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October 21, 2011 6:54 AM   Subscribe

The Bitcoin bubble is bursting.
posted by griphus (103 comments total) 18 users marked this as a favorite

 
I haven't done an enormous amount of research into the Bitcoin phenomenon, so this may be entirely off base, but it strikes me as an attempt to create a fiat currency without any actual government backing the money. If so, how was that not a self-evidently terrible idea?
posted by Holy Zarquon's Singing Fish at 7:06 AM on October 21, 2011 [2 favorites]


I for one advise hurriedly converting all your bitcoins into a more stable currency, such as Beenz.
posted by FAMOUS MONSTER at 7:06 AM on October 21, 2011 [2 favorites]


What's the Beenz to Flooz conversion rate these days anyway?

In bitcoin's case, I guess a New Yorker puff piece was taken as a sell sign? [Link is a summary; whole article is paywalled. Does not accept bitcoin.]
posted by chavenet at 7:08 AM on October 21, 2011 [4 favorites]


(cackles, goes out back to dig up mason jars full of CyberGold)
posted by jquinby at 7:10 AM on October 21, 2011 [1 favorite]


I haven't done an enormous amount of research into the Bitcoin phenomenon, so this may be entirely off base, but it strikes me as an attempt to create a fiat currency without any actual government backing the money. If so, how was that not a self-evidently terrible idea?

Please, for the love of god, read about this before commenting so we all don't have to spend the next 200 comments explaining what BitCoin is, what it isn't, and have the whole Currency 101 class again.

There are even some great FPPs on this subject, if you're interested.
posted by odinsdream at 7:10 AM on October 21, 2011 [11 favorites]


What's the Beenz to Flooz conversion rate these days anyway?

I thought eyeballs were the real currency on the web. At least I hope so, 'cause I've got a storage locker full of...um, A-HA-HA! forget I said anything.
posted by PlusDistance at 7:12 AM on October 21, 2011 [29 favorites]


Yeah I should've (previously)
posted by griphus at 7:15 AM on October 21, 2011


IIRC, the whole thing backing bitcoin is artificial scarcity.

That, and also the society's enthusiasm for it. Since I mean, I can have the only pebble naturally shaped like a dodecahedron in the world, but it's not worth something unless someone else wants it.

There's a service out there for shorting on Bitcoins, and there are people still mining bitcoins even though they're worth less than the electricity to mine them. There is one guy mining bitcoins using a more efficient FPGA, so he's spending about $.20 per $2 coin, but that seems to be an isolated case. It's really interesting seeing what's going on here. I don't think bitcoin is going to be a good investment for speculators anytime soon, and I'm not sure it'll remain the method of choice for sending money for illicit goods which seems to be its most promising use right now, but it'll make for some interesting case studies.
posted by mccarty.tim at 7:16 AM on October 21, 2011


So every previous discussion of Bitcoin on Metafilter has been full of earnest people proclaiming how it really is the one true new currency and will be valuable forever. Can't wait to see how this discussion goes.

I'm also curious to see if we ever find out who actually profited in the Bitcoin run-up and whether there was deliberate market manipulation or just good luck.

The Forbes piece really nails it: "Bitcoin isn’t secure as the thefts have shown, it’s not liquid, as the various price crashes have shown when one single large order goes through an exchange, it’s not widely accepted so it’s not all that good as a medium of exchange and as we’re now finding out, it’s not a good store of value either".
posted by Nelson at 7:18 AM on October 21, 2011 [8 favorites]


BitCoin is cryptographically secure. That doesn't actually help protect against theft in cases where people give their BitCoins to banks (MtGox). Crypto only protects people who keep the right secrets secret and keep the wrong people off the hard drive.
posted by LogicalDash at 7:21 AM on October 21, 2011 [1 favorite]


Come back to me in a few hundred hours--I'm still computing my surprised face.
posted by Horace Rumpole at 7:22 AM on October 21, 2011 [13 favorites]


There was an internet bubble. Then it popped.

Somehow I'm still using the internet.

Huh, I guess speculative bubbles actually don't destroy the value of the underlying assets.
posted by LogicalDash at 7:25 AM on October 21, 2011 [1 favorite]


Actually the bubble burst in mid-June. It's been interesting to watch the coverage of Bitcoin since then.
posted by muddgirl at 7:28 AM on October 21, 2011 [2 favorites]


And what's the underlying value of a bitcoin?
posted by edd at 7:29 AM on October 21, 2011 [3 favorites]


i do not really understand the scorn bitcoin gets. it seems to be coming from a weird place and all shot through with veins of ressentiment and spite. whenever the value drops you get a whole bunch of people congratulating their own perspicacity and shrewdness, the same kind of commentator who uses coal strikes to make unfavorable/trollish comparisons to "occupy wall street". just alienated and bitter and creepily spiteful.

@Nelson
So every previous discussion of Bitcoin on Metafilter has been full of earnest people proclaiming how it really is the one true new currency and will be valuable forever.
it's significant, that they're earnest, isn't it. that's what powers the schadenfreude
posted by This, of course, alludes to you at 7:30 AM on October 21, 2011 [8 favorites]



So every previous discussion of Bitcoin on Metafilter has been full of earnest people proclaiming how it really is the one true new currency


You must not be reading the same MetaFilter I am.
posted by spicynuts at 7:32 AM on October 21, 2011 [10 favorites]


There are even some great FPPs on this subject, if you're interested.

I've read them. Most of my reading on bitcoins has been done through Metafilter, thus the "not an enormous amount of research" thing. But it's a set of tokens that were created to be artificially scarce within strict limits. The creators then set out to convince people that the tokens have real-world value. That's the definition of fiat money- you come up with a currency and then get people to agree it has value, as opposed to hard money, where you start out as something people ascribe value to and convert it into a currency.
posted by Holy Zarquon's Singing Fish at 7:32 AM on October 21, 2011 [9 favorites]


Has anyone here actually purchased goods using bitcoin?
posted by demiurge at 7:32 AM on October 21, 2011


I think bitcoin has more potential as a sort of transfer service, like paypal minus the oversight and centralization, which appeals to the paranoid and people buying illicit stuff.

Unfortunately, people aren't going to trust it even for that until bitcoin stabilizes, if that ever happens. It could be that the market's too small for stability, but I think it's not really going to grow until it stabilizes, and other issues are cleared up, such as insecure banks, or worse, banks whose owners take your money and run. Dealing with money locally on the harddrive seems pretty bad, too, since not everyone knows how to keep their computer secure and their data backed up and redundant, meaning their money could die with their drives. I know some of the minarchists/anarchists/hardcore libertarians would hate to hear this, but this is proving why the FDIC is so great.
posted by mccarty.tim at 7:32 AM on October 21, 2011 [2 favorites]


Has anyone here actually purchased goods using bitcoin?

Silk Road was a Bitcoins-for-illicit-substances exchange. The New Yorker piece linked above has the journalist buying a hotel stay with bitcoins, although the manager of the hotel admitted that the owner (his mother) did not know he was accepting Bitcoin.
posted by griphus at 7:35 AM on October 21, 2011


Oh, wait, "here." Sorry. Never mind.
posted by griphus at 7:35 AM on October 21, 2011


Gee, I hear the Euro's not working out too well. Maybe this could be a replacement for that!
posted by newdaddy at 7:37 AM on October 21, 2011 [1 favorite]


There's a comment on a blog post that says Silk Road crashed recently and that speculates that this may have worsened the Bitcoin decline.

I've read on a number of occasions that a lot of Bitcoin's value comes from it being the means by which people anonymously buy drugs on Silk Road.

I couldn't immediately find any info on Silk Road being or having been down, though.
posted by Anything at 7:39 AM on October 21, 2011


@LogicalDash

no the internet stopped existing and everyone had to grow up and do honest work for a living

on a completely unrelated note, george f. will and pj o'rourke make some good points
posted by This, of course, alludes to you at 7:40 AM on October 21, 2011


Ĉu vi parolas Esperanton?
posted by robocop is bleeding at 7:41 AM on October 21, 2011 [4 favorites]


it seems to be coming from a weird place and all shot through with veins of ressentiment and spite.

No, a singular distrust of anything that seems like a scam cooked up by the same sorts of libertarian lackwits who keep putting the economy into a powerdive for lulz and profit. This distrust seems to be paying off in the long term.
posted by Slap*Happy at 7:41 AM on October 21, 2011 [19 favorites]


I'm just going to leave this here.

I guess the moral is, don't sell your bitcoins because Wells Fargo is planning on accepting bitcoins on monday?
posted by mccarty.tim at 7:42 AM on October 21, 2011 [1 favorite]


So, when überlibertarians try to tell me that no economy has ever failed without the interference of the government, is this the specific recent example to trot out?
posted by Sticherbeast at 7:44 AM on October 21, 2011 [1 favorite]


So, when überlibertarians try to tell me that no economy has ever failed without the interference of the government, is this the specific recent example to trot out?

Of course not, because the only reason this failed is because the government actually lead the FUD campaign against bitcoins! They were even behind the multiple hacking and DDOS attacks!
posted by ymgve at 7:47 AM on October 21, 2011


Damn. I built a beowulf cluster a couple years ago that I couldn't figure out a purpose for. Now you tell me I could have been generating money with it???

Which makes me wonder why some super efficient super-FLOPS computer can't spend 5 seconds to calculate the remaining bitcoins left in the world.
posted by brenton at 7:47 AM on October 21, 2011


i do not really understand the scorn bitcoin gets.

Pointing out the flaws in a system isn't scorn - it's rationality. Bitcoin was an interesting experiment but beyond that the endgame was obvious from the beginning. Most bloggers who were enthusiastic about bitcoin talked about the real benefits of an anonymous currency - but they also bragged about the enormous sums of money they had made mining and hoarding it. Once those speculators started selling off their holdings, there was no real useful demand because there was nowhere to spend them. Couple that with the fact that bitcoins greatest selling point (its anonymity) was also it's greatest weakness (no web of trust, no authentication, no way to insure against theft, etc).

None of this was a surprise. All of it was predictable, and was predicted.

whenever the value drops

So you mean "continuously, since June of 2011?"
posted by muddgirl at 7:51 AM on October 21, 2011 [11 favorites]


That's the definition of fiat money- you come up with a currency and then get people to agree it has value, as opposed to hard money, where you start out as something people ascribe value to and convert it into a currency.

I guess it depends on your definition of fiat money, but it's not really the same thing as the kind of government-backed currencies that exist today. The way it normally works is that a government says "These pieces of paper we print are worth X. You can use them to pay your taxes and they are the official currency here." With Bitcoin it's more like "Here is a distributed system for creating artificially scarce tokens, and for exchanging those tokens in transactions" It's only like a fiat currency in that the tokens themselves have no intrinsic value.
posted by burnmp3s at 7:52 AM on October 21, 2011


Just watch what happens when people stop hoarding all those US dollar coins!
posted by mrgrimm at 7:53 AM on October 21, 2011 [1 favorite]


I've done some Bitcoin mining on my home computer, no money invested but the chance of generating free money for the cost of spare CPU cycles made the decision a no-brainer for me. Something's always better than nothing! In this case, that something was a grand total of 0.03 BTC (six whole cents!) over the course of three months. Not that I expected a great deal of lucre to appear in my lap, but the prospects seemed a bit better back when I started and they were selling for $30 a pop.

I think Bitcoin will come into its own once the price settles down. People (myself included, to some extent) were using it as a get-rich-quick scheme instead of a currency. It's awfully hard to do the latter when the price is fluctuating wildly as a result of the former. Once the bubble's finished popping and the dust has settled, maybe it'll be a more hospitable environment for ordinary commerce. Maybe it won't. I think it would be serendipitous if it hit parity with the U.S. dollar and just stayed relatively constant for a while. Maybe it won't.

My prediction is that eventually the world is going to operate on a digital currency of some kind. Seems almost unavoidable. I doubt it'll be Bitcoin. But Bitcoin is an important precursor, helping pave the way. Who knows how long it'll take to get there, or how many more currencies will claim to be "the one" before "the one" arrives (and is eventually succeeded by another "the one"). The takeaway, I hope, is that the genre of instant, anonymous, global currency is not a flash-in-the-pan... it'll be here, in one form or another, forever. Despite Bitcoin's flaws, the idea behind it is too appealing to too many people for it to die.
posted by The Winsome Parker Lewis at 7:53 AM on October 21, 2011 [6 favorites]


Which makes me wonder why some super efficient super-FLOPS computer can't spend 5 seconds to calculate the remaining bitcoins left in the world.

Because the combined computation amount spent on mining Bitcoins is, as far as I can see, several times faster than the world's most powerful supercomputer.

(The fastest computer in the world does 8000 teraflops. Compare to the Bitcoin network, which corresponds to 123000 teraflops.)
posted by ymgve at 7:56 AM on October 21, 2011 [4 favorites]


i do not really understand the scorn bitcoin gets.

I assume a lot of it has to do with the fact it seems to be loved by Libertarians and anti-government kooks. Also, it's kind of a silly idea, as has been pointed out many times over.
posted by chunking express at 8:02 AM on October 21, 2011 [2 favorites]


@muddgirl

i get the distrust but it's like people are clapping for every news story about bitcoin values dropping, you know? and i don't see the hostility being directed so much at the perperators of whatever scam there might be (and if it is a scam as opposed to an economic malfunction, i am not sure who stands to benefit in the end), but at the earnest believers in the thing.

personally i kind of wonder if it doesn't have much to do with how people were (apparently) making money with their computers for little or no effort and how bitcoins are being used to buy drugs through silkroad.
posted by This, of course, alludes to you at 8:05 AM on October 21, 2011 [1 favorite]


Compare the collapse of Bitcoin to the fact that the Rapture didn't occur today.
posted by Sticherbeast at 8:09 AM on October 21, 2011


> Has anyone here actually purchased goods using bitcoin?

I have an internet pal on another web site who bought six adderalls off Silk Road with some bitcoin. He did this more as an experiment than because he had any demand for the adderalls. He chose that because he calculated it as the smallest exposure to law enforcement hassle while providing for a meaningful result.

Also I know another guy in real life who bought the graphics processing unit and is enthusiastically mining away 24 hours a day. He is a little odd (Dungeons and Dragons comic book guy) but not really strange. You could invite him to a dinner party and he wouldn't creep anybody out.

The whole thing is pretty fascinating to me, I suppose I agree pretty close with Winsome Parker's take, right up to the point where I am going to take the trouble to do any mining myself.
posted by bukvich at 8:09 AM on October 21, 2011


I think the problem is that I can't wrap my mind around understanding bitcoins' value. And I need to be able to understand the value of a currency to have any faith in it. It seems like Glenn Beck scam for geeks. I know that's not a fair assessment, but then the fair assessment needs to be easier to grasp. And I have a PhD. Which is my way of saying, damn it, I wish my degree could prevent me from feeling like an idiot.
Because (and I'll end here), instinctively, this feels like it has the nugget of a great idea not just for libertarian idealists or doomsayers.
posted by dances_with_sneetches at 8:11 AM on October 21, 2011


People are clapping because they were right, and back when bitcoin started, any sort of negative coverage of Bitcoin was met with fanatical and sometimes illogical responses from supporters. People like to be right, especially when their opinions are cemented by opposition. I don't think there's a moral component to it at all.
posted by muddgirl at 8:12 AM on October 21, 2011 [8 favorites]


There is apparently a DNS alternative based upon bitcoin, called namecoin.
posted by jeffburdges at 8:20 AM on October 21, 2011 [2 favorites]


The way it normally works is that a government says "These pieces of paper we print are worth X.

Outside of a controlled economy, the government can't do that. A dollar is worth the weight of bananas you can buy with it, and that is between you and the grocery store.

I've got my money in Canadian dollars, which have been appreciating slowly relative to the American dollar and are printed in pretty colours.
posted by justsomebodythatyouusedtoknow at 8:22 AM on October 21, 2011 [3 favorites]


And what's the underlying value of a bitcoin?

Exactly the same as the underlying value of a dollar: nuthin'.

However, the underlying value of the Bitcoin currency system has to do with the ability to exchange stuff with people over the internet without having to rely on credit cards and PayPal and shit.
posted by LogicalDash at 8:26 AM on October 21, 2011


The way it normally works is that a government says "These pieces of paper we print are worth X.

Outside of a controlled economy, the government can't do that. A dollar is worth the weight of bananas you can buy with it, and that is between you and the grocery store.


To be clear by X I meant "1 dollar" or "1000 rupies" or "50 SpaceCreds", that they were worth a particular value in some sort of made up monetary value system. Not actual worth in terms of what goods and services you can buy with them.
posted by burnmp3s at 8:28 AM on October 21, 2011


ymgve: I wonder if someone could do a GRAPE style system just to calculate BitCoins.
posted by Grimgrin at 8:30 AM on October 21, 2011


Metafilter: Enthusiastically mining away 24 hours a day. A little odd but not really strange.
 
posted by Herodios at 8:32 AM on October 21, 2011


The reason I clapped when Bitcoin dropped was that it crashing to zero is the only thing that is going to keep even more idiots from losing even more money. You kind find posts all over the place online of people investing thousands of dollars into this shit, thousands of dollars they could in no way afford. How do I know they couldn't afford to do the incredibly stupid thing they were doing? They posted about that as well. Bitcoin mining rigs, $30,000 worth in that New Yorker article alone.

The longer Bitcoin did anything but disappear down a black hole the more people got involved in it. In a 'currency' that had it somehow in some way miraculously gained traction would have spelled the end of the current economic order (stated goal of 1/2 the jerks using the thing) and the rise of the worst kind of libertarian (breathing).
posted by Peztopiary at 8:33 AM on October 21, 2011


I'll own up to scorn and schadenfreude about the Bitcoin collapse. I'm not particularly proud of it. I spent a lot of time reading cypherpunks in the late 90s. I like the concept of crytoanarchy. I spent a lot of time researching cryptocash protocols and was friends with one of the e-money startups of the late 90s (all of which failed). BitCoin is a very impressive achievement, both technically and socially. They've done what we were talking about, it actually works.

Except.. except.. all this earnest excitement, the language about "mining coins", the hype, it just feels dangerously naïve to me. Particularly in the face of simple incompetence like Mt. Gox our the potential of outright deliberate fraud taking advantage of all these earnest folks. The good news is the total value of the BitCoin economy has never been terribly large, hopefully no one lost real money they needed to pay for their home, or food, or the like. I hope.

PS: the underlying value of a dollar is the US government, its banks, and its military.
posted by Nelson at 8:33 AM on October 21, 2011 [4 favorites]


Wow, an upper limit of 21 million bitcoins would itself be a huge hurdle to widespread adoption. Even if it caught on in the us, it would mean less than one in ten people could even have _one_ bitcoin.

I believe I said before that Bitcoin seems like the somewhat broken early form of something that will almost certainly be dominant in the future. (Who needs some $5000 computer that fills an entire room when we can do addition problems by hand in the time it takes to fill out the punch cards, right?) It's a first foray into distributed currency, and that's very cool, but it's hit some really serious rocks, which will be instructive for the next attempt, which will almost certainly be better. And then eventually, someone will nail the formula, and the result will be hard to ignore.

The interwebs already have a massive decentralizing effect, and it would be fascinating to see what would happen if currency is decentralized successfully.
posted by kaibutsu at 8:35 AM on October 21, 2011 [3 favorites]


kaibutsu: Just to be clear, bitcoins can be used for transactions in fractional amounts. You can buy or sell something for .05 BTC, or .0001 BTC, or whatever.
posted by pts at 8:38 AM on October 21, 2011


PS: the underlying value of a dollar is the US government, its banks, and its military.

So they're like stocks? So if you collect enough US dollars you get a senator automatically, and you don't have to bribe him or anything?

Nah, I'm pretty sure you have to exchange the money for stuff in order to get value out of it. If you just hold onto it... well... you might get interest.
posted by LogicalDash at 8:38 AM on October 21, 2011


worst kind of libertarian (breathing)
huh.
I'll own up to scorn and schadenfreude about the Bitcoin collapse. I'm not particularly proud of it.
i have a hard time not being sympathetic to these dudes and their bullshit wild-eyed dreams. maybe if i got disappointed more often i'd be a little harsher, i guess
posted by This, of course, alludes to you at 8:40 AM on October 21, 2011


I'll own up to scorn and schadenfreude about the Bitcoin collapse
posted by Nelson at 4:33 PM

"Ah ha!"
posted by PeterMcDermott at 8:54 AM on October 21, 2011


Dead libertarians at least have the excuse that every time someone implemented their god awful ideas they weren't around to see the results. All the money spent on this particular pipe dream could have done something useful. All the graphic card cycles used could have been involved in some other massively distributed project that actually would have had tangible results as opposed to just generating waste heat for a massive pyramid scheme.

Every single time someone tries to build Libertopia it's because they won't deal with the world as it is, they won't try to fix it or change it, they'll just fuck off to some island and leave the rest of us in this mess. Assholes one and all.
posted by Peztopiary at 8:55 AM on October 21, 2011 [4 favorites]


It's Flaxscrip or nothing for me, as far as alternative currency goes.
posted by COBRA! at 8:55 AM on October 21, 2011 [3 favorites]


Gee, I hear the Euro's not working out too well.

Strange. I paid my breakfast this morning in €, and the café owner didn't complain. Moreover, it costed me exactly the same amount of € as during the last year. I suspect that would not have been the case with "bitcoin".

Seriously, the news of the demise of the € are greatly exaggerated. Coincidentally, they are usually carried by people who don't use it themselves.
posted by Skeptic at 8:56 AM on October 21, 2011 [4 favorites]


@peztopiary

just curious but since you feel strongly about this i'd guess you've thought it through: do you have anything against the idea of anonymous money/anonymous computer-transferred money in itself
posted by This, of course, alludes to you at 9:07 AM on October 21, 2011


Yes. It eliminates the governing bodies of the world and replaces them with ??? Whatever the new currency is called, it is designed as a deliberate attempt to uncouple Capital from any restraints any government could place on it. Capital is untrustworthy as I feel the past ohhh the whole of human history has shown.

I think that Libertarianism as a political movement is the worst option. Trusting the people who currently bay about being 'job creators' to set up some sort of new government chills me to the bone. All the worst excesses of Capitalism with none of the restraints (pitiful though they are) placed on it by modern man is honestly one of the most horrendous things I can think of.
posted by Peztopiary at 9:24 AM on October 21, 2011 [4 favorites]


There was an internet bubble. Then it popped.

Somehow I'm still using the internet.

Huh, I guess speculative bubbles actually don't destroy the value of the underlying assets.


There was a housing bubble. Then it popped. Somehow all the houses still exist.

Maybe one of us doesn't have a clue what "bubble" means.
posted by The World Famous at 9:26 AM on October 21, 2011 [5 favorites]


PS: the underlying value of a dollar is the US government, its banks, and its military.

So they're like stocks?


Nonono, not like that. Dollar holders don't get ownership of those institutions; they benefit from their active defense of it's value. If the value of the US dollar is threatened, the banks will influence their government to deploy it's military. It's not a coincidence that you can only buy Persian Gulf oil using US dollars.
posted by ceribus peribus at 9:30 AM on October 21, 2011


It's not so good for a currency to have a bubble, since the main job of currency is to have a fairly stable value.

I could see maybe using Bitcoins for a transaction if Paypal started causing me problems and bitcoins were widely accepted, but I would convert them to USD as soon as possible.
posted by mccarty.tim at 9:31 AM on October 21, 2011


ok thank you peztopiary. i have a couple more questions

is cash a form of anonymous currency, and if so, are you in favor of cash or not?

(incidentally i am not libertarian/attempting to defend them)
posted by This, of course, alludes to you at 9:32 AM on October 21, 2011


I guess it's anonymous in the sense that it is very difficult to trace, maybe impossible depending. I am in favor of it because it makes transactions easier. In some ways it doesn't differ from the hypothetical currency because it only exists as a thing with worth because all the governments pretend that it does. I had originally written because we pretend it does, but that isn't really the case is it? The reason I'd prefer cash to bitcoins is because the government that controls the monetary policy behind cash is representing me and the other citizens in it so at least in theory cash has limits to what it can and cannot be used for. In practice most of those limits are illusory though.

I kind of feel like we (alright I :) ) might be monopolizing this thread though. Memail me?
posted by Peztopiary at 9:43 AM on October 21, 2011


I think it's an interesting discussion and totally on-topic, so personally I'd think you wouldn't have to take it outside the thread.
posted by goodnewsfortheinsane at 9:45 AM on October 21, 2011 [1 favorite]


brenton: Which makes me wonder why some super efficient super-FLOPS computer can't spend 5 seconds to calculate the remaining bitcoins left in the world.

Every time another block of bitcoins is computed, the difficultly of computing the next block (of decreasing size) is also increased, so as to maintain a consistent rate of bitcoin production in the face of increased computational resources. So you could knock out a few, but then it'd get harder.

kaibutsu: Wow, an upper limit of 21 million bitcoins would itself be a huge hurdle to widespread adoption. Even if it caught on in the us, it would mean less than one in ten people could even have _one_ bitcoin.

The idea is that as more bitcoins are demanded, you can divide bitcoins to the point that you have 2.1 quadrillion sub-bitcoins. That's 300,000 sub-bitcoins per person on earth.
posted by JiBB at 9:48 AM on October 21, 2011


Alright never mind then. This, of course, alludes to you do you think I'm being unduly harsh about Bitcoin? I suppose also, what are your opinions on the libertarian movement?
posted by Peztopiary at 9:51 AM on October 21, 2011


Oh also, I'm out of favorites for the day (a thing that happens regularly, because why shouldn't I favorite everything that makes me smile?) so that is why this conversation isn't littered (the key concept with the damn things) with them.
posted by Peztopiary at 9:53 AM on October 21, 2011 [2 favorites]


because why shouldn't I favorite everything that makes me smile?

Same reason you shouldn't buy everything you want.
posted by The World Famous at 9:55 AM on October 21, 2011 [1 favorite]


I guess one sincere objection I have is that it seems like an awful awful lot of computer time grinding away to no real purpose, when there's so much real valuable work lying around waiting to be done. Real intellectual capital is created when you discover something new and potentially useful (a protein sequence that forms a unique shape, say). To just plug someone else's software into your desktop and let it grind away - I feel like to do so and expect value to suddenly occur is either naive or willfully obtuse. Particularly when, as someone upthread said, the resulting capital has absolutely no constraints on it and no underlying support other than a handful of crypto math that very few people are qualified to verify. Ok, I'm done now.
posted by newdaddy at 10:00 AM on October 21, 2011 [2 favorites]


So if you collect enough US dollars you get a senator automatically, and you don't have to bribe him or anything?

Pretty much. Once you pop your head above some arbitrary financial ceiling, politicians start courting you for contributions.
posted by rhizome at 10:07 AM on October 21, 2011


Pretty much. Once you pop your head above some arbitrary financial ceiling, politicians start courting you for contributions.

True. But it's not like they suddenly start doing your bidding without you having contributed anything.
posted by The World Famous at 10:12 AM on October 21, 2011


Cash is anonymous in small amounts, but the more you're trying to move, the more trouble and expense and illegality it's going to take to do it anonymously. The phrase to search for is "anti-money laundering." For example:

Cash transactions in excess of $10,000 must be reported on a Currency Transaction Report (CTR), identifying the individual making the transaction as well as the source of the cash.

AML regulation post-9/11 has had some interesting side effects -- notably, it brought to light that Eliot Spitzer was withdrawing large amounts of cash to pay for prostitutes. I'm not taking a moral stance on that here, but it shows the difference between the (American) cash economy and a really anonymous economy.

Bitcoin potentially makes this kind of regulation impossible (unless the government has control over everyone's personal computer, and screw that). Everyone becomes their own bank, capable of holding all of their funds outside of any kind of regulated institution and instantly transferring them to anyone else. Of course money will still show up on government radar if you're putting it in a savings account, investing in public companies, doing business with honest companies that get audited, etc., but it makes a different level of unregulated economy possible.

If it didn't, then what would be the point? We already have gold.

I'm leery of this effort because I believe in government. I like that people and companies are forced to pay their taxes. I wish there was more corporate financial oversight rather than less. I believe that in principle the government should try to level out the peaks and crashes of free market capitalism, even if they screw it up sometimes. I think that some kinds of transactions are bad for the world -- human trafficking, protection rackets, ponzi schemes, child porn, predatory loans, identity theft marketplaces -- and I like that it's hard to cover the financial tracks of those enterprises.

I won't lie and say that I understand the financial system, and I don't support everything government does that I do understand. But it seems to me that the onus is on BitCoin to show that, if it were to succeed, the level of financial regulation that would remain possible would be better than the level of financial regulation we have now. So far I'm a skeptic.
posted by Honorable John at 10:21 AM on October 21, 2011 [5 favorites]


Ah, thanks for the clarification JiBB. Subdividing physical coins is unlikely in meatspace, though the subdivision of basic currencies into fractional parts is, of course, standard.

I guess one sincere objection I have is that it seems like an awful awful lot of computer time grinding away to no real purpose, when there's so much real valuable work lying around waiting to be done.

This seems like an objection that would be equally applicable to the whole capitalist system, in which people spend many hours a day dedicating time to making money instead of doing real, valuable work.
posted by kaibutsu at 10:24 AM on October 21, 2011 [2 favorites]


Who knows how long it'll take to get there, or how many more currencies will claim to be "the one" before "the one" arrives (and is eventually succeeded by another "the one").

I'LL BUY THAT FOR A ZUCKER!
posted by FJT at 10:32 AM on October 21, 2011


@honorable john

i agree. i guess it speaks to my biases that i am thinking of anonymous cash in terms of e.g. some guy buying banned underground comix books in florida or a dissenting chinese national purchasing parts for a private computer network, instead of bad things like what you are talking about. although they are apparently still happening regardless of AML, so ???

obviously the solution is to criminalize the bad uses of money while allowing the good, so all we need to do is agree on those and we'll be set
posted by This, of course, alludes to you at 10:42 AM on October 21, 2011 [1 favorite]


And what's the underlying value of a bitcoin?

The underlying value of a bitcoin is computer processing cycles (Floating point operations, FLOPs), which also can be expressed less accurately in watts or time depending on how many FLOPs you can get per watt. Or: "How fast are you? How dense?" to quote a certain cyberpunk fiction novel.

That value is extremely volatile and dynamic, especially since bitcoins become harder and harder to mine (mining = calculating the cryptographic hash), but that doesn't mean it won't settle down and be more stable in the long run. Eventually people are going to run out of bitcoins to "mine", and the scarcity will help stabilize the value. In theory.

In a sense the comparison to tulip markets isn't entirely off base. During the tulip craze the most valuable tulips were hybrids and rare varieties - it's why we have so many different kinds of tulips now. Except hard-to-mine bitcoins aren't more valuable on the open market.

But unlike tulips, bitcoins aren't ornamental plants. They don't rot or wilt. They're not able to be (easily) destroyed. They're designed to be about as permanent as a string of electronic numbers can be.

I'm not a bitcoin cheerleader, fanboy nor libertarian, but I could see bitcoin (or something like bitcoin) becoming a stable, valued currency.

We're already in in era where information (and the ability to process it) is really the true currency of the global market.
posted by loquacious at 10:57 AM on October 21, 2011 [1 favorite]


the underlying value of the Bitcoin currency system has to do with the ability to exchange stuff with people over the internet without having to rely on credit cards and PayPal and shit

Like on Amazon.com? or Ebay?

Though, I can see how buying MDMA without having to give anyone your credit card info could be handy, don't get me wrong.
posted by chunking express at 11:00 AM on October 21, 2011


I guess one sincere objection I have is that it seems like an awful awful lot of computer time grinding away to no real purpose, when there's so much real valuable work lying around waiting to be done.

No purpose? How do you think that computer time stacks up to the human time spent on our existing financial system?
posted by pjaust at 11:04 AM on October 21, 2011


Bitcoin potentially makes this kind of regulation impossible (unless the government has control over everyone's personal computer, and screw that).

Interesting that you dislike the government having control of everyone's personal computer, but approve of them having control of everyone's bank account.

Personally, I'm very troubled by things like the new "money-laundering" laws, the ban on donating to organizations which "support terrorism", collusion between government and business in regards to copyright enforcement, the government's willingness to use taxes and banking to go after medical marijuana dispensaries and even people who print their advertisements, etc. I'm not an economic libertarian, but I certainly am a social one, and it's hard not to notice that the government is increasingly using money and control of money, especially cash, as a proxy for crime (particularly non-violent victimless crime) and/or a tool to be used to further political goals.

The more they do this, the less people will trust them with their money, and the more people will want and even need something like bitcoin.
posted by vorfeed at 11:04 AM on October 21, 2011 [1 favorite]


Like on Amazon.com? or Ebay?

It is a serious violation of Ebay's TOS to offer to sell most items for cash or cash equivalent (money order, Western Union, bank transfer, etc), and this has been true for years. I'd be shocked if Amazon isn't the same way.
posted by vorfeed at 11:11 AM on October 21, 2011


The underlying value of a bitcoin is computer processing cycles
Maybe I'm misunderstanding, but that doesn't seem to be the case to me. That was certainly how they were originally obtained, but those processing cycles are gone and are never coming back; they have no value.

I think that the underlying value of a bitcoin is the faith in its users that other people will accept it in exchange for goods and services. In this, it is no different than any other currency, fiat or not. In all cases, it eventually just boils down to nothing but faith. However, that faith may be significantly more likely to reflect reality in some cases than in other cases.
posted by Flunkie at 11:16 AM on October 21, 2011 [3 favorites]


Man, the thousandth fraction of a bitcoin I collected before I got sick of it was worth 3 cent and now it is worth .2 cents.

My retirement plan is really screwed up.
posted by nanojath at 11:16 AM on October 21, 2011


I don't want to say "called it!" But...called it.
posted by T.D. Strange at 11:34 AM on October 21, 2011


> But it seems to me that the onus is on BitCoin to show that, if it were to succeed, the level of financial regulation that would remain possible would be better than the level of financial regulation we have now. So far I'm a skeptic.

You might be interested in this. There are some very sketchy characters involved in the back story. The cypherpunks newsgroup was frequented by both Jim Bell and Julian Assange.

One of these days I am going to build a Venn diagram of the set of metafilter users who hate bitcoin and the set of metafilter users who hate wikileaks. There ain't no way that is an empty set.
posted by bukvich at 11:46 AM on October 21, 2011 [4 favorites]


Interesting that you dislike the government having control of everyone's personal computer, but approve of them having control of everyone's bank account.

Anyone who isn't either a perfect anarchist or perfect fascist has to engage in the same balancing act: you grant some powers to the state and reserve some to the individual.

Right now, we've struck one balance with speech and another balance with financial regulation. I like that internet speech is essentially unregulated, and mostly unregulatable. I also like that financial transactions have a fair bit of regulation. As you point out, there are cases where that regulation is excessive or gets abused. There are also, I think, cases where it doesn't go far enough.

BitCoin proposes to essentially take the financial regulation balancing act off the table by making many kinds of regulation much more difficult, especially regulation that preserves freedom in other areas. I'm far from convinced that would be a good thing.
posted by Honorable John at 11:55 AM on October 21, 2011



Wow, an upper limit of 21 million bitcoins would itself be a huge hurdle to widespread adoption. Even if it caught on in the us, it would mean less than one in ten people could even have _one_ bitcoin.


This was already considered in the design of the system. Fractional values are fully supported.

Please, again, if you want to ask a technical question about BitCoin in this thread, understand that you can find your answer very, very easily by reading even a tiny amount about BitCoin first.
posted by odinsdream at 12:19 PM on October 21, 2011 [2 favorites]


i get the distrust but it's like people are clapping for every news story about bitcoin values dropping, you know? and i don't see the hostility being directed so much at the perperators of whatever scam there might be (and if it is a scam as opposed to an economic malfunction, i am not sure who stands to benefit in the end), but at the earnest believers in the thing.

personally i kind of wonder if it doesn't have much to do with how people were (apparently) making money with their computers for little or no effort and how bitcoins are being used to buy drugs through silkroad.


For many, Libertarianism* is the scam, and people are hostile against its perpetrators. Regardless of the merits of Bitcoin itself, many folks want to see Libertarianism get a kicking. There's nothing shameful about this joy, it's plain old ideological opposition. I don't doubt Libertarians feel some joy when governments run into fiscal problems or default.

*"Big L" Libertarianism, obviously. "Little l" libertarianism is just fine.
posted by Jehan at 12:51 PM on October 21, 2011


Jehan, what do you mean by "Big L"? As far as I know, little-l and big-L libertarians have the same basic analysis of the world and policy objectives, and differ because little-l's prefer to work through the established political parties (usually, but not always, choosing parties of the right), while big-L's prefer to organize expressly libertarian political parties, notwithstanding their poor electoral politics.
posted by MattD at 1:02 PM on October 21, 2011


i get the distrust but it's like people are clapping for every news story about bitcoin values dropping, you know? and i don't see the hostility being directed so much at the perperators of whatever scam there might be (and if it is a scam as opposed to an economic malfunction, i am not sure who stands to benefit in the end), but at the earnest believers in the thing.

This is entirely true, and all too typical of Metafilter lately. They rightly blame the Tea Party for our current political climate, and believe all libertarians are at fault.

Meanwhile, Louisiana is attempting to ban the use of cash in secondhand sales so they can track everything you sell.

Be careful whose side you take here. Bitcoin isn't the enemy. It's yet another option, another choice we should have.
posted by formless at 1:46 PM on October 21, 2011


When did Metafilter vote on a coherent political and personal philosophy? I must have been sick that day...

Be careful whose side you take here. Bitcoin isn't the enemy. It's yet another option, another choice we should have.

I'm not on anyone's "side." Bitcoin was terribly implemented and many people pointed that out months and months and months ago. To confuse that with making an "enemy" of Bitcoin just fuels a combative discourse.
posted by muddgirl at 1:50 PM on October 21, 2011


Bitcoin was terribly implemented and many people pointed that out months and months and months ago.

What flaw is that? There's a social issue, that there is no inherent trust system in place, so that places trust verification on the user, but that's not necessarily a flaw.

The implementation seems alright to me, and I've actually looked at the source.

When did Metafilter vote on a coherent political and personal philosophy? I must have been sick that day

I must have been sick too, because I don't remember when the vote was, but if you go back through previous bitcoin threads, you'll see that same ressentiment and spite that was pointed out upthread. It's really angry for what's an alternative currency system.

I think some people assume backers of bitcoin are the same people who believe all government should go away. While there is some overlap, that's not entirely true. I believe we should have strong government social programs and education programs, but I also believe anonymous purchases are important for privacy and a functioning democracy.
posted by formless at 1:58 PM on October 21, 2011


I like that internet speech is essentially unregulated, and mostly unregulatable.

That's the problem. If money is regulatable and the laws regarding it are selectively enforced -- and they are -- then internet speech quite obviously becomes regulatable, extra-legally or not. One only needs to look at what's happened with Wikileaks donations, copyright infringement, DeCSS, the Playstation 3, etc. to see this in action.

I agree that you have to "grant some powers to the state and reserve some to the individual", but I'm seeing more and more evidence that the government isn't acting in good-faith with regards to their economic power... and when that happens, the people will go elsewhere.

On preview, "anonymous purchases are important for privacy and a functioning democracy" just about says it all.
posted by vorfeed at 2:00 PM on October 21, 2011 [1 favorite]


I wish bitcoin long term success, free from the price spikes caused by goldbugs/speculators with GPUs. I also wish there existed a method for shorting bitcoins. ;)
posted by jeffburdges at 2:10 PM on October 21, 2011


What flaw is that?

Since very few organizations accepted Bitcoin in exchange for goods (in exclusion to other, easier-to-use currency), it could not attract anyone but speculators. The reason the price is dropping is because there's no demand. In other words, it's really really hard to overcome the network effect, and it doesn't look like anyone considered that. Federally-backed, stable money has value because everyone accepts it.

There's a social issue, that there is no inherent trust system in place, so that places trust verification on the user, but that's not necessarily a flaw.

It's not just an issue of trust, it's an issue of insurance. My bank deposit (which is digital money) is backed by the full faith and credit of the US gov't, up to a certain amount. It is protected by my bank's insurance, such that if I am ripped off or robbed, protections are in place. No, it's not anonymous, but then again Bitcoin isn't strictly anonymous either - only when we trust a third party to slice up transactions does it become anonymous - so why is such a service infeasible with digital dollars?
posted by muddgirl at 2:26 PM on October 21, 2011 [1 favorite]


Seemed like an awful like of drama and questions about the bit coin "community". Sites getting hacked, sites losing wallet files. Ad to the fact that nobody knows much about the
posted by Ad hominem at 2:29 PM on October 21, 2011


Dammit

Nobody knows much about Founder and creator of the original client Satoshi Nakamoto

People have said the cryptography checks out, and it is clear he is very skilled. But it would lend credibility to have a public face to the project. Very mysterious because he is unknown outside his work with bitcoin
posted by Ad hominem at 2:33 PM on October 21, 2011


Like chain letters and forwards about Bill Gates email testing; bitcoin will continue to find suckers over and over again. Every time it rises back up the original scammers with their hoarde of
coins can dump their worthless "coins" on new rubes. It is the endless recurring ponzi scheme.
posted by humanfont at 2:41 PM on October 21, 2011 [1 favorite]


kaibutsu: Subdividing physical coins is unlikely in meatspace...

I've always been a bit skeptical but I've heard this anecdote repeated before:
The seventeenth-century Spanish gold coins known as "reales," and favored by pirates, were called "pieces of eight" because each coin was perforated into eight pie-shaped sections and could be broken into fractions of their full value. Two "pieces of eight," one quarter of the coin, is the source of the use of the American slang term "two bits" to signify a "quarter" dollar.
However, I've never actually seen a picture of a Spanish dollar cut up this way. Are there any numismatists in the house who can confirm it?
posted by XMLicious at 8:56 PM on October 21, 2011


Well, I'm not a coin guy but I can tell you that anecdote is all kinds of wrong. To pick two obvious problems, pieces of eight were made of silver not gold. And they were called pieces of eight because one spanish silver dollar was worth eight reales It is a reference to the value of the coin not to the physical properties. By itself those two facts should be enough to discredit the anecdote.

But if that's not enough, a trivial glance at a piece of eight would reveal that it was not perforated into eight sections. I'm actually holding one in my hand right now.
posted by Justinian at 9:38 PM on October 21, 2011 [2 favorites]


I think the peices of eight bit confuses the practice of shaving coins. People would take the gold coins and shave off bits to look like normal wear and tear. Then they would sell the shavings off as gold they had panned or otherwise mined.
posted by humanfont at 7:09 AM on October 22, 2011


Physical Bitcoin
Each Casascius Bitcoin is a collectible coin backed by real Bitcoins embedded inside. They come in two denominations: 1 bitcoin, and 25 bitcoins. Each piece has its own Bitcoin address and a redeemable "private key" on the inside, underneath the hologram.
Via Marginal Revolution.
posted by Anything at 5:47 AM on October 23, 2011 [1 favorite]


Ahh, but how does verifying that an account has 25 BTC with block explorer verify that said same account hasn't been encoded into multiple physical 25 BTC bitcoins, well I suppose the guy gave his real name.
posted by jeffburdges at 11:06 PM on October 23, 2011


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