If I were to try to devise a plan for the ultimate nerd circljerk, it would be hard to beat Bitcoin (BTC). It’s essentially a complicated protocol that allows anyone with a computer and some computer smarts to “mine”, i.e. “mint”, a digital currency. As nerds are wont to do, there is a whole bunch of nerdery layered on top of that simple fact, but if you want to understand the nut of stories about the many different follies of Bitcoiners, don’t forget that someone paid for a computer, power and used their smarts, or rented smarts, to make them. Bitcoins are also completely anonymous, and Bitcoin transactions are untaxed.
So, to review: dreamt up by nerds, takes place on the Internet, no taxes, no regulation, subject of huge amounts of speculation yet not of much use in the real world, and subject to giant bubbles. If you could express a Ron Paul Presidential campaign in the form of “money”, it would be Bitcoin.
As with any nerdfest, there are starfucker-profiteers who want to get in on the action, like the Winkelvoss twins, who say they own 1% of all Bitcoin.
“We have elected to put our money and faith in a mathematical framework that is free of politics and human error,” Tyler Winklevoss said.
The Winkelvii keep their Bitcoins on flash drives in safe deposit boxes in real physical banks in the real physical world, because of all the Bitcoin theft that has occurred over the years, so if Tyler really believes what he’s saying there, he is even stupider than he appeared to be in the Social Network. (As far as I’m concerned, the only interesting part of that movie was the fact that there are some humans on earth so douchey that you want Mark Zuckerberg to fuck them over. Also, too: “Their first two investments [with their meager Facebook go-away-money settlement] were in Hukkster, a start-up shopping Web site and SumZero, an online community for professional money managers.” What a track record of success: were the names “BendOverrr” and “YouWillBCheated” taken for the shopping site?)
Anyway, now that you can trade in Bitcoin derivatives, I assume the whole thing is going to spin out of control and all that will be left once the dust settles will be the tracks of some Galtian tears. There’s been a crash in Bitcoin value in the last couple of days, and the main exchange halted trading yesterday after the value of BTC fluctuated between $266 to the current value of about $80. BTC was about $20 a couple of months ago. Predictions about the future, as we know, are difficult, but my guess is that BTC holders will see that value again, just as someone jumping from the top of a tall building sees the middle floors: on the way down and in a state of panic.
(Image of the guys running the largest Bitcoin exchange, Mt. Gox, from the Verge)
comrade scott's agenda of rage
I’m hoping that every middle-aged white guy with a high school diploma who’s “in IT”, and every one I’ve met who thinks he’s the smartest guy in the room and, no surprise here, is a glibertarian, sinks his money into this crap for obvious reasons.
Baud
I want to invest in Balloon Bucks! When is Cole going to start issuing some?
Poopyman
I’m just happy I kept my money in tulip futures.
negative 1
The anonymity is very helpful when doing illegal transactions. However, and this is totally unconfirmed so take it for what it’s worth, the founder claims that if the FBI or someone else really wanted to, they could figure out who spent the money. My guess is that there will be a major crash the first time someone gets caught doing something naughty because they were able to track a bitcoin expenditure.
Also, apparently only some kinds of ‘fiat money’ are a problem for libertarians.
Aimai
Ditto gold, apparently, and you can at least use it for jewelry if you want. I’m pretty sure the winklevoss twins are really spokesmodels –whether they know it or not–their name is vaguely associated with the Internet and with uncertainty and being screwed over by smarter people. It’s a perfect storm of inchoate feelings and images for the kind of Internet hysteric and shut in who doesn’t watch Glenn beck but who is just as gullible and fearful and arrogant all at once.
Poopyman
Also too, from the bitcoin theft link:
So, if I was much much less law-abiding than I am, I could have opened a bitcoin exchange, acquired a fair bit of business, claimed I was hacked, then announced I was going off to search for the real
killerthieves? Wow! It really does sound like a Galtian paradise!4tehlulz
Goddammit, there was a way to short bitcoins. I wanted to do that when BTC first hit 100, but couldn’t find it at the time.
Oh well all the cool kids have moved on to other coins…
Turbulence
Bitcoins are also completely anonymous, and Bitcoin transactions are untaxed.
Bitcoin transactions are not anonymous. In fact, the protocol ensures that all transactions are published to everyone. You can conceal transactions to some degree by entrusting your Bitcoin to a blinding service that makes the transaction on your behalf. Everyone can still see the transaction, but since it will have been made by the blinding service, it will be buried with lots of other transactions. The problem here is that the service can steal your bitcoin or if they’re hacked (which has happened), can lose it all. You have to choose between anonymity and security: you can’t have both.
Frankly, this whole thing is such a disaster, I’m surprised its come this far.
Randy P
So computers have accelerated the bubble-grow-and-pop cycle. I look forward to the near-future era when automated trading programs on laptops can get all speculative and then panicky on their own without the need for humans in the loop. Programmed-in greed and gullibility parameters. Then we can see fortunes made and lost in a couple of hours, automatically.
jibeaux
It’s such a strange concept, if I have it right. A fiat currency, not backed up by any government or insurance. I mean, currency works because we basically all agree to pretend like these little green pieces of paper have value. If they don’t have any value anymore, then we have bigger problems because it means our government has gone the way of Somalia. How exactly does a private enterprise duplicate that?
Aimai
How is this not a Ponzi scheme as well as basically identical to the old story of the guy who raffles off a dead donkey for a couple of kopecks. He collects thousands of rubles from everyone for a chance at winning a live donkey, draws the lots and presents the dead donkey to the winner. The winner complains and our hero cheerfully refunds the two kopecks the winner paid for his “chance.” Win, win?
mai naem
The TiddlyWinklies are the kind of people you hear about who win a good sized lottery jackpot and are filing for bankruptcy three years later. Zuckerberg’s a douche but these people are stoopid.
PsiFighter37
As someone who works in finance, I cannot believe that people actually think Bitcoins are the future. Creating currency from solving math riddles? Really?! And these are the same clowns who want to go back to the good standard.
Cognitively dissonant and full of pure, unadulterated stupid.
geg6
Jeebus but this story has had me laughing my ass off for two whole days now. This is so a typical glibertarian complete and utter fuck up. The Onion loses again to reality.
ETA, that picture is pure gold. Those two look exactly like two of our campus IT guys. Seriously.
Bruuuuce
Also, too, this critical difference from Wall Street: http://tapastic.com/episode/3686
artem1s
@4tehlulz:
I’ve heard tell that you can get odds on anything in Vegas. Just saying!
Older_Wiser
The industry is infested with Galtians–they deserve every failure they get, the money grubbers.
mellowjohn
quite a few years ago, i read a small book about the tech bubble called “fucked companies.”
sound like these bozos would fit right in.
Karl The Crap Blog Detective
Someone made this thing. You can see (and hear) bitcoin transactions happen in real time.
mistermix
@Turbulence: I get your point, but it’s anonymous in the sense that the addresses on both ends are just addresses (numbers, locations on the Internet, etc.). It’s not like writing a check where you have to name the other party by a real name.
artem1s
uh oh, from Wikipedia
According to Reuters, undisclosed documents indicate that banks such as Morgan Stanley and Goldman Sachs have visited bitcoin exchanges as often as 30 times a day. Employees of international banks and major financial organizations have shown interest in the bitcoin markets as well.[62]
Citizen_X
@negative 1:
Hmm, I don’t know. Imagine that you arranged to buy two kilos of heroin, and you show up with a thumb drive with your Bitcoins on it. I think the supplier would walk away with his heroin and a couple less bullets.
divF
@Randy P: R.A. Lafferty wrote a short story along these lines – “Slow Tuesday Night”- in which fortunes, marriages, and intellectual / artistic reputations are made and lost, in multiple cycles over an eight-hour shift. His premise was that the human brain was modified to allow faster processing and decision-making, but otherwise close to what you are envisioning.
ETA: It is a really funny story. My favorite conceit was that divorces were all conducted in Small Claims Court.
arguingwithsignposts
WTF? Who names a shopping site after a term that has a derogatory connotation.
I want someone to invest in my PAC – Griftster.com!
Suffern ACE
@artem1s: how does a bank visit an exchange. Hey I visit this site from my desk at work. Does that mean the accounting industry has expressed interest in cat pictures? Of course employees from the big banks are going to visit the site. It’s in the news and not hard for them to find.
aimai
@Citizen_X:
Thats presuming that bitcoins aren’t being scammed at a much higher level in which some “investors” can get their money out and some can’t. I can well imagine that it might be possible to transfer money seamlessly over the web, avoiding banks, by using bitcoins as markers. How do people cash in and out? There’s no way of knowing in this system whether some members (organized crime, insiders) aren’t favored and able to take their money in and out of the system at will while lower level “investors” are stuck holding their bitcoins, unable to redeem them for real cash.
Napoleon
I hope those two loose everything they have, and they will have it coming to them.
Chet
@jibeaux:
No, we don’t “pretend.” Merchants don’t “pretend” to exchange your pieces of green paper for goods and services, they really do that, and as a result your pieces of green paper have real value. Similarly, some merchants will exchange Bitcoins for goods and services, which means that Bitcoins have real value, as well.
There’s no need to pretend that dollar bills or Bitcoins have value; they really do have value, and that value is as currency. Additionally, there’s a finite amount of both, so they both have some additional value as commodities. The boom and bust in Bitcoins (or, sometimes, dollars) is a function of the latter, not the former.
Bitcoins make for a pretty shitty investment, but as a currency they have a number of advantages, since they’re a form of cash you can transmit electronically. If you want to enjoy the advantages of Bitcoin transactions without getting burned by Bitcoin speculators, buy the Bitcoins when you want to buy something with them.
Suffern ACE
@Citizen_X: I assume you’d have made the arrangements, but most drug dealers prefer envelopes filled with forever stamps. Apparently they like the love design.
Morbo
@bitcoin_txt has had a pretty good week of material to work with.
JPL
@Chet: One currency has the backing of the government, the other the backing of Ayn Rand and she’s still dead.
Citizen_X
@aimai: Good point. However, if one is the paranoid type–like, say, gangsters or libertarians–how does one know for sure that they’re not the ones being scammed by someone higher up?
Keith G
While I think anybody who would put more than their “name a star” money into bit currency is foolish beyond measure, I think activities such as these are important to follow, study, and evaluate.
There are many corners that we just can’t see around, so it’s really neat that there are people signing up to be lab rats in this economic modeling experiment.
Chet
@aimai:
You sell your Bitcoins and somebody buys them.
JPL
OT.. This is an article about someone murdered while driving their 400,000 car in Atlanta yesterday. link
It’s worth a read just to see what the front license plate says.
also, too the picture can be enlarged for better viewing.
JoyfulA
Thanks for “If you could express a Ron Paul Presidential campaign in the form of “money”, it would be Bitcoin.”
I really needed a bellylaugh this morning.
piratedan
related kinda sorta…
http://www.upworthy.com/sigh-elizabeth-warren-embarrasses-some-bank-regulators-to-their-faces-again-2?c=ufb1
a couple of things…. if you think the system is rigged, you’re right and what is sad, is that Warren is apparently the only legislator there, and that is sad.
Napoleon
@Chet:
No, she is right, they have no value (intrinsic value). To the extent they do have “value” it is because we pretend they do. In comparison, if you have a barrel of oil it may have more or less intrinsic value tomorrow, but people still drive cars and heat their homes so it will still have and intrinsic value.
Chet
@JPL: “Backing of the government”? No, that’s not accurate. The US government backs the value of Treasury Bills, they don’t back the value of a dollar. And the way they back the value of a Treasury Bill is by promising you that if you present it for redemption they’ll give you X number of dollars for it.
What backs the value of any currency is the value of what you can buy with it, and there are a ton of things you can buy with Bitcoins. So, the currency has value. Not “pretend” value, real value.
Napoleon
@Chet:
You live in a fantasy world if you beleive that.
Dave
I guess what I am missing here is where is the backing to provide value to the bitcoin? The dollar has the backing of the US government. Where is the similar guarantee for a bitcoin? Or even something as basic as gold or silver? Otherwise it just seems like a scam/mass delusion.
Randy P
@divF: Thanks. I’ll have to track this down. I may have even read it once, but if so I remember almost nothing about it.
Now I’ve got myself interested in writing a program for speculative bubbles. Not in actual speculating, but in simulating the bubble cycle and figuring out the key parameters in human behavior to model.
Anybody got a good link on bubbles, particularly what makes them pop?
Gin & Tonic
@Chet:
If you agree to sell me your car for two bushels of clam shells, that does not make clam shells currency, it makes you an idiot.
JPL
@Chet: It has real value until it doesn’t.
Cheap Jim
@Chet: I don’t think bitcoins could fairly be called commodities. Wheat is a commodity, coal is a commodity, gold is a commodity. All of them have real uses based on their physical properties. In a stretch, I guess you could even use federal reserve notes as shelf paper. But bitcoins have no physical properties that make them at all useful in themselves. They are not commodities.
eldorado
@Aimai: the number of bitcoins that can be mined is not infinite. i *think* they have mined around half of total.
Chet
@Napoleon:
No, look, there’s no “pretending” needed. If there’s a guy down the street who will take dollars and give me bread, and I feel like I need bread today, then my dollars have real inherent value because I can give some of them up for the bread I want.
The merchant isn’t going to “pretend” to give me bread, and I’m not going to “pretend” to give him a dollar; I’m really going to give him a dollar and he’s really going to give me bread. Where’s the pretending? On the merchant’s side? No, he’s just like me; the dollars he earns have value because he can take them to other merchants and get what he wants.
It’s the value of the goods and services you can exchange them for that determine the value of a currency. That’s why dollars are more valuable than Cambodian Riel, even in Cambodia; owning Riel gives you access to the stunted economy of “people willing to accept Riel for things”, whereas owning dollars gives you access to the vast, worldwide economy of “people willing to accept dollars for things.” There’s nothing “pretend” about it. It’s the most rational thing in the world to accept in trade something you can then offer in trade for the things you want. Currencies have inherent value because of what you can do with them – exchange them for goods and services, denote price, store value.
Walker
@jibeaux:
It is not a currency so much as it is a virtual commodity. The “mining” allows it to be issued by anyone, not just a central authority. This is not that different than trying to do business with oranges, bartering with them based on the current price in the commodities market.
srv
You people haven’t put 2 and 2 together have you?
Bitcoin and Balloon-Juice crash on the SAME DAY!
Wake up Sheeple!
Chet
@Napoleon: No, I live in a world where prices are denominated in currency, which merchants will accept in exchange for goods and services.
ericblair
@Chet:
Most money is electronic: the money supply of most currencies is far larger than the amount of its paper currency in circulation.
The problem with bitcoins is that people do seem to be using them as an investment, of the “get rich quick” variety, which leads to hoarding and panics. The bitcoin system is intended to be deflationary in the long run, which is a Bad Thing if you actually intend the money to circulate.
The Moar You Know
@Napoleon: He’s our local NRA shill. He already lives in a fantasy world, not at all surprised to see him on this thread insisting that this scam is somehow equivalent to real money.
The True Libertarians, seeing as they’re not going to get the gold standard back, want a currency of their own. Bitcoin is the flavor of the month. That it is a fiat currency and backed by nothing tangible, oddly enough, doesn’t concern them at all – showing that fundamentally, libertarian is just another word for a jerk with no principles whatsoever.
TXG1112
All you need to know about Bitcoin is that its largest exchange was originally for Magic the Gathering.
(Magic the Gathering Online eXchange – Mt. Gox)
Chet
@Dave:
Dollars don’t have the “backing of the US government.” Dollars aren’t even issued by the US government. You’re thinking of Treasury Bills, which are backed by the US government. Dollars aren’t backed by anything but the fact that you can spend them for things.
aimai
@Chet:
Chet, you really need to read a good history of money, how it started, and how it works. Bitcoins are money-like, true but they are not “as good as” some monies, like the dollar or a major hard currency. They are more like a soft currency or a scrip that trades (briefly) within very limited zones–regional (like a coinage like a Nepali Rupee or Confederate scrip) or between certain types of businesses that habitually do businesss with one set of clients like “scrip” offered to workers in lieu of money. The problem with those kinds of money-like substances is that a) there’s no law enforcing acceptance of this “money” by other people (full faith and credit) and there’s no law forcing banks to redeem this “money” or FDIC insurance for this “money.”
You are right that absent a whole lot of government interference and laws (like FDIC) even our money is quite ephemeral, and the value of it certainly goes up and down over time–but there is a whole scaffolding that makes it not entirely illusory. Those things are not in place for Bitcoin. Expect the entire thing to go kablooey with the early investors simply spreading their hands wide and saying “who could have known?” while the later, smaller, ones see their life’s savings in harder currency pissed away on an internet scam.
Chet
@The Moar You Know: You’re a liar. I’m no glibertarian and I hate the NRA. If something I said is wring, prove it. Make an argument of your own.
Or, you know, just tell lies to discredit me. I guess that works around here, too. What a circle-jerk.
aimai
@TXG1112:
I thought this had something to do with “gold mining” in games, is this the same thing? People online paying hard cash to “redeem” it for things with social/emotional value in an online game?
Randy P
@Gin & Tonic: What if there’s a grocer willing to give you a month of groceries for those clam shells? And he’s willing to do that because he can give them to the electric utility to pay his electric bill. And they can take them because they can pay their employees with them, because there are grocers who…
I’m sure there’s a fundamental flaw here but I don’t see it. Seems to me it becomes currency when you get a critical mass of people willing to accept them as currency. Probably the flaw has something to do with the need to establish a consensus on the value of a clamshell, and what can go wrong is what went wrong with Bitcoin.
But that just makes me wonder why “money” works at all.
jibeaux
@Chet: It has no intrinsic value, is what I’m saying. It’s not like a pound of sugar. I realize that we don’t pretend to exchange goods and services for currency, that we actually do it, but we do it because we have all bought into the idea that the currency will work as a substitute for trading, and a large part of the reason we buy into that idea is the stability of the government backing that currency. If the government collapses, then a dollar bill is no different than a piece of paper colored on by a kindergartner with a green crayon, and in that sense we’re all taking a tiny leap of faith when we start saving money instead of saving cattle or something. I don’t understand how a private entity duplicates that trust relationship sufficiently to build a stable currency.
Napoleon
@The Moar You Know:
Did not know that.
Well I will stick with the currency with pretend value that 1) has an entire nation standing behind its sucess, with a govenment willing and able to manipulate its supply and value to assure continuity of value, to some degree or anouther and 2) such nation is able to create a demand for such currency simply from the fact that you have to pay taxes in it, or go to jail.
Amir Khalid
I only skimmed the Wikipedia article, and as far as I can tell this Bitcoins thing is kind of like money, but virtual rather than real (i.e. not represented by physical currency) and not backed by any government. I keep coming back to one thought: whatever tech hocus-pocus is going on behind this, it ain’t real money. I’m reminded of the rule in Rowling’s wizarding universe that money is one of the things you can’t bring into existence by magic.
Cassidy
@Chet: How is it you can be deliebrately obtuse and prove your opponents argument in the same paragraph? Mad skilz, you haz them.
Belafon (formerly anonevent)
@Chet: Money only has value in that people believe it has value. It’s not like food, which has a built in value, namely that we can consume it to convert it to live. It would make more sense to have something like food as a currency, but there are plenty of complications with it. Gold is the same way. There are uses for it, being a great conductor. But it has it’s high value right now because people want to believe it has value.
If we stopped accepting the US dollar as currency it would have no value.
Mark S.
@JPL:
Never heard of the $400,000 car in question, and they just stopped making them. Why anyone would buy one of those things when you could buy a Lexus for an eighth of that price is beyond me.
aimai
@eldorado:
This is all notional, though, isn’t it? The “laws” governing bitcoins are neither real, government backed laws or the laws of mining and availability. I could create an “aimai” coin and determine that no others would be made but it still wouldn’t necessarily create value.
Come to think of it there is a guy I read about years ago who had a beautiful art/politics project. He created “dollars” which were beautifully hand drawn and inked, very close to the real thing (the counterfeiter’s squad was watching him closely because he sailed so close to the line) and he would go to local merchants and “trade” them his dollar for something he needed–like a meal or an object–and then he would (I think, IIRC) go back to them and buy back the art object and frame it and sign and date it with the transaction marked on the frame? Something like that.
...now I try to be amused
(Emphasis mine.) Didn’t HAL-9000 say something like that?
Dave
@Chet: You are being intentionally difficult. Federal Reserve Notes are backed by the assets of the Reserve Banks, authorized by the US Code and recognized as legal tender. So they are backed by elements of what we consider to be “the US government” in a colloquial sense.
Bitcoins are backed by what? Nothing. It’s a fiat currency that depends on people being crazy enough to accept it as having some value.
Chet
@aimai: I never said they were a “hard currency” and I never said that there was any law that forced a bank to redeem them. In fact, none of those things are true, which diminishes the value of Bitcoins on one of the three major functions of currency – the ability to store value.
Which is why I pretty clearly stated – don’t invest in Bitcoins. They’re stupid for that. They’re also stupid for denominating prices because their value is so volatile. So don’t denominate prices in Bitcoins.
But as a medium of exchange? Pretty useful, in a way that cash isn’t. So, like I said, the best way to use Bitcoins is to buy them only when you’re immediately going to spend them on something. Why do that? Because when you exchange a Bitcoin, you aren’t presenting any sort of identity token that, later, someone can present to your bank and fraudulently drain your account. That alone is a pretty substantial improvement on spending dollars over the Internet.
jibeaux
@Cassidy: I’m not sure he understands what “inherent value” means…
JPL
@Mark S.: Did you look at the license plate. Blessed Maybe it should have said not blessed enough.
jibeaux
Another way to explain intrinsic value is, if you can’t think of a use for the item that doesn’t involve exchanging it for something else, then it doesn’t have intrinsic value.
Gin & Tonic
@Randy P: When the IRS will accept those clam shells from me in payment of my taxes, or when I can take two bushels down to my bank and exchange them for Euros, give me a call. Otherwise, as aimai said better than me, they’re “scrip” and not “money.” There’s a difference.
Chet
@jibeaux:
But you’re wrong, is what I’m saying. It does have intrinsic value, and that value is as currency.
But that’s clearly not the case. The utility of the dollar has nothing to do with the presence of the US government. In Post-Apocalyptia, if merchants will still denominate prices in dollars and exchange them for goods and services, then the dollar will still have value. If merchants stop doing that, then the dollar loses all value regardless of the existence of the US government (ignoring it’s legal power to compel merchants to accept US dollars.)
Now, that said, the government’s power to insist that the US dollar is legal tender is something that adds to the value of a dollar and subtracts from the value of a Bitcoin (which is nobody’s legal tender.) But legal tender is just a status that a currency can have somewhere; it’s not what makes it a currency. It’s the fact that it can be used as a medium of exchange that makes it a currency, and if something is a currency, then it has inherent value.
Chet
@Dave:
Stop being stupid. They’re backed by the fact that you can exchange them for goods and services.
Chet
@Gin & Tonic: I never said they were money. I said they were currency.
There’s a difference.
Snarki, child of Loki
Think it’s fucked now? Just wait until they start with the Bitcoin ‘credit default swaps’, because you need to make sure that your trusted intermediary doesn’t go belly-up.
What could possibly go wrong?
BTW, that photo doesn’t just scream “IT guys”, but also “comic book dudes”.
Belafon (formerly anonevent)
@Randy P: It really does have to do with critical mass and a belief that it is worth the value stated on the money. Stable currencies are backed by a large authority, which we normally call a government. Then you start getting into monetary policy about how the actual value is determined. Without a belief that the value is what is stated, you end up with large inflation or deflation and all those kinds of worries.
And wait until people start using leaves for currency, and then try to burn down all the forests.
Chet
@jibeaux:
I can denominate a price or a debt in a currency without exchanging it for something else, and I can store value in a currency without exchanging it for something else. Currencies have inherent value – because they can do the things we use currency to do.
artem1s
@Suffern ACE:
I have no idea what this means really. I assume the brokers have some customers who want to invest in bitcoins and they are making the transactions for them? I also assume the same idjits who ponzi’d the construction/housing market will do their best to raid bitcoin too. in other words, grifters gotta grift.
only when Chase does it the poors end up paying for it, not some doofus nerd with a gold standard fixation.
aimai
@Chet:
Look, I get it, you are going to keep shifting the rationale for why bitcoins are like money and therefore good.
Obviously bitcoins are not like cash/hard currency so, yes, they trade more easily than physical cash. But so does credit and pretty much all banking transactions. You don’t think that when you buy something with a check or a credit transaction that somewhere they are actuallyloading and unloading cash or coins in that amount do you?
But you don’t seem to know the actual meaning of the term “hard currency” aside from cash or coins. A currency is “hard” when lot of countries want it and will trade goods, services, and their own currency for it. A currency is soft when this is not true. For example although Nepali Rupees have a value in Nepal, and can be traded for other kinds of currencies, they are not very desirable and you actually can’t easily send money or get them from outside the country. This is not true for dollars. When a currency is soft and people need to buy or sell stuff outside the country of origin (for instance in border areas) you can easily get hoarding of hard currency, use of hard currencies pushing out local soft currencies, and other anomalies.
Bitcoins are not “hard currency” in this sense. Right now there is an agreement among a small sector of the global population that bitcoins might serve as markers for some kinds of transactions but there is nowhere near the critical mass of consumers and governments backing these transactions. If someone refuses your bitcoins there is no government that willf orce them to accept it (which actually happens within government backed currencies. “Will be accepted as legal tender” means that businesses and the government itself has to accept its own money. IT does not have to accept other forms of money. So when someone wants to refuse your clamshells they can do so and there are no repercussions.
Omnes Omnibus
@Randy P:
Money works because chickens don’t fit in your wallet.
aimai
@Chet:
Currencies do not have “inherent value” they have an assigned value.
jibeaux
@Chet: If there’s nothing you can do with the dollar except exchange it for something else, then it simply has no intrinsic value, I’m sorry. A currency having value is dependent on everyone agreeing to acknowledge the value of the currency and there’s nothing intrinsic about that. In Post-Apocalyptia, you’re going to want high-proof grain alcohol.
handsmile
@divF:
I read that wonderful story as a teen, i.e., decades ago, and it has always stayed with me. Really quite formative to my thinking about technology and social change. So pleased to learn that at least one other shares my enthusiasm.
@Randy P:
These two recommendations may be more historical than you are seeking, but the first is very insightful on commodity speculation and the second is very delightful on human folly:
Tulipmania: Money, Honor and Knowledge in the Dutch Golden Age – Anne Goldgar
Extraordinary Popular Delusions and the Madness of Crowds – Charles Mackay
ericblair
@jibeaux:
I’d like to know, too, because the only way I’ve heard it used is in the context of goldbuggery. I don’t think it means anything.
The way I’d define something as “inherently valuable” is that it can be used by people without being exchanged for anything else. Since the whole point of currency is that it is used for exchanging for something else, what’s the point of that?
We’ve used “virtual currency” forever. Go to the museum and look at Sumerian accounting records. Coins and notes are relatively recent inventions that seems to have had a lot to do with provisioning travelling armies; if you lived in one place and didn’t go anywhere, you just kept track of who owed what to who either in your head or on paper in some measure of currency and had a public reckoning every once in a while.
The difference with bitcoin is that it doesn’t have a state that sets monetary policy or that will accept it for the payment of taxes, so as people have said it’s more like local tally sticks than anything else. It’s an interesting experiment, but I don’t think I’ll be sinking any money into it.
SatanicPanic
@jibeaux:
I don’t think it can. There’s ca$ino chips- if we’re in a casino I might trade physical goods for them. I imagine that’s as good as it gets for private currencies.
ETA- FYWP
aimai
Reviewing Chets various arguments is like talking to a child, or humpty dumpty. I get that that money/currency/cash and trade are all very difficult subjects but they aren’t that difficult. No one is arguing that at the moment bitcoins are operating, for a small group of people, “like” a currency or “like” money. But lots of things operate that way for a while within similar small groups. We have tons of history about it. Whether it is a smart or safe way to store value is not clear. Is it safer than storing your value in a currency backed by any particular government at any particular time? Doubtful. Highly doubtful. Is it safer than storing your value (transferred to it by the fact that you are actually purchasing it with actual money derived from transactions outside the system?) doubtful if you could be storing your dollars in a US bank, less doubtful if you were storing your money in Cyprus.
Given who is investing in bitcoins and how little they understand money and monetary policy, history and social reality I think the preponderance of the evidence is that this is a giant scam in which a lot of foolish investors will lose their shirts and come crying to some government regulator weeping bitter tears. Chet will be one of them if he gets a chance. But the problem with bitcoins is the same problem that the Chets see as a virtue–its UNREGULATED and not transparent. The investors will have the same or lesser chance (actually) than people who invested with Madoff or other rip off artists.
eldorado
@aimai: i should have block quoted because i only wanted to address your question about it being a ponzi scheme. the supply of coins isn’t infinite, and the software that does all this is open source and heavily studied. in theory, changes to core calculations would raise immediate red flags.
eta: never used bitcoin, but co-workers were involved a couple of years ago
Randy P
@Belafon (formerly anonevent): Continuing thking out loud here, I was coming to that conclusion from the discussion, that it does depend on critical mass. But that mass is measured in the millions of people so it’s hard to start from scratch.
But as Gin & Tonic’s comment on “scrip” vs “money” implies, one bank willing to exchange clamshells for Euros or Dollars would provide critical mass too, wouldn’t it? And then all of a sudden I have an official exchange rate too.
Odie Hugh Manatee
The ability to make something out of thin air that idiots will gladly exchange for goods and services as if it was real money sounds like a scam that is only going to benefit a few people once reality comes crashing down on these idiots.
Money for nothing…
aimai
@jibeaux:
Stockings? cigarettes? chocolate? I highly recommend, for fans of post apocalyptia, S.M.Stirling’s first two books, maybe the first three, in his “Dies the Fire” series about what happens when electricity and gunpowder cease to function and the whole world is thrown back, technologically and socially speaking, to a medieval level of development. Its really quite interesting.
jibeaux
@ericblair: True all that. I once heard an interesting podcast that involved, maybe Polynesians or someone a long time ago? They identified these huge boulders as currency, but obviously it was inconvenient to move them, so they just designated the tribe or whatever that they belonged to in their heads. It was fascinating, I wish I could remember more details.
Chet
@aimai:
Look, I get it, you’re going to insist on arguing against strawmen instead of what I’m actually saying.
I never said that Bitcoins were money.
I never said that Bitcoins were “hard currency” in that sense or in any other. Bitcoins are not a hard currency.
jibeaux
@aimai: Sounds interesting!
The Moar You Know
@Chet: Just to set the record straight, if I’m a liar, you can explain your comments here, then. And on this thread as well.
I’ve got plenty more examples.
You are a shill for the NRA, beyond any doubt.
rda909
Oh goody! I’m sure the Ron Paul Re-edumacation Camp will take Bitcoins, so now I can send the kids! FreeDUM! And they throw in Jesus for free. Thanks you, BitcoinJesus!
http://www.ronpaulcurriculum.com/
(it’s real)
Chet
I just listed the two other things that you can do with a dollar – denominate prices and debts, and store value. That’s why currencies have inherent value.
aimai
@Randy P:
I think it takes way more than “one bank.” I read a book on early forms of money–i.e. bank notes–in the early US and it was pretty eye opening as to the random, contingent, and complicated ideas about money and about banking that were operating then. Although “money” changed hands at the local level scrip also changed hands for other kinds of transactions–scrip backed by banks the value of whose “holdings” and ability to cash out their own scrip could only be guessed at. Local newspapers actually published a guestimated value for bank notes which were circulating locally (as in “Bank of New York Note” circulating in the New England area) with information regarding whether they were being redeemed at above or below the stated value. The farther away the bank, the less information about its real circumstances, the less likely you were to have accurate knowledge of transactions with respect to redemption. If someone accepted a note on the “bank of Pennsylvania” or “bank of Ohio” they were running the risk that they would eventually have to physically go to that territory and redeem it in person (and perhaps find out that the bank had actually ceased to exist) or they were hoping to trade it on to some other sucker while receiving some portion of the stated value in local goods and services.
PeakVT
@Cheap Jim: Money is not considered a commodity in general speech, but it can be useful to consider it to be one when thinking about economics.
Chet
Reading your posts is like sniffing an open sewer. Look, I can be insulting, too!
I realize you think you’re showing off, here, but all you’re demonstrating is that you’d rather address any argument besides the ones I’m making. I don’t think my posts are hard to read, and they’re never insulting until you assholes start to be insulting in response. It’s astonishing that it took 28 posts and my involvement before anybody disagreed with even a single aspect of yet another ignorant, dismissive, aggressively-wrong Mistermix post, and per usual, the minute somebody did they earned a world of abuse for their trouble.
The Moar You Know
@Mark S.: Maybachs have:
1. Recliners in the back.
2. Armor (obviously not GOOD armor, as this case shows).
3. Full NBC-capable air filtering system.
4. Other defensive and luxury goodies. I think the engine runs about 600hp as well. They’re supposed to be pretty fun to drive in spite of them weighing about 4 tons.
It’s more than a bit of a step up from a Lexus.
Randy P
BTW I’m not arguing for my position. I was trained in physics and I’m doing what the physicists call “reasoning from first principles”. I freely admit ignorance on this topic. I’m just trying to work out what the necessary and sufficient conditions are to make something “money”. And even real, globally accepted “money” can go bad. Trying to understand that too. I realize that people spend lifetimes studying this stuff yet nevertheless, with a physicist’s arrogance (they train you in that as an undergrad. Seriously. Same as doctors in med school) I’m thinking there is a compact Unified Money Theory in here somewhere which I can grasp.
I’ve tried to train myself out of that arrogance over the decades once I realized it had been trained in. But a certain “you can model anything with the right equations” attitude will always be there.
Foregone Conclusion
I have it on good authority (from a friend of a friend)that one of the Winkelvoss twins is a bit of a creep with the ladies (albeit a successful one). And arrogant. You would never believe that, would you?
ericblair
@jibeaux:
Yap currency. As far as I understand it, these were indeed left where they were a lot of the time and people just took title to them. I think a few were lost at sea on boats, but that didn’t stop anybody: they just traded title to the ones at the bottom of the ocean as well. They were used for big transactions, like animals and perhaps dowry or bride-price if they had those, so it wasn’t like you went and bought your venti skim latte with them.
RSA
@…now I try to be amused:
I agree, pretty funny. A mathematical framework may be free of human error, but its application apparently isn’t, what with the thefts and losses and all. In the end, bitcoin transactions are still subject to human decisions based on limited information, and broadly speaking there’s no way to eliminate politics or human error from that.
Also, for computer nerds, these guys don’t seem to have much understanding of the current state of the art in computer security.
Chet
@The Moar You Know:
Well, firstly I only made a single comment in this thread. So “comments” is a lie.
Nothing to explain – not a single one of those comments offers any support for the NRA whatsoever. There’s not even an instance of “You know, I hate the NRA but they’re right about…” because they’ve never been right about anything, not even by accident. They’re loathsome, and the only statements I’ve ever made about the NRA in those threads or any other is that they’re loathsome.
Prove me wrong, liar. Or were you just counting on the fact that nobody would bother to review 300 post threads and just trust you? They shouldn’t. Here’s what I did actually say about NRA chair-asshole Wayne LaPierre:
You’re a liar.
Napoleon
@aimai:
I am around 1/2 of the way through the history book What Hath God Wrought (which is great) and it has a pretty good explanation of the whole banks issuing their own currency method of currency and such methods associated problems in the context of discussing Andrew Jackson destroying the Second National Bank of the US, which bank was extremely popular at the time because it greatly lessened many of the problems associated with banks issuing their own currency, which was what was done at the time in the absense of a central bank. It took the Civil War to bring a central bank system back since it was not possible for the country to function with such a half ass system and win the war.
Chet
@Randy P:
It’s not hard, which is why human societies have had money for basically ever. (Despite the common understanding, there have never actually been barter societies. Ask an anthropologist, it was an astonishing thing to learn that economists and historians don’t seem to have accepted yet.) What you need is a scarce item that people will denominate prices in, and accept as a medium of exchange.
That’s it. That’s why prisoners hoard cigarettes even if they don’t smoke; that’s why the Island of Yap is covered in multi-ton stone wheels; that’s why people spend real money to buy World of Warcraft gold.
Omnes Omnibus
@Randy P: A critical mass of people who accept item is a necessary but not sufficient factor. Government backing, in that the government will accept the item for settlement of debts and mandates that others within its borders accept it as well, is vital. Absent the government backing, one has scrip.
aimai
@Chet:
I’m sorry you took that as an insult, it was more of an observation. I’m quite interested in Money from an anthropological perspective and I’m also interested in your style of argument which is, indeed, very humpty dumpty in that words mean what you want them to mean when you want them to mean them. The child observation was also more related to the fact that you are oddly literal in your thinking about both the discussion and the thing “bitcoin” which has some properties and lacks others. You seem to like to talk about one set of properties as money like and to slip rapidly from one thesaurus like definition to another without reflecting on what is actually being discussed: when and how will bitcoins act like a safe reservoir for value? Can they do so absent government backing? Will they get government backing? Who benefits from bitcoins now, in their unregulated state and how wlll the stored value change in the future. The rapid fluctuations in value (from 250 down to 80 in a day) make them sound like anything but a good investment. Its true that other commodities (like silver, gold, grain) can rise and fall quickly but as others have pointed out to you that is not to say they make a good medium either of exchange or stored value.
Chet
@ericblair: Also, fun fact – the Ra (the stone wheel currency, there’s one downtown at the Smithsonian) “crashed” when Irish sailors (armed with iron tools and massive ships and, as a result, far greater capability to quarry the stone wheels) flooded the “market.”
Listen to the idiots around here and there’s no way that the Ra was a “real” currency, but actually look at it, how it was used, and what happened to it, and it’s clear that it was every bit as real as the US dollar. Saying otherwise is just the racist assertion that a bunch of Yap island savages were too stupid to have real money.
PeakVT
@Randy P: Money works because of belief. There really isn’t anything more too it. People have spent a lot of time trying to figure out the mechanics of the belief transmission, but it’s still all down to belief.
If you don’t believe me (heh), take a dollar out of your wallet and try cutting it into little pieces.
aimai
@Napoleon:
I’ll look for it. This seems like a great thread to recommend Tom Levenson’s book again, for people who don’t know it: “Newton and the Counterfeiter.” Its really a marvellous book.
Chet
@aimai:
I can’t imagine anything less interesting than talking about what words mean, especially with someone who knows as little as you. But, again, this has nothing to do with my words “mean what you want them to mean when you want them to mean them”, and everything to do with the fact that I’m simply not making the statements you’re accusing me of making.
You’re having a bang-up argument with somebody, it’s just too bad it’s not with me. Here’s what I mean:
They won’t. They won’t ever act as a safe reservoir for value. I’ve repeatedly stated that they’re a terrible reservoir for value. How are you not getting this? Why keep asking me to defend positions I’m explicitly not taking?
Gin & Tonic
@Randy P: You’d love reading When Genius Failed by Roger Lowenstein. You can model anything with the right equations, until you can’t, and you lose your shirt.
aimai
@Chet:
No, I’m not having an argument with you. That’s true. I’m just using some of your posts to think a bit more about money, credit, bitcoins, and scams. I am actually an anthropologist. Money isn’t my area of expertise but certainly exchange, debt, household economies, subsistence economies and ancient economies are something I’ve studied and worked with.
Chet
@aimai:
Well, then, is it necessary to be so abrasive and accusatory? Pardon me for misunderstanding the exchange, I guess, but when you come on as strong as you did, how could anyone be faulted for thinking you were arguing with them?
gene108
@aimai:
Gold mining is a scam/hack. People create a character, who offers to give your character ‘x’ amount of in-game gold for ‘y’ real world money paid to them.
Some folks go for it because it’s easier than grinding out quests or selling stuff and you can buy cooler armor/weapons than most characters at your level.
The Moar You Know
More Chet shilling for the NRA agenda:
Evidence
More evidence
https://balloon-juice.com/2013/01/29/school-shooting-drill-to-include-someone-shooting-blanks-in-hallway/
Goddamn, he never stops
You too can play along, enter this into your Google:
chet site:balloon-juice.com
The hits just keep on coming!
The Moar You Know
More Chet shilling for the NRA agenda:
Evidence
More evidence
Goddamn, he never stops
You too can play along, enter this into your Google:
chet site:balloon-juice.com
The hits just keep on coming! Sadly, FYWP only lets you post three links at a time. I gotta page full of ’em.
Villago Delenda Est
@Belafon (formerly anonevent):
This.
“Money” is a representation, in a more portable form, of things of actual value to humans. Like food, or fuel, or furniture. Silver and gold were chosen for coins because they’re durable and can be made portable.
aimai
@Chet:
I don’t fault you. I’m not arguing with you. I’m in a general discussion about something in the world “bitcoins” which lots of people are noodling around talking about. I think some of your posts have been confusing, slippery, and badly thought out but I found even that interesting. I won’t respond directly to your posts anymore if it bothers you, I’ll just respond to the generic propositions you are raising, if you like that better.
Grumpy Code Monkey
@aimai:
He’s not saying that BTC are good; he’s saying that they’re useful for certain kinds of transactions, and that any value they have is being determined by what people have been willing to exchange for them (and up until a couple of days ago, people were willing to exchange in excess of $200 for a single BTC).
I don’t think he’s making the argument that BTC are on par with dollars or pounds or euros in terms of how their value is determined or maintained; at least, that’s not how I’m reading his statements. He stated flat out that BTC are a “shitty investment” because (I’m assuming) their value is being determined solely by market forces, making them far too volatile for anything except as a means of exchange.
ericblair
@Chet:
I agree with this 100%, which is why I don’t think the concept “inherent value” has any, er, value. Money isn’t inherently valuable, it’s valuable within the context of a society.
I don’t have a problem with calling bitcoin money; I just think it’s an unstable form of money that’s going to continue suffering from the problems that plagued a lot of currencies before we had a semi-decent grasp of macroeconomics.
Robert Sneddon
@Napoleon: I’m sitting with a bunch of banknotes[1] in my pocket issued by three different banks, and they’re all good money as far as any retailer in a hundred miles radius is concerned. Of course everyone has confidence that they can turn those notes around and spend them later for full face value, and so on further down the chain.
[1] Bank of England 10 and 20 pound notes, Royal Bank of Scotland 10 pound note, two Bank of Scotland five pound notes. I’ve not had a Clydesdale Bank note in my pocket for a few days and Irish banknotes don’t normally circulate here in Scotland.
different-church-lady
Bitcoins, chickens… what’s the difference, really?
Chet
@The Moar You Know: Three threads and not a single example of my supposed support for the NRA.
You’re a liar. Quote me even a single time showing support for the NRA, or retract. They’re loathsome. And so are you.
Chet
@aimai:
aimai, if you want to respond to me, respond. That’s totally fine! Just respond to what I’m actually saying. Don’t make things up and then attribute them to me in order to have something to argue about. That’s the kind of dishonesty that “Moar You Know” is engaged in.
Villago Delenda Est
@Chet:
You’re making my head hurt with your failure to understand the basics here. Those two “values” you’ve mentioned are in the notional category, not the physical category. The notional category is one of belief.
Chet
@Grumpy Code Monkey: Wow, somebody actually read my posts instead of seeing “Chet” and assuming I was the embodiment of everything they wanted to disagree with. I’m astonished.
different-church-lady
@Chet: Maybe you should ask yourself what you’re doing to invite all this duck hunting into your life.
Woodrowfan
Am I the only one who looks at their photo and thinks of the classic SNL Star Trek sketch, “Have you ever even kissed a girl?”
Chet
@different-church-lady: Posting here, and not agreeing with the mob. That seems to be all that it takes. And I’m not the only one who’s noticed.
Randy P
@Robert Sneddon: There’s some sort of interesting side discussion buried there on regions where multiple currencies are accepted. I don’t think Canadian coins are generally accepted in the US, but I grew up less than 150 miles from Canada and they were freely circulated there, treated as a 1-to-1 exchange independent of the official exchange rate. I think dollars were also treated that way, but less commonly. And nothing larger so far as I know.
aimai
@Grumpy Code Monkey:
Yeah, I was often responding to earlier comments where he was more bullish on bitcoins. For example his expressed point that they were “better than cash” when no one is comparing them to cash which led to the discussion of “hard currency/hard currencies.”
scav
@different-church-lady: How else can he scare up more theoretically amorous ducks? The gun schtick was getting shopworn.
Chet
@aimai: I never said that they were better than cash. I said that they were better than cash for buying stuff on the Internet, and I’m pretty sure that’s true by definition, since you can’t buy anything with cash on the Internet.
This is what I’m talking about. The things you’re describing as my “expressed points” aren’t actually points I’ve ever made. If that comes as a surprise to you then you really need to work on reading for comprehension, not reading for something to argue with.
J.W. Hamner
@Chet:
You have to pay your taxes in dollar bills and the government has tanks. In addition, the Federal Reserve demands that the baking system use dollar bills (once again with their demands backed by tanks).
Bitcoins do not have any authority ascribing them value by fiat. They have value as long as people want them, that is true… but they do not have inherent (commodity) or aesthetic value (gold) to back them up in case people lose interest. Why might people lose interest? Because of a competitor. There is nothing about a Bitcoin that cannot be copied and perhaps improved upon. If another virtual currency proves to be superior and more widely adopted then what happens to the value of Bitcoins?
Chet
@scav: Like I said, I don’t see how it could be anything I’m actually saying; in one of those gun threads I had the surprising experience of basically saying “The NRA is stupid and wrong about this” and people saying “OMG, how can you be defending the NRA?”
Um, I’m not and never have? People see that name “Chet” and just immediately lose their shit, I guess. It’s not even my real name (thank god, or else the one time I posted about how great ice cream is, one of you assholes would mail me a bomb.)
different-church-lady
@Chet:
Which mob? We have a few to choose from.
Chet
@J.W. Hamner:
But that’s not the government “backing value”, that’s the government creating legal tender within its borders. Different concept. (Of course, the fact that a dollar is legal tender within the US does contribute to its value, but it’s not the sole determinant of it.)
You’re thinking of Treasury Bonds. That’s the instrument whose value is backed by the government. The value of a dollar is backed by the fact that you can buy and sell things with it. Bitcoins have value for the same reason. They’re nobody’s legal tender, so they’re less useful than dollars, but they’re not useless simply by fact of not being anybody’s legal tender.
aimai
@Grumpy Code Monkey:
I’d also like to query the vague use of “value” in the (unattributed by me) observation that bitcoins have “value” because for five minutes they were trading for 200 dollars. The 200 dollars have a value in that they can be instantly exchanged for, among other things, bitcoins, at a relatively stable rate of exchange. The bitcoins, since they then traded for 80 dollars on the same day for dollars–have a rapidly fluctuating value that makes them look more like a stock or a collectible or a tulip at the height of tulipomania. We know quite a bit about the utility of such things–penny stocks during a pump phase before the dump phase, tulips before the market dropped out of them, “collectibles” or, as Tbogg has memorably put it, Beanie Babies.
Lovejoy, the hero of the novels about an antiques dealer, puts it best when he says “a thing has a value that is determined by the price you can sell it for five minutes after you bought it.” Chet has been arguing that bitcoins are no good for “stored value” but are good for quick payments/transactions that are untraceable and untaxeable by governments. Sure. OK. but the line between “stored value” and “quick transactions” is itself an illusion. Plenty of real money systems have foundered on that point. When the bank is no longer able to service the transaction, doesn’t have anything to back up the transactions with, closes for a forced bank holiday, or extracts a fee higher than you want to pay your quick transaction can end up losing you money.
If you are buying a bitcoin in order to accomplish a transaction within a few seconds or minutes of buying the bitcoin you might be said not to be relying on “storing” your value but anything longer than that and you will, of course, lose your shirt in the downturn between 200 dollars a bitcoin and 80. The utility of a secret/private transaction in which you lose that amount in the course of the transaction strikes me as less than I would want to risk and less risk than I would be willing to take from a bank handling the transfer for me, for example.
At any rate we’ve seen all this before. The fact that its happening “on the internet” doesn’t make it really novel–people have passionately put their real money into various fake money schemes for years, even centuries. It always goes bad.
Omnes Omnibus
@Chet: I will grant you that I have never seen you specifically defend the NRA. I will, however, note that the positions for which you argue in gun threads tend to line up with those of the NRA.
Chet
@aimai:
I wouldn’t go so far as to say that it’s an “illusion”, but it’s certainly fuzzy.
aimai
@Chet: No, I comprehend just fine. You might be surprised to discover that your comments are somewhat wandering and illogical and that your terminology is often vague and inappropriate. I’m quite used to that because, uh, teaching and having to work with college students and highschoolers. Sometimes in an extended discussion among a lot of people people will ask you to clarify, or challenge some of your basic assumptions or definitions. Its really not an insult to you or because they “don’t comprehend” your true genius. IF it makes you feel better you can put it down to the fact that you have only this tiny corner of the internet in which to make your points, and you need to make them serially on this thread. I’m not to blame if during the course of saying whatever it is you think you are saying you need multiple posts to make your point–I’m just trying to follow the general argument.
J.W. Hamner
@Chet:
I don’t really see them point of your semantic distinction between direct government backing and laws which the government backs giving value to the dollar.
Bitcoins are useless if you want a stable medium of exchange. That doesn’t mean they have no value, but it does mean they are a very poor form of currency.
Chet
@Omnes Omnibus:
Are you sure? I believe in Federal registration and ballistics fingerprinting of all guns sold and owned, a national ban on magazines larger than seven rounds and the adoption of California’s “bullet button” law (banning detachable magazines that don’t require a special tool to detach), a tax on ammunition, serial identifiers for every round sold, mandated microengraving of firing pins, a Federal law against stockpiling ammunition, and when the technology is mature, all guns should require biometric locks to allow them to be fired only by designated individuals. I don’t own any guns and never have.
Are you sure my positions line up with the NRA? I don’t really see it, I guess.
different-church-lady
How many bitcoins can I get for my chickens? And which currency has more stability at the moment?
Chet
@aimai:
“Illogical” you’d be able to demonstrate if you could, but “wandering” is clearly false – few of my comments are long enough to wander. I’m consistently on-point. It’s just the case that you don’t know how to fucking read.
The Other Chuck
Sure BitCoin has value. So do Moon Cake Vouchers — for a while anyway.
Roy G.
So, to recap, Bitcoins are not a Ponzi scheme, but a Fonzi scheme – as in FREEEDUM!
scav
@Chet: Check your automatic assumption that your logic is necessarily impeccable and that everyone, simply “Everyone! you run across simply hates and reacts to you based on recognizing the letters c.h.e.t in that order. Or, are you likewise “a mathematical framework that is free of politics and human error”?
Omnes Omnibus
@Chet:
If that is the case and you have posted about this, then I have not seen those particular posts – I have not read and memorized every comment on every gun safety thread. In which case, I am willing to retract my statement.
Chet
@scav: Ok, so what am I wrong about? I’ve been disagreed with plenty, but I’ve demonstrated how those disagreements were either with something I hadn’t actually said, or were wrong on their merits. If I’m not right, what am I wrong about?
Chet
@Omnes Omnibus:
But which ones did you read where you think I was promoting the NRA agenda? Like, which post of mine did you read where I said “you know, I think the NRA is right about…” or whatever. Be specific, if you can.
Isn’t it possible that your “impression” that I’m an NRA supporter comes entirely from other people saying as loudly as they can that I’m an NRA supporting lunatic, not from anything I’ve actually said? And would those other people be a good source for my views, if it’s to their interest to save face by discrediting me? I mean, look, this was said:
What’s the relevance of that comment to Bitcoins? Why would somebody say that, even if it were true, in a thread about Bitcoins? Isn’t the point to make people think that no matter what I say, I’m somebody who can be dismissed because I don’t believe the right things?
I feel like this can be a teachable moment for you.
scav
@Chet: Nor have you been proved right about anything for that matter. What you’ve demonstrably been observed as being is attention-seeking with dodgy logic.
Run along, I’m out of kibble.
Gin & Tonic
@Omnes Omnibus:
Slacker.
Grumpy Code Monkey
@Chet:
I’m ornery that way.
FWIW, I know dick-all about monetary history, or economics, or much else having to do with how money actually works, so I can’t say anything about the substance of some arguments (such as whether BTC have intrinsic value or not). From that perspective, I haven’t seen you say anything egregiously wrong or indefensible. But I will have to defer to the domain experts on that.
The question then becomes, who here is the domain expert?
Omnes Omnibus
@Chet: Dude, there is no relevance to the bitcoin discussion; I was participating in the tangential discussion. I also did not say that you were an NRA supporter. Further, I took you at your word on your gun safety positions.
As a result, this little bit of condescension was unnecessary and dickish.
aimai
@Roy G.:
You win the thread.
aimai
@Chet:
Wandering definitionally. Which was the original point that set you off. You use words like value and pretty much every other word associated with money in an imprecise, ahistorical, and largely idiosyncratic way. That’s the humpty dumpty point I made upthread. You are semantically imprecise and yet like to argue semantics. Its tedious. I don’t know about the NRA stuff but I think, having glanced at some of your previous comments, the reason people think you are pro-gun/pro NRA is that you often say things that are either stupid or snark and then don’t defend them or retract them when people query your exact meaning. On the first thread linked you appear to be arguing that since an individual was wrongfully killed with a 22 that other gun laws and restrictions are pointless. That’s the kind of imprecise, vague, or bullshit misdirection that you have engaged in here in the discussion of bitcoins.
Chet
@Omnes Omnibus:
Yes, that’s the point. I’m asking you to speculate on reasons why it might have been brought up (not by you!), and what that might imply about whatever evidence or impression you had that caused you to state:
I take you at your word that you no longer believe that to be the case; I’m interested in finding out why you believed it in the first place without having, apparently, any direct knowledge about what positions I’ve argued in any gun thread.
I wasn’t being condescending. I really think there’s an opportunity here to explore how it is that a small number of liars can manufacture a widespread impression that is completely opposite the truth. You took a step to defend that untruth, a step you’ve now retracted (which I genuinely appreciate.) Aren’t you at all interested in what led you to make that mistake? I am.
Va Highlander
Y’know? There’s a surprisingly thin line between god-level troll and thick as a fuckin’ plank.
Grumpy Code Monkey
@J.W. Hamner:
Which doesn’t contradict anything Chet’s already said. He never said they were awesome, just that they were useful in a particular context. Outside of that context, not so much.
Chet
@aimai:
Except that I haven’t been. I’ve been using the words entirely consistent with their accepted meaning, in both formal and practical use. Certainly nobody treats money as though it has only “pretend” value; shouldn’t we be suspicious, then, of the widespread “too cool for school” Freakonomics-style pose that money “only has pretend value”? Isn’t that basically nothing more than #slatepitch for econo-nerds?
aimai
@Chet:
I don’t mean to be rude but you’ve pretty much exhausted my supply of random interest in this topic by knowing nothing much about it and insisting on talking about it at length. Originally I thought you were trying to make some interesting or at least commonplace points about it and that I could learn from you either what a knowledgeable person knows about bitcoin, or what a regular garden variety fool knows about it, but by this time whatever you know about it turns out to be uninteresting, derivative, and largely vague and uninformative and uninforming.
cvstoner
This is snake oil of the highest grade.
Given that an unregulated shadow banking industry is what got us in the mess to begin with, let’s hope this idiocy implodes before it does too much damage.
Ecks
@jibeaux: probably a dead thread by now, but Chet is closer to right than you are here.
On the surface, dollar bills and bit coins have no intrinsic value (burning them is a poor way to heat your home). If you look a little deeper they both appeal to the same intrinsic value which is that people need a medium of exchange for their goods and services, because barter is a horribly inefficient system for a whole economy (imagine having to save a mountain of knives and butter and roses and phones to trade for dinner – it’s so much easier to have an arbitrary unit that we all agree to exchange with each other for the purpose).
If people decided they weren’t going to accept dollars tomorrow, but only clamshells instead, then overnight the dollar would become worthless. Yes you could have a lot of them in an institution calling itself a bank, but that wouldn’t do you any good if nobody would give you anything in return for them.
The difference is that the dollar has a far larger number of people who are far more invested in it, and as Aimai says, the dollar has a number of legal and financial institutions that are built up around it that give it an awful lot of momentum to keep it as the preferred medium of exchange for an enormous number of people. So long as we all believe it then it stays real, and we all believe it because it has become real. It’s circular, but it works.
The big risk with BitCoins or scrip or whatever else is that there are only a small number of people using them, and a lot of the big players aren’t that committed to using them for exchange, so it’s relatively easy for a large number of the people who had been exchanging them to simply stop… at which point they DO become worthless.
Chet
@aimai: Thank goodness you weren’t rude!
scav
It gets better, especially in light of this quote:
from today’s bbc updates on bitcoins
They just cut out the middle-man in account-draining. Profit!
plus, the exchange went offline again after coming under a sustained hack attack which saw it bombarded with data. In a tweet, MTGox said the it was being hit by a “stronger than usual” attack. Security!
Kiril
Reading this thread reminds me of listening to my college professors explaining blogs back in 2003.
Omnes Omnibus
@Chet:
The fact that I don’t recall every comment from every person on every gun thread does not mean that I do not recall instances of you arguing against specific gun regulations.
Va Highlander
There is nothing mysterious about why Reserve Notes are ‘real’ money and bitcoins are not. I thought this is what put the “fiat” in “fiat currency”. A dollar bill is currency because 31 U.S.C. § 5103 makes it so.
And what makes it so is that the full faith and credit of the US stands behind the law. Sure, it’s ultimately just a matter of belief but so is the idea that I have to pay taxes or refrain from cooking meth in the basement.
Chet
@Omnes Omnibus:
I don’t deny that I’ve argued against specific gun regulations – specifically, the stupid ones, like the “background check” law that would give every nutbag with a gun the stalker’s dream of being able to access your full Federal background, credit history, and medical records based on nothing more than their say-so that you wanted to buy their gun.
But I don’t recall the NRA’s position on background checks to have anything to do with protecting unarmed Americans from predation by legal gun owners. In fact I’m pretty sure they’d vociferously oppose that framing of the debate. Are you sure you want to keep arguing that I’ve adopted positions consonant with the NRA in any way?
Jay C
@aimai: @Napoleon:
One factor you don’t mention re the early US banknote system is the “specie” issue: the requirement that – somewhere along the economic line – some debts had to be paid in “specie”, i.e. silver or gold coin. The “private” banknote system grew up due to the fact that in pre-Gold Rush America, there was a (often severely) limited supply of precious metals to be coined into currency, and that paper money was a simple (if often unstable) method of expanding the money supply in a given economy, without the need to actually acquire, keep and handle large amount of metal coins – only enough to take of routine specie transactions. Of course, the drawback was/is that the rest of the bank’s “money” was just so much engraved paper, but that was an acknowledged risk in the “classical” economy.
And to which point: @Robert Sneddon: Aren’t the Bank of England and Bank of Scotland quasi-governmental monopolies in the UK, with a (??the exclusive??) right to be considered “legal tender”? That tenner in your wallet may be, technically, a “banknote”; but what if, say your own (private) bank, say, HSBC, issued a ten-pound note on its own account (which might end up being called “Hushbucks” or whatever): would your local store be more or less likely accept them at face value for goods? Or discounted?
Gin & Tonic
@Chet: This is funny. 170+ posts, probably half from you or to you, and yet nowhere in your studied contrarianism have you disagreed substantively with any point of mm’s summary:
But by now I have more important things to do, like eat lunch.
TXG1112
@aimai:
I believe it was a trading and auction site for actual Magic cards.
StringOnAStick
One thing that has been missing from this discussion is the regulation of markets, such as financial regulations that govern the trading of currencies, commodities, stocks, etc. Bitcoin totally lacks this in any form. The allegations of front-running purchase orders are serious, and show where the real money is being made in this little scam (and front-running isn’t the only non-free market activity happening in this particular virtual Wild West). Someone places an order to buy 100 bitcoins, one of the ‘exchanges’ (such as they are) sees this order coming, jacks up the price and pockets the difference. This sort of thing is how traders in regulated markets end up going to jail; in bitcoinlandia, it’s just another day ending in “y”.
Tbogg said it quite succinctly; we are now in the hype phase that will drag in all the little fish, at which point the big fish cash in, walk away, and leave a landscape littered with true believers who will be a whole lot poorer. I share his cynical joy that most of these will be Libertarians who worship free markets but are too stupid to determine the difference between fantasy and reality.
By the way, the hedge fund guys who are getting into this market are very, very clear on how this is going to work out; they are quite experienced in this particular pattern. If you think your desktop Dell is any competition for the kind of computational firepower wielded by the professional trading community, you’ve not been paying attention to the last 2 major stock bubbles in this country.
Catsy
@gene108:
No, it’s not. It’s usually against the TOS, and depending on your outlook the purchaser might be considered a cheater, but fundamentally “gold miners” in MMORPGs are doing nothing more than spending time in the game to accumulate digital goods, and then selling those goods to someone for whom they have actual utility.
Those goods might have no intrinsic value whatsoever in the physical world, but in the game world they translate into an actual gameplay advantage or at least an increase in the person’s enjoyment of the game, and therefore have value to them.
Chet
@Gin & Tonic: Clearly wrong. I’ve made a pretty good case for Bitcoin’s use in the real world, and it’s worth pointing out that:
describes basically every significant invention of the past 20 years. But, keep pretending like “OMG NERDS” is a winning intellectual argument. I guess it is, by the standards of the usual Balloon Juice wankfest.
Ecks
@The Moar You Know: Having read through a couple of those (just searching his name in them), I don’t see the shill for the gun industry that you are claiming.
I see someone who has at times a limited grasp on the reality of gun violence (e.g., claiming that England’s higher rate of rapes means that their gun restrictions don’t prevent crime is just “WTF” levels of stupid. The rates of rape being higher in the UK have nothing to do with guns, and everything to do with an alcoholic and sometimes rather sexist culture… the low level of gun ownership in the UK does, however, have a lot to do with both laws restricting gun ownership, and a very small number of people being shot every year per capita compared to the States).
Anyway, what I AM seeing here is a whole lot of lazy pattern matching on your part: “He says something to attack a gun control law, therefore he must be an NRA shill, therefore he must believe XY and Z too.” or “He is not wholeheartedly condemning BitCoin, therefore he is a supporter of them as a full hard currency”. It’s lazy, it’s dishonest, and it makes for poor debate.
Jay C
@Ecks:
Nope, not dead yet: You (and the other commenters as well) are quite right about the relative value/intrinsic value/faith-and-credit aspects of “money”: but then also, it still doesn’t explain away the attraction (and, I have have sinking feeling, the probable persistence) of Bitcoin as an “alternative currency”, and/or speculation scam.
Sure, some smart geeks have taken the equivalent of “power points” or “magic skill levels” in an online RP game, and turned them into a sort of real-life “currency” by setting up a trading framework in real life which has some sort of relationship to actual money (since you can buy or sell Bitcoins). Yes, it’s all very shaky: but when (unless?until?) that “critical mass” of speculators has to make a choice between propping up their market, or bailing and letting it crash, BTC will probably be sticking around.
Though “crash and burn” still seems, to me, to be the more likely endgame…
Li
@jibeaux: The reason that this ‘open currency/crypto currency’ idea might work is that there is no private entity that has issued it, has control over it, or can particularly game it. The entire creation and transaction structure is person to person, and though there are exchanges, nothing about the system relies upon them. It is backed by faith, yes, just like bank issued currencies, but unlike a bank currency a Wiemar Germany/Zimbabwe situation is impossible because no one entity can create an endless supply. Inflation shouldn’t be a worry. The code is open, and thus anyone can ‘mine’ coins, exchange coins, bank coins, ect., but as coins become more common the process of mining gets more difficult. The total number of coins is fixed. At too low a point IMO, as setting the total number possible at a few million will inevitably cause deflation. But this is just the first go-round of this idea. The first bank-issued currencies were disasters too, but they are the standard now.
Really, the reason that this came up is not some sort of glibertarian vision, but rather frustration with the fact that the banks are totally unaccountable, and have been given far too much power to mint currency through debt due to a lack of regulation. This currency is effectively regulated (monetarily) by its very structure, and transfers are actually more closely regulated than, say, cash. After all, cash can flow with no trace, but bitcoins can not; all transactions are recorded, but those transactions are not necessarily connectable with individuals.
I predict these currencies will be successful if the Cyprus ‘haircut’ spreads to other nations. Given that our parasitic banking system has bankrupted themselves totally with their wild gambling habit, and that ‘hooks’ have recently been put in Canadian law (up north where the law still matters) this sort of institutional theft is likely to spread. And this will inevitably drive people to crypto currencies that are not reliant upon banks to function. I don’t think the winner, the sci-fi ‘credit’ will be Bit-coin though. It will be some other crypto currency that arises at some later point. But I don’t think that this genie can be put back in the bottle at this point.
Whatever way it goes, I think it will be fun to watch. *popcorn*
Ramiah Ariya
Going this far, my understanding of bitcoin and currency is about the same, as explained by Chet. I don’t see what is “glibertarian” about bitcoint all.
scav
@Ecks: I think there was a fair bit of the scale issue underlying the distinction between script and currency and I forget what other terms entered the discussion. The actors creating/backing the money/currency/script also play an important role as does the infrastructure created around and by the medium of exchange. What happens during a breakdown of the system is important Esp the existence of other major actors being willing to jump in. The simple existence of a continuous range of greys doesn’t mean light grey is functionally equivalent to ebon.
Eta. machine posted before I was finished pondering. oh well.
Ecks
@J.W. Hamner: The government only demands that I pay taxes in dollars if I earn dollars. If I don’t have any dollars they try to either kick me out as an illegal, or they give me dollars to live on.
That said, your analysis of why BitCoins is weak is correct. The dangers with them is that the small pool of people who accept them for exchange might dry up. And then your token goes from being usable currency to being another 1 or 0 on a hard drive. The same thing COULD happen to dollars (with the 1’s and 0’s at my bank’s hard drive stopping meaning anything), it’s just it’s infinitely less likely to do so anytime soon because there are so damn many other people who do keep on treating US dollars as currency.
Va Highlander
@Ecks:
No, because you would still have to pay Federal taxes with dollars. You would still need an exchange rate of clams to dollars, in order to know how much you owe the IRS, and some facility for changing your clamshells back into dollars.
All you’re doing is restating the same falsehood.
dance around in your bones
@Randy P:
Back in the day, Canada accepted US money, no prob. I crossed the border down into the US with my Canadian friend, and we stopped at a motel in the US. When we tried to pay with Canadian money, the desk lady looked at it like it was Monopoly money. We had to convince her to let us stay the night and then we’d go to a bank in the morning to exchange.
Same with pesos,dollars – dollars accepted freely in Mexico, but try paying in pesos outside of right next to border areas and then only in certain places? You’re SOL.
And just a funny story – we used to have a collection of leftover money from various travels. We went to an Afghan restaurant in San Diego and when we paid the bill we buried some Afghanis in the dollars. You should have heard the shouts from the back room when they discovered them – the waiter and several others from the kitchen came rushing out and said “Where did you get these?!” These were refugees from the Soviet invasion, and they hadn’t seen Afghanis for a long time.
So, money can have a nostalgic value as well.
Ecks
@Va Highlander:
Not really. Cigarettes function as currency in prisons, despite the fact that there is no law or resolution that has ever been passed by anything that so much as attempts to call itself a legal authority of any kind.
Dollars are a currency, as Chet says, because people are willing to exchange things for them. The fact that the US government says that people operating commercial establishments in the USA are obligated to accept dollars as payments for their commercial wares gives a lot of institutional inertia to the dollar to make sure that it won’t stop acting as a currency any time soon, and that is deeply comforting to people who are thinking of using dollars, and will play a strong role in making sure that it does keep operating as a currency. But it would still be a currency even if the US government repealed all it’s currency laws tomorrow. The laws help it, but they are not required.
ETA:
“And what makes it so is that the full faith and credit of the US stands behind the law. ”
That Word, I Do Not Think It Means What You Think It Means
Va Highlander
@Ecks: Yes, really.
Va Highlander
@Ecks: Badly worded, I admit, and if gloating over it makes you feel special, by all means.
Ecks
@Jay C: Don’t disagree, and also too love your name. V. clever :)
Ecks
@scav: That’s a good point. Currencies are a bit like fires in that they are self-propagating systems. And like fires they can go out if they get too small, and like fires you can build systems to keep them stoked and regulate the flow of fuel, and even to spark them up again when they start to fade. And if you do those things they can burn very steadily and reliably for pretty much as long as you keep it up, if not longer.
BitCoin, by this analogy is a small brush fire. It might stick around a while, it’ll probably flame out totally at some point.
I thought Li @183 had some interesting ideas about the underlying logic for it though.
Auguste
@Gin & Tonic: If you agree to sell me your car for two bushels of clam shells, that does not make clam shells currency, it makes you an idiot.
It’s funny that you bring up clam shells.
(Not my observation. Pointed out by a friend far more educated in these matters than myself.)
ETA: In case it wasn’t clear, that comment is about more than just demonstrating “shells have been currency!” Because of the way Bitcoins are collected/mined, Bitcoins fit an awfully large part of the definition of Cowry.
Jay in Oregon
@Catsy:
I don’t have a problem with MMORPGs who forbid selling in-game items for cash because it creates incentives to break the system to their benefit, and creates headaches for customer service with innocent and/or stupid players get ripped off.
Many “pro” gold miners have exploited bugs or flaws in the game to duplicate items and gold. They also like to compromise other players’ accounts and loot their characters, steal from guild vaults, etc.
Others run bots who create characters, run around killing stuff for a while, sell the drops, and mails the money to another account; then the character gets deleted, and the cycle starts over again.
What’s hilarious is that, especially in the last couple of expansions in WoW, it’s not that hard to get gold if you actually PLAY the game. I have a free-to-play WoW account to look at the new stuff from time to time, and it is ridiculously easy to hit the 10 gold cap before you hit the level 20 cap; in the old days, you had to work hard to earn that much. The rewards have improved in the new starting zones and after level 15, you can join groups using the Dungeon Finder and get a goodie bag and a little bit of gold for finishing a dungeon, and that’s not counting any loot you actually get from drops.
Opie_jeanne
@aimai: your comment reminded me of what happened in Iceland. Unsophisticated when it came to higher finance, they were easy pickings for the usual suspects. Good on them for not bailing out their banks after behaving so recklessly.
Another Halocene Human
@PsiFighter37: Gold and math riddles–currency only the elite can use, not moochers and takers.
Tehanu
I miss Green Stamps. Does that count for anything?
Also, Armie Hammer was better looking than the Winklevii.
Another Halocene Human
@Citizen_X: You are incorrect, until the Feds started catching on bitcoin was being heavily used to buy drugs through mail order, the perfect supply chain for paranoid nerds with social anxiety.
Joel
Here’s a problem I like to envision for any fixed-supply currency:
Imagine one person owned all of the currency in the world. With gold, of which there isn’t even that much, that’s not even that hard to imagine.
How much is the currency worth, then?
Another Halocene Human
@ericblair: The bitcoin system is intended to be deflationary in the long run, which is a Bad Thing if you actually intend the money to circulate.
Oh. Really. Excuse me while I-a ha ha ha.AHAHAHAHAHAHA!!!! HAHAHAHAHA!!! austrian HAHAHAHAHAHAHA!!!
Another Halocene Human
@JPL: You can’t take it with you.
Another Halocene Human
@Randy P: Hm, I guess I was lucky I was never taught “you can model anything”. In fact, we learned pretty early on that doing physics we had some very powerful–but very limited–tools. However, I never forgot how important it was to think like a scientist, to be careful about how you design an experiment, and to realize that our human intuition about the world is often flat wrong.
It does and has always frustrated me that some people will stubbornly believe stories that sound cool to them even when they have blunt proof otherwise staring them in the face.
We used to tell a joke: Never let evidence get in the way of a good theory.
Another Halocene Human
@Va Highlander: Win.
Another Halocene Human
@Catsy: And people have been killed over them, just like people have been killed over ca$in0 chips.
Gin & Tonic
@Joel: Lots of articles, even a book or two IIRC, about the Hunt brothers trying to corner silver. This isn’t a bad summary.
Another Halocene Human
Wow, so we have someone who glibsplains shit he or possibly she knows nothing about with utter confidence, but then tells us that the difference between one non-zero probability and another is “infinite”.
Plonked with prejudice!
Catsy
@Jay in Oregon: I don’t disagree with any of that. I was simply disputing that gold farming is a scam or a hack. Whatever one thinks of it, it’s providing a product that people are willing to pay for, and the customers are getting what they paid for. It’s a hell of a lot more productive than derivatives trading.
Omnes Omnibus
@Chet:
In that you are opposing gun safety regulations, yes.
aimai
Can you buy bitcoins with things other than dollars/real money? I mean, I suppose you could hand a cow or clams or a farmhouse in the auvergne over to another person and get their assignment of bitcoins, but can you go to the “bitcoin bank” and buy bitcoins by bartering stuff form them or do you have to purchase them with dollars/real money? Does that make them different from other forms of money–that you can only access them through government backed money? I’m honestly curious.
Redshirt
Inherent value = can be used in and of itself for survival or function. Gold has *some* inherent value, but not much.
Currency has none. It’s an abstract – an agreed upon symbol.
Consider a book – in and of itself its only inherent value is for making fire. If you can’t read, it’s quite useless.
However, society has developed languages and continues them through teaching, and thus an enormous amount of knowledge is transferred through books, making them very valuable. But not inherently so.
Society long predates the use of currency.
sm*t cl*de
The Tulip episode is not the best analogy. Shirley what people are acquiring and exchanging are shares in “A company for carrying on an undertaking of great advantage, but nobody to know what it is.”
eyelessgame
It’s kind of weird that this causes so much flamage.
Part is certainly the fluid semantics of words like “real” and “pretend” and “intrinsic” and “value” and “backed”.
Currency typically has value as currency, period. This goes for gold – its value as a conductor is a *very* recent understanding; people didn’t make gold coins in Rome because gold could function as a conductor; they wound up using it because gold was distinctive, rare, and hard to counterfeit, meaning that there was a controlled amount of it in circulation, but really, everybody used it as a medium of exchange because everybody else did. That’s really the full reason.
And that’s what currency is, and always has been. It’s an IOU. It allows you to separate the two halves of a barter exchange; you exchange your goods or services for a culturally-recognized IOU, and later exchange the IOU for someone else’s goods or services. Separating the halves of a barter exchange allows you to sell your goods and services at their point of maximum desirability, instead of being forced to exchange at the time and place where you have greatest need for someone else’s.
But they’re accounting markers. Do accounting markers have “value”? Yes, absolutely, so long as everyone involved agrees to use the same set of IOUs. There’s powerful reasons why it’s a good idea to have a monopoly on the form of the IOUs – it lets a many-to-many market function.
The dollar works very well as a medium of exchange – as currency – because it is rare, distinctive, and hard to counterfeit. (“Rare” in the sense of “controlled quantities.” We won’t suddenly discover a trove of dollars that renders all the existing dollars worthless. (If such a thing did happen, we’d have runaway inflation. Same thing would happen if we used gold as currency and then discovered a mile-sized solid block of gold. Runaway inflation; the gold coin would collapse in value.)
To argue whether the dollar is “backed” by the government is to quibble semantics. If the US government collapsed, it is almost certain that everyone would stop using US dollars as a medium of exchange. They would lose their value as currency. And this would happen because everyone would figure everyone else would be losing faith in the dollar. And, hey presto, they would.
It used to be that the dollar was “backed” in that it could be exchanged for gold. But that’s just a differently-colored chimera. Gold is just as much a fiat as dollars or bitcoins. It isn’t “backed” by anything; it is a fiat currency that has value solely because everybody thinks it has value, because it is rare, distinctive, and hard to counterfeit.
Bitcoins are nonsense because most people think they’re nonsense, because a lot of people are skeptical that bitcoins are rare, distinctive, and hard to counterfeit. (They’re very probably correct.) And because no one particularly wants to accept a bitcoin as a medium of exchange; the economy works better when there’s only one agreed-on form of universal IOU; we use the dollar.
turbo
The U.S. government does back the dollar–mainly with U.S. Treasuries.
When the Fed prints notes, it has to back them with assets, which it usually does with the purchase of Treasuries.
This transaction counts as part of the national debt.
Yeah, that’s right: money the government owes itself is included in the calculation of the national debt.
Groucho48
I agree with Chet that, using his very narrow definition of what bitcoins are best used for, they are a currency. However, given how narrow that definition is, I don’t really see the point of using them. He concedes they are not investments and shouldn’t be stored long term. The only advantage he mentions in which they are superior to plain old dollars is that they can be used anonymously and without connecting to your “real” money. Well, I don’t think that is much of an advantage, as I don’t think it is 100% anonymous and it isn’t all that hard to provide security for your real money. Not to mention, you are making two transactions instead of one, which definitely increases the risk of bad things happening.
Also, they are not as secure as real money, so, you are assuming an extra risk in using them and you get no monetary advantage to compensate for that risk. Now, if you buy $100 worth of bitcoins and immediately use them to buy something that costs $100., the risk may be small. But, it isn’t zero. The transaction only makes sense if you can get something for less, using bitcoins, than you can using dollars. Like, say, groupon coupons, which are a lot like bitcoins, except you do get a better deal to make up for the risk of having a groupon coupon instead of a $50 bill.
I just don’t see any advantage to using bitcoins for spot transactions and there is the downside of increased risk. For longer term, it definitely doesn’t make any sense unless you are a gambler and think you can make enough bitcoin profit to outweigh the substantial risk of such an artificial and privately held market.
Pseudonym
This whole damn thread is just arguing over unstated definitions. Do dollars (or other forms of currency) have intrinsic value? Well, it depends on how you define intrinsic value. If you define it as “being useful for doing things” as Chet apparently does, of course they do, because they can be used to do things. But that’s a stupid way to define intrinsic value, because it’s just a restatement of the definition of value, meaning that the modifier “intrinsic” has no value. If you define intrinsic value as value apart from use as a currency (e.g. being edible), then currencies by definition don’t have intrinsic value. Similarly, the U.S. government doesn’t “back” the dollar in the sense of guaranteeing that it can be exchanged for some other currency such as gold, but it does “back” the dollar in the sense of being responsible for maintaining the usefulness of the dollar as currency by controlling the money supply and establishing the dollar as legal tender and the form in which taxes are paid. Bitcoins are a form of currency in the sense of being a medium of exchange, but not a currency in the sense of being a particularly useful medium of exchange.
Pseudonym
@aimai: Bitcoin mining has nothing to do with gold mining in games. Gold mining denotes performing generally repetitive actions (like killing low-level enemies) in order to earn in-game gold, which gold can be sold to other players in exchange for “real” money like dollars so that those other players can get ahead in the game without taking the time to “earn” gold themselves. Bitcoin mining involves using computational resources to solve cryptographic mathematical problems that identify the individual coins. There are a finite number of possible bitcoins, each one associated with a different mathematical problem. (I believe the problems also vary in difficulty.) The first person to solve a bitcoin’s problem and publish that answer publicly establishes ownership of that bitcoin. Ownership can then be transferred by publishing a transaction record digitally signed by the owner. (At least I assume that’s how they work; I haven’t actually read anything about them, but that’s how I’d do it and I’m smart.)
aimai
@Pseudonym:
Thank you, that’s very interesting. I guess I don’t understand how that is any different from any othe rform of “mining” except that it gives computer nerds a slight headstart over, say, gold miners and seems to assign ownership of the “thing” (however notional the thing is) to its “discoverer” but it doesn’t really since ownership can and must be transferred to others if the bitcoin is to act as a currency. When I use dollars, or gold, I don’t need the “discoverer” of it to assign rights over it to me or that assignation has happened so far in the past and is so irrelevant to the current transaction as to be meaningless.
In fact carving currency off from its original owner is one of the things tha tmakes currency function well, as opposed to barter of goods and services directly for other goods and services (because one of the problems of barter is the problem of having to know the counterparty and seperately evaluate the value of his particular version of goods and services.
In the meat industry you used to have to know your farmer or your butcher, and be able to evaluate the quality of various ages of animals because in new urban areas you were dependent on buying a specific cut of meat from a specific person who had slaughtered the animal on a given day. you could not go down to the butcher store and rely on finding the cut of meat you wanted, of the age you wanted, on any given day. This problem was solved by the meat packing companies shipping pre-cut refrigerated meat directly to butchershops that they owned, or which were then deskilled because the customer preferred not to have to make these judgements afresh every time they bought the meat or rely on a local butcher who might not be able to guarantee freshness or skill in meat cutting. This is very interestingly covered in Nature’s Metropolis. Its not a situation of barter, but its a situation in which a thing (meat in this case) is transformed from something which has to be understood and purchased as a singular, unique object to a commodity which is standardized and guaranteed at a supra local level.
Matt McIrvin
@Randy P:
The “near-future era” came 26 years ago:
http://en.wikipedia.org/wiki/Black_Monday_(1987)
Matt McIrvin
@Ramiah Ariya:
The main thing is that there’s designed to be an absolutely fixed limited quantity of them, with the difficulty of “mining” them increasing as the supply gets closer to running out (which in turn makes the existing supply more and more valuable).
In other words, it’s designed to be just like gold, only even more so: people keep finding more reserves of gold, but very soon, the universe’s supply of bitcoins is going to be completely mined out, with the supply mathematically prevented from ever increasing again.
This is how you design an electronic currency if you’re a Rothbardian goldbug, which many libertarians are. They’re terrified of inflation above all, which robs value from people who have a lot of money stashed away, and curiously sanguine about deflation, which impoverishes workers, debtors and people who don’t have much money.
If everyone actually used them as currency, it would be a lot like going back on the gold standard: there would be massive deflation and a general depression, as people hoarded the money against its increasing value instead of letting it actually circulate.
fuckwit
The problem with bitcoin is that it’s deflationary. It’s basically gold, and yes, the glibertarians and preppers love them some gold (or silver).
The good thing about bitcoin is that it’s an experiment in DOING SOMETHING other than complaining about our dysfunctional global banking system and the governments that it owns (which is to say, almost all of them).
I bought some as a hedge. At $10, many months ago. And a couple more last month at $100 because it was heading up and I didn’t want to lose out on the chance to ever buy any again. Turns out I could buy a lot more if I wanted now, but I’m holding instead, and will see how this all turns out. I had my fun.
Cigarettes function better than bitcoin as a currency because they have a demurrage and inflation built in: you can smoke the fucking things. The goldbugs who run bitcoin haven’t realized yet that inflation is necessary in order to have a functioning currency.
Oh, also, a single-point-of-failure like MtGox is anathema to the whole design of bitcoin. There’s not supposed to be one single huge corporation who can crater the whole thing.
Basically, bitcoin has reinvented Too Big To Fail, and watched it fail. Hard.
And they’ve proven again that free, unregulated markets are a clusterfuck, are brittle, are prone to being gamed by douchebags like the WInklevii, and generally that regulation is a good goddamned thing. Who knows if they’ve actually learned that.
So, that was a pretty big fuckup, and it’ll be interesting to see if the bitcoiners learn anything from it, and if there’s anything that can be done about it if they do.
My prediction is that the price will stay at around $100, with lots of wild fluctuations, until the problems that turned up this week get solved.