versus the dollar. It's about Bitcoin versus the next in line after the dollar. And in this case there are two new competitors, each specializing in separated parts of the money function.

Bitcoin obviously capitalizes on the crisis that the dollar now faces. And as I just pointed out, if the collapse was bad enough and the knowledge base of price ratios was wiped out, Bitcoin could then compete with other currencies to establish a new regressive link to gold or even silver. But oh my, what if some other people already saw this coming four decades ago and sought to create a currency to prevent a major meltdown from occurring that would have set us back to having to reestablish a fresh barter link. Hmm, maybe that's why the second most widely used medium of exchange in the world today was created based on its fundamental regressive link with the barter money par excellence.

The way I see it, Wejn, this young kid named Bitcoin that is trying to be a hard money doesn't stand a chance at monetization. And I don't need to fully understand the algorithms or encryption to judge the concept. I can stipulate that the encryption is really cool and bleeding edge stuff like you say, and still reject the concept on common sense grounds.

As for the douche in the videos, I actually like him! I think he is hilarious, and so do some of the other FOFOA regulars (ones that have emailed me rather than posting comments like Texan). I even got a couple donations for this post! So rather than gasping that old online insult: "wow, just wow," maybe contemplate why you don't like him if you truly don't have a stake in Bitcoin. There's a line at the beginning of the fifth video that pretty much encapsulates why I put up this post:

"First of all, a lot of people have been saying that I've been too harsh, and mean and hateful to people that are just trying to come up with a new idea. Maybe so. But if my harshness and my meanness and my hatefulness will stop one person from getting scammed into this, then it's all worthwhile."

I just put up a very simple poll. It's at the bottom of the sidebar. It reads:

Target price for Bitcoin = $0

You can all click on agree or disagree.

People have been emailing me for almost a year now asking what I think of Bitcoin. Well, thanks to this hacker story I finally took a good look at it, and now you all know what I think! ;)

Sincerely,
FOFOA

costata said...

FOFOA,

I think you nailed it with that comment.

Cheers

jkjkjkjkjkjkjkjj said...

Sorry Costata to plagiarize you ;)

FOFOA, you nailed it, great!

Ramon said...

@ Wejn:

Hey, I'm kind of a silver bug lol.

Especially with news bits where Coca-Cola is taking issue with JP Morgan, Goldman, et al.:

Warehouse ownership by Wall Street banks raises market manipulation suspicions


@ FOFOA:

Lots of food for thought. A good night's rest and I'm poring over your posts.

There might be a technical solution that would somewhat alleviate the hard money categorization of Bitcoin. I don't want to provide only a partial reply, so I'll finish my response before posting later.

Thanks for the stimulating ideas.

julian said...

Cheers FOFOA!!

Indenture said...

Off topic but today is important for Greece and the EU: Greek default: End of the world or small patatas?

Indenture said...

New Trojan Targets Bitcoin Wallets
"Recent events have dragged the shadowy currency into the light of public scrutiny, and now its squirming users have another headache to deal with: a trojan designed specifically to pilfer your Bitcoin wallet."

Indenture said...

Another Bitcoin Crash

Indenture said...

Bitcoin Exchange Scam – Bitcoins Are Now Worthless

Indenture said...

Centralization is Killing BitCoin

Indenture said...

I think there should be a prize for the first person who donates Bitcoins to FOFOA!

DP said...

@Indenture: You've been busy! :-)

I have a suggestion in mind for the prize. Something suitably valuable, to repay such great generosity.

Indenture said...

DP: I knew very little about Bitcoin until it was brought up here. I of course have to research it in case I want to go 'All Inn' :)

I think The FOFOA Bill is the currency we need. I'm sure once I explain the details of the transaction my Bartender will understand!

Indenture said...

Can geeks save bitcoin after hellish week of hack, heist, trojan and a crash?

Indenture said...

Electronic Frontier Foundation Stops Accepting Bitcoin Donations

Indenture said...

Doug Casey on Bitcoin and Currencies
"With the bubble that arose in tulip bulbs in 17th century Holland, you might at least have wound up with a flower."

Indenture said...

From the above link Doug Casey of Casey Research said, "Frankly, I can’t see why anyone would, when there’s already an electronic digital currency like Bitcoin but backed with gold: GoldMoney. I should disclose that I’m a small investor in the company. But I have to say that I really do like GoldMoney. It does everything Bitcoin does – or did – but is backed by something of real value: gold. That means it’s not just an abstraction, but an actual store of wealth. The ultimate proof of that is that you can take delivery of your gold if you want to. With Bitcoin, there’s nothing to take delivery of. I don’t understand why anyone would use Bitcoin when they can use GoldMoney, which does all the same things but has real backing."

Indenture said...

According to Wikipedia: "Currency exchanges also exist between Bitcoins and other virtual currencies, such as the Linden Dollar. I'm sure no one would ever use Chinese Prisoners to mine for Linden Dollars to trade for Bitcoins to trade for Dollars. That would never happen.

Indenture said...

"What is the difference between seti@home and Bitcoin? One is a futile search for intelligent life, the other one analyzes radio signals from space."

Indenture said...

The following is a list of sites that currently accept Bitcoin

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