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Online Cash Bitcoin could Challenge Governments, Banks

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Re: Online Cash Bitcoin could Challenge Governments, Banks

#41

Post by tybris »

AndrewMoffat wrote: post #28

Why is Bitcoin a good currency again? If I understand how it is distributed correctly, those with higher/more computational power receive more of the finite bitcoins. How does that not favor the already rich?

Traditional currency is still too reliable because it is tricky to get a critical mass to give up their faith in government and the economic system. For these boom and bust times we need something that can become completely worthless overnight when someone finds a new mathematical technique, flaw in the BitCoin implementation, or lucrative exchange scheme.

Re: Online Cash Bitcoin could Challenge Governments, Banks

#42

Post by quanticle »

phillmv wrote: post #34
bonzoesc wrote: post #19

Earlier quoted context omitted.

Those are the first uses because online gamblers and muckraking NGOs are the ones most desperate for an alternative to a government-issued currency. If the average person was unable to function with inflationary currencies, they'd find an alternative.

Inflationary currencies? I'm pretty sure every form of currency is subject to inflation.

Currencies linked to physical goods of limited quantities wouldn't inflate. For example, I could make a currency that represented shares of Picasso paintings. Since there are only a limited number of Picasso paintings, my currency wouldn't inflate.

Commodity-linked currencies (e.g. those that are gold/silver based) don't inflate much in a practical sense, since the amount of gold/silver being mined each year is usually much less than the amount of gold and silver already being used for exchange. That said, the US did experience a pretty huge bout of inflation after the California gold rush, as all that new currency increased the money supply.

Re: Online Cash Bitcoin could Challenge Governments, Banks

#43

Post by weavejester »

Duff wrote: post #33
weavejester wrote: post #29

Earlier quoted context omitted.

You don't have to put all your eggs in one basket. You could accept payment in dollars and bitcoins, and exchange the bitcoins for dollars the day you receive it. If the bitcoin market suddenly crashes, you'd only lose the amount you hadn't managed to exchange for dollars.

If you do that, what's the advantage of bitcoin?

You can send bitcoins directly to a person's account without going through an intermediary, such as Paypal or a bank. This means that it would potentially be cheaper, but more importantly it would be easier to automate, and easier to start up interesting financial web apps.

Re: Online Cash Bitcoin could Challenge Governments, Banks

#44

Post by weavejester »

quanticle wrote: post #35
weavejester wrote: post #29

Earlier quoted context omitted.

You don't have to put all your eggs in one basket. You could accept payment in dollars and bitcoins, and exchange the bitcoins for dollars the day you receive it. If the bitcoin market suddenly crashes, you'd only lose the amount you hadn't managed to exchange for dollars.

And how exactly would you exchange bitcoin for dollars? Presumably, you'd have to go through a bank, or PayPal, or a regulated brokerage house of some kind. To keep bitcoin from taking off, all the US government would have to do is pass a law or put pressure on the financial industry to not allow that exchange.

That's a valid strategy, and one the US government may even employ. However, other countries would have to agree to similar restrictions, otherwise you could trade dollars for euros, then euros for bitcoins. It also wouldn't prevent over-the-counter exchanges between individuals.

The US government would also run into opposition from groups like the EFF, and I think it would be difficult to word the law to ban bitcoins specifically, and not other similar mathematical activities (like issuing SSL certificates).

Re: Online Cash Bitcoin could Challenge Governments, Banks

#45

Post by sage_joch »

I think the main takeaway is that governments are making a strong case for an alternative, decentralized currency:

  * preventing transactions they don't agree with
  * inflating savings away
  * freezing bank accounts of adversaries
  * seizing cash at security checkpoints

Re: Online Cash Bitcoin could Challenge Governments, Banks

#47

Post by weavejester »

zacharypinter wrote: post #8
weavejester wrote: post #5

Earlier quoted context omitted.

There are lots of examples of governments or large organisations taking down networks with single points of failure, but far fewer examples of taking down highly distributed networks like Bitcoin. I don't think this fight is a foregone conclusion. I think it would be difficult to write a law that would make Bitcoin illegal, without making things like MMO currencies or SSL certificates illegal.

One guess is they might write a law that requires U.S.-based online businesses to collect certain information about the transactions they accept that would make accepting bitcoins illegal.

That wouldn't necessarily make accepting bitcoins illegal, it would just make accepting bitcoins from anonymous sources illegal. I think they'd also have a hard time justifying why I can buy a product anonymously in cash (or with a pre-paid VISA), but I can't buy a product anonymously using bitcoins. Particularly since bitcoins have less anonymity than cash, because a history of all transactions is maintained.

Re: Online Cash Bitcoin could Challenge Governments, Banks

#48

Post by phillmv »

quanticle wrote: post #42
phillmv wrote: post #34

Earlier quoted context omitted.

Inflationary currencies? I'm pretty sure every form of currency is subject to inflation.

Currencies linked to physical goods of limited quantities wouldn't inflate. For example, I could make a currency that represented shares of Picasso paintings. Since there are only a limited number of Picasso paintings, my currency wouldn't inflate. Commodity-linked currencies (e.g. those that are gold/silver based) don't inflate much in a practical sense, since the amount of gold/silver being mined each year is usual…

Hrm. My understanding is that inflation can affect anything we attach value to (and that broadly speaking "value" is also an abstract concept).

Suppose the price of oil (or any other primary resource) jumps 50%, increasing the nominal cost of everything that has been made from it. Your gold backed dollar now can be exchanged for less things than before, irrespective of the total supply of gold in the world.

Does that make sense? I'm woefully under read in economics.

Re: Online Cash Bitcoin could Challenge Governments, Banks

#50

Post by astrofinch »

AndrewMoffat wrote: post #28

Why is Bitcoin a good currency again? If I understand how it is distributed correctly, those with higher/more computational power receive more of the finite bitcoins. How does that not favor the already rich?

You might as well say dollars suck because they're printed by the US Government and therefore favor the government.
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