Zero Reserve - A distributed Bitcoin Exchange
bitcointalk.org
bitcointalk.org
Such exchanges can be totally anonymous, including who runs them. They don't deal with people or fiat currency. Just usernames and blockchains. People trust them based on their history, like an ebay seller, and admins realize there's no need to rip off users because it's not worth it to them in the long run (let alone what might happen to them if they are personally outed for doing so.) People can go in and out of them for very short periods of time to lower the risk it should disappear during that time, ie to lower their "exchange risk." They could also have a set lifespan... "we will operate from 2015-2018" this might lower risks as well.. imagine if Silk Road had a fixed shelf life that expired before it was caught.
On a similar note, Litecoins are big in China. If the blockchain were to come under attack, a large group of Chinese people would be pissed off enough to come together to do something about it. Or, more importantly the Chinese government may have high up officials or execs that hold Litecoins, and it could end up the preferred blockchain of the Chinese, and they turn a blind-eye to regulating it.
There is no reason for anyone to prefer altcoins for trade unless they are useful for something bitcoin isn't (which I haven't really seen yet).
Demand for trade is the only difference between bitcoin and a hot potato stock in a company with 0 earnings and 0 capital. In other words, in the long run, absolutely essential.
In summary, altcons have no reason to exist unless they can do something bitcoin can't.
Next year, we'll start seeing altcoins pop up for anything and everything. The marketcap doesn't have to be millions.
A few days ago, I was talking to my co-workers about DOGE, because I'm pretty into it. This morning, when I walked into work:
"Hey, remember how I was saying DOGE had a $2MM market cap the other day and you were laughing? Today it's $12MM. It's now the 8th biggest altcoin (and is almost 7th)."
http://coinmarketcap.com/ has the whole list of altcoins and the numbers and graphs for them, if anyone is interested in this kind of thing.
DOGE specifically has changed my entire perspective on cryptocurrency. It's incredibly interesting.
But every altcoin has a set of pro and cons. They're just like flavours of Linux, and how hard is it to switch over as a miner, user or admin? The real power of altcoins how I see it will come when a second generation of altcoins comes into existence. Perhaps some way of retracting stolen or lost coins would be an interesting feature, perhaps tying coins to an email address for approval of spending or a resending of lost keys.
At first I thought you might really be onto something on this, but you aren't.
To put it simply: BTC->LTC at ex1 and then ex1->ex2 and then LTC->BTC is no more anonymous than BTC->BTC at ex1 and then ex1->ex2 and then BTC->BTC.
In both cases the two exchanges have to collaborate to reveal your identity. But in one case they have two be aware of 2 blockchains instead of 1. No big deal.
Still, I think Bitcoin provides much more value than any altcoin.
true, but expect Gox to introduce ltc soon, and then probably Coinbase and BTC China. The debate will shift from is bitcoin needed/useful to are altcoins needed/useful? Interesting times ahead. The $10,000,000 per bitcoin notion will be gradually diffused into other coins, and there'll be winners and losers, and it'll get ugly as blockchains are attacked, pump and dumps, powerful people takes sides, and misinformation put out. Bitpay and the Winklevoss' have already stood by bitcoin (at least publically.)
And the answer is "no." Though as they say, the market can potentially stay irrational for longer than you (in this case, I) can stay solvent. So what you are describing could happen for a while.
> The $10,000,000 per bitcoin notion will be gradually diffused into other coins, and there'll be winners and losers, and it'll get ugly as blockchains are attacked, pump and dumps, powerful people takes sides, and misinformation put out.
And those are the reasons that bitcoin is literally always going to be better as a means of trade and store of value. Those coins don't have any advantages but they have all the disadvantages you mentioned. The more widley used/mined/liquid bitcoin is, the more advantage it has. And I don't mean social network effects, I mean the things you are talking about.
I read there are only about 3500 setups mining bitcoin. It's too difficult to do on a homemade setup. Then again, I don't know how the pools are operating in this concept. If you're a young guy wanting to get into cryptocurrency, you're not going to get into bitcoin except as a way to get or dispense of another crypto from fiat (that's what makes bitcoin valuable - as a trendsetter and gateway.) Other altcoins may not offer any significant benefits to bitcoin on the whole, but vice versa too... I can think of things I don't like about bitcoin including a massive blockchain (13 gb) that takes days to download. To me the differences in algorithm choice and number of confirmations is a side issue (perhaps I should take them more seriously) to other things including demographics of adoption, regulatory environments, adoption and market perceptions.
It not really about the lines of code: its the way and context the software with its blockchain has been implemented, developed and brought to light.
I would say that political ideology is another big difference. The early adopters of Bitcoin were largely of a certain ideological bent that made them predisposed to wanting Bitcoin to succeed. When have you ever seen this kind of behaviour around a penny stock?
But the thing you quoted me saying is what ultimately does provide a rational justification for bitcoin having a market price.
So basically what I'm saying is those ideologues got the right answer on their math homework, despite having made some mistakes in the calculations.
However not everybody who invested in bitcoin is a mistaken ideologue. I'm not (though I'm not anyone important, just a guy). Certainly Satoshi was not. He acutally "worked the problem correctly" and got a valid answer.
That's what will be interesting. I'm bullish on scrypt, but which one? I couldn't call it.
On the one hand, you have Bitcoin, which is essentially an attempt to replicate a gold/commodity-like currency in a distributed, electronic fashion.
On the other hand, you have the notion that all money is ultimately an abstraction of who owes who. That is, money models social relationships.
A project that successfully combines these two notions could be quite interesting.
A good example of why this is happening is in the Christmas story. Mary and Joseph were travelling via donkey in while VERY pregnant to another city to pay their taxes to the Roman government. Tax payment in those days meant putting coins or goods in the tax collector's hands. Not very convenient or practical.
The ability to use IOUs and trust as a payment vehicle solves a great many problems. Kids discover this at age 6 when they forget their lunch money. Trust is the key component, and a good reason why Bitcoin is successful. (example: The Chinese are always exploiting any means possible to get money in forms other than RMB)
That's what money is. You don't eat a coin or bill, it's an "IOU some future tangible good or service".
Think about it, you either have barter -- no money concept involved. Or you have money-facilitated trade -- then the money (whether coins or bills or seashells) is always a "debt" of sorts for deferred/future "trade settlement". That IOU characteristic automatically happens to whatever emerges (or is decreed) as the unit-of-account+medium-of-exchange of the day. And that's fine, this and only this allows trade beyond immediate barter.
The USD is a fiat currency, it only has value because the US government says it has value. Fiat currencies are very close to debt basises.
Non-fiat currencies like Bitcoin are a little different, since there is actual value to a Bitcoin. It is similar to how gold and silver were once used.
The benefit of fiat currencies is they can't be used for other things affecting the monetary supply, they are always in circulation (pretty much, obviously there are exceptions).
Bitcoin is in a weird spot, it is a non-fiat currency without having to worry about the destruction aspects, as Bitcoins can't be destroyed. There is the whole getting lost thing, but that is unavoidable without implementing a use or lose it scheme (which some altcoins are trying).
Bitcoins do not have value. I've seen two arguments for it, and I'll counter both.
1. 'value because mining, network uses' Bitcoins are not mining, they are a reward for doing it. If nobody wants to trade for bitcoins, they have no more use than yesterday's lotto numbers.
2. 'bitcoins have qualities that make them good for trading' You cannot apply those qualities to anything other than the bitcoins themselves, so they become null in the scenario where nobody actually wants to trade for bitcoins. This is not intrinsic value.
(bitcoin is fiat)
Bitcoin is crypto-fiat, decreed by the laws of cryptography and computer code (Lawrence Lessig's "code is law").
Gold also has no intrinsic value. Sure it has some industrial applications, but everyone is getting around fine with very small amounts of it. But no one doubts that gold has value.
Market value is determined by demand, not who backs it.
Bitcoin has most of the features of a central bank in that it regulates the amount of money in circulation and has policy limits on who can create money and how. Unfortunately it's policies are fixed at birth and cannot be changed without unanimous consent of those participating in it's accounting system ( unanimous consent being a synonym for nearly impossible ) and the enforcement is done by protocol and public accounting; rather than by the fact that your local "insurance company with an army" will accept it as a valid form of payment.
And to be fair to the USD, Bitcoins regulations are laughable simplistic compared to a "real" currency, especially since it is so heavily biased towards deflation.
I do not mean to say that Bitcoin is unsound or poorly designed, just saying that the intrinsic tools available cannot compare given the scope of the initial creation.
BTC can be destroyed - as easy as deleting wallet.dat / losing your private key.
There is another reason why Bitcoin is in a weird spot, though. Bitcoin is neither anybody's IOU nor does it have an intrinsic, physically-based value similar to gold. It is perhaps the only example of a currency (or near-currency) that arose purely from something else entirely, and I'm not quite sure what that "something else" even is.
Second, from what I understand, the first gold coins that were intended as currency were made of gold precisely because gold was already valued for other reasons. I do know that historically speaking, the value of gold coins was usually unrelated to the price of their gold contents, so it is true that they played the role of an IOU. However, (a) there is a reason why governments chose gold rather than a different material (psychology based on the pre-existing value of gold), and (b) throughout the ages, gold was also used as a payment-commodity in trade.
That latter use is probably overstated by the goldbugs, but it would be wrong to dismiss it entirely.
Gold was around production costs ($250) before the "general commodity bull-run 2001-2011" and is now back at around production costs (nowadays roughly around $11xx - $12xx, many opinions about this and different ways to quantify but production costs are in this range these days, no longer in the low hundreds as 12 years ago).
Gold coins are not the same, and are similar to IOUs as you mention. But gold does not base its value off the fact that at one point it was used as a currency.
The whole money-as-IOU vs money-like-gold distinction is another thing again.
So, I think original reply has a very good point. There are two types of currency being talked about and bitcoin is very much in the money-like-gold camp whereas this proposal is very much a money-as-iou concept. Personally I think this idea of combining the two is really exciting and something I've been working on - like modern banking is to gold, I think money-as-iou built on top of bitcoin is a very exciting prospect.
In my way of looking at things there is fiat money then there is debt based and market based money, or as I like to call them 'two sided' and 'one sided' currency.
Bitcoin is a 'one sided' currency like gold (or tulips during the tulip mania) in that there is only one person involved in creating its value. Originally it's mined, but it's valuable because there are people who will buy it today because they estimate there will be people who want to buy it tomorrow. That is, there is market today, because there is an estimate of a market for it tomorrow (and a guarantee of limited supply). People buy bitcoins (or gold or tulips) today either because they are speculating on it's future value or because they find it useful to convert there thing of value (let's say it's tee shirts they are selling online) temporarily into gold or bitcoins because the instrument in question is more easily transferred, combined and stored than the thing they have of value (tee shirts). However, their intention in either case was to sell it back into the market later on. As the Austrian economists would say there is a market value for cash in your wallet because its easier to carry around this cash and turn it into bread at the corner store than try to convince the shop owner to accept an hour of your labor (or part ownership in your house). The point being that nothing intrinsically 'backs' the currency other than the ongoing existence of a market place [1] and corresponding estimate of that ongoing existence.
'Two sided' money or debt based currency systems require at least two people to create them, They are 'valuable' regardless of the market mood in future, because at some point a promise was made to redeem that instrument for something ostensibly of value in future. To the extent that the person (or person(s)) making that promise continue to be 'in good standing' the instrument in question continues to have value. They also have value, like one sided systems, because of simple market place estimates. Two sided or debt based currency systems include mutual credit systems (such as LETs or 'commercial barter'), the original ripple system, and also, in a much more complicated way, most of the value in our modern commercial money system. You can distinguish a debt based system different from 'one sided' system in that, nominally at least, the instrument of credit is destroyed once it returns back to the person who created it, so the amount of currency in circulation can expand or contract depending on the amount of promises made.
With modern money (what people sometimes, unhelpfully call 'fiat' money [2]) our commercial banks create more money by expanding their balance sheet. When they do this, a new deposit is created at the same time as a corresponding promise in the form of a loan the bank makes to a person (who promises to pay back the loan by doing things for the instrument in question, aka 'money' and then returning that money to the bank). When the person or company eventually pays back that loan (or they default) the corresponding deposits on the other side of the balance sheet are also extinguished. In this way the money supply can both expand or contract. (Unlike gold or bitcoin).
In practice, of course, it only ever expands. Two sided aka modern money is more flexible than one side money (aka money-like-gold, aka bitcoin) in that the supply, or more usually, the rate of creation of supply can be controlled by adjusting the interest rates on loans (and hence the willingness of people to take up new loans and thus expand the money supply). On the other hand some claim it is more open to corruption (or just short term thinking) leading to oversupply and hence inflation (or loss of value) in the longer term.
All of which is to say the grandparent post really has a very good point. This proposal is about money-as-IOU which is really quite the opposite of the bitcoin money-like-gold concept. That said, the combination of the two is very exciting in my opinion (which is why I've been working on http://thankful.as and have been excited about ripple since as an idea since I first heard about it)
Phew.
[1] Of course Gold (unlike bitcoin) does have a small 'intrinsic' value as adornment or in industrial processes, but IMHO this is largely irrelevant as to what is the reason for its value as a currency, and why I believe bitcoin has as much staying power as gold. (ie lots).
[2] Gold has also, on occasion, been stamped with the picture of the king, signifying that it is acceptable within that kingdom in payment of taxes. This 'stamping' is functionally very similar to the 'fiat' laws we have in place today regarding the value of cash.
Interestinyly whenever gold was stamped, the gold traded for a higher value the metal value of raw gold of the same weight, though only within the kingdom in question, not internationally. Of course, from the King's perspective the neat thing about this was that the king could redeem value today by buying (or just taking) raw gold and then stamping it with their picture. Essentially they receiving value today from the future value of taxes that would be paid in that coin. This may be one reason why monarchs would so often call in all the gold in their kingdom, stamp it, and then send it back out again.
Incidentally, by continuing the analogy of gold and bitcoin, the government could also, today, retrieve value from their future taxes by stamping certain parts of the bitcoin chain with a cryptographic stamp indicating that they would be willing to accept those particular bitcoins as legal tender for taxes in future.. thus allowing them to buy bitcoins at price x, stamp them and then sell them for price y, higher than x. (Where market economics would suggest that the carrying capacity of (y-x)*n for the n bitcoins they do this to would be about equal to the future value of all taxes that people want to pay in bitcoins.)
... is false. Both represent the bearer trusting their economic society to pay back the debt for the original goods or labour for which the bearer exchanged for its acquisition, at some point in the future.
I would also agree that Bitcoin has a good chance as a commodity (I just don't have the right risk factors to invest) the only frustrating thing about Bitcoin is so many people talking about how Bitcoin needs to become a major currency.
The only thing negative I would say about your post is that you have to be really careful talking about inflation and deflation. Inflation is often put in a negative light because it discourages saving, but deflation discourages spending, which is much more dangerous. Which is why I don't have any faith that Bitcoin itself will become a currency, the deflationary problem is built in and part of the core.
It has value because it's the only thing the US will take in payment for tax and fee obligations.
It's a rather open question as to which of these emerged first; it may very well have been the credit systems.
http://ifex-project.org/ attempts to do just this. Overall strategy: (1) treat a transaction between entities as a higher level abstraction than that which occurs over the wire within a particular settlement system (2) segregate settlement pathways and assets (3) maintain absolute neutrality on both (4) keep things extensible
Really amazed at how little feedback this has had despite frequently pointing at it in what I would have thought were the 'right' circles...
So basically, I think this exchange could be used in such an idea. It'd have to tie in with an accounting information system, and other systems. Possibly an ERP. Management can approve of all intracoin/fiat trades on the exchange, because it means a department will need to make an external purchase, and management may want to approve of it... to see and approve where its real money is about to go. Also, a conglomerate of companies tied into 1 exchange and 1 intracoin would be interesting.
add: company exchange can also hold bitcoins/??coins for spending at other companies that accept cryptocoins. And sales can be received in cryptocoins. If that was the case all the time, fiat would only be needed to pay government taxes.
A P2P market place for Bitcoin would permit trading and price
discovery even in the absence of cooperation from the legacy payment
infrastructure. Orders get signed and published through the network and matched
by each node. A buyer sends a Ripple like payment to the seller who sends
Bitcoins as part of one single transaction. The system requires trust in friends,
but no further."It is not hard to defraud people on #bitcoin-otc. In many senses it's not an exchange at all, simply a discovery mechanism, as there is no settlement offered. It's just a lead-gen system.
I'd be interested in seeing what happens but I'd be surprised if this manages to capture more than a portion of the otc trading market.
The one who is last is holding the IOU is gonna support the loss ?
Which makes it far less useful than a conventional exchange.
My local coffee shop in Ogaki will sell you 11 200 yen vouchers (conveniently equal to one cup of coffee) for 2,000 yen. How precisely does Bitcoin improve this for buyer or seller?
But you might want to give some thought to how you'll prevent counterfeiting. A voucher for a cup of coffee is one thing, but if you want to raise a lot of money then security is a bigger concern. As far as I know there's no established infrastructure or service for this sort of thing. If you do it, you're pretty much building something from scratch.
Bitcoin has the potential to make it as simple as installing client software, and telling your customer base about it. If bitcoin gets to common usage, and people succeed in building decentralized exchanges, then your customers could buy your vouchers using the app they use already, and resell them later with a button click or two.