This week’s high-tech pet rock, or sercon economic tool? Maria Bustillos, in the New Yorker, on “the future of Bitcoin“:
On March 16th, the Cypriot President Nicos Anastasiades, who’d been in office for about a month, announced a strategy to solve the country’s banking crisis. This plan, which would be funded in part by confiscating money directly from every single bank account in Cyprus—even the very smallest—met with instantaneous and violent opposition from the country’s citizens…
The following Monday, the price of the decentralized electronic currency bitcoin rose from forty-five to fifty-five dollars on the major exchanges, and by Wednesday it had nipped up to sixty-five dollars. The financial media generally agreed that the two dramas are related. According to Bloomberg Businessweek, it appears that Spaniards are liable to have been particularly active buyers of bitcoins that week, having taken the debacle in Cyprus as the likely sign of a forthcoming governmental plunder of their own savings. The evidence coming out of Spain is circumstantial—a spike in Google searches for “bitcoin,” and another on mobile-app downloads of Bitcoin-related software were widely reported—but the pieces appear to fit. Subsequent developments (including the announcement of an eleventh-hour bailout deal for Cyprus) have so far failed to stabilize the euro or cool the bitcoin fever, with the price over a hundred and three at the time of writing…
The weakness in existing currencies stems from lack of faith in institutions—particularly central banks, which are often in league with commercial and investment banks. When a government bails out a failed bank or insurance company—in essence, by printing money—the net effect is that the currency as a whole is debased, in favor of a few and at the literal expense of everyone else, which amounts to a fair description of today’s global financial system. Hence the sudden appeal of bitcoins, which appear, for the moment, at least, to be immune to the machinations of inept or crooked bankers and politicians.
* * *In many ways, bitcoins function essentially like any other currency, and are accepted as payment by a growing number of merchants, both online and in the real world. But they are generated at a predetermined rate by an open-source computer program, which was set in motion in January of 2009. This program produced each one of the nearly eleven million bitcoins in circulation (with a total value just over a billion dollars at the current rate of exchange), and it runs on a massive peer-to-peer network of some twenty thousand independent nodes, which are generally very powerful (and expensive) G.P.U. or ASIC computer systems optimized to compete for new bitcoins….
For those more interested in the consumerist details, NYMag’s Kevin Roose actually went out and bought a bitcoin (which involved, among many other elaborately explicated steps, a trip to CVS).
raven
Say what?
Baud
@raven:
High-tech tulips.
Warren Terra
The technology to limit the supply, distribute new ones, and prevent the creation of forgeries is interesting – but utterly lacking from the story is any notion of why they have any value whatsoever. I mean, I understand that the generation of each coin requires (computing) effort, which is rewarded – but that seems quite arbitrary. I suppose all money is arbitrary, but there are underlying uses for gold (as decoration and in industry) and for government.
Baud
@Warren Terra:
Value is a function of demand, and apparently there is a demand for bitcoins because some people don’t trust traditional currency.
What I don’t understand is why bitcoin isn’t considered a commodity subject to regulation by the CFTC.
I thought the liberal consensus is that printing money right now was a good thing, and we were mad at the Fed for waiting too long to do it.
Linda Featheringill
@Baud:
Printing money has an inflationary effect, to your delight or dismay as the case may be. Since we are struggling against deflationary forces right now, printing money is considered a good thing by some folks. Just don’t try it at home.
Linda Featheringill
I do have a question. Can you actually buy stuff with bitcoins? Like food and housing etc.?
Ramalama
This post has weird timing. I have spent the last coupla months thinking about using ye olde Bitcoin as a way, perhaps, to bolster my retirement fund, which is sadly lacking. Also thought it would be a great way to sell our kids book on science & environment with Bitcoin, as in, ‘Hey pay like a robot, read like a kid.’ Or some other better put ad campaign.
PsiFighter37
Not to come off as a firebagger, but if Obama’s new budget has chained CPI in it, he should have his head checked. SS is NOT the problem, and he should know that the easiest fucking way to solve the funding problem in SS is to raise the cap, which is set at the stupidly low level of $106k or thereabouts.
If a Democratic president cuts SS, we are just giving away what was supposed to be our permanent advantage on the issue. Dumb, dumb, dumb political move.
kindness
Ever use Tor? The marketplace there uses bitcoin. I seem to remember a couple years ago when someone hacked the system and wiped out the value of bitcoins or something. They were about $20 a piece then.
So, the possibility of a criminal element manipulating/fraud element I really don’t want to go there. Reminds me of Glenn Beck pushing gold.
bd of mn
I seem to hear about these every year or so, each news report highlights both the fact that there’s one pizza joint in NYC that accepts them as payment, and that people have been hacked and their bitcoins disappeared…
Southern Beale
$700 toilet seats, y’all.
But the budget deficit is like slavery, we must cut food stamps and Head Start, arggle barggle…
Mustang Bobby
Will they work in the slot machines at the Seminole Hard Rock Casino in Fort Lauderdale? Just curious.
Napoleon
So I have never heard of these things before today and yet today, before 8 am, I hear one story on NPR about them and see two articles on line about them. This has Pet Rock stamped all over it.
NotMax
Gonna repeat post this for the daytime crowd, as I found it so fascinating as a snippet of living history.
So sayeth one of Hitler’s food tasters, a now 95-year-old woman who also survived – and surmounted – brutalities which can scarce be imagined.
JPL
@PsiFighter37: This. The repubs will never deal and will use any suggested cuts to Social Security against the democrats.
Ken
@Linda Featheringill: Yes, but only the same way you can buy stuff with gold or potatoes. That is, you first have to sell your bitcoins to get dollars or euros, then you can spend the dollars or euros on food and housing. There are rare exceptions, vendors who will accept bitcoins directly.
ericblair
Don’t know what to think of Bitcoins: historically, there have been a lot of informal currencies like tally sticks that people in a community used, generally because the official currency (that you could pay the government with) wasn’t available or was undesirable for some reason. Most of these are pretty ephemeral.
Long term, I think there’s a bit of a problem. The certificate chain for Bitcoin uses elliptic curve cryptography, which is pretty secure right now. However, experimental quantum computing technology is in the lab already, and it’s theoretically capable of breaking ECDSA. So the whole thing might go poof at some point, along with a whole bunch of the cryptography we’re doing now.
cvstoner
Not sure how this doesn’t represent yet another shadow banking scam or even some kind of electronic “gold standard.”
In either case, doesn’t bode well.
Walker
@ericblair:
I believe in quantum cryptography, but the advantages of quantum computing are looking like fools gold. In particular, it is not clear why these algorithms aren’t trading exponential time for exponential energy.
Besises, if this crypto is actually broken, the economy will have bigger issues than Bitcoin.
cvstoner
@ericblair: I think it’s much more likely that the bright boys at Goldman Sachs will figure out how to game the system long before the cryptography gets hacked :-)
Baud
@Linda Featheringill:
Legitimate debate is fine. I just don’t want to hear how the elites are screwing over the 99% by printing money and by not printing money.
Alex S.
As soon as the next end of the world passes us by, the value of these bitcoins implodes. Don’t get sucked in. Why have there been several articles been on bitcoins in the past week alone? Is someone pushing the price to sell his own old stash?
Evolving Deep Southerner
@PsiFighter37: I agree. Raise the cap to $400K. The same threshold they set the “tax increase” after the Bush tax cuts expired. It’ll fix that shit in a hurry. Certainly well before we hit the “danger zone” on SS in 2037. For the life of me, I don’t understand why both sides haven’t just left Social Security the fuck alone, as a thing apart from all this other shit in play. What does anybody gain from fucking with it either way?
PsiFighter37
And a real shitty employment report. There’s the sequester going into effect…
Ryan C
If you can’t understand why Bitcoins have value, please explain why you think a dollar has value. The ignorance about the nature of currency in all the comments I see here is embarrassing.
You guys are usually smart about economics. It’s obvious you’re so eager to be snarky about a new idea that you’re not thinking before typing.
Suffern ACE
@Ken: so it would be like me trying to conduct my daily life using Swiss francs. Sure I could do it, but the transaction costs of going to the currency trader would be higher than if I just used a bank or kept my money in dollars. Plus I would open myself up to risks that the bit coin trader would have a glut of bit coins or a shortage of dollars when I needed my cash so it would not have a very stable value. I don’t think I want my cash to fly around in value wildly like that. It is after all my cash.
Ryan_C
If you can’t understand why Bitcoins have value, please explain why you think a dollar has value. The ignorance about the nature of currency in all the comments I see here is embarrassing.
You guys are usually smart about economics. It’s obvious you’re so eager to be snarky about a new idea that you’re not thinking before typing.
Jay in Oregon
@kindness:
Hackers recently knocked Instawallet, a site that helped people set up Bitcoin “wallets” and enter the economy, offline so badly that the site isn’t planning to come back anytime soon.
Every so often, a Bitcoin exchange gets compromised in some form or another, causing spikes in the value of Bitcoins until the dust settles. One got compromised so badly that it drove the price for Bitcoins down to around 25 cents a coin, and they had to freeze trading and rolled back all of the transactions held in escrow.
Bitcoin exchanges seem to be run with business acumen slightly better than that of PayPal, but with worse security. If you want a currency whose value can fluctuate 50-90% in either direction, that has absolutely no use or value outside of the internet, and which is just begging to be gamed with by some well-financed investors, have fun.
I have co-workers who have fallen in love with Bitcoin recently, and I’ve been a long-time reader of Slashdot, which runs regular articles on Bitcoin; I imagine someone there has invested and is trying to push up the value of their coins…
PeakVT
Job gains weak, U3 rate down, labor force participation rate down.
Is the “spring swoon” (our shitty media’s latest alliteration obsession) here?
ericblair
@Walker:
It’s not magic, but quantum computing should be able to do some things extremely well due to the use of superposition, such as simulation and decryption. I don’t see where energy has anything to do with it: it’s a different mechanism.
balconesfault
A couple years ago my techhie son first told me about bitcoins … at the time he was in college finishing his Comp Sci degree, and wanted a high end video card so he could have the processing speed to manufacture some (don’t ask me). So I took him to Fry’s, and he set up a box dedicated to bitcoin mfg, and produced a bunch before the algorythm got too much for his processing power to handle.
Back in October this year, had him jailbreak my new android phone so I could use it traveling to Chile, and in setting it up (he always erases firmware and puts on open source stuff) he left a bitcoin as a present. At the time it was worth about $10.
Nice present from your kid, eh? I’ve long wished we’d have had him about 10 years earlier – I’d be retired living on the seed money I’d have stuck into his first business.
Ryan C
If you can’t understand why Bitcoins have value, please explain why you think a dollar has value. The ignorance about the nature of currency in all the comments I see here is embarrassing.
You guys are usually smart about economics. It’s obvious you’re so eager to be snarky about a new idea that you’re not thinking before typing.
Higgs Boson's Mate
Remember the baseball card craze of the late Eighties to the early Nineties?
Baud
@cvstoner:
I’m sure they are working on Bitcoin default swaps as we speak.
Ryan C
@ericblair: People have been bragging about the hypothetical benefits of quantum computing for 15 years now, but no viable quantum computer has been produced. Until a real quantum computer starts doing practical work, we really should stop the breathless hyperbole about their potential.
Jay in Oregon
@Ryan C:
Then enlighten us. Every article about Bitcoin I see has commenters eager to silence critics by calling them ignorant or uninformed, but no one ever offers to educate people.
You would think that people would be eager to get newcomers into the Bitcoin economy, if only to drive up the demand for their own coins.
Where can we get some basic information on how Bitcoins work?
jurassicpork
BTW, ICYMI, I have a new dictionary out called The Misanthrope’s Manual and here’s 13 sample political definitions. Please pass the word about it.
Jay in Oregon
@Baud:
I don’t think they have to go that far.
Just think of all of the lovely investment schemes like pump-and-dump, that are illegal (or at least frowned upon in polite society) but are OK in the Bitcoin economy, since there are no rules…
Paul Krugman pointed out that the majority of Bitcoins are hoarded, not traded. So, it’s like the gold standard all over again; as a commodity it seems to be doing fine at making specific people rich, but as a currency it fails at making the economy as a whole wealthier.
Roger Moore
They can’t even get this part right. Inflation tends to help debtors at the expense of creditors, which is exactly the opposite of what the global financial system wants. That’s why the 1% is so vehemently opposed to anything that might possibly drive up inflation.
some guy
now that Obama has proposed to cut Social Security benefits I wonder if seniors will be able to use bitcoins to buy their catfood?
ericblair
@Ryan C:
It’s not cold fusion. Multiple qubit systems have been developed in labs and executing basic algorithms. I don’t think you have to sit around and wait until they’re in Best Buy to start considering the implications.
lol
Bitcoins are a ponzi scheme for Ron Paul fans.
Face
What’s the exchange rate of Bitcoins to Ameros?
lojasmo
@PsiFighter37:
I agree, but we should wait and see before we drink ourselves to death, eh?
lol
@PsiFighter37:
Chained CPI plus an increase in minimum benefits and some other tweaks would probably be pretty good for most people.
Every proposal that’s actually been bandied about have generally be clever ways to redistribute outlays from the higher end to the lower end while giving the whole endeavor the sheen of “Entitlement Reform” for the Very Serious People who care about that and not really cutting Social Security.
Look at the whole of what’s actually being proposed, don’t just seize on one aspect and declare “HE SOLD US OUT”.
Roger Moore
@Mustang Bobby:
Probably not. OTOH, there’s no need to go to a cａsino to gamble with your Bitcoins, since their value is going to fluctuate wildly anyway.
lojasmo
@Ryan C:
I’m thinking full faith and credit of the US government has been viable a “bit” longer than this new currency.
Cassidy
Since an open thread,
Invicta FC 5 is taking place tonight and can be bought for $9.95. Invicta FC is the all female organization and tonights card features 14 total fights inlcuding Sarah Kaufmann (former Strikeforce Champ), Chris “Cyborg” Santos (former Strikeforce Champ), “Karate Hottie” Michelle Watterson, Julia Budd, and rising fan favorite “Rowdy” Bec Hyatt. Also, on the undercard, is Rose Namajunas, another rising star.
If you’re interested in combat sports at all, tonight is going to be a great night of fighting from some very talented women.
PeakVT
CR has graphs of the jobs report up.
ericblair
@Jay in Oregon:
More specifically, the Bitcoin is failing at being a medium of exchange because it looks far more profitable to hoard them rather than exchange them for goods and services. This makes Bitcoin prone to panics if the perceived value starts to drop, without any mechanism for adjusting monetary policy.
NonyNony
@Warren Terra:
Like any other form of money, they have value because people are willing to accept them in exchange for goods and services. Like any other form of money, any “intrinsic value” that their form has is utterly and completely irrelevant EXCEPT as a rationale for why people may or may not choose to accept them in exchange for goods and services. Gold coins only have value because people trust that gold has value to other people.
The proper question to be asking is why the hell people think would accept Bitcoins in exchange for goods and services and why they think that other people would be willing to do so as well. Honestly I think a lot of them have been “dazzled by bullshit” and think they’re getting in on the ground floor of the next “big thing”. The comparison to pet rocks is probably not right, but the comparison to tuplips (or baseball cards in the 80s, or comic books in the 90s, or pick your favorite example of a speculation bubble) is probably quite apt.
some guy
Cutting Social Security is just plain stupid. SS has nothing to do with the deficit. Cutting SS is politically stupid, and is part and parcel of the long-standing efforts to roll back the New deal.
we should be INCREASING the benefits, not cutting them. of all the boneheaded moves by President KillList cutting SS benefits is the most boneheaded of them all. hopefully progressives will rally against this, and make sure there are no cuts to Social Security.
Baud
WSJ has an article today that gold prices are falling. I can’t believe Glenn Beck led us astray.
Omnes Omnibus
@Ryan C: Of course fiat currency only has value because people believe it does, but let’s look at why people believe it does…. The dollar is issued by the government of a superpower; the US (world) economy is so tied to the dollar that if it goes under we have real problems; the dollar is hard to counterfeit; etc. The bitcoin? Not so much. Bitcoins, at the moment, seem to appeal to those who don’t trust governments but are still credulous. And to those who have figured out that the first group exists. Maybe there is a future in bitcoins, but I’ll hold off for now.
Belafon (formerly anonevent)
@lojasmo: Actually, a better response would be to call your congresscritters and the president and tell them not to do it.
some guy
and of course the Center Right BJ Fight Club has long assured us that Obama would NEVER cut Social Security, has no plans to cut Social Security, and further, anyone who even hinted at the idea that Obama would cut Social Security was a dangerous demagogue and a liar.
let’s preview the Republican attack ads for the 2014 election, shall we?
“Obama wants to take away your Social Security!”
“Democrats wants to cut your benefits, we Republicans will save Social Security.”
“How can you trust Democrats when they want to cut your Social Security benefits?”
just really really really fucking stupid.
Sarah, Proud and Tall
There’s a new open thread upstairs if you early birds are interested, plus Zandar with wonderful news on how we are all screwed.
Roger Moore
@Ryan C:
I think most of the people here understand enough about economics to understand why Bitcoin has value; it’s because there are people out there who believe that it has value and are willing to exchange it for goods and services. The real question they’re asking is why on earth those people think it has value. Dollars are forced on us by the US government, since they’re the only currency we may use to pay our taxes or other obligations to the government. There’s no comparable reason to want or need to use Bitcoins, and they lack any kind of practical utility the way precious metals do.
Roger Moore
@ericblair:
Not to mention that the supply of Bitcoins is absolutely capped at 22 million, which guarantees that there can never be any useful Bitcoin monetary policy. They appear to have designed by people who are either willfully ignoring everything we know about macroeconomics or are trying to scam people who are.
Omnes Omnibus
@some guy: You know, when you use a term like “President KillList,” it does make your entire argument so much stronger. Kudos to you, sir.
Evolving Deep Southerner
@some guy: Or really kind of brilliant. Let every damn Democrat, House or Senate, run like hell against it, and call Obama everything but a white man over it. He won’t give a shit. He’s not running for a damn thing.
handsmile
@some guy:
It might interest you to know that a certain Nobel Prize-winning economist explicitly agrees with your point about GOP attack ads in the final sentence of this blog post, “Desperately Seeking ‘Serious’ Approval”:
http://krugman.blogs.nytimes.com/2013/04/05/desperately-seeking-serious-approval/
Cygil
Bitcoins are the goldbuggery of the digerati set.
@Roger Moore: They appear to have designed by people who are either willfully ignoring everything we know about macroeconomics or are trying to scam people who are.
In Catholic meta-ethics, there is the concept of “vincible ignorance.” The line between scammer and mere incompetent businessperson is vague. Both classes just assume that rules and external restraints somehow don’t or won’t apply to them.
If Bitcoins ever become a “thing”, expect it to be regulated to the point where the appeal of Bitcoins (eg to evade taxes and currency regulations) evaporates, much like Youtube is now helping to squash the main appeal of Youtube with stepped up copyright enforcement.
ericblair
For everyone’s elucidation, I did some poking around and it looks like Bitcoin’s vulnerabilities to quantum computing are actually not too bad. Specifically, the public only has access to hashes of public keys and not the public keys themselves, so are a lot less vulnerable to the “standard” QC codebreaking algorithms.
Looks like the main risks with Bitcoin are more related to 17th century tulip bulbs than 21st century computing technology.
Cygil
If you can’t understand why Bitcoins have value, please explain why you think a dollar has value. The ignorance about the nature of currency in all the comments I see here is embarrassing.
A dollar has value because it has the full faith and credit of the United States government behind it. Bitcoin nuts anticipate finance going back to the days when you had hundreds of banks in America, each issuing their own banknotes with no real constraints, with the attending monetary chaos when a bank collapsed (a frequent occurence) and those banknotes became worthless. The difference being, at least with banknotes, the note was notionally backed with specie. Bitcoins are backed by… well, a vague hope that the system of shared hallucinated value doesn’t break down.
Neither citizens nor government want to go there.
You may as well invest in Magic: The Gathering cards or Disney dollars.
Funkula
A few important points to consider about bitcoins:
1. It is designed to be a deflationary currency. The number in existence is still increasing, but there is a finite possible number of them. This means that once all of them are “mined,” to use their terminology, no more can ever enter the economy. This makes them effectively useless as a currency for a non-zero-sum economy.
2. It has proven to be about as plagued with scammers and thieves as the EVE Online virtual economy. Trusting anyone else to act in good faith in the bitcoin economy is a very risky proposition.
3. The core community is mostly cranks of the Ron Paul variety. Shops that take bitcoins seem to mostly deal in things like guns, survival gear, and gold. If you want anything with actual practical or aesthetic value, it may be a little harder to track down.
I recently saw someone refer to bitcoins as “Dunning-Krugerrands.” I think that’s going to be my preferred term from now on.
cvstoner
@Baud: Indeed, although I’m sure some young trader has already had these queued up and ready to go, just waiting for the right critical mass of suckerdom to pull the trigger.
lol
@Funkula:
Yep. The “hack” that took shutdown one of the banks this week was, more likely than not, simply the owner of the bank walking off with all the bitcoins the marks had deposited into it.
Sentient Puddle
Also of note is that the bitcoin is in the midst of a ridiculously epic bubble. By way of comparison, find the previous bubble around August ’12 on that chart.
Matt McIrvin
@Funkula: Right. The problem with bitcoins isn’t that they’re funny money that can be created out of thin air. It’s actually the opposite, that they’re a virtual currency created by goldbuggish hard-money libertarians to act like electronic gold, only scarcer. The universe’s supply of them is artificially limited and surprisingly close to being completely mined out.
Even absent bubbles, the tendency of bitcoins would be to get more and more valuable and then stop circulating entirely, making them useless as a currency.
Jay in Oregon
@Cygil:
I wish I still had my Mox Sapphire. That was a pretty card.
I frequent a game store that still teases in Magic singles, and it’s like another world from when I played. People were describing their decks solely in terms of dollar value (“that guy has a $1,500 deck”, “I bought six packs as part of a draft and got two $40 cards out of it”).
I think Wizards of the Coast figures that there has to be once or two overpowered cards in each release (or cars that can make for powerful combos) to keep people buying packs; in a year or two they become useless for formal tournament play, and so their value drops.
todd
The only real value of bitcoins is that it facilitates completely untraceable online transactions, which is one aspect that rarely gets mentioned in mainstream articles. If you want to know why bitcoins are considered valuable, just connect to Tor and head to the Silk Road onion site. On darknet networks like I2P and Tor, Bitcoin reigns supreme.
Maus
Place for deregulationist Ron Paul fans to pump and dump and market manipulate to their hearts’ content. I hope they enjoy suffering through the crashes.
FormerSwingVoter
This is just another libertarian wet dream, that such people wank on endlessly about. The tell is “forthcoming governmental plunder of their own savings”.
The banks don’t have enough money to cover the deposits. Someone loses out. Period. The idea that the money *was* there, but that “government” decided to “plunder” it, is so divorced from reality as to be comical.
Well, it would be comical, if it weren’t commonly accepted as fact.
nemesis
$ – bitcoins – tor – silk road – good drugs.
If you want a good intro into BTC, visit Reddit.
Having followed the BTC phenom for about a week, I see huge holes in their trading exchanges, where manipulation can be massive. Frequently, when the load gets heavy (yeah, right) the exchanges get sluggish or stop completely. Perfect time for the suits to see all the orders and flip coins. Its gonna get ugly for many who are sitting on theoritical hundreds of thousands/millions of dollars worth of BTC.
Libturds see this as somehow connected to Cyprus. Thats stupid. Idioticly stupid.
Ramalama
I am in no way any kind of Paul supporter, unless Paul Simon wants to throw his hat into some kind of ring I’m interested in. I’m not even critical of the comments people made about how bitcoins are the tulips of the 21st Century. Whatever. Currencies fluctuate wildly and some people make money regardless of whether certain dollars or francs or gandpoobahs are going up or down.
I entertain the thought of using bitcoins for things that I’ve already paid for. Things I won’t actually spend money on like electronic versions of aforementioned kids book and also a vacation rental we have in the hinterlands somewhere in Quebec. Because why? Because things are wildly different with the Republican party and the mainstream tv and new folk won’t talk about that. As a result the US is going a direction I’d rather it not. I’m not eschewing dollars. I’m not even thinking about the ‘ship going down’. Because I’m guessing it will right itself. But will I be an old bitty when the government stops messing with the economy? It’s a crap shoot. It’s all a crap shoot. Why does entertaining thoughts of adding other currencies – even pretend ones – make anyone and everyone a nut?
FormerSwingVoter
@Ramalama:
If you think this statement has even a cursory involvement with reality, I’ve got a bridge to sell you.
PJ
@Ryan_C: At the moment, the bitcoin seems to have little or no value as a currency (apparently some internet vendors will take it, but there seems to be no use in the real world – no one gets paid in it and no one accepts it), but a fair amount of value as a commodity. As a commodity, however, it has no intrinsic uses, and its value seems to be very subject to manipulation (e.g., all the articles about it recently), and it seems like before long it will have less value than a tulip bulb. If it is not used as a currency, how can it function as currency? More to the point, even if it were used as a currency, how would it be better than any existing currency?
The Other Chuck
So the Spaniard bitcoin folks bought enough to move the market, eh? Both of them did?
I gave my gf a kiss yesterday and nothing. Today she slipped a $5 in my wallet when she noticed I was out of cash. Ergo, my currency is up INFINITY PERCENT.
fuckwit
I think bitcoins are cool. Still a risky, new, geeky, and experimental thing, but very cool.
It’s like gold without the gold. And it’s decentralized, and geeky, and much easier to deal with and trade.
Look, all currency is bullshit. US Dollars are backed by nothing. Euro as well. Gold is valuable why exactly? No particular reason. Warren Buffet said it best, what would aliens think if they saw us, we dig this shit up out of the ground, and then go bury it in the ground somewhere else.
Currencies are shared illusions, a fiction, a social contract. Bitcoin is just another, newer one, with some interesting and unique features.
Right now there’s http://bitcoinstore.com and some other places you can buy stuff, and more coming online soon.
This stuff always starts out with the geeky crowd as early adopters, then goes mainstream. Of what use was a PC in 1980? What could you do with an internet connection in 1989? What websites could you visit in 1994? Who do you know that had an iPhone in 2007? etc etc.
The biggest problem with bitcoin is that, like gold, it is deflationary. This means, it encourages the concentration of wealth and discourages spending, trade, and economic activity. It is built for hoarding. Well, fine. People are already hoarding gold, now they can hoard abstract mathematical cryptographic numbers instead.
Or stamps. Or all the other stupid shit that humans hoard and consider valuable just because they are of limited supply.
I bought me some bitcoins just to play with the technology. It’s pretty interesting actually.
Djur
“Look, all currency is bullshit. US Dollars are backed by nothing.”
US dollars are legal tender in the US, which means that if you want to do business and pay taxes in the world’s largest national economy, or purchase the most stable and trusted bonds in the world, you have to deal in dollars. You cannot buy US treasury bonds with bitcoins. You can’t pay US taxes in bitcoins. You can’t employ US workers by paying them bitcoins.
US dollars are backed by the US economy, which is as far from “nothing” as anything could possibly be.
You’re right, though: bitcoins are pretty much electronic gold. If people want to invest in them, that’s their business. But it’s not a currency.
Ramalama
@FormerSwingVoter: Have you ever listened to this podcast about how Brazil faked its way out of major economic currency trouble?
Ramalama
@Djur: Don’t want to get into semantics about what is and isn’t currency but you also can’t pay your US taxes with Euros. Why is anyone willing to entertain playing with bitcoins automatically nuts? I mean, the few of us who did haven’t even mentioned FDL or Glenn Greenwald…