Posted on 12/02/2013 9:41:44 AM PST by Star Traveler
Virtual currency: It is mathematically elegant, increasingly popular and highly controversial. Bitcoin’s success is putting it under growing strain.
ALL currencies involve some measure of consensual hallucination, but Bitcoin, a virtual monetary system, involves more than most. It is a peer-to-peer currency with no central bank, based on digital tokens with no intrinsic value. Rather than relying on confidence in a central authority, it depends instead on a distributed system of trust, based on a transaction ledger which is cryptographically verified and jointly maintained by the currency’s users.
Transactions can occur directly between the system’s participants at almost zero cost, without the need for a trusted third party or any other intermediary, and are irreversible once committed to a permanent and fully public record. Bitcoin’s mathematically elegant design ensures that the money supply can increase only at a fixed rate that slows over time and then stops altogether. Anonymity, while not assured, is possible with the right precautions and tools. No wonder Bitcoin is so appealing to geeks, libertarians, drug dealers, speculators and gold bugs.
Bitcoin began in 2008, at the height of the financial crisis, with a paper published under the pseudonym Satoshi Nakamoto. The technical design outlined in the paper was implemented in open-source software the following year. It came to widespread prominence in 2012 and has been in the headlines ever since.
(Excerpt) Read more at economist.com ...
I should also point out that the cost of manufacturing paper dollars exceeds their intrinsic value as fuel or wallpaper. In fact, manufacturing perfectly good paper and ink into paper dollars reduces the intrinsic value of the components.
“The value comes solely from its scarcity, and demand. This is as true for Bitcoins as for gold.”
If I lived long enough to collect on such a bet, I’d wager that gold will still be valued by mankind thousands of years after BitCoin has faded from all memory.
Even if for no other reason, BitCoin depends upon an electronic infrastructure to exist. Gold doesn’t.
Depends on your love of wall paper....
Rather than relying on confidence in a central authority, it depends instead on a distributed system of trust.
The value of something (anything) is whatever someone else pays for it on the open market (i.e., not a coerced transaction) and that only true at that particular time. It changes from day to day and from buyer to buyer for all items which are bought and sold - whether it’s the US Dollar or gold or silver or TVs or cars or whatever.Exactly. The notion that things must have something like an “intrinsic value” in order to have a price is outdated. 19th century economics. Gold was the primary counterexample.A Bitcoin is worth whatever people pay for it that day.
When I first tried Bitcoin about 8 months ago, I downloaded and installed the software, then it has to run a synch pass to download the DB’s.
I have a DSL line, it’s not lightning fast, but it’s respectable.
Took over FOUR DAYS of continuous running to get the DB downloaded.
Bitcoin has a scalability issue that will kill it.
Soon.
All commodities (e.g., land, gold, oil, pork bellies, etc.) have both intrinsic and non-intrinsic value. The intrinsic value is that the commodity can be used for something other than as a currency. The non-intrinsic value is mostly a matter of supply and demand.This notion of intrinsic value seems weakly defined and useless to me. If the intrinsic value of gold derives from the fact that it can be used to make jewelry, then we should be able to explain what the “intrinsic value” of jewelry is. I doubt that you will get very far there.Gold has intrinsic value because it can be used to construct other things, such as jewelry and electronics. Most of its value, however, is non-intrinsic value, based on current supply and demand.
People have preferences, and they like owning jewelry, or gold. And if they own a certain number of units of gold/jewelry at one point in time, they are still willing to pay a certain amount of money to get even more of it. Why? Who cares. All that counts, and what makes the value, is this willingness to pay to get even more of it. This is what eventually results in the market price, and we simply don’t need a notion of “intrinsic value” here.
Note that I am not a fan of Bitcoin, and do not advise investing in them. This entire idea of limiting the creation of new Bitcoins by the scarcity of CPU cycles seems ugly and unelegant to me. It may or may not be a bubble, I don’t care. All I am saying is that whether or not Bitcoin is a good idea does not depend on anything like “intrinsic value”
If people keep using it as currency, it will keep some value. That does not mean that its current rate is not a big bubble that is about to burst. But that has nothing to do with intrinsic value. There can be bubbles of things with practical use, too, after all.
From orbit... It's the only way to be sure.
LOL!
Using that logic, North Korea’s currency should be top notch.
If I lived long enough to collect on such a bet, I’d wager that gold will still be valued by mankind thousands of years after BitCoin has faded from all memory.Yes. I wouldn’t worry about the electronic infrastructure so much as about the underlying crypto tech. What if it gets cracked? I think there is some inherent risk that there is a hole in the whole scheme that might render all Bitcoins worthless overnight. That won’t happen with gold. Well, unless somebody finds a cheap way to turn sand into gold or something…Even if for no other reason, BitCoin depends upon an electronic infrastructure to exist. Gold doesn’t.
Yeah, a technical issue like that is a big problem. I don’t know the answer to that, but I’m sure some good technical and computer minds can address it ... and they’ll have to ... “or else” ...
When Big Government closes banks in a financial emergency, one and all can neither transact nor reach assets in safe deposit.
Assuming that a similar crisis exists....say bitcoin depriving the Fed from effectively coercing economy or profiting therefrom....it would not be a difficult thing for BigGuv to order servers blocked. Right??
But whether bit coin is a good monetary system or not is immaterial to me, it is a wonderful means for illegal transactions. For this reason alone I believe it should be outlawed.
I did not used to think that way, I used to think this is great, that it gave people an independence that they didn't have in the past. But people have always had independence with gold coin, silver coin or anything else of value that can be bartered. What bothered me is when I was hit with the Trojan virus called crypto locker, a virus that found my computer via an email from USPS and encrypted all of my files, or at least all of my data files including pictures. I had backups I have several NAS boxes, the Trojan managed to find all of my connected storage. I thought my business was ruined but I did manage to find enough backups on laptops and unconnected storage that I was able to restore most of my files. I would have been willing to pay the $300 ransom that the Trojan horse wanted but I was out of town when it happened and they only give you 72 hours to pay the $300 ransom. The method for paying the ransom? Bit Coin! Bit Coin is anonymous. So here are these crooks stealing $300 from people and the only way they can do it is only through an anonymous money transfer.
I was so angry at the people who tried to steal $300 from me by holding all my data as ransom that I could have easily shot them had they been standing in front of me.
I hope the people that did this get syphilis and have a very slow painful death. I also wish governments would outlaw bit coin.
When Big Government closes banks in a financial emergency, one and all can neither transact nor reach assets in safe deposit.Oh, I don’t think it would be so easy because: What servers? The most interesting thing about Bitcoin is that it is based on so-called serverless peer-to-peer protocols. It is a network of nodes without any central servers. There may still be some small servers for bootstrapping, but they contain no essential information and can be easily replaced, in some offshore countries.Assuming that a similar crisis exists....say bitcoin depriving the Fed from effectively coercing economy or profiting therefrom....it would not be a difficult thing for BigGuv to order servers blocked. Right??
Congress makes a law that Bitcoin is not a form of currency which can be traded for dollars in the US. The Liberty Dollar comes to mind. The FBI and Secret Service goes to the nodes and kindly confiscates the property of those who haven't given up their encryption keys.
It was only part of the logical argument.
China’s biggest Bitcoin exchange, BTCChina, has stopped accepting deposits in Chinese yuan. The shutdown has sent the currency into a downward spin, stripping it of half its value overnight. It is trading at $572 on Mt.Gox, down from a high of about $1,200 last week. ...
And so goes the price of tulip bulbs.
A fool and his Bitcoins are soon parted.
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