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Ecuador Turning to Virtual Currency

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Re: Ecuador Turning to Virtual Currency

#21

Post by EduardoBautista »

rubyrescue wrote: post #16
evbogue wrote: post #9

Perhaps a smarter idea for Ecuador is to take all of the USD they're circulating and convert it into an existing and proven cryptocurrency. While becoming the best place in the world for a unhindered exchange of USD --> BTC, they'd also not have to worry about all of the problems of building and administering a centralized virtual currency from scratch.

This is EXACTLY what argentina did before the 2001 crash, by pegging ARS to USD @ 1:1. The problem is you lose the ability to set monetary policy because you can't set interest rates nor loan money via a central bank, when you don't own the currency.

The difference here is that the USD is much more stable than BTC.

Re: Ecuador Turning to Virtual Currency

#22

Post by tinco »

jordigh wrote: post #14
EduardoBautista wrote: post #11

Earlier quoted context omitted.

Imagine you buy a house worth 100k one day in bitcoin. The next day, bitcoin increases its value 25%. That same house is now worth 75k, but you still owe 100k plus interest. This is one of the biggest flaws in bitcoin that people just can't seem to understand (or just don't _want_ to understand). You can't have a good loaning system with an unstable currency. Edit: I posted a better explanation below: "You take out a…

If it's the only currency in Ecuador, the price of a house in Ecuador in bitcoins doesn't have to match the fluctuations of BTC USD. If Ecuador also tightly controls exchange with foreign currencies (which they likely already control, just not tightly?), then they can make the value of bitcoins within Ecuador as stable as any other currency. As for how they would acquire bitcoins in the first place, all they have to…

The private key idea is a catastrophe practically begging to happen ;) They'd base their entire economy on the idea that at no point in the future a meager kb of data will not leak from a government or bank in a historically rather unstable country.

Bitcoin's designed to be decentralized, and I don't think it's possible to force Bitcoin into centralized control. If they are going with a virtual currency that's in their control their best bet is going to be a Ripple like currency, like the one Stripe backed last week.

Re: Ecuador Turning to Virtual Currency

#23

Post by moron4hire »

I've only been to Ecuador once, but it seemed like people in general didn't trust the government and thought it was corrupt. If that is the case, Ecuador's problems wouldn't be monetary or fiscal at all, it'd be that they have a bunch of crooks robbing them blind.

It always seems like it's my lay-about, heavy-drinking, multiple-DUI-offending, chain-smoking, new-car-on-lease-every-two-years cousins who have the most trouble with money. I once saw one of them chug the leftover half of a bottle of whiskey, smash it over the back of his truck (oblivious to the damage he did to the tail light) and scream, "That's how we DO!" Yeah, you have no idea how truthfully you speak, you idiot. And those three kids by two women you had out of wedlock are the ones who suffer the most for it. But "live fast, die young, and leave a beautiful corpse," amiright!?

If you don't get the analogy, my cousin is corrupt government, the kids are the people they govern. I'm not in general calling Ecuadorians drunken layabouts. And I'm not saying I specifically know this is the problem. I'm just saying, money is a communication of value, so if you have money problems, you most likely have value problems.

Re: Ecuador Turning to Virtual Currency

#24

Post by tormeh »

evbogue wrote: post #9

Perhaps a smarter idea for Ecuador is to take all of the USD they're circulating and convert it into an existing and proven cryptocurrency. While becoming the best place in the world for a unhindered exchange of USD --> BTC, they'd also not have to worry about all of the problems of building and administering a centralized virtual currency from scratch.

BTC is deflationary. Central banks will set stuff on fire to avoid deflation, but BTC is deflationary by design. BTC is dumb, basically, and unfit for being what wages are given and loans taken in.

Euro inflation is 0.2% or something like that and the ECB is not only demanding money for bank-to-ECB deposits, but giving away ECB-to-bank loans for free. Soon it's going to start buying government bonds. If that doesn't get inflation back to norm helicopter cash-drops are probably next.

Re: Ecuador Turning to Virtual Currency

#25

Post by ricardonunez »

[deleted] wrote: post #5
billyhoffman wrote: post #2

Given Ecuador's financial situation, this seems like a plan to print money to pay bills, and make that "virtual" money to saving on printing :-)

[deleted]

They have to pay for exchanging damaged currencies. It cost millions every year to Ecuador. That's what he is referring to printing I believe.

Re: Ecuador Turning to Virtual Currency

#26

Post by jordigh »

tinco wrote: post #22
jordigh wrote: post #14

Earlier quoted context omitted.

If it's the only currency in Ecuador, the price of a house in Ecuador in bitcoins doesn't have to match the fluctuations of BTC USD. If Ecuador also tightly controls exchange with foreign currencies (which they likely already control, just not tightly?), then they can make the value of bitcoins within Ecuador as stable as any other currency. As for how they would acquire bitcoins in the first place, all they have to…

The private key idea is a catastrophe practically begging to happen ;) They'd base their entire economy on the idea that at no point in the future a meager kb of data will not leak from a government or bank in a historically rather unstable country. Bitcoin's designed to be decentralized, and I don't think it's possible to force Bitcoin into centralized control. If they are going with a virtual currency that's in the…

Yeah, I know, it's just a stupid suggestion. :-)

There were many other online currencies proposed before bitcoins. The real innovation in bitcoins is decentralisation, so I suppose if you want to centralise it again, you can just throw out the whole blockchain idea.

Re: Ecuador Turning to Virtual Currency

#27

Post by lucb1e »

> A monetary authority will be established to regulate the money

I suppose I should not have been so excited. The title really does read a "virtual" currency and not a cryptography-backed cryptocurrency.

This isn't what it sounded like, it's just like Paypal except the government is in charge.

Re: Ecuador Turning to Virtual Currency

#28

Post by lucb1e »

jordigh wrote: post #6

What's virtual about it? I can't tell from reading the article. Is it virtual merely because none of it will be coins or bills? Do other such "virtual" currencies exist, i.e. virtual merely because they only exist in ledgers and bank balances? I mean, other than the vast majority of US dollars and other traditional currencies. All this talk of virtual currencies reminds me of how Europeans viewed Chinese paper money…

There are others, like Stripe is currently developing and the former e-gold, but none backed by any government that I'm aware of. Norway mentioned plans to abandon physical money altogether, but no specific mention of a new, virtual currency. It wouldn't be any time soon anyway.

Re: Ecuador Turning to Virtual Currency

#29

Post by lucb1e »

EduardoBautista wrote: post #11
evbogue wrote: post #9

Perhaps a smarter idea for Ecuador is to take all of the USD they're circulating and convert it into an existing and proven cryptocurrency. While becoming the best place in the world for a unhindered exchange of USD --> BTC, they'd also not have to worry about all of the problems of building and administering a centralized virtual currency from scratch.

Imagine you buy a house worth 100k one day in bitcoin. The next day, bitcoin increases its value 25%. That same house is now worth 75k, but you still owe 100k plus interest. This is one of the biggest flaws in bitcoin that people just can't seem to understand (or just don't _want_ to understand). You can't have a good loaning system with an unstable currency. Edit: I posted a better explanation below: "You take out a…

> The next day, bitcoin increases its value 25%.

Yeah because the Dollar was perfectly stable when it was five years old and accessible to only a select percentage of the population (how many people are really able to use a wallet with the cryptic addresses? Not my parents at least).

Besides, when many people buy their house in Bitcoin the market cap would be much higher and the price would not fluctuate 25% in one day. Not without a fatal flaw in the algorithm or World War III anyway.

The only reason Bitcoin is unstable is because it's not used by that many. That's not a flaw from Bitcoin, that's the network effect. Like Facebook versus Google+, though that's a bad comparison because G+ has no game-changing advantages, at least none that Facebook couldn't replicate.

Re: Ecuador Turning to Virtual Currency

#30

Post by rhino369 »

lucb1e wrote: post #27

> A monetary authority will be established to regulate the money I suppose I should not have been so excited. The title really does read a "virtual" currency and not a cryptography-backed cryptocurrency. This isn't what it sounded like, it's just like Paypal except the government is in charge.

You can have a cypto currency controlled by a central bank. In fact, we'll probably have them eventually. It would have a lot of the benefits of a cypto, like instantaneous transfer, without the drawbacks like major volatility.
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