Bitcoin & the crypto-currency revolution. (get some here).

[Thinking Aloud]

OK let me change out gold for diamonds then. Industrial grade diamonds are worth fuck all. The big shiny ones have no use other than being big and shiny

Tell that to a fairly high proportion of hominids with 2 X chromosomes...

They've been sold the idea that big and shiny is valuable, by the people who dig up big and shiny stones.

[JimC]

OK let me change out gold for diamonds then. Industrial grade diamonds are worth fuck all. The big shiny ones have no use other than being big and shiny

Tell that to a fairly high proportion of hominids with 2 X chromosomes...

They've been sold the idea that big and shiny is valuable, by the people who dig up big and shiny stones.

True, but the value is still real, even if it comes from spin...

As long as the spin lasts, that is...

[Collector1337]

My favorite part of bitcoins is the anonymity. You'd be surprised at the selection of... um... "unique" items you can't just buy off the normal internet.

Yeah, yeah, more weapons of various sorts to masturbate over...

Ha! That's what you think I'm talking about.

What stupidity.

[Bella Fortuna]

Collector, you certainly spend a lot of time here for someone who has contributed not one post that doesn't involve bitching, moaning, personally attacking others or obtuse complaining. Why?

[Xamonas Chegwé]

Collector, you certainly spend a lot of time here for someone who has contributed not one post that doesn't involve bitching, moaning, personally attacking others or obtuse complaining. Why?

[Azathoth]

Collector, you certainly spend a lot of time here for someone who has contributed not one post that doesn't involve bitching, moaning, personally attacking others or obtuse complaining. Why?

[Collector1337]

Collector, you certainly spend a lot of time here for someone who has contributed not one post that doesn't involve bitching, moaning, personally attacking others or obtuse complaining. Why?

Stop being stupid and imposing your asinine shit on me and then I won't have anything to bitch about anymore, will I?

As an atheist, you should know how that feels.

[Brian Peacock]

[Seabass]

Collector, you certainly spend a lot of time here for someone who has contributed not one post that doesn't involve bitching, moaning, personally attacking others or obtuse complaining. Why?

Stop being stupid and imposing your asinine shit on me and then I won't have anything to bitch about anymore, will I?

As an atheist, you should know how that feels.

[Skepticus]

The comparisons made earlier between gold and BC are interesting. I've not watched any of the recommended videos, and don't have time, so if they answer my question I apologise for asking it here.

Gold is a substance that actually has a use in the real world, plus some very appealing chemical properties - particularly its stability, conductivity, malleability, and indeed appearance. It's the desire for this substance that gives it its initial value, and makes it worth acquiring. Even if gold somehow lost its financial value through some banking upset, it would still be useful in its own right, and would still be sought after because of its physical properties.

BC has the scarcity of gold, but does it have any other properties that give it intrinsic value, even if its monetary value reduces to nearly zero for whatever reason? Do the BCs themselves, through virtue of the mining or some other process, hold some property (whatever it is the mining machines have to do to make them) that has value in the real world?

In other words, if I buy a bar of gold, I still have a bar of gold even if it's worthless; if I acquire BC and it becomes worthless, what do I have? Or am I barking up the wrong analogy, because the real comparison of BC is with, say, paper money, which is also nearly useless if its value vanishes?

Those are fairly common but reasonable concerns TA.

Firstly, gold does have some attractive properties that even made it useful as money in the days of olde. It's hard to imagine it ever being used in the future on any scale, as paper/plastic/digital money is so much more convenient. Convenience itself, has become an important property. Actually it's crucial in the modern economy. People want to simply 'swipe and go', so credit/debit cards have become a way of life. Even carrying fiat cash around is becoming unfashionable. Gold coins are prone to being too heavy, debasement, cornering the market and shaving, so the value of gold as an actual transacting medium is an idea that has had it's day. Important to note here, is that gold was used as bullion to back many currencies. It's value continued to be sustained, because the central banks (until the 70's) were required to keep a stock of a certain percentage of gold in reserve. This has not been so in most western countries for some time, so nothing prevents unchecked inflation of the money supply, which is why we are seeing so many fiat currencies in trouble.

The intrinsic properties of gold that you mention, do as you suggest, make it useful. That in turn, imparts upon it, a perceived value for those who might have a use for this commodity. But properties like malleability and conductivity are not actually properties that make it useful as a transacting medium. Currency is already mostly digital and the properties of binary numbers in databases, have been found to leave gold and even cash in the dust. The utility function of gold as a currency, is a different kettle of fish to the utility function of gold as an industrial material or as a decorative metal. In that context gold is just another commodity and so we might as well be comparing bitcoin to wool, or coal, or... or kettles of fish. The properties of money that make it good as money have been well established. The one property gold still has in favor of its usefulness as money, is that it exists in the world as a fixed limited supply. It is scarce.

Scarcity, is a fundamental property that our existing money systems have done away with (at our ultimate peril), so that greedy, filthy rich capitalists, can manipulate the system and stack the deck in their favor. The properties considered favorable as money are as follows.

• scarcity
• durability
• divisibility
• fungability
• transportability / convinience
• noncounterfeitability.

Bitcoin has all of these qualities in spades. Bitcoin then adds another couple of desirable properties that government fiat currencies have never had.

Autonomy:

That is the ability to use bitcoin without any intervention by third parties. To some extent it can be argued that cash, is used where people require autonomy in individual transactions, but underlying this short term freedom, is that the cash is still government issued fiat and controlled by central reserve banking. It still devalues and requires people to use central suppliers (i.e. banks) for access to it initially for it to materialize in the cash economy. Bitcoin is the first truly autonomous money system that allows transactions of money without any central point of control, due to it's peer to peer nature. It's not perfectly anonymous, but rather more autonomous, as it can be used without anybody granting you authority.

Free of trust / counter party risk:

This property is not as obvious and requires a little more effort to grasp. One of the benefits of third party transactions, is that there may be guarantees involved in those transactions (through banks paypal etc) and they can be reversed in case of fraud. The problems that follow from this, is that such security comes at a cost, and the charge-backs themselves are just as often (if not more so) used as a method of fraud. Often these disputes result in arbitrary decisions by people who have unfair authority, who may freeze funds and make judgments that are wrong/unfair. More regulation of the payment facilitation industry, just heaps more layers of arbitration, bureaucracy and central decision making on top. Law offers no guarantee that the decisions will go the right way. One alternative to having a mediator is to have transactions backed by a third party. In order to back transactions, the guarantor accepts risk. That's known as a counter party risk. When dealing with a trusted party however, bitcoin allows any payment to be made, without the added risk of an intermediary, that isn't necessarily trustworthy. Even then the bitcoin protocol allows for transactions that facilitate automatic escrow. When paying in person (such as from a wallet on a smart Phone) bitcoin actually eliminates the need for trust altogether.

In terms of scarcity bitcoin has all the benefits of gold.
In terms of autonomy bitcoin has all the benefits of cash.
In terms of transportability/convenience bitcoin has all the benefits of digital fiat.

Bitcoin has all the desirable properties of all other forms of money (and much more) without any of the disadvantages. Thats because bitcoin was designed to be money from the ground up. Unlike other money, bitcoin was designed for the internet age with forethought and hindsight aplenty. The failings of government fiat and the success of gold were taken into account as were the needs for electronic transaction over the Internet. The properties bitcoin has are exactly what we should expect from an ideal money system.

Based on Merit & mutual cooperation:

Value accrued to bitcoin, is a product of it's intrinsic properties, convenient and useful as money (as apposed to some other utility function), as well as the confidence and appeal it has in opening egalitarian freedom, in the way it allows a whole new mode of entrepreneurial endeavor based on mutual cooperation. It levels the playing field and puts control of money back into the hands of the whole community. Oh and we should note that the newly empowered community, is nothing less than the whole world. Bitcoin is also a first in making monetary borders evaporate along with trade restrictions and all that political cross border turmoil. A truly global currency. Let's not forget the minuscule fees. That's strictly not intrinsic to bitcoin but to the network, but circumventing the alternative fiat system that charges like a wounded bull, is a consequence of the peer to peer nature. The cost of supporting the banking industry alone is mind boggling so having circumvented that, sending bitcoin at such a tiny cost, opens a plethora of opportunity for micro-transacting of amounts that would have been formerly unfeasible. That in turn opens opportunity to the un-banked and third-world residents who may now trade in small denominations and without national/state limitations.

So that is the basic rundown on bitcoins properties. The value it attains as a result, will and should be based on properties that are required to make it good money rather than unrelated utility like conductivity. No mater what other properties gold or anything else has, it can't be physically sent over the internet. Most money today is in the form of digital tokens of accounting (i.e. credit/debit card) and the technological methods of accessing those token. If anything were going to replace the existing fiat system, I don't think many would want to relinquish the convenience of digital transferability. Bitcoin retains that digital transferability, as it has to to maintain the benefits of the existing system. But in order to be digital and ubiquitous, it's not possible (or necessary), to retain those properties (like conductivity shininess) that only a physical currency or commodity could have. We stopped requiring those properties as soon as we began wiring money around from bank to bank then plastic cards and ATMs followed suit. What has changed in a peer to peer context, is just that we can do all that stuff without the help of any greedy thieving banks and meddling authoritarian governments. Then again, that kinda changes everything don't it?

I'd personally rather vest value in a form of money, according to the virtue of it's properties, wherein those properties serve as useful and dependable money. The value of any currency, never did rely in any fundamental way, on the value of preexisting (non money) properties. They all relied on mutual agreement to use those currencies as tokens of exchange in the marketplace. preexisting properties of value, have really only served as a bootstrapping method, but once you have increasing demand for a limited commodity, the non money utility value is really quite irrelevant. So yes, TA, I do think the more appropriate analogy is with fiat cash money. I can see that crashing to oblivion, but bitcoin (or perhaps another cryptocurrency that supersedes it) will always be trusted and used by people, because having some value, just relies on some people who will chose to give it value. As long as there are two people who agree transact in bitcoin it will still have value. And until a radically new system comes along, it will be regarded as the ideal form of money.

This video, is a talk by Eric Voorhees, who explains much of this subject mater very well:

[JimC]

A a result of a series of posts culminating in this post here: http://rationalia.com/forum/viewtopic.p ... 3#p1505033 and given previous warnings, Collector1337 has been suspended for 24 hours.

[Thinking Aloud]

* lots of stuff *

Thanks for that response, Skepticus! That's useful stuff - I appreciate it.

[pErvinalia]

The big problem with this model, of course, is the requirement for never ending growth. It's debatable whether that is even possible. It's highly unlikely it will be possible.

You actually think this is "debatable?"



It's not even remotely debatable. It's an obvious and overwhelming no.

The issue is that not all growth is linked to physical resources.

Growth! Economic growth, is ALL linked to and constrained by physical resources of the natural world.

No it's not. If I give singing lessons to my neighbours, that isn't particularly linked to any physical resource usage. Of course, we can't divorce all economic growth from physical resource usage totally, but some forms of growth use FAR less resources than other forms of growth. Treating all forms of economic growth as the same is not rational.

Even more so now with our service (including financial) economies.

Are you kidding?

No. Financial services produce less CO2 and use less resources than steel or cement production. I'm not sure what's so strange about this concept to you.

What's worse their contribution is actually not as tangible or as easily justifiable in terms of the practical resources we need to live. We could do without another gossip columnist or interior decorator. But a potato farmer is a provider of stuff; (stuff we need or at least can easily justify). The potato farmer we can live with and their agriculture industry is vital to society. The 'growth' areas that only provides services (help) that adds cost to living without necessarily adding value to the end product (like advertising and marketing), are the first places to look for efficiency benefits, when the economy slumps and the fat needs to be trimmed.

I agree with you on this, and this is why I mentioned the hoodoo thing below. But it has nothing to do with the discussion. Treating all growth as the same is fallacious.

The whole thing seems like a hoodoo scheme to me, but I admit that I only know the broad issues in economics.

I don't mean to be facetious, but I would have thought I understood economics 'broadly' before my foray into to the bitcion world. Yet I couldn't understand why Mr Ron Paul kept calling inflation ''effectively a hidden tax' and such things. I understood the law of effort and reward and a little economic game theory, but I simply didn't know how the existing money system worked. I didn't understand the role of the federal reserve in finance, nor how our money comes into existence in the first place. Most people only have some vague assumptions about this. It's simply a lack of background facts that we all seem to be deluded by, not the lack of common sense, wisdom or intelligence.

I don't mean to be facetious, but Ron Paul is a fucking lunatic on all but foreign policy issues. I've spent a fuckton of years arguing with anarcho-capitalist libertarians on the internet, and I have a reasonably good grasp on the sheer insanity lassez faire would be.

But anyway, even when we are still using more resources, that can be overcome to a degree by recycling. It's going to depend on how good recycling can get. The main bottleneck to recycling everything (if the technology existed) is energy. But energy is effectively infinite (i.e. solar, and therefore wind and tidal etc). I think we can't go on growing for ever, but I think the point where we hit a wall is going to be a lot further down the line than the doom sayers predict.

You think? Srsly? I don't see how you come to this conclusion. If you want to see how I rather disagree, I urge you to watch the video posted above on the exponential function, and then watch Money As Debt if you don't understand the link between the physical world and economic growth, as I'm fairly sure you don't.

I doubt there would be anything in that video that I haven't seen 50 times before. But I'll have a watch at some point. I put it to you that it is you who doesn't understand how the monetary system works. There seems to be this naive view in libertarian circles that debt incurred from new money can't be repaid. I've seen absolutely zero to convince me that this is the case.

Again. Not being factious or condescending but if you are wrong there are serious consequences afoot. I wish everybody understood just a few simple things. If I am wrong, I would want to know how and why.

As I said below, we are fucked by climate change / ecosystem collapse long before we hit any monetary system collapse.

I'm not usually into having more laws, but charging interest should be illegal. I mean shit, they just create the money out of fucking thin air. Charge interest on freshly created air money? WTF?

There has to be a price on new money. Otherwise governments would just print it non-stop.

HUH? How does banks charging citizens interest, discourage governments from printing money?

[I'm obviously talking about governments creating new money. Not banks. I've addressed banks below.] Because the government has to pay it back. It appears on the government balance sheet.

Do you realize government's only print a tiny fraction of the money in circulation, even then it's not for spending but to replace federal reserve notes that need to be destroyed?

"Printing" money, doesn't mean literally printing money. It means creating NEW money. New money is not printed. It is 1's and 0's on a computer somewhere. But it is created out of debt, and also adds inflation into the system. THAT is the price of new money. Without that price, new money would just be created infinitely.

The vast bulk of money is created by banks themselves when people take out loans. You'd save me a lot of time if you just watched the video.

Money is most certainly NOT created that way. All that money loaned out is accounted for. Even though I haven't watched the video, I know exactly the line of reasoning it is going to try and use (the one about banks only needed to hold 10% (or whatever it currently is) of reserves for what they hold in gross).

It's probably far from a perfect system, but I don't know what else could work.

There's this new software and peer 2 peer network protocol called bitcoin. Ever heard of it? It makes banks (and probably governments) obsolete, by circumventing their money monopoly and allowing people to trade freely without restrictions or borders. It's international and transactions are nearly instant and can be used over the Internet. Was there anything else that we needed? OH YEAH! and there will only be 21 million bitcoin in existence, so that pretty much puts paid to the infinite inflation and runaway debt addiction. Bitcoin was the currency deliberately designed from the grass roots, preciceley to solve this very problem.

That's all great, but I can't buy most stuff with it. Simply, it's largely useless. If it reached critical mass, then yay. But till then, it's nothing.

[GrahamH]

The big problem with this model, of course, is the requirement for never ending growth. It's debatable whether that is even possible. It's highly unlikely it will be possible.

You actually think this is "debatable?"



It's not even remotely debatable. It's an obvious and overwhelming no.

The issue is that not all growth is linked to physical resources.

Growth! Economic growth, is ALL linked to and constrained by physical resources of the natural world.

No it's not. If I give singing lessons to my neighbours, that isn't particularly linked to any physical resource usage. Of course, we can't divorce all economic growth from physical resource usage totally, but some forms of growth use FAR less resources than other forms of growth. Treating all forms of economic growth as the same is not rational.

Your capacity to give singing lessons is obviously limited by time and number of 'neighbours', even if we assume you can teach an infinite number of people at once.

[pErvinalia]

Sure, but that's not the point.

By the way, I apologise to Skepticus for being a bit testy in my last response to him. Stress is messing me up at the moment.