Bitcoin, a service and the micro-micro-economy
bitcoinbulletin.com
bitcoinbulletin.com
1)Hard money, once you receive payment in bitcoin it stays with you, meaning no chargebacks(Paypal, credit cards, looking at you).
2)Fast payment, you can recieve payment within minutes of it being made(sometimes faster, but more on this in a moment).
3) Low barriers of entry, to start accepting bitcoin you don't need a bank account, or even your own computer. You can use one of a number of free(or cheap) online services such as mybitcoin.com or just go ahead and install it on your machine.
4) No red tape, this is slightly related to the above but important enough to warrant it's own point. With bitcoin there are no forms, no regulations, no paperwork. You can send bitcoin to anyone, anywhere, anytime, any amount and no one will care or track you, or freeze your account or any of the other issues when dealing with the current banking system.
5)It's the most innovative financial ecosystem on the planet and evolving damn fast. Because there is no regulation, it's easy to start writing applications that use bitcoin. Services and goods are springing up at an astounding rate.
Now you may say that payments take minutes, but creditcards are instantanious this is true (to a certain extent, at least with payment confirmation). However because of the flexibility of bitcoin, it's ease of development a technical solution to this issue will arrise in the near future(next two to three months).
Right now bitcoin is small, but it's growing fast, real fast, and faster than the growth of bitcoins themselves or even it's users are the services and goods that are springing up around it.
In a years time bitcoin is going to be so easy to use people like your grandmother are going to wonder why they ever bothered with credit-cards(or online banking) at all.
Sexy no?
It is well worth a listen.
The big upcoming service that will be able to utilise bitcoin is nfc which google is bringing to android. They recently introduced a bitcoin library so it will be a possibility at least.
Bitcoin is perfect/preferable for very small transactions. This coupled with the fact that there simply aren't many Bitcoins out there probably points to unique ideas cropping up in the micro-micro-economy space. Check out https://en.bitcoin.it/wiki/Trade for a complete list of services.
1)Phishing, if your private keys and password are compromised your money is gone.
2)Regulations, although governments would find it difficult, if not impossible, to regulate BitCoin. They can regulate the exchange of BitCoin into everyday fiat currencies. We seen this with the likes of e-gold when exchangers were cracked down on due to the ease of laundering money in the system.
3)Value, if people have no faith in the value of BitCoins then the system will not work. Right not there's a lot of commerce with BitCoin but it seems that it's only digital products or services that are accepting it. Once sellers of physical products start accepting BitCoin then it might become are more common currency.
4)Drugs, CP and money laundering. Although I don't believe in the scaremongering tactics used by politicians in order to regulate the likes of the internet, this system is going to be vulnerable to the similar attacks. We've already seen narcotics marketplaces open up that are now accepting BitCoin by operating through the TOR network. Soon enough this will receive a lot of unwanted attention.
E-gold's centralised system was not what I was debating. It was the exchange of e-gold to fiat currencies.
Alpaca socks I will assume are created by the person who actual sells them. Dealing with other suppliers who won't accept BitCoin was the obstacle I was detailing.
I don't debate that you can launder money in USD but it is easier in this system. There's no paper trail, well there's no identity linked to wallets.
There's a lot of information in the blockchain. I'm not sure bitcoin is really that great for laundering.
I'm sorry I would have replied to your comment earlier but I was incapacitated with laughter.
How often have the "authorities" been able to help a person recover a stolen wallet? Or the funds taken from their bank account with a skimmed ATM card? Or any of the thousands of other kinds of fraud and theft or robbery?
The "authorities" file reports, thats about it. What they do provide is the illusion of protection, a false sense of security.
Really what are they the "authorities" going to do that a normal person can't?
2)In the near future there will be anonymous bitcoin exchanges, immune from government actions. http://weekly.co.nr/index.php?q=article/anonymous-money-need...
3)If people have no faith in the $ then that system will not work, the reality is than money is what people accept for goods and services, every currency whether bitcoin, USD,or gold is backed by the goods and services people will accept it for.
Right now there are merchants that accept bitcoin for goods and services, it's users do the same, I've hired someone paying with bitcoin. It works just fine.
4)Short of banning cryptography (good luck with that) there is nothing the government could do to prevent people using bitcoin whether it's used for the purchase of illegal guns, drugs, sex, hit contracts etc. The worst the governmet can do is target the exchanges, but as I said before that's not going to be an issue either.
Soon enough, I expect law enforcement to start to actively target bitcoin exchanges (see e-gold). Sure people can respond to this by using elaborate schemes like the one you link to ("When depositing or withdrawing from ATM's the runners/operators face must be concealed as they have cameras. The ATM's used must constantly be changed, they must essentially be random otherwise the operators can be caught"). Then the only way to obtain or sell bitcoins will then be to take part in this elaborate and blatantly illegal money-laundering scheme.
Criminals might still be willing to do that (although organized crime presumably have access to better money-laundering facilities already, so I'm not sure how many). But users of services like witcoin (bitcoin based micropayments to tip your favourite bloggers) presumably won't. Likewise, mining will become less popular if the only way to get money from it looks like it attracts the interest of the FBI. And how many will run the p2p client at all (so the entire trust network could collapse)?
I need to write an article on kitty activism and other ways to allow bitcoin to thrive.
Computer security being what it is, and with bitcoin growing at the rate you claim it is, I may soon be a millionaire without having done any real work.
Welcome to the future.
Jokes aside, the current financial system has the exact same problems, and infact can be worse, especially with username:password based authentication. If someone skims your ATM card and gets your pin number too bad, you've lost the money.
Or you could have your wallet pickpocketed, and the thief would be gone without you even knowing the money was missing.
What about credit cards? Protect consumers with chargebacks? yes. However these same consumer protections also hurt merchants, who are the ones that pay for chargebacks and frauds. Because there are no chargebacks bitcoin is very attractive to online merchants.
If users are not comfortable being responsible for taking care of their btcoins they can always use the bitcoin banking services like mybitcoin.com
Fact is bitcoin is money, clever thieves will be able to find clever ways of stealing money, it's been happening since money has been happening.
If you're looking for a perfectly secure currency don't hold your breath, cause one hasn't been invented yet and isn't likely any time soon.
>the difference is that their a sophisticated infrastructure that exists to combat....
Infrastructure becomes moot when it's too "sophisticated" for granny(or me,I mean really, how often haveI lost my online banking key fob? or I have to enter an endless string of numbers just to see my balance?) to use.
And besides, we have the "sophisticated" infrastructure of cryptography on our side. The only real way around this is with social engineering, to which the current financial system is equally vulnerable.
With regards to the "authorities" you list see here http://news.ycombinator.com/item?id=2387022, I find it hard to imagine that the CIA is worried or working on the problem of Nigerians or Russians trying to scam people, or helping people who are victims.
The basic difference is that if someone manages to steal $1000USD from my bank account, the overwhelming odds are that I'll get it back, if for no other reason than my bank will cover it. If someone steals 1000BTC from my wallet, the odds are vanishingly small that I'll ever recover it.
Clearly the CIA isn't acting directly on behalf of your grandmother if someone steals her credit card, but then again local law enforcement isn't acting to derail sophisticated electronic attacks against the international banking system. Never the less, they both have their roles that they play in protecting the financial system over all.
That all depends on how they stole it. If they skimmed your ATM card and got the pin then they have the money, and it's gone, and your bank won't give it back(you're supposed to keep the PIN secret remember), and the police can do nothing. The overwhelming odds are that your money, once gone is gone for good.
Also people don't steal bitcoins from your wallet, maybe they can steal the wallet itself but not the bitcoins from the wallet, and if that wallet is encrypted then good luck with that.
With that said, if you want anonymity, you don't use a bitcoin bank. Which means you store ALL your money on your computer, probably. Who carries ALL their money in their wallet? No-one.
ATM cards have various protections built into them, pin number, fraud protection, withdrawal limit, the fact that people keep them on their person and know to protect them, etc.
You can't steal an ATM card from 200 feet away without someone knowing about it.
It's also relatively hard to pickpocket people. You have to be right next to them.
The first bitcoin-stealing virus is going to be downright hilarious. (What's your physical analogy there? Someone could build a network of tiny robots and have them covertly steal cash from banks? It's theoretically possible.)
In fact, let's put it this way: to steal all the bitcoins from my non-techie friend's PC is going to be much easier and less traceable than stealing all the cash from his bank account.
And the bank, being a website(quite possibly based outside the government in questions reach) can ignore them. And that's if the "banks" really have any information about you besides your username and password.
>they are worse than regular banks, being uninsured, unregulated, and unsecured.
Why would a website(aka, the bitcoin bank) that stores a few bits, information(which is what bitcoins are, information) need to be insured, or secured(apart from backups). And being unregulated is a good thing, it allows the "bank" to provide the services their customers want.
You do know that the reasons real banks have all these things is because they don't have all the money their depositors think they have right?
> Also, real banks have men with guns (not to mention the capability to summon heavily-armed police officers on very short notice) to protect them.
Because the criminals will "break" into your bitcoin "bank" with guns and steal your bitcoins... at gunpoint? What? Have you even read what you wrote?
Encrypt the hardrive, and not even the might of the Soviet Army can get those bitcoins. Are you truely that stupid? Really?
I don't know what else to say.
The reason a bitcoin bank needs to be insured and secured is so that someone doesn't gingerly walk in, pick the computer up, and take off with $40,000,000 of your customers' money. Part of the point of a bank is security. That's why people who earn no interest don't keep large sums of cash in their homes.
And yes, using a gun to force someone to give you a computer with $40,000,000 in it is likely to happen. Clearly, I have read and understood what I wrote. Have you?
You can encrypt a hard drive, sure, but do you? If the bitcoin bank isn't regulated, they don't have to encrypt their drives. Depending on the encryption, the same gun they use to steal the computer can be used to force you to give passwords. Or they can eavesdrop on you, or the account holder, or both, or an infinite variety of other things that I am not going to go into.
I'm done with this argument; you are trolling.
If a bank lets a thief get away with an unencrypted harddrive full of bitcoins who is going to ever use them again?.
Bitcoin is a strange concept, I am not convinced it will take off but the potential is amazing.
Or even something like Dropbox, especially if the drive becomes password-encrypted without internet and there's a remote-disconnect feature when online.
If you access to their financial info, you can steal money. Just because it is digital doesn't make it magical.
I read this as: "If you give bitcoins to someone in exchange for goods/services and they don't deliver, you're screwed, your money is gone, there is no-one you can talk to". That sounds like it's good for sellers and bad for buyers.
The bitcoin proponents make a big deal that transactions can't be reversed. But if you continue reading the FAQ, they also make a big deal about the fact that you shouldn't deal with people you don't trust and that it's your responsibility. I'm sorry, but that doesn't make sense to me. If transactions were only done between trusted parties, there wouldn't be a need for chargebacks either. You want to put the responsibility entirely on the customer, who has no practical ability to judge trustworthiness of an online retailer.
An escrow service doesn't make sense either. Then I have to trust that service. Maybe if some well-known non-bitcoin entity offered such a service, I would be inclined to trust it. But for now, it doesn't seem to me that any of the bitcoin entities have enough to lose to convince me that they're not front ends for scamming operations. I mean, Bernard Madoff and Enron were scams, how in the world could I judge that these operations aren't?
It's true I don't have much trust in the government to go find my money when my wallet's picked out of my pocket. But I do have some trust in that if a store front just took customers' money without giving anything back, they would be shut down pretty soon.
No, what's needed is a scheme which not only ensures the currency transaction, but the entire transaction. It seems that, at least for digital goods, one should be able to design a system where the good is encrypted, and the use of your key to decrypt it simultaneously effects the currency transaction. Still doesn't ensure the content is what they said it would be, though...
It's made and run by one of the main bitcoin developers.
It's a tradeoff.
I'm sure your tax authorities would have something to say about that. I'm pretty certain they'll want to see your bitcoin transactions accounted for in exactly the same way as any other.
Sure if you're an already existing company it's a good idea to keep accurate records, file forms etc. but if your some 15 year old kid with a great idea who cares, go for it!
With the arrival of new businesses operating entirely from within the bitcoin economy and cypherspace no amount of government regulation will matter. How can you tax something you can't even find, or stop or do anything to?
In any case, morals aside, I don't really see why this is different to cash for taxation purposes. Cash is also basically untraceable, and while there are certainly plenty of under-the-table transactions that mean it's not taxed 100% accurately, it's pretty hard to get away with avoiding taxes indefinitely if you're handling a lot of it. I don't understand why bitcoin would be any different.
However you could sell a lot of online services with bitcoins, potentially millions of USD worth without the taxman getting so much as a sniff that anything odd is happening. Nor even if they investigated you would they be able to prove anything(depending on your lifestyle,no pricy sports cars).
With regards to my political views, I'm not a fan of paying governments to screw me. I tend to like the idea of keeping the wealth I created. But more importantly I like being able to make that wealth with methods that the government might not approve of.
And bitcoin can allow me to do that.
You should add, "while letting everyone else pay for the benefits I receive," just so it's clear.
Research? Paid for it when I bough the product that was used to monetise it.
I've been working since I was 15, paying taxes since I was 16. I'm nearly 30 now. I'm not wealthy by any count but you can be damn sure I've paid plenty.
I save my money in the bank I pay tax in the interest, I save money in my pension, I pay tax when I withdraw it. I buy shares I pay tax, sell I pay tax. I even have to sell the shares every few years just so the government can tax me on it in the meantime.
I own a house, I pay tax just for the privalege (I don't own a house by the way, just saying).
I get taxed on the money I make as income, I get taxed on the money I spend as sales tax, I even get taxed on the money I don't spend.
If I give what little I've earned to my kids when I die, a huge whopping chunk of it is taken in tax. If I have a home, and I give it to my kids when I die, they have to sell it to pay for the tax the government has charged.
I'm wondering where other people are paying for me, cause from what I see I'm paying for everything I get and use, and paying tax.
I think, one less way the government can squeeze a little bit more blood out of a person is a good thing.
So you can just go ahead and suck my cock with your collectivist claptrap.
That's real eloquent of you.
Yeah, I'm sure you only benefited from services that are directly taxed. How wrong I was... If this is the level of farsightedness in the bitcoin community, I'll know to stay away now, thanks.
To remain nominally on-topic: unless you live in a place like Somalia, Afghanistan, or Iraq, I'm pretty sure you are benefiting from living in a country with a stable government and enforceable laws and contracts and all that. I'm also pretty sure you'd like someone to go after those who might all of a sudden take off with your retirement savings (unless you have them in Bitcoin) or that prevents a gang of armed thugs from kicking you out of the home you were planning to give to your kids. Well here's the news, take away your despicable, tax-stealing government and all those things go away.
I'm pretty sure that there's a very strong correlation between a government funded by general taxes and the presence of said benefits. Show me one example where there's functioning rule of law without a functioning government. And a government does in fact cost money to run.
Plus if i charge different amount for the same service, i will be frowned upon. If government does this, nobody notice. Probably the only fare tax - is when anyone pays proportionally to services they got, not proportionally to income.
In principle, I slightly agree with you. But only very slightly. I tend to think it's obviously immoral to build a system where a minority live in excess while the majority live on scraps. It's clear we have a philosophical disagreement. Apart from that, I don't see how you'd run a functioning society without having it apply to everyone. If I don't want the benefit of societally-enforced laws, do I also have the right to not obey them to the detriment of others? If I do not want the benefit of regulations to prevent air and water pollution, does that give me the right to pollute it for others?
Besides, if you feel so oppressed, you are in fact free to leave. Most countries are not like the Soviet Union, and as far as I know there are alternatives without taxing governments. Those alternatives have other drawbacks, though, but that's exactly my point. It seems to me that those who complain about taxes want to have their cake and eat it, too.
Unfortunately, i'm not free to opt out my property from the government dominion and subscribe to some other government. When governments won't have a territorial monopoly, than we will get a real competition for their services.
The basic, vital services you need (police, fire, roads, water, government administrators, etc) amount to only 24% of the government budget and a much smaller fraction of the federal budget.
http://www.usgovernmentspending.com/piechart_2009_US_total#u...
(Education and the military make up the remainder.)
I draw a line at 50%. When >50% of your taxes are simply taken and given to others, I think it's morally legitimate to evade them.
Your morality may vary. I'd be curious to know where you draw the line. Is it ok for the government to waste 75% of your tax money? Is it ok for other organizations threatening violence to do the same? I.e., is it morally legitimate to evade Mafia protection payments if they spent 50.01% on publicly beneficial services?
[1] I'm counting SS, medicare/medicaid/etc, welfare and mortgage interest deduction as "direct wealth transfers". I don't know how to allocate interest on debt, so I'm excluding that from the total. There are probably other categories of direct wealth transfers that I didn't think of.
Your Mafia example is spurious, as it's not subject to elections. A democratic government only exists by the consent of the governed. I do not think that corporations or organized crime have taxing authority.
Indeed, the money supply in the bitcoin market increases steadily over time, this should be inflationary, causing the value of BTC to fall. The fact that it doesn't speaks to how thinly traded the BTC markets are, and that there are simply more buyers than sellers interested in BTC - primarily due to articles about bitcoin that drum up interest, and due to speculators participating in the market.
Bitcoin values are very loosely coupled to fundamentals - you can't buy food, energy or commodities with it. In general you need to transfer it back to a fiat currency to do anything classically useful with it. Currencies that either rapidly appreciate or rapidly depreciate are both ill suited for any kind of real commerce - people need relatively stable pricing to conduct any kind of direct business in fiat money. While there are certainly examples where fiat currency runs away in either inflationary or deflationary ways, central banks, charged with protecting their currencies often take dramatic steps at times to prevent moves either way.
In these ways bitcoin currently resembles either a pump and dump scheme the tulip bubble. Which it is depends on whether you believe the people driving the rises in pricing are intentionally exploiting the press and thin nature of the market, or if most of the participants are simply along for the speculative ride.
Of course, it is in the rational best interests of anyone who holds bitcoin to disagree with this assessment. That said, I do genuinely welcome any kind of informed debate on the issue.
We are well aware of this fact.
How can I help bitcoin out? Sell something on the market!
Rationally, people not wanting to speculate in the currency should hold off obtaining any until there is something they want to purchase with it right then.
On the other hand, we have to be patient about goods and services coming online. The community grown a lot in the past few months but it takes a while for people to develop their goods and services and find their niche within the economy. The economy is small, so it's harder to make money as well.
For example, I am just starting to gain back my investment on a niche magazine I made for bitcoin. After the website development is finished, I will be moving on to an ambitious video game project.
Just to be clear, the bitcoin economy is very tiny. It's only about 4.4 million USD economy at best and the real value is probably much smaller.
No, it is in the rational best interests of anyone holding bitcoins to have the most accurate assessment possible of their future value.
If that assessment suggests the future value will go down, it is in their rational best interests to sell bitcoins.
> Indeed, the money supply in the bitcoin market increases steadily over time,
This is partially correct - the money supply increases asymptotically; the deflation eventually resulting from this may become a problem in the future.
> this should be inflationary, causing the value of BTC to fall.
I have a couple of issues with this statement:
1. the value of a currency is usually most meaningful relative to another currency; BTC is not unique in having a money supply that increases over time.
The current annual rate of increase of the BTC money supply is about 7.57%. The rate of increase of the USD M0 money supply is around 4.50% (I am having trouble finding the exact value).
2. money supply alone does not determine the true value of a currency - the size of the economy (amount of goods and services purchasable with that currency) is also a factor, among other things.
It seems to me a reasonable assumption that, given how green BTC is (created in 2009), the size of the BTC economy is increasing substantially faster than the size of the USD. If this is the case, BTC's increasing market size is probably greater than its increasing money supply, relative to the USD - quite possibly enough to justify its increase in value, by my estimates.
EDIT: the Bitcoin M0 increase rate is currently 50%, not 7.57% - this is an important difference, and it supports your statement that the value of Bitcoins is quite speculative. However, I stand by my reasoning that it is less speculative than you claim.
Also, what's the exchange rate between bitcoins and Flooz?
The difference is bitcoin is decentralized while every other internet currency has been reliant on a single entity to issue it.
you can post on the witcoin sandbox and someone is offering .10
Thanks for linking the bitcoin charts site which is another worthy bitcoin service.
Also, each category has its own prices. Some categories post/comment/vote costs at current Bitcoin exchange rate are USD 0.0000000079.
This should be sufficient for the near term ;)
There is a cost if the articles isn't popular(which rules submitting any old crap)
There is a cost of voting up articles, which rules out people with too much time(and not enough money) on their hands scewing the numbers.
Perhaps it hasn't worked before, but then no one has tried doing this with bitcoin, that singular ingredient makes a lot of formerly impossible things very achievable.
Readers end up with this because this is what readers want. We know this is what they want because it's what they pay for, which works just fine for tabloid newspapers.