Gavin Andresen on BitCoin and Virtual Currency
econtalk.org
econtalk.org
A decentralized, global currency is truly a foreign concept to economists.
In the early 1990s there were many who immediately realized the potential of this thing called the world wide web. But there were only a few who were articulate in delivering the message: "I hope you will pay attention, THIS IS KIND OF A BIG DEAL".
During the financial crisis, many on the left expressed concern about a deflationary spiral. I don't claim any economic expertise, but the concern seemed valid. Bitcoin, by slowly reducing the speed at which currency is produced, effectively ensures long term deflation. Couldn't this have all kinds of bad consequences for the economy?
I favor ideas like "campaign finance reform". I also am not a fan of various forms of fraud, bribery, and organized crime. Of course these things all exist now, but bitcoin would seem to make them scale much more smoothly. I don't want government to micromanage the economy, but I also want it to be able to create and enforce laws that help correct problems caused by extreme economic freedom.
I also think taxes are needed. I think a bitcoin-driven economy is one that is hard to tax because it's hard to prove that person X has, or has received, some amount of money. Even sales tax seems difficult to collect. Is there some form of tax that would still work?
Also, will lenders be wary of bitcoin since they have little recourse to collect money from someone? Will something like credit cards still work? Will investors be scared to invest in startups since it becomes harder to trace where money is going?
I'm not trying to debate the free market with the libertarians out there. I'm curious if someone can explain why my concerns are invalid, due to my misunderstanding of the economic consequences of bitcoin.
> I also think taxes are needed.
The cypherpunks would tend to disagree with you. Remember, taxes aren't inherent to any system of monetary value, they're just laws that say "pay us x or go to jail".
Point two:
"During the financial crisis, many on the left expressed concern about a deflationary spiral. I don't claim any economic expertise, but the concern seemed valid."
Deflationary spirals are an economic theory, and have never yet been seen in the wild.
The only "problems caused by extreme economic freedom" are the groans and reactions of centralized monetary control as liberty is restored to the people.
Instead it works like an economy that is not merely a gold standard but an economy where gold tokens are actually traded physically and are the only currency that is permitted. An example of this would be the economy of the Byzantine empire which was very stable and lasted over 1000 years. It was constructed in such a way as a reaction in part to the relentless debasement of the western roman empire's currency, which many believed was a central cause of its decline.
Gold isn't currently the currency (in most places), so I'm not sure what you mean here. If you listen to the podcast, the right-leaning (but generally fair) host makes a convincing explanation why there would be deflation under bitcoin. Also, gold and deflation are part of a popular story for explaining the great depression. I say all of this not to debate any of these points, but to point out that there is a case to be made that bitcoin would deflate over time and that it might have negative consequences.
I think bitcoin is somewhat different than gold because it is more decentralized (in practice) than having a national currency backed by gold. For example, it may scale more cleanly than gold and cash for corrupt uses, since bank accounts and the sources of money can be more readily hidden. I'm skeptical that this is a good thing.
http://www.nma.org/pdf/gold/his_gold_prices.pdf
Why would the price have been so steady? Was the supply of gold increasing at just the right rate to keep it steady (unlikely) or was the economy so much less efficient at the time that prices didn't tend to fluctuate as they should (my guess). Perhaps the government played a role by owning a massive amount of gold? I don't think any of these explanations would apply to bitcoin (or gold, now).
Is there a better explanation? (and does it also apply to bitcoin?)
> However, in preindustrial England, and indeed in many preindustrial economies, inflation rates were low by modern standards. Figure 8.7 shows the English inflation rate from 1200 to 2000 over successive forty-year intervals. Before 1914 inflation rates rarely exceeded 2 percent per year, even in the period known as the Price Revolution, when the influx of silver from the New World helped drive up prices. In a country such as England, which had a highly regarded currency in the preindustrial era, the crown did not avail itself of the inflation tax, despite the close restrictions Parliament placed on its other tax revenues. Only in the twentieth century did significant inflation appear in England. By the late twentieth century annual inflation averaged 4–8 percent per year. Thus there has been a decline, not an improvement, in the quality of monetary management in England since the Industrial Revolution. > > ...Thus in Roman Egypt wheat prices roughly doubled between the beginning of the first century AD and the middle of the third.[12] But that reflects an inflation rate of less than 0.3 percent per year.
I submit that it is unlikely that any of your explanations would operate over most of England's post-Invasion history and also in Roman Egypt a millennium before.
E.g. compare 1800 with 1900 with the help of CPI: http://www.measuringworth.com/calculators/ppowerus/
You should measure how many services and products 1kg of gold can buy you.
Real estate still works well.
I think there are two kinds of deflation. One is just the currency getting more valuable. The other is deflation due to everyone having to stop and pay down their debts. The latter is horrible because the deflation makes the debt harder to pay off. The former is no big deal.
Some economists talk about the "spiral" caused by people putting off purchases, since they can get more for their money later. Those economists have yet to explain why people keep buying so many computers, cellphones, and flat screen TVs. If people don't actually put off their purchases in the expectation of lower prices, the spiral argument fails.
Finally, it's important to remember that bitcoins are not legal tender, and quite likely never will be. Deflation of one currency in the context of multiple competing currencies is going to have much less of an overall economic effect.
Listening now.
Fake gold and silver Ron Paul coins seized: http://www.msnbc.msn.com/id/21836699/ns/politics-decision_08...
Out of curiosity, how much do you have for sale?
As pointed out in this thread, that's not a bitcoin address. That's just a GPG key fingerprint. Nothing to do with bitcoin itself. Terribly sorry for the foobar.
The original post:
> It's a bitcoin address, used for both sending and receiving. If you want to trade with a person, you enter that address as receiver's address in a transaction.
Nb., each bitcoin user can freely generate several addresses to protect privacy; up to and including using one-off addresses (i.e., address for just one transaction).
1HkrUYFNW6XHR99HoDivQuHRhMghwVaVMF def bitcoin_address(public_key):
x = "\x00" + ripemd160(sha256(public_key))
x += sha256(sha256(x))[0:4]
return base58_encode(x)----
Because Bitcoin transactions are not able to be reversed, buying them is notoriously difficult online, as fraudsters like to buy them with stolen credit cards. (Of course, this means that almost nobody sells Bitcoins for PayPal/credit cards/etc. due to chargeback risk.)
It's much better to deal with someone you know, or, failing that, someone with existing reputation. I was hoping to make life easier for fellow HN scenesters.
Please pardon the intrusion, commerce-phobe.