In mathematics we trust.
April 4, 2013 6:09 AM Subscribe
Cool. I need to convert my hoard of Ameros anyway.
posted by briank at 6:35 AM on April 4, 2013 [7 favorites]
posted by briank at 6:35 AM on April 4, 2013 [7 favorites]
I kind of want to buy some just so I can talk about my bitcoin investment at parties.
You're going to make so many new friends!
posted by thsmchnekllsfascists at 6:35 AM on April 4, 2013 [39 favorites]
You're going to make so many new friends!
posted by thsmchnekllsfascists at 6:35 AM on April 4, 2013 [39 favorites]
So, at what point will the publicity be sufficiently large that the Department of Treasury gets involved and starts trying to shut this sucker down? What happens when the subpeonas go out and accounts get frozen?
Or more practically, come tax time, how you record gains or losses on transactions from Bitcoin to dollars? Is it a foreign currency? Is it an investment?
posted by leotrotsky at 6:36 AM on April 4, 2013 [1 favorite]
Or more practically, come tax time, how you record gains or losses on transactions from Bitcoin to dollars? Is it a foreign currency? Is it an investment?
posted by leotrotsky at 6:36 AM on April 4, 2013 [1 favorite]
I occasionally work with someone who brags about owning a handful of bitcoins. He's also a bit of a gold bug, and not very good at recognizing irony.
posted by RonButNotStupid at 6:40 AM on April 4, 2013 [5 favorites]
posted by RonButNotStupid at 6:40 AM on April 4, 2013 [5 favorites]
However, I find it difficult to believe that anyone who has written critically of the dangers of bitcoin would prefer an economy where private cash transactions are illegal.[sour, mirthless laughter]
posted by This, of course, alludes to you at 6:41 AM on April 4, 2013 [1 favorite]
I love that we're actually living the cypherpunk future - you can buy drugs on anonymous websites with cryptocash! See also Felix Salmon on why it's a Bad Thing.
What I think a lot of these discussions ignore is that a currency has several uses: a store of value (savings), a unit of account (valuing goods, debt), and a method of payment. Bitcoin is too volatile for debt or investment (as opposed to speculation), but it sure seems to have its uses as a way of moving money around.
posted by ianso at 6:41 AM on April 4, 2013 [4 favorites]
What I think a lot of these discussions ignore is that a currency has several uses: a store of value (savings), a unit of account (valuing goods, debt), and a method of payment. Bitcoin is too volatile for debt or investment (as opposed to speculation), but it sure seems to have its uses as a way of moving money around.
posted by ianso at 6:41 AM on April 4, 2013 [4 favorites]
It seems like most True Believers (R) (I'm sure this is intended to be ironic) find all the media attention Bitcoin gets to be chaotic (ie this thread, which has one of those hilarious beginnings that makes you think it's all just weed-dealing libertarians but then it turns out the 'rational adults' like Mike are the ones who are running the business).
I mean, it's really hard not to be dismissive of the endeavor but I think the New Yorker article does a good job of capturing the spirit of the movement which, for the adherents, is a true alternative to the somewhat opaque system that we have.
posted by dubusadus at 6:42 AM on April 4, 2013 [1 favorite]
I mean, it's really hard not to be dismissive of the endeavor but I think the New Yorker article does a good job of capturing the spirit of the movement which, for the adherents, is a true alternative to the somewhat opaque system that we have.
posted by dubusadus at 6:42 AM on April 4, 2013 [1 favorite]
I thought bitcoins was just currency used to purchase illegal stuff on the Tor network.
posted by magstheaxe at 6:43 AM on April 4, 2013 [1 favorite]
posted by magstheaxe at 6:43 AM on April 4, 2013 [1 favorite]
So, at what point will the publicity be sufficiently large that the Department of Treasury gets involved and starts trying to shut this sucker down?
They're already working on it.
posted by deadmessenger at 6:44 AM on April 4, 2013 [1 favorite]
They're already working on it.
posted by deadmessenger at 6:44 AM on April 4, 2013 [1 favorite]
I recently heard Bitcoins referred to as "Dunning-Krugerrands", which I think might be the most perfect neologism I've ever seen.
posted by mhoye at 6:50 AM on April 4, 2013 [127 favorites]
posted by mhoye at 6:50 AM on April 4, 2013 [127 favorites]
After the most recent post about bitcoins I went to the site to check it out. Downloaded the only open-source app they had (like I'm going to trust my valuable imaginary imaginary money to unseen algorithms) and fired it up. Three days later, it still hadn't downloaded ALL TRANSACTIONS EVER IN THE HISTORY OF FOREVER so I gave up.
People run this stuff on their smartphones? Or do they have a dedicated array of them for downloading transactions and then one to actually use?
posted by DU at 6:50 AM on April 4, 2013
People run this stuff on their smartphones? Or do they have a dedicated array of them for downloading transactions and then one to actually use?
posted by DU at 6:50 AM on April 4, 2013
I spent the rest of yesterday wondering if I'd been scammed. Both BitInstant and Bitstamp appear to be legitimate businesses, judging from various magazine profiles and funding announcements.
lololol
posted by DU at 6:56 AM on April 4, 2013 [2 favorites]
lololol
posted by DU at 6:56 AM on April 4, 2013 [2 favorites]
i always wondered why everyone isn't at least cool with people being able to get drugs
then i realized that, for the people who aren't cool with this, drugs are not a thing
posted by This, of course, alludes to you at 6:59 AM on April 4, 2013 [1 favorite]
then i realized that, for the people who aren't cool with this, drugs are not a thing
posted by This, of course, alludes to you at 6:59 AM on April 4, 2013 [1 favorite]
People run this stuff on their smartphones? Or do they have a dedicated array of them for downloading transactions and then one to actually use?
At this point dedicated bitcoin-mining hardware pays for itself pretty quickly.
posted by mhoye at 6:59 AM on April 4, 2013
At this point dedicated bitcoin-mining hardware pays for itself pretty quickly.
posted by mhoye at 6:59 AM on April 4, 2013
No serious person owns these as anything other than wacky novelty, because their value is wildly speculative and they have already had their security publicly compromised several times; no serious vendor will ever accept them as payment because they know exactly what's going to happen when the IRS eventually reads the New Yorker article about them; and widespread discussion of how awesome they are appears to be solely the purview of crypto-obsessed anarcholibertarians who think the math is cool, while also insisting that their value couldn't possibly be a speculative bubble, and also that the gold standard and a deflationary currency system are somehow worth returning to.
So maybe we can stop making two new threads a week about Bitcoins, yeah?
posted by Mayor West at 7:03 AM on April 4, 2013 [5 favorites]
So maybe we can stop making two new threads a week about Bitcoins, yeah?
posted by Mayor West at 7:03 AM on April 4, 2013 [5 favorites]
Three days later, it still hadn't downloaded ALL TRANSACTIONS EVER IN THE HISTORY OF FOREVER so I gave up.
You only need the whole blockchain if you're going to mine. Otherwise you can get by with just a bitcoin wallet that doesn't need to know about every transaction ever in history.
Of course, the Bitcoin community being what it is, almost everyone goes the whole blockchain way, what with them all being fearless self-sufficient entrepreneurs slaving over a bank of hot video cards everyday.
At this point dedicated bitcoin-mining hardware pays for itself pretty quickly.
That's perhaps debatable. You have to account for the electricity of course and thrashing that machinery day-and-night can bring on failure. Dedicated hardware is expensive and the mining returns are getting smaller and smaller. A dedicated mining rig could pay for itself in a few months, but that's very dependent on the current price of bitcoin: it it falls through the floor, months could become years. And new improved hardware could make your obsolete overnight.
posted by outlier at 7:04 AM on April 4, 2013 [2 favorites]
You only need the whole blockchain if you're going to mine. Otherwise you can get by with just a bitcoin wallet that doesn't need to know about every transaction ever in history.
Of course, the Bitcoin community being what it is, almost everyone goes the whole blockchain way, what with them all being fearless self-sufficient entrepreneurs slaving over a bank of hot video cards everyday.
At this point dedicated bitcoin-mining hardware pays for itself pretty quickly.
That's perhaps debatable. You have to account for the electricity of course and thrashing that machinery day-and-night can bring on failure. Dedicated hardware is expensive and the mining returns are getting smaller and smaller. A dedicated mining rig could pay for itself in a few months, but that's very dependent on the current price of bitcoin: it it falls through the floor, months could become years. And new improved hardware could make your obsolete overnight.
posted by outlier at 7:04 AM on April 4, 2013 [2 favorites]
Or do they have a dedicated array of them for downloading transactions and then one to actually use?
How is BitCoin designed to avoid becoming trapped by those who can afford to devote rooms of processors to mining BC? It seems built to reward ever-increasing hardware investment, rather than anything meaningful or productive which would make it a morally-superior alternative to our current monetary systems.
posted by Thorzdad at 7:04 AM on April 4, 2013 [6 favorites]
How is BitCoin designed to avoid becoming trapped by those who can afford to devote rooms of processors to mining BC? It seems built to reward ever-increasing hardware investment, rather than anything meaningful or productive which would make it a morally-superior alternative to our current monetary systems.
posted by Thorzdad at 7:04 AM on April 4, 2013 [6 favorites]
At this point dedicated bitcoin-mining hardware pays for itself pretty quickly.
And new improved hardware could make your obsolete overnight.
A few of many reasons that no matter what anyone else says about it being anonymized electronic "democratic" currency, etc, I believe this to be a route to quick money for the technological elite who can exploit modern hardware.
Mining bitcoins gets exponentially harder, and there are many claims that the future of bitcoin is via vendors and recirculating existing currency as opposed to mining... yet who do you think will have access to the most modern methods of mining that will break through prior barriers?
It's a method for those with access to resources and power to exploit others for personal gain, except without any oversight, transparency, or regulation.
(Sure, there's some transparency in the source code. Not what I'm talking about.)
posted by MysticMCJ at 7:10 AM on April 4, 2013 [4 favorites]
And new improved hardware could make your obsolete overnight.
A few of many reasons that no matter what anyone else says about it being anonymized electronic "democratic" currency, etc, I believe this to be a route to quick money for the technological elite who can exploit modern hardware.
Mining bitcoins gets exponentially harder, and there are many claims that the future of bitcoin is via vendors and recirculating existing currency as opposed to mining... yet who do you think will have access to the most modern methods of mining that will break through prior barriers?
It's a method for those with access to resources and power to exploit others for personal gain, except without any oversight, transparency, or regulation.
(Sure, there's some transparency in the source code. Not what I'm talking about.)
posted by MysticMCJ at 7:10 AM on April 4, 2013 [4 favorites]
government...printing money...the currency as a whole is debased
bitcoins...are generated at a predetermined rate
Remember, it's only bad if an elected government does it.
posted by justsomebodythatyouusedtoknow at 7:10 AM on April 4, 2013 [7 favorites]
bitcoins...are generated at a predetermined rate
Remember, it's only bad if an elected government does it.
posted by justsomebodythatyouusedtoknow at 7:10 AM on April 4, 2013 [7 favorites]
You only need the whole blockchain if you're going to mine. Otherwise you can get by with just a bitcoin wallet that doesn't need to know about every transaction ever in history.
Ah, I didn't realize that. Although it doesn't really change the matter, since I wasn't planning on doing any actual WORK to get bitcoins.
posted by DU at 7:14 AM on April 4, 2013 [1 favorite]
Ah, I didn't realize that. Although it doesn't really change the matter, since I wasn't planning on doing any actual WORK to get bitcoins.
posted by DU at 7:14 AM on April 4, 2013 [1 favorite]
Three days later, it still hadn't downloaded ALL TRANSACTIONS EVER IN THE HISTORY OF FOREVER so I gave up.
Wow, from looking around, the complete chain is up to 6 GB? That starts to actually be a problem for distribution. And do you need to constantly be updating it?
posted by smackfu at 7:14 AM on April 4, 2013
Wow, from looking around, the complete chain is up to 6 GB? That starts to actually be a problem for distribution. And do you need to constantly be updating it?
posted by smackfu at 7:14 AM on April 4, 2013
It seems built to reward ever-increasing hardware investment,
And people who live in places with cheap electricity. The electricity will probably cost more than the hardware after a short while for most people.
posted by smackfu at 7:15 AM on April 4, 2013 [1 favorite]
And people who live in places with cheap electricity. The electricity will probably cost more than the hardware after a short while for most people.
posted by smackfu at 7:15 AM on April 4, 2013 [1 favorite]
Decentralised Currencies are Probably Impossible (.pdf)
posted by Brian B. at 7:17 AM on April 4, 2013
posted by Brian B. at 7:17 AM on April 4, 2013
How is BitCoin designed to avoid becoming trapped by those who can afford to devote rooms of processors to mining BC? It seems built to reward ever-increasing hardware investment, rather than anything meaningful or productive which would make it a morally-superior alternative to our current monetary systems.
Bitcoin mining is based somewhat on random number generators. There is a limit on how many bitcoins can exist of something like 21 million. So if you have a random number generator that generates unique random numbers between 00,000,000 and 20,999,999, it's easy to capture the first instances of unique numbers. But as the population of mined bitcoins gets toward the limit, it becomes very hard to generate a random number that someone hasn't already generated. So there are designed-in diminishing returns for the miners.
Once a bitcoin has been mined, it stays in existence and never gets destroyed. So, like a physical coin, it is passed around from owner to owner as they spend them.
The theory behind this is that the people with the early, cheap and easy bitcoins will use them to buy stuff, and then they will be out in the wild, participating in the economy.
posted by gjc at 7:26 AM on April 4, 2013 [4 favorites]
Bitcoin mining is based somewhat on random number generators. There is a limit on how many bitcoins can exist of something like 21 million. So if you have a random number generator that generates unique random numbers between 00,000,000 and 20,999,999, it's easy to capture the first instances of unique numbers. But as the population of mined bitcoins gets toward the limit, it becomes very hard to generate a random number that someone hasn't already generated. So there are designed-in diminishing returns for the miners.
Once a bitcoin has been mined, it stays in existence and never gets destroyed. So, like a physical coin, it is passed around from owner to owner as they spend them.
The theory behind this is that the people with the early, cheap and easy bitcoins will use them to buy stuff, and then they will be out in the wild, participating in the economy.
posted by gjc at 7:26 AM on April 4, 2013 [4 favorites]
there'll always be a need for an easily launderable fungible means of exchange, but if not plugged in to the existing payments infrastructure (controlled by gov't: fedwire/CHIPS/SWIFT codes) i feel like bitcoin is just a modernized version of _trust-based_ hawala.
think about the unit of account function of money in terms of consumer basket/purchasing power and relative prices (exchange rates) like who 'controls'/defines it and how (or in what forms) it's 'simultaneously determined' esp wrt stuff like the Billion Prices Project @MIT & economic complexity.
basically i don't see the institution of central banking going away anytime soon -- if it did, it'd have to be reinvented all over again and (like LISP ;) probably badly -- altho it is clearly evolving (rapidly!) and whether digital cash/currency constitutes a revolution or not, and if/how CB's can adapt, remains to be seen.
They're already working on it.
RIP Bitcoin, I think (Gold to grey)
also btw...
-Total Bitcoin value passes $1 billion (notice that it's still quoted in dollars!)
-Bitcoin May Be the Global Economy's Last Safe Haven
-In wake of Bitcoin spike, Instawallet halts service and Mt. Gox "eats" DDOS
-The problem with Bitcoin
-Ceci n'est pas un Bitcoin
-When memory becomes money; the story of Bitcoin so far
-Bitcoin as fiat
-Of Bitcoins and RINs
-Here's a simple, 60-second primer on Bitcoin
-What Bitcoin Really Is
-I Bought A Bitcoin (And You Can Too)
-Four Reasons You Shouldn't Buy Bitcoins
-more
-more...
oh and Helicopter money: Federal Reserve should print money and give it directly to households :P
posted by kliuless at 7:28 AM on April 4, 2013 [2 favorites]
think about the unit of account function of money in terms of consumer basket/purchasing power and relative prices (exchange rates) like who 'controls'/defines it and how (or in what forms) it's 'simultaneously determined' esp wrt stuff like the Billion Prices Project @MIT & economic complexity.
basically i don't see the institution of central banking going away anytime soon -- if it did, it'd have to be reinvented all over again and (like LISP ;) probably badly -- altho it is clearly evolving (rapidly!) and whether digital cash/currency constitutes a revolution or not, and if/how CB's can adapt, remains to be seen.
They're already working on it.
RIP Bitcoin, I think (Gold to grey)
also btw...
-Total Bitcoin value passes $1 billion (notice that it's still quoted in dollars!)
-Bitcoin May Be the Global Economy's Last Safe Haven
-In wake of Bitcoin spike, Instawallet halts service and Mt. Gox "eats" DDOS
-The problem with Bitcoin
-Ceci n'est pas un Bitcoin
-When memory becomes money; the story of Bitcoin so far
-Bitcoin as fiat
-Of Bitcoins and RINs
-Here's a simple, 60-second primer on Bitcoin
-What Bitcoin Really Is
-I Bought A Bitcoin (And You Can Too)
-Four Reasons You Shouldn't Buy Bitcoins
-more
-more...
oh and Helicopter money: Federal Reserve should print money and give it directly to households :P
posted by kliuless at 7:28 AM on April 4, 2013 [2 favorites]
The interesting thing about the article is not necessarily the supply of BitCoins as an alternative currancy, but rather the growing demand for them. The state of domestic finance policies is so rapidly declining that you have regular people looking into speculative decentralised virtual currencies made by a Japanese man nobody can find.
It used to be gold that attracted money from nervous individuals – either through a marketable security or as jewellery. The fact that the discussion about BitCoins is increasingly in relevance seems to indicate that not only are citizens losing faith in certain markets (stocks, bonds, gold) but in actual currencies.
It would be easy to say that the thousand-headed hydra of Invisible Financial Manipulators are to blame, working in earnest behind the scenes to increase their wealth to the detriment of the rest of civilisation. But that's a bit too tin-foil hat. The reality seems to be that the complexity of markets, and the constant attempts to make them both interoperate AND maintain independence is creating a system that is so fragile, it can only be supported through a means where the only rule is now by exception.
Yes, the interesting thing about BitCoin is not BitCoin at all, but the fact that people consider BitCoin to be a viable alternative to their own currency. Can we then say they have the same amount of trust in a phantom Japanese mathematician as they do in the (unelected) leaders governing national banks? If popular trust in an institution such as a national bank is so low that this comparison is even slightly plausible, the future perhaps looks more volatile then it did yesterday.
That being said, who doesn't love a thousand-headed hydra?
posted by nickrussell at 7:30 AM on April 4, 2013 [17 favorites]
It used to be gold that attracted money from nervous individuals – either through a marketable security or as jewellery. The fact that the discussion about BitCoins is increasingly in relevance seems to indicate that not only are citizens losing faith in certain markets (stocks, bonds, gold) but in actual currencies.
It would be easy to say that the thousand-headed hydra of Invisible Financial Manipulators are to blame, working in earnest behind the scenes to increase their wealth to the detriment of the rest of civilisation. But that's a bit too tin-foil hat. The reality seems to be that the complexity of markets, and the constant attempts to make them both interoperate AND maintain independence is creating a system that is so fragile, it can only be supported through a means where the only rule is now by exception.
Yes, the interesting thing about BitCoin is not BitCoin at all, but the fact that people consider BitCoin to be a viable alternative to their own currency. Can we then say they have the same amount of trust in a phantom Japanese mathematician as they do in the (unelected) leaders governing national banks? If popular trust in an institution such as a national bank is so low that this comparison is even slightly plausible, the future perhaps looks more volatile then it did yesterday.
That being said, who doesn't love a thousand-headed hydra?
posted by nickrussell at 7:30 AM on April 4, 2013 [17 favorites]
I don't think it's (necessarily) bad if an elected government does it, and I think there are a lot of valid criticisms of Bitcoin. But I don't think this is one of them.government...printing money...the currency as a whole is debasedRemember, it's only bad if an elected government does it.
bitcoins...are generated at a predetermined rate
If I remember correctly, there are a known, finite number of possible Bitcoins, ever. And the "predetermined rate" is not constant; it decreases over time.
From the point of view of someone who thinks it's bad that elected governments can print money whenever they want, this is totally different. There's a limit. It's a known limit. You can take good guesses as to how many Bitcoins there will be at any given point in time. All of these things can be taken into account when valuing a single Bitcoin. The same absolutely cannot be said of (for example) a dollar, which, at least theoretically, can be debased at any time by any amount any number of times.
posted by Flunkie at 7:38 AM on April 4, 2013
Can we then they have the same amount of trust in a phantom Japanese mathematician as they do in the (unelected) leaders governing national banks?
Frankly, as a college grad with modest familiarity with math and cryptography, I have somewhat more trust in the math than I do in the U.S. government's interest in and ability to improve (or at least not damage) my financial wellbeing.
I think the risks in Bitcoins are from manipulation, side-channel attacks and the like, not from direct attacks to the underlying protocol. And those same risks affect regular securities and money, but the responses to those risks are (supposed to be) managed by the very same government people who have failed to keep my trust over my lifetime. Bitcoin is policed by distributed -- you could say vigilante -- justice. But apart from the knee-jerk reaction to the word "vigilante," can you really say the government is doing a bang-up job of providing official justice? Or that the Bitcoin community's responses to attacks on it have been ill-considered or poorly executed?
posted by spacewrench at 7:45 AM on April 4, 2013 [1 favorite]
Frankly, as a college grad with modest familiarity with math and cryptography, I have somewhat more trust in the math than I do in the U.S. government's interest in and ability to improve (or at least not damage) my financial wellbeing.
I think the risks in Bitcoins are from manipulation, side-channel attacks and the like, not from direct attacks to the underlying protocol. And those same risks affect regular securities and money, but the responses to those risks are (supposed to be) managed by the very same government people who have failed to keep my trust over my lifetime. Bitcoin is policed by distributed -- you could say vigilante -- justice. But apart from the knee-jerk reaction to the word "vigilante," can you really say the government is doing a bang-up job of providing official justice? Or that the Bitcoin community's responses to attacks on it have been ill-considered or poorly executed?
posted by spacewrench at 7:45 AM on April 4, 2013 [1 favorite]
a Japanese man nobody can find.
To be clear, Satoshi Nakamoto is just a pseudonym.
posted by seemoreglass at 7:48 AM on April 4, 2013
To be clear, Satoshi Nakamoto is just a pseudonym.
posted by seemoreglass at 7:48 AM on April 4, 2013
How is BitCoin designed to avoid becoming trapped by those who can afford to devote rooms of processors to mining BC?
Since the mining difficulty is based on the previous two weeks of network-wide mining performance, the miners are competing with each other. So in theory, the miners will keep investing in mining equipment until the cost of mining equals the price of bitcoins.
Right now we're (allegedly) starting to see the first custom ASICs which are 50x more efficient than GPU mining. It's hard to imagine how it's going to get faster unless someone finds a flaw in SHA-256 or perfects quantum computing, both of which would be arguably good things.
The fact that CPU/GPU mining is becoming obsolete is a good thing too, because it means that botnet operators will no longer find this activity profitable (at least until PC makers include mining hardware in their chipsets).
Anyway, miners are actually providing a service -- the collective action of mining secures the chain of transactions, as anyone wanting to hack the block chain would need to possess more computing power than 50% of the network. As long as the majority of miners are "good" (and not colluding) this should work.
I think it's interesting, and I think the scheme has problems to overcome. But I don't see the difference between bitcoin collectors and billionaires parking their assets in collectible art (and if you say that the art has intrinsic value, ask the owners if they give a shit).
posted by RobotVoodooPower at 7:49 AM on April 4, 2013
Since the mining difficulty is based on the previous two weeks of network-wide mining performance, the miners are competing with each other. So in theory, the miners will keep investing in mining equipment until the cost of mining equals the price of bitcoins.
Right now we're (allegedly) starting to see the first custom ASICs which are 50x more efficient than GPU mining. It's hard to imagine how it's going to get faster unless someone finds a flaw in SHA-256 or perfects quantum computing, both of which would be arguably good things.
The fact that CPU/GPU mining is becoming obsolete is a good thing too, because it means that botnet operators will no longer find this activity profitable (at least until PC makers include mining hardware in their chipsets).
Anyway, miners are actually providing a service -- the collective action of mining secures the chain of transactions, as anyone wanting to hack the block chain would need to possess more computing power than 50% of the network. As long as the majority of miners are "good" (and not colluding) this should work.
I think it's interesting, and I think the scheme has problems to overcome. But I don't see the difference between bitcoin collectors and billionaires parking their assets in collectible art (and if you say that the art has intrinsic value, ask the owners if they give a shit).
posted by RobotVoodooPower at 7:49 AM on April 4, 2013
There are a lot of things that are wrong with BitCoin and people who are currently storing a lot of money in it are crazy, but I think the more important aspect of BitCoin becoming popular is that it is creating a sort of cash-equivalent transaction infrastructure on the Internet that will be hard to get rid of even if BitCoin itself fails. There are already independent alternatives to BitCoin that are available through the same exchanges that BitCoin is, so once vendors start accepting BitCoin (which they convert to a normal currency after the transaction is done), it's very easy for them to start using something else. The hard part is actually getting a cryptocurrency popular enough that the infrastructure can be built, and BitCoin is doing that now, but BitCoin doesn't have to be around in 10 years for that infrastructure to survive. Until government-controlled currencies can easily be used for all of the types of transactions that BitCoin is currently supporting, there is always going to be a demand for an alternative and if BitCoin fails then a new alternative will probably take its place.
posted by burnmp3s at 7:53 AM on April 4, 2013 [1 favorite]
posted by burnmp3s at 7:53 AM on April 4, 2013 [1 favorite]
Bitcoin wants to be a currency, but it's really a commodity; the analogy is gold is really apt, I think. It's good for speculation and for hedging against inflation, but using it as a currency would be as bad as having a gold standard.
I never can figure out why bitcoiners, like goldbugs, have such grave fears about the "debasement" of the currency. If anything, monetary policy in the developed world has been far too tight. The Federal Reserve has expanded the monetary base of the dollar tremendously in the past half-decade, yet inflation has been miniscule. Meanwhile, the eurozone is crucifying itself on a cross of price stability. I can see the appeal of Bitcoin as a payments mechanism that reaches farther than the current banking system allows, but I wouldn't want it as a replacement currency.
posted by Cash4Lead at 7:58 AM on April 4, 2013 [3 favorites]
I never can figure out why bitcoiners, like goldbugs, have such grave fears about the "debasement" of the currency. If anything, monetary policy in the developed world has been far too tight. The Federal Reserve has expanded the monetary base of the dollar tremendously in the past half-decade, yet inflation has been miniscule. Meanwhile, the eurozone is crucifying itself on a cross of price stability. I can see the appeal of Bitcoin as a payments mechanism that reaches farther than the current banking system allows, but I wouldn't want it as a replacement currency.
posted by Cash4Lead at 7:58 AM on April 4, 2013 [3 favorites]
Right now, Bitcoins are worth at least 10 times more than they should actually be worth. So this is my advice:
- If you own any bitcoins, now is the time to sell enough to recoup your original investments and get a little nest egg in addition. Then you can keep the rest and hope speculation drives the price even more insanely high.
- If you don't own any coins, don't even think about buying some now. "Investing" right now is for all intents and purposes gambling. If you still insist on playing along, remember: Never put in more than you can afford to lose.
posted by ymgve at 8:02 AM on April 4, 2013 [1 favorite]
- If you own any bitcoins, now is the time to sell enough to recoup your original investments and get a little nest egg in addition. Then you can keep the rest and hope speculation drives the price even more insanely high.
- If you don't own any coins, don't even think about buying some now. "Investing" right now is for all intents and purposes gambling. If you still insist on playing along, remember: Never put in more than you can afford to lose.
posted by ymgve at 8:02 AM on April 4, 2013 [1 favorite]
That Dunning-Krugerrand coinage is sheer genius. A quick search through Google's date limits turns up a first use of that phrase in November 2011, albeit not about BitCoin. First BitCoin usage I could find happened on September 7 2012 in two different places: Hacker News and the CivFanatics forums. That suggests an earlier common origin, maybe doing more than 3 minutes of research could find it.
posted by Nelson at 8:03 AM on April 4, 2013 [1 favorite]
posted by Nelson at 8:03 AM on April 4, 2013 [1 favorite]
The Dunning-Krugerrand term is used a lot on Something Awful, and I seem to recall it being used over a year ago there. I suspect that might be the origin, or at least where it spread from.
posted by ymgve at 8:06 AM on April 4, 2013 [4 favorites]
posted by ymgve at 8:06 AM on April 4, 2013 [4 favorites]
Just to be clear, I have no stake in Bitcoin as a technology or as a brand. Bitcoin, or the desire for something like it, is a natural consequence on The War on Some Drugs, and the War on Cheap Overseas Pharmaceuticals, and the relentless overreach of the United States government.
People want anonymous monetary transactions, conducted over the Internet. If not Bitcoin, then something else will emerge.
posted by adipocere at 8:09 AM on April 4, 2013 [3 favorites]
People want anonymous monetary transactions, conducted over the Internet. If not Bitcoin, then something else will emerge.
posted by adipocere at 8:09 AM on April 4, 2013 [3 favorites]
Something else already emerged for anonymous monetary transactions on the Internet. e-gold. The history is awkward, mostly because most of the use of e-gold was for various kinds of illegal activity.
posted by Nelson at 8:11 AM on April 4, 2013
posted by Nelson at 8:11 AM on April 4, 2013
I find it difficult to believe that anyone who has written critically of the dangers of bitcoin would prefer an economy where private cash transactions are illegal.
A secondhand dealer shall not enter into any cash transactions in payment for the purchase of junk or used or secondhand property. Payment shall be made in the form of check, electronic transfers, or money order issued to the seller of the junk or used or secondhand property and made payable to the name and address of the seller. All payments made by check, electronic transfers, or money order shall be reported separately in the daily reports required by R.S. 37:1866.
The reason? "It's a mechanism to be used so the police department has something to go on and have a lead,"
posted by rough ashlar at 8:18 AM on April 4, 2013 [1 favorite]
A secondhand dealer shall not enter into any cash transactions in payment for the purchase of junk or used or secondhand property. Payment shall be made in the form of check, electronic transfers, or money order issued to the seller of the junk or used or secondhand property and made payable to the name and address of the seller. All payments made by check, electronic transfers, or money order shall be reported separately in the daily reports required by R.S. 37:1866.
The reason? "It's a mechanism to be used so the police department has something to go on and have a lead,"
posted by rough ashlar at 8:18 AM on April 4, 2013 [1 favorite]
I never can figure out why bitcoiners, like goldbugs, have such grave fears about the "debasement" of the currency.
Being of an individualist bent, the first hint that the value their money holdings - which they implicitly or explicitly believe to be a measure of their self worth - is socially determined is a very scary realization.
posted by downing street memo at 8:19 AM on April 4, 2013 [16 favorites]
Being of an individualist bent, the first hint that the value their money holdings - which they implicitly or explicitly believe to be a measure of their self worth - is socially determined is a very scary realization.
posted by downing street memo at 8:19 AM on April 4, 2013 [16 favorites]
As is so often the case, the real wealth to be made here is in selling shovels to the miners.
posted by GameDesignerBen at 8:22 AM on April 4, 2013 [2 favorites]
posted by GameDesignerBen at 8:22 AM on April 4, 2013 [2 favorites]
As is so often the case, the real wealth to be made here is in selling shovels to the miners.
From what I've seen so far, it seems the largest wealth is made by claiming to be a bank that can securely store the miners' gold, then one night you just leave town with the whole bank on the back of a horse.
posted by ymgve at 8:27 AM on April 4, 2013 [13 favorites]
From what I've seen so far, it seems the largest wealth is made by claiming to be a bank that can securely store the miners' gold, then one night you just leave town with the whole bank on the back of a horse.
posted by ymgve at 8:27 AM on April 4, 2013 [13 favorites]
Total Bitcoin value passes $1 billion (notice that it's still quoted in dollars
Wow. That's kind of shocking to me. I don't see why small vendors would object to accepting bitcoin as long as they could charge a %15 premium or something and immediately convert them back to dollars at the going exchange rate.
posted by Golden Eternity at 8:29 AM on April 4, 2013
Wow. That's kind of shocking to me. I don't see why small vendors would object to accepting bitcoin as long as they could charge a %15 premium or something and immediately convert them back to dollars at the going exchange rate.
posted by Golden Eternity at 8:29 AM on April 4, 2013
What are they worth on the Beany Baby market?
posted by Devils Rancher at 8:40 AM on April 4, 2013 [1 favorite]
posted by Devils Rancher at 8:40 AM on April 4, 2013 [1 favorite]
Total Bitcoin value passes $1 billion...
This also confuses me. How can Bitcoin be worth any actual amount of dollars, since BC exists expressly outside normal normal monetary systems and exchanges? This seems to be even more of a "Because we say so. Trust us." valuation than Bitcoin fans claim the US Treasury operates under.
And, how easy is it in reality to swap your BC for dollars?
posted by Thorzdad at 8:41 AM on April 4, 2013
This also confuses me. How can Bitcoin be worth any actual amount of dollars, since BC exists expressly outside normal normal monetary systems and exchanges? This seems to be even more of a "Because we say so. Trust us." valuation than Bitcoin fans claim the US Treasury operates under.
And, how easy is it in reality to swap your BC for dollars?
posted by Thorzdad at 8:41 AM on April 4, 2013
How can Bitcoin be worth any actual amount of dollars
Current exchange rate.
And, how easy is it in reality to swap your BC for dollars?
Very.
posted by jaduncan at 8:46 AM on April 4, 2013
Current exchange rate.
And, how easy is it in reality to swap your BC for dollars?
Very.
posted by jaduncan at 8:46 AM on April 4, 2013
This also confuses me. How can Bitcoin be worth any actual amount of dollars, since BC exists expressly outside normal normal monetary systems and exchanges? This seems to be even more of a "Because we say so. Trust us." valuation than Bitcoin fans claim the US Treasury operates under.
And, how easy is it in reality to swap your BC for dollars?
There's a putative exchange rate in as much as that's what people are willing to pay for bitcoins at the Mt Gox exchange. So, multiplying every bitcoin in existence by that rate gives us the worth.
Of course, it's not that simple. Most bitcoins are not in circulation, if anyone starting dumping massive amounts of them (as several have hypothesized will happen someday when early miners try to cash out) the price will plummet, and Mt Gox only allows US$1000 to be withdrawn a day. But it's only a little sillier than asking "how many rupees is the whole US monetary system worth?"
posted by outlier at 8:48 AM on April 4, 2013 [1 favorite]
And, how easy is it in reality to swap your BC for dollars?
There's a putative exchange rate in as much as that's what people are willing to pay for bitcoins at the Mt Gox exchange. So, multiplying every bitcoin in existence by that rate gives us the worth.
Of course, it's not that simple. Most bitcoins are not in circulation, if anyone starting dumping massive amounts of them (as several have hypothesized will happen someday when early miners try to cash out) the price will plummet, and Mt Gox only allows US$1000 to be withdrawn a day. But it's only a little sillier than asking "how many rupees is the whole US monetary system worth?"
posted by outlier at 8:48 AM on April 4, 2013 [1 favorite]
Bitcoin wants to be a currency, but it's really a commodity; the analogy is gold is really apt, I think. It's good for speculation and for hedging against inflation, but using it as a currency would be as bad as having a gold standard.
I think it's even worst than gold or other traditional commodities. With commodities, at least there's a physical underlying substance that represents time value and effort. The underlying substance of a Bitcoin are numbers that satisfied a particular mathematical constraint and the social memory of the network that records your ID as the owner of that solution. I think it was Felix @ Reuters or Izzy @ FTAv that said it, it's a commodity without any intrinsic value. It's pure fiat.
It's very clever though and an interesting experiment.
posted by tksh at 8:50 AM on April 4, 2013 [3 favorites]
I think it's even worst than gold or other traditional commodities. With commodities, at least there's a physical underlying substance that represents time value and effort. The underlying substance of a Bitcoin are numbers that satisfied a particular mathematical constraint and the social memory of the network that records your ID as the owner of that solution. I think it was Felix @ Reuters or Izzy @ FTAv that said it, it's a commodity without any intrinsic value. It's pure fiat.
It's very clever though and an interesting experiment.
posted by tksh at 8:50 AM on April 4, 2013 [3 favorites]
Mt Gox only allows US$1000 to be withdrawn a day
That's just the basic limit. If you go through their verification process you are allowed to withdraw half a million each month.
posted by ymgve at 8:52 AM on April 4, 2013 [1 favorite]
That's just the basic limit. If you go through their verification process you are allowed to withdraw half a million each month.
posted by ymgve at 8:52 AM on April 4, 2013 [1 favorite]
it's a commodity without any intrinsic value.
What? Gold doesn't have intrinsic value, either.
posted by downing street memo at 8:57 AM on April 4, 2013 [2 favorites]
What? Gold doesn't have intrinsic value, either.
posted by downing street memo at 8:57 AM on April 4, 2013 [2 favorites]
That's just the basic limit. If you go through their verification process you are allowed to withdraw half a million each month.
You are correct. Which ballparks to $17K a day. Although I understand some bitcoiners are reluctant to verify themselves, hiding from the man and all that.
Question: if someone does try to cash out big time from Mt Gox, could Mt Gox actually cover it? With the price rise, there's a lot of bitcoiners who could try to take out at that limit. Of course, such a withdrawal might cause the price to crater.
posted by outlier at 8:59 AM on April 4, 2013
You are correct. Which ballparks to $17K a day. Although I understand some bitcoiners are reluctant to verify themselves, hiding from the man and all that.
Question: if someone does try to cash out big time from Mt Gox, could Mt Gox actually cover it? With the price rise, there's a lot of bitcoiners who could try to take out at that limit. Of course, such a withdrawal might cause the price to crater.
posted by outlier at 8:59 AM on April 4, 2013
If you don't own any coins, don't even think about buying some now. "Investing" right now is for all intents and purposes gambling. If you still insist on playing along, remember: Never put in more than you can afford to lose.
This advice only makes sense if you think bitcoins are about investing. I couldn't care less about that: what excites me about bitcoin is that it can replace paypal.
I give paypal dollars in exchange for credits in my paypal account. I'm not "investing" in paypal credits; I'm just getting ready to send those credits to someone else. I don't leave a balance hanging around with paypal and if they went out of business tomorrow I wouldn't really care that much. Same with bitcoin: if I buy a bitcoin, I'm not "investing" in bitcoin, I'm just getting ready to send some credits to someone else. If someone else pays me in bitcoin, I'm just as likely to keep a big pile of bitcoins sitting around as I would be to keep a big balance in a paypal account: that is, not at all.
Of course bitcoin has a different risk profile, and that is what makes it interesting. You don't have to worry about Paypal skimming a cut, or freezing your account because they think your geek conference is actually a money laundering scheme, or reporting your activity to some unfriendly government, because none of those things can happen with bitcoin. On the other hand, it's up to you to secure your bitcoin wallet and back it up, and there's an extra layer of exchange involved in getting useful value out of your digital credits.
posted by Mars Saxman at 9:04 AM on April 4, 2013 [3 favorites]
This advice only makes sense if you think bitcoins are about investing. I couldn't care less about that: what excites me about bitcoin is that it can replace paypal.
I give paypal dollars in exchange for credits in my paypal account. I'm not "investing" in paypal credits; I'm just getting ready to send those credits to someone else. I don't leave a balance hanging around with paypal and if they went out of business tomorrow I wouldn't really care that much. Same with bitcoin: if I buy a bitcoin, I'm not "investing" in bitcoin, I'm just getting ready to send some credits to someone else. If someone else pays me in bitcoin, I'm just as likely to keep a big pile of bitcoins sitting around as I would be to keep a big balance in a paypal account: that is, not at all.
Of course bitcoin has a different risk profile, and that is what makes it interesting. You don't have to worry about Paypal skimming a cut, or freezing your account because they think your geek conference is actually a money laundering scheme, or reporting your activity to some unfriendly government, because none of those things can happen with bitcoin. On the other hand, it's up to you to secure your bitcoin wallet and back it up, and there's an extra layer of exchange involved in getting useful value out of your digital credits.
posted by Mars Saxman at 9:04 AM on April 4, 2013 [3 favorites]
What? Gold doesn't have intrinsic value, either.
Okay, value may not be the best word but gold, even if it was worthless, still has its value as a shiny metal and a heavy one at that. You don't need a community to acknowledge its existence either. Bitcoins have no existence until the majority (I think it's majority) agrees they exist.
posted by tksh at 9:06 AM on April 4, 2013 [1 favorite]
Okay, value may not be the best word but gold, even if it was worthless, still has its value as a shiny metal and a heavy one at that. You don't need a community to acknowledge its existence either. Bitcoins have no existence until the majority (I think it's majority) agrees they exist.
posted by tksh at 9:06 AM on April 4, 2013 [1 favorite]
Question: if someone does try to cash out big time from Mt Gox, could Mt Gox actually cover it?
As long as Mt Gox is halfway competent, they should even handle a full shutdown where everyone panics and withdraws all of their coins and dollars. Mt Gox is not a bank, it's just a facilitator that helps buyers and sellers find each other - each trade is backed by real users on both ends, just like any other stock/commodity market.
posted by ymgve at 9:06 AM on April 4, 2013 [1 favorite]
As long as Mt Gox is halfway competent, they should even handle a full shutdown where everyone panics and withdraws all of their coins and dollars. Mt Gox is not a bank, it's just a facilitator that helps buyers and sellers find each other - each trade is backed by real users on both ends, just like any other stock/commodity market.
posted by ymgve at 9:06 AM on April 4, 2013 [1 favorite]
I put some effort into it and I think I finally wrapped my head around what bitcoins are, but I also could see the light coming from the "Just Give Up and Write The Whole Thing Off" tunnel my mother traveled for years when it came to computers. This is a snapshot on my journey to getting old.
posted by ThePinkSuperhero at 9:07 AM on April 4, 2013 [4 favorites]
posted by ThePinkSuperhero at 9:07 AM on April 4, 2013 [4 favorites]
The underlying substance of a Bitcoin are numbers that satisfied a particular mathematical constraint and the social memory of the network that records your ID as the owner of that solution... it's a commodity without any intrinsic value
But the fact that the network has to work so hard to compute the cryptographic hashes that secure each block of transactions is a kind of value, since anyone wanting to contest the transaction history would have to work at least that hard. Bitcoin's value is that it's extremely hard to forge transactions that are accepted by the network, so long as the majority plays fairly.
posted by RobotVoodooPower at 9:08 AM on April 4, 2013
But the fact that the network has to work so hard to compute the cryptographic hashes that secure each block of transactions is a kind of value, since anyone wanting to contest the transaction history would have to work at least that hard. Bitcoin's value is that it's extremely hard to forge transactions that are accepted by the network, so long as the majority plays fairly.
posted by RobotVoodooPower at 9:08 AM on April 4, 2013
More interesting than "$1B in value" is "over $19.5M in BTC/USD exchanges a day"; I pulled that number from this chart. Yesterday Mt. Gox exchanged about 150,000 BTC at a price of roughly $130/BTC, 150,000 * 130 =~ $19.5M. That's only the Mt. Gox exchange, there are others, but I believe Mt. Gox is still the vast majority of all BitCoin / hard currency exchanges.
Also interesting is intra-BitCoin transactions a day, the size of usage of the currency. The best data I could find is from BlockChain's charts, which shows estimated USD transaction volume peaking at $60M yesterday. Interestingly the same graph in BTC doesn't show much change in activity over a year; a slow rise from 200,000 BTC to 300,000 BTC a day. At the historical price of roughly $10 / BTC, that shows total activity in BitCoin to be about $2.5M / day for the last year.
posted by Nelson at 9:14 AM on April 4, 2013 [2 favorites]
Also interesting is intra-BitCoin transactions a day, the size of usage of the currency. The best data I could find is from BlockChain's charts, which shows estimated USD transaction volume peaking at $60M yesterday. Interestingly the same graph in BTC doesn't show much change in activity over a year; a slow rise from 200,000 BTC to 300,000 BTC a day. At the historical price of roughly $10 / BTC, that shows total activity in BitCoin to be about $2.5M / day for the last year.
posted by Nelson at 9:14 AM on April 4, 2013 [2 favorites]
And, how easy is it in reality to swap your BC for dollars?
Well, it's not like there is any central bank or anything. You need to find someone who has dollars and wants BTC. This is easy when the currency is going up. When it goes down, it's pretty easy for the person you were previously easily exchanging with to just run out of dollars to trade.
posted by smackfu at 9:17 AM on April 4, 2013 [2 favorites]
Well, it's not like there is any central bank or anything. You need to find someone who has dollars and wants BTC. This is easy when the currency is going up. When it goes down, it's pretty easy for the person you were previously easily exchanging with to just run out of dollars to trade.
posted by smackfu at 9:17 AM on April 4, 2013 [2 favorites]
But the fact that the network has to work so hard to compute the cryptographic hashes that secure each block of transactions is a kind of value, since anyone wanting to contest the transaction history would have to work at least that hard. Bitcoin's value is that it's extremely hard to forge transactions that are accepted by the network, so long as the majority plays fairly.
Yea, in that way it behaves like a commodity. A price exchanged in lieu of hard work done. But what is the hard work that's being done? Numeric solutions to an arbitrary question that changes in difficulty based on how quickly previous questions are being solved.
Let's say that question being solved instead were protein folding simulations. Or the search for the next largest prime. Or digits of pi. All these solutions are pure information and their value is what the participants agree on. There's no lowerbound to their value. I guess I'm arguing there's no physical residue of the hard work that's being done and so, there's no intrinsic value if no one else recognises your solution to that arbitrary question.
posted by tksh at 9:22 AM on April 4, 2013 [1 favorite]
Yea, in that way it behaves like a commodity. A price exchanged in lieu of hard work done. But what is the hard work that's being done? Numeric solutions to an arbitrary question that changes in difficulty based on how quickly previous questions are being solved.
Let's say that question being solved instead were protein folding simulations. Or the search for the next largest prime. Or digits of pi. All these solutions are pure information and their value is what the participants agree on. There's no lowerbound to their value. I guess I'm arguing there's no physical residue of the hard work that's being done and so, there's no intrinsic value if no one else recognises your solution to that arbitrary question.
posted by tksh at 9:22 AM on April 4, 2013 [1 favorite]
Stuff like this makes me think that Pratchett may have just pulled off one of the first works of prophetic fantasy.
posted by CBrachyrhynchos at 9:23 AM on April 4, 2013
posted by CBrachyrhynchos at 9:23 AM on April 4, 2013
Okay, value may not be the best word but gold, even if it was worthless, still has its value as a shiny metal and a heavy one at that. You don't need a community to acknowledge its existence either. Bitcoins have no existence until the majority (I think it's majority) agrees they exist.
But the value of gold doesn't exist until a community gives it value. I could imagine a primitive society believing gold is cursed somehow, giving it essentially negative value or something. Gold does have material value in electronics and aerospace, etc., but this probably only accounts for a fraction of its price.
The advantage of bitcoin, it seems to me, is that it is not physical and can be used purely electronically and anonymously.
I haven't found a good explanation of the recent price explosion. Maybe it is more hedge funds buying in? It does seem like the amount of bitcoin in actual circulation may be quite small. I wonder why miners aren't cashing out now.
posted by Golden Eternity at 9:26 AM on April 4, 2013 [1 favorite]
But the value of gold doesn't exist until a community gives it value. I could imagine a primitive society believing gold is cursed somehow, giving it essentially negative value or something. Gold does have material value in electronics and aerospace, etc., but this probably only accounts for a fraction of its price.
The advantage of bitcoin, it seems to me, is that it is not physical and can be used purely electronically and anonymously.
I haven't found a good explanation of the recent price explosion. Maybe it is more hedge funds buying in? It does seem like the amount of bitcoin in actual circulation may be quite small. I wonder why miners aren't cashing out now.
posted by Golden Eternity at 9:26 AM on April 4, 2013 [1 favorite]
I had been ignoring the whole Bitcoin thing and written it off as wishful thinking, but these articles were pretty interesting. Then again, I’m always surprised at how many people I meet who seem to think there is some intrinsic value to U.S. currency, or gold, or whatever.
It’s all faith, people. There’s a likely probability that our entire economy was/is completely broken a couple of years ago. I don’t think the government bailed out the banks so much, I think they set up an elaborate smokescreen to make us think our Ponzi scheme of a system was still working. I thank them for it, even though it was mostly evil. Now let’s move to a better system.
posted by bongo_x at 9:31 AM on April 4, 2013 [1 favorite]
It’s all faith, people. There’s a likely probability that our entire economy was/is completely broken a couple of years ago. I don’t think the government bailed out the banks so much, I think they set up an elaborate smokescreen to make us think our Ponzi scheme of a system was still working. I thank them for it, even though it was mostly evil. Now let’s move to a better system.
posted by bongo_x at 9:31 AM on April 4, 2013 [1 favorite]
Okay, value may not be the best word but gold, even if it was worthless, still has its value as a shiny metal and a heavy one at that. You don't need a community to acknowledge its existence either. Bitcoins have no existence until the majority (I think it's majority) agrees they exist.
The fact that if gold suddenly lost 99% of its value, you would still have the 1%, is like saying that Zimbabwe dollars still have value because they can be used as scratch paper. It would be relatively easy for transaction fees to wipe out the percentage of value that you would have left if all of the value from it being a scarce currency was lost.
Today a single ounce of gold is worth over $1500, due almost entirely to speculation. If you want to have some very small pieces of highly useful but mostly worthless metal after BitCoin loses all of its value as a currency, then buy $1480 worth of BitCoin, and spend $20 on ebay buying a set of 1oz bullion bars of copper, brass, zinc, iron, and aluminum. That's over 5 times as much (diversified!) shiny metal for the same investment, and you've successfully hedged against the chance that you might not have a few ounces of metal at some point in the future.
posted by burnmp3s at 9:37 AM on April 4, 2013 [7 favorites]
The fact that if gold suddenly lost 99% of its value, you would still have the 1%, is like saying that Zimbabwe dollars still have value because they can be used as scratch paper. It would be relatively easy for transaction fees to wipe out the percentage of value that you would have left if all of the value from it being a scarce currency was lost.
Today a single ounce of gold is worth over $1500, due almost entirely to speculation. If you want to have some very small pieces of highly useful but mostly worthless metal after BitCoin loses all of its value as a currency, then buy $1480 worth of BitCoin, and spend $20 on ebay buying a set of 1oz bullion bars of copper, brass, zinc, iron, and aluminum. That's over 5 times as much (diversified!) shiny metal for the same investment, and you've successfully hedged against the chance that you might not have a few ounces of metal at some point in the future.
posted by burnmp3s at 9:37 AM on April 4, 2013 [7 favorites]
But the value of gold doesn't exist until a community gives it value. I could imagine a primitive society believing gold is cursed somehow, giving it essentially negative value or something. Gold does have material value in electronics and aerospace, etc., but this probably only accounts for a fraction of its price.
Oh, I don't think gold has any monetary value until it two parties think it does. I didn't mean to come off as a gold bug.
I do think there is still some intrinsic value to gold, even negative in your example, if it has no monetary value. Like how hog bellies may have no monetary value in certain cultures but there's still intrinsic material value to its physical existence. Gold exists, thus at the least, it can be used to curse people or to throw at your enemies or to prop up your table or keep your sheets from being blown away. And by those functions, it imputes the tiniest bit of value.
Can't do that with numbers.
posted by tksh at 9:43 AM on April 4, 2013
Oh, I don't think gold has any monetary value until it two parties think it does. I didn't mean to come off as a gold bug.
I do think there is still some intrinsic value to gold, even negative in your example, if it has no monetary value. Like how hog bellies may have no monetary value in certain cultures but there's still intrinsic material value to its physical existence. Gold exists, thus at the least, it can be used to curse people or to throw at your enemies or to prop up your table or keep your sheets from being blown away. And by those functions, it imputes the tiniest bit of value.
Can't do that with numbers.
posted by tksh at 9:43 AM on April 4, 2013
There is an physically defined "intrinsic" value to gold in that it posses an atomic number that makes it both distinct and chemically useful. There is a legally defined value to dollars in that people must pay their taxes in dollars and financial institutions are compelled to accept dollars, as I mentioned in another bitcoin thread. Bitcoin possesses neither.
There is no intrinsic value in the past work done to create bitcoins because value derives from marginal costs. We've exactly this problem with copyright, namely "As every graduate of an introductory economics class knows, the market works best when items sell at their marginal cost".
Art is perhaps a better analog for the wholly socially constructed value of bitcoins. Art's socially constructed value seems more resilient however. Yes, your signed Rosemary's Baby poster lost value when Roman Polanski's pedophilia came out, but considerable value remained.
In principle, all the bitcoin detractors could get together to kill bitcoin by creating their own incompatible bitcoin fork that incorporated all the best proposed protocol mods that bitcoin cannot easily adopt now. We might even adopting obvious protocol improvements the goldbugs dislike, such as a fixed permanent inflation to reduce transaction costs, or attaching contracts to individual coins, thus giving them contractual value along with their socially constructed value. Incidentally, attached contracts create an arbitrage opportunity that make all coin's value more well defined.
In essence, we could prove bitcoin to be a pyramid scheme by running our own better bitcoin-like pyramid scheme. Or maybe bitcoin itself is already performance art on the level proposed in Black Mirror episode one that exposes the socially constructed nature of all currencies?
posted by jeffburdges at 9:47 AM on April 4, 2013 [1 favorite]
There is no intrinsic value in the past work done to create bitcoins because value derives from marginal costs. We've exactly this problem with copyright, namely "As every graduate of an introductory economics class knows, the market works best when items sell at their marginal cost".
Art is perhaps a better analog for the wholly socially constructed value of bitcoins. Art's socially constructed value seems more resilient however. Yes, your signed Rosemary's Baby poster lost value when Roman Polanski's pedophilia came out, but considerable value remained.
In principle, all the bitcoin detractors could get together to kill bitcoin by creating their own incompatible bitcoin fork that incorporated all the best proposed protocol mods that bitcoin cannot easily adopt now. We might even adopting obvious protocol improvements the goldbugs dislike, such as a fixed permanent inflation to reduce transaction costs, or attaching contracts to individual coins, thus giving them contractual value along with their socially constructed value. Incidentally, attached contracts create an arbitrage opportunity that make all coin's value more well defined.
In essence, we could prove bitcoin to be a pyramid scheme by running our own better bitcoin-like pyramid scheme. Or maybe bitcoin itself is already performance art on the level proposed in Black Mirror episode one that exposes the socially constructed nature of all currencies?
posted by jeffburdges at 9:47 AM on April 4, 2013 [1 favorite]
Just to be clear, I have no stake in Bitcoin as a technology or as a brand. Bitcoin, or the desire for something like it, is a natural consequence on The War on Some Drugs, and the War on Cheap Overseas Pharmaceuticals, and the relentless overreach of the United States government.
all this complaining about heinous miscarriages of justice, corporately-bought laws, and backwash from the Reagan era is all well and good, but as a Something Awful "dot com" forum member, i'd prefer to coin hilarious neologism memes for people who don't particularly feel like being victimized by those things
posted by This, of course, alludes to you at 9:53 AM on April 4, 2013 [1 favorite]
(As a materials scientist, I just want to remind everyone that, as the most electrically conductive material that does not tarnish, gold is essential and essentially irreplaceable in the technologies used to write, edit, store, and display these comments.)
posted by Mapes at 10:10 AM on April 4, 2013 [9 favorites]
posted by Mapes at 10:10 AM on April 4, 2013 [9 favorites]
There is no intrinsic value in the past work done to create bitcoins because value derives from marginal costs. We've exactly this problem with copyright, namely "As every graduate of an introductory economics class knows, the market works best when items sell at their marginal cost".
Obviously, there is not much intrinsic value to the paper and ink of a $100 bill either. I'm no economist, but I don't think the value of money itself is necessarily derived from its marginal cost, but rather as its effectiveness as a stable medium of exchange. The fact that money is a social construct is probably apparent to most people, and doesn't need exposing. I suppose there is some additional security in the value of the US dollar in that it's guaranteed by the US government - which may be somewhat more trustworthy than bitcoin.org and has more assets and nuclear weapons, etc.
posted by Golden Eternity at 10:10 AM on April 4, 2013 [2 favorites]
Obviously, there is not much intrinsic value to the paper and ink of a $100 bill either. I'm no economist, but I don't think the value of money itself is necessarily derived from its marginal cost, but rather as its effectiveness as a stable medium of exchange. The fact that money is a social construct is probably apparent to most people, and doesn't need exposing. I suppose there is some additional security in the value of the US dollar in that it's guaranteed by the US government - which may be somewhat more trustworthy than bitcoin.org and has more assets and nuclear weapons, etc.
posted by Golden Eternity at 10:10 AM on April 4, 2013 [2 favorites]
There is also a lot of insecurity in the value of the US dollar because of the US government, which has some very strong opinions about the sorts of exchanges which should and should not be taking place and how much it should know about the people participating in them.
posted by Mars Saxman at 10:20 AM on April 4, 2013 [1 favorite]
posted by Mars Saxman at 10:20 AM on April 4, 2013 [1 favorite]
gjc: I've read several long articles about bitcoins and the concept never made sense to me until your 150-word explanation.
posted by payoto at 10:30 AM on April 4, 2013
posted by payoto at 10:30 AM on April 4, 2013
I suppose there is some additional security in the value of the US dollar in that it's guaranteed by the US government
Is it? Or is that just an assumption? If it is for all 'goods and services' - why can't you walk into the local IRS office and pay what they want? How about the Louisiana effort to make cash purchase of 2nd hand goods illegal?
What, exactly, is the nature of the claimed guarantee?
posted by rough ashlar at 10:38 AM on April 4, 2013
Is it? Or is that just an assumption? If it is for all 'goods and services' - why can't you walk into the local IRS office and pay what they want? How about the Louisiana effort to make cash purchase of 2nd hand goods illegal?
What, exactly, is the nature of the claimed guarantee?
posted by rough ashlar at 10:38 AM on April 4, 2013
pi, e, and prime numbers are also unique solutions to many problems. A beauty of numbers' intrinsic value is that once discovered, they are available to everyone.
But back on track, I learned today from Slashdot that MtGOX is derived from "Magic The Gathering Online Exchange".
posted by achrise at 10:41 AM on April 4, 2013
But back on track, I learned today from Slashdot that MtGOX is derived from "Magic The Gathering Online Exchange".
posted by achrise at 10:41 AM on April 4, 2013
What, exactly, is the nature of the claimed guarantee?
I don't know. Like I said, I'm no economist. Currently, I would say it is the guarantee is in operation in the fed's charter to keep prices stable. If that were to fail massively, I'm guessing the government could enforce price fixing or become a buyer/seller of last resort. Perhaps that is essentially what they have done by buying GM, AIG, Fannie and Freddie, Mortgage backed securities, bailing out banks, etc.
posted by Golden Eternity at 10:51 AM on April 4, 2013
I don't know. Like I said, I'm no economist. Currently, I would say it is the guarantee is in operation in the fed's charter to keep prices stable. If that were to fail massively, I'm guessing the government could enforce price fixing or become a buyer/seller of last resort. Perhaps that is essentially what they have done by buying GM, AIG, Fannie and Freddie, Mortgage backed securities, bailing out banks, etc.
posted by Golden Eternity at 10:51 AM on April 4, 2013
If the intrinsic value of something is not relatively close to its priced value, I don't think it's very relevant for discussion.
posted by smackfu at 10:58 AM on April 4, 2013
posted by smackfu at 10:58 AM on April 4, 2013
Currently, I would say it is the guarantee is in operation in the fed's charter to keep prices stable.
So how is The Federal Reserve 'the government'?
posted by rough ashlar at 11:00 AM on April 4, 2013
So how is The Federal Reserve 'the government'?
posted by rough ashlar at 11:00 AM on April 4, 2013
Their charter (the Federal Reserve Act or whatever) is "the government." wikipedia:
posted by Golden Eternity at 11:05 AM on April 4, 2013 [1 favorite]
During the 1970s, the Federal Reserve Act was amended to require the Board and the FOMC "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."[18] Also in that decade, the Act was amended so that the member governor proposed by the President to be Chairman would have a four-year term as Chairman and would be subject to confirmation by the Senate (member governors per se each have 14 year terms, with a specific term ending every two years) (Section 10). The Chairman was also required to appear before Congress at semi-annual hearings to report on the conduct of monetary policy, on economic development, and on the prospects for the future.[19]anyway, this is a derail....
posted by Golden Eternity at 11:05 AM on April 4, 2013 [1 favorite]
Interestingly, there is already an alternative to bitcoin called litecoin, designed to make GPUs less effective for mining. So anyone who wants to join the mining game earlier could jump on litecoin instead.
posted by jeffburdges at 11:12 AM on April 4, 2013
posted by jeffburdges at 11:12 AM on April 4, 2013
An interesting take: On the fact that Bitcoin has a Kill Switch; and how to disconnect it.
tl;dr: A large fraction of bitcoins are owned by a very small number people who are not circulating them. If they sell, they could crash the bitcoin market.
posted by cosmic.osmo at 11:26 AM on April 4, 2013 [5 favorites]
tl;dr: A large fraction of bitcoins are owned by a very small number people who are not circulating them. If they sell, they could crash the bitcoin market.
posted by cosmic.osmo at 11:26 AM on April 4, 2013 [5 favorites]
A large fraction of bitcoins are owned by a very small number people who are not circulating them
ah, so it IS more similar to modern economics than I thought
posted by MysticMCJ at 11:30 AM on April 4, 2013 [8 favorites]
ah, so it IS more similar to modern economics than I thought
posted by MysticMCJ at 11:30 AM on April 4, 2013 [8 favorites]
Mayor West: No serious person owns these as anything other than wacky novelty, because their value is wildly speculative and they have already had their security publicly compromised several times; no serious vendor will ever accept them as payment because they know exactly what's going to happen when the IRS eventually reads the New Yorker article about them; and widespread discussion of how awesome they are appears to be solely the purview of crypto-obsessed anarcholibertarians who think the math is cool, while also insisting that their value couldn't possibly be a speculative bubble, and also that the gold standard and a deflationary currency system are somehow worth returning to.The lovely thing about absolutes is that it almost* guarantees that you're dead wrong.
I know a CEO of a successful, small startup company that decided to expand his company's online user experience by building a virtual casino, running entirely on bitcoins. He bought $40,000 worth of them to start his venture, when they were worth about $1 apiece.
Since his business was in the black before he started buying BTC, and - well, do the math on his windfall - and BTC would still be useful to his business model at $1 or $1000 apiece - it's kind of hard to think of him as "not serious".
*ICWutIDidThere.
posted by IAmBroom at 11:34 AM on April 4, 2013 [1 favorite]
looking at this chart, and knowing what i know about bitcoin, i do not see how a crash is NOT on its way:
http://bitcoincharts.com/charts/mtgoxUSD#rg360ztgSzm1g10zm2g25zv
posted by MysticMCJ at 11:55 AM on April 4, 2013
http://bitcoincharts.com/charts/mtgoxUSD#rg360ztgSzm1g10zm2g25zv
posted by MysticMCJ at 11:55 AM on April 4, 2013
It's too bad that the "mining" of something like this cannot be tied to some of the problems people try to solve with distributed computing, like "folding at home."
posted by maxwelton at 11:56 AM on April 4, 2013
posted by maxwelton at 11:56 AM on April 4, 2013
I love kill switch article, cosmic.osmo, thanks! Is anyone implementing Bitcoin-P yet?
posted by jeffburdges at 12:05 PM on April 4, 2013
posted by jeffburdges at 12:05 PM on April 4, 2013
No one is implementing Bitcoin-P, because the whole idea is stupid. You know what would undermine Bitcoin quite a bit faster than some people theoretically* being able to pull the price down? The idea that some group will be the arbiter of which coins are worth anything or not. Since you can't refuse a trade, the rich guys can just dilute their wealth out to random people, effectively poisoning the whole system.
*Why the hell would someone which has literally hundreds of millions worth of USD in bitcoins ever try to induce a crash?
posted by ymgve at 12:42 PM on April 4, 2013 [2 favorites]
*Why the hell would someone which has literally hundreds of millions worth of USD in bitcoins ever try to induce a crash?
posted by ymgve at 12:42 PM on April 4, 2013 [2 favorites]
That being said, the largest threat to Bitcoin is itself. When the hype dies down in a few days/weeks, it won't be the "old money" barons that will make the price come tumbling down, it will be all the people who invested on the recent months of hype and now face total annihilation of their investment.
posted by ymgve at 12:48 PM on April 4, 2013
posted by ymgve at 12:48 PM on April 4, 2013
I've been writing a long article about it for the site I work for. It's very interesting stuff, and I wish I'd gotten into mining a long while back, but hey, I also wish I'd bought a few shares of Amazon. The concept is the most interesting thing, and everyone I talked to seemed pretty sure that it wasn't going to be a day-to-day currency, and that its value wouldn't stabilize for some time (and at what level, no one even speculated).
But as others have noted, the fact that we're even talking about a crazy distributed crypto-currency as being even close to useful indicates just how far we've come and both how little people trust financial establishments and how little they know about them. It's very complicated, but it progresses heedless of our ignorance!
I like it. Let it ride! Je langer, je lieber.
posted by BlackLeotardFront at 12:50 PM on April 4, 2013 [1 favorite]
But as others have noted, the fact that we're even talking about a crazy distributed crypto-currency as being even close to useful indicates just how far we've come and both how little people trust financial establishments and how little they know about them. It's very complicated, but it progresses heedless of our ignorance!
I like it. Let it ride! Je langer, je lieber.
posted by BlackLeotardFront at 12:50 PM on April 4, 2013 [1 favorite]
This article made me feel inspired to dig up my old bitcoin wallet with 0.02 BTC in it from my previous hard drive. We now have a digital equivalent for digging around in the couch cushions for spare change.
posted by NMcCoy at 12:55 PM on April 4, 2013 [3 favorites]
posted by NMcCoy at 12:55 PM on April 4, 2013 [3 favorites]
Our hypothetical Bitcoin-P works for the same reason you could assign specific bitcoins to represent stock ownership, options, etc., ymgve. If your business dislikes those bad bitcoins, then you must ask you customers to send you good bitcoins whenever you get paid in bad ones, otherwise you don't ship the product. Yes, it annoys your customers, but if your suppliers still accept bad bitcoins, then you could pass those on, while saving the good ones. Or even run a mixing service or casino that pushed the bad ones off onto others. In principle, a federal prosecutor with an anonymous investment in bitcoins could even track down the "big pile" owners, jail them, and confiscate their coins, so that his good coins increased in value.
posted by jeffburdges at 1:22 PM on April 4, 2013
posted by jeffburdges at 1:22 PM on April 4, 2013
But the fact that the network has to work so hard to compute the cryptographic hashes that secure each block of transactions is a kind of value, since anyone wanting to contest the transaction history would have to work at least that hard.Is this actually true? I don't know enough about the technical details of Bitcoin to say for sure, but I actually kind of doubt it. There are lots and lots of mathematical problems that simultaneously:
(1) Are extremely difficult to find an answer for, and
(2) Are pretty easy to check whether or not any proposed answer is correct or not.
That is, for example, you could program a computer to say "Give me some answer to this problem", and six months later it might spit out the fact that "14321876989671389457778572843715987438157" is an answer to this problem.
But you could also program another computer to ask it "Is 14321876989671389457778572843715987438157 an answer to this problem", and it would spit out "yes" or "no" (correctly) in a microsecond.
posted by Flunkie at 1:41 PM on April 4, 2013
As I noted upthread, there is afaik no intrinsic value in the partial hash collision that awards making a block, Flunkie. Yes, the answer being easy to check makes it's marginal cost zero once it's been published, but that's essential to making the protocol work. You could not trust an authority who merely asserted an answer to a difficult to check problem. There is no intrinsic value to the answer of a random unsolved partial hash collision either unless we socially construct one, even though you'd need to pay someone to find it for you. It's just a random math problem, not the nth digit of pi.
posted by jeffburdges at 2:09 PM on April 4, 2013 [1 favorite]
posted by jeffburdges at 2:09 PM on April 4, 2013 [1 favorite]
Bitcoin is policed by distributed -- you could say vigilante -- justice. But apart from the knee-jerk reaction to the word "vigilante," can you really say the government is doing a bang-up job of providing official justice? Or that the Bitcoin community's responses to attacks on it have been ill-considered or poorly executed?
Perhaps replacing one set of thugs with another is not a good basis for an economic system. Leaving aside the debate of whether the use of Bitcoins is an economic system or the functional equivalent of trading baseball cards in a speculative bubble.
posted by Blazecock Pileon at 2:17 PM on April 4, 2013 [1 favorite]
Perhaps replacing one set of thugs with another is not a good basis for an economic system. Leaving aside the debate of whether the use of Bitcoins is an economic system or the functional equivalent of trading baseball cards in a speculative bubble.
posted by Blazecock Pileon at 2:17 PM on April 4, 2013 [1 favorite]
Flunkie - Yes, there are lots of hash functions that have these properties, but the value Bitcoin miners add (in theory) is the network effect -- that there are a huge number of people competing to be the one to guess the correct answer. The winner gets a small reward for finding a valid block hash and from including others' transactions in this block.
If the problems weren't hard enough, or enough people weren't working on them simultaneously, it would be much easier for an attacker to forge blocks and reverse transactions. So it's not that the problem has value, it's the network, just like Facebook or any other social site, and it's why alternatives to the main Bitcoin network haven't taken off.
posted by RobotVoodooPower at 2:43 PM on April 4, 2013
If the problems weren't hard enough, or enough people weren't working on them simultaneously, it would be much easier for an attacker to forge blocks and reverse transactions. So it's not that the problem has value, it's the network, just like Facebook or any other social site, and it's why alternatives to the main Bitcoin network haven't taken off.
posted by RobotVoodooPower at 2:43 PM on April 4, 2013
I kind of want to buy some just so I can talk about my bitcoin investment at parties.
You're going to make so many new friends!
For some reason I was at a party where people talked about BitCoins. They're easy to mock, but apparently they're useful for buying drugs on the Silk Road.
posted by Charlemagne In Sweatpants at 3:01 PM on April 4, 2013
You're going to make so many new friends!
For some reason I was at a party where people talked about BitCoins. They're easy to mock, but apparently they're useful for buying drugs on the Silk Road.
posted by Charlemagne In Sweatpants at 3:01 PM on April 4, 2013
i always wondered why everyone isn't at least cool with people being able to get drugs
then i realized that, for the people who aren't cool with this, drugs are not a thing
WTF are you even talking about? The site that started the funniest attacks on BitCoin - CosbyCoin and a bunch of scams I don't understand - has a dedicated drug subforum. But please continue to incoherently defend every dodgy thing on the Internet.
posted by Charlemagne In Sweatpants at 3:05 PM on April 4, 2013
then i realized that, for the people who aren't cool with this, drugs are not a thing
WTF are you even talking about? The site that started the funniest attacks on BitCoin - CosbyCoin and a bunch of scams I don't understand - has a dedicated drug subforum. But please continue to incoherently defend every dodgy thing on the Internet.
posted by Charlemagne In Sweatpants at 3:05 PM on April 4, 2013
Everyone of these articles about Bitcoins makes me sigh, because I should have got in on this bullshit from the start and sold them yesterday.
posted by wcfields at 5:19 PM on April 4, 2013 [3 favorites]
posted by wcfields at 5:19 PM on April 4, 2013 [3 favorites]
Mapes: "(As a materials scientist, I just want to remind everyone that, as the most electrically conductive material that does not tarnish, gold is essential and essentially irreplaceable in the technologies used to write, edit, store, and display these comments.)"
I'm sure you're tired of having to explain this, but how does graphene compare to gold in this respect (mostly in conductivity and lack of tarnish, I know we don't have graphene transistors yet)?
posted by Strass at 5:57 PM on April 4, 2013
I'm sure you're tired of having to explain this, but how does graphene compare to gold in this respect (mostly in conductivity and lack of tarnish, I know we don't have graphene transistors yet)?
posted by Strass at 5:57 PM on April 4, 2013
Price tumbles after bitcoin hack
happy I am not an idiot. stupid sheeple...
posted by shockingbluamp at 6:03 PM on April 4, 2013
happy I am not an idiot. stupid sheeple...
posted by shockingbluamp at 6:03 PM on April 4, 2013
You know how in sci-fi, people bring out a tiny electronic card with a screen on it and pay for things with credits? That's bitcoin.
Hate it if you must, but it's a sign we live in the future now (dystopian or otherwise).
posted by amuseDetachment at 8:08 PM on April 4, 2013 [2 favorites]
Hate it if you must, but it's a sign we live in the future now (dystopian or otherwise).
posted by amuseDetachment at 8:08 PM on April 4, 2013 [2 favorites]
I am dubious about the success of this concept too, but $130 to $115 is not a "tumble".
posted by aeschenkarnos at 10:00 PM on April 4, 2013
posted by aeschenkarnos at 10:00 PM on April 4, 2013
But back on track, I learned today from Slashdot that MtGOX is derived from "Magic The Gathering Online Exchange".
Yes, the most important exchange for bitcoins started as a trading site for a children's card game.
If that doesn't fill you with confidence I don't know what will.
posted by Iax at 11:34 PM on April 4, 2013 [2 favorites]
Yes, the most important exchange for bitcoins started as a trading site for a children's card game.
If that doesn't fill you with confidence I don't know what will.
posted by Iax at 11:34 PM on April 4, 2013 [2 favorites]
Yes, the most important exchange for bitcoins started as a trading site for a children's card game.
If that doesn't fill you with confidence I don't know what will.
Nokia started off making boots. Why do I care about that?
posted by jaduncan at 7:30 AM on April 5, 2013 [1 favorite]
If that doesn't fill you with confidence I don't know what will.
Nokia started off making boots. Why do I care about that?
posted by jaduncan at 7:30 AM on April 5, 2013 [1 favorite]
Yes, the most important exchange for bitcoins started as a trading site for a children's card game.
Yes, I suppose that the "ages 13 and up" that Magic: The Gathering has been marketed to throughout it's two decade history technically includes "children", characterizing it as such is rather dismissive of a game invented by someone with a PhD in combinatorial mathematics, a game complex enough to be able to satisfy Turing Completeness, and a game who's annual Pro Tour awards $250,000 in cash prizes and is considered to be a significant training ground for other professional tournament circuits for other card games such as Poker.
posted by radwolf76 at 7:40 AM on April 5, 2013 [5 favorites]
Yes, I suppose that the "ages 13 and up" that Magic: The Gathering has been marketed to throughout it's two decade history technically includes "children", characterizing it as such is rather dismissive of a game invented by someone with a PhD in combinatorial mathematics, a game complex enough to be able to satisfy Turing Completeness, and a game who's annual Pro Tour awards $250,000 in cash prizes and is considered to be a significant training ground for other professional tournament circuits for other card games such as Poker.
posted by radwolf76 at 7:40 AM on April 5, 2013 [5 favorites]
No discussion of Bitcoin is complete without a link to the list of major BitCoin heists. Mt. Gox has been reasonably good compared to other BitCoin providers; only about $50,000 in direct thefts. But the June 2011 breakin had more significant repercussions; the hacker stole Mt. Gox's user database, including poorly salted passwords, and then used that to break into other BitCoin systems. I'm amazed they recovered their market position after that.
posted by Nelson at 7:45 AM on April 5, 2013 [1 favorite]
posted by Nelson at 7:45 AM on April 5, 2013 [1 favorite]
Need I remind you guys AGAIN that these stupid "bitcoins" were originally developed and marketed by a bunch of 20-something farmers who got pissed about a tax levied on their drinks - their DRINKS! - and decided to dress up as aborigines and vandalize a government ship. WHO CAN TAKE THEM SERIOUSLY AFTER THAT?
Wait, did I say bitcoin? My bad. Wrong currency. Carry on.
posted by IAmBroom at 12:44 PM on April 5, 2013 [2 favorites]
Wait, did I say bitcoin? My bad. Wrong currency. Carry on.
posted by IAmBroom at 12:44 PM on April 5, 2013 [2 favorites]
Strass: Graphene is a contender for highest-resistivity material ever at room temperature, better than silver, if it can be made cleanly enough; another caveat is that the remarkably low resistivity is in-plane only. Bonus points to graphene if it can be rolled into a tube to resemble a bulk material and if it can be electrically accessed easily (here gold has a great advantage due to its ductility, which enables easy wire bonding). The breakthroughs are coming at a monthly rate in this area.
posted by Mapes at 1:55 PM on April 8, 2013
posted by Mapes at 1:55 PM on April 8, 2013
Sorry, Libertarians, History Shows Bitcoin Isn't the Future
-Les Bitcoin obsessives
-Interesting things I found out about Bitcoin mechanics today
-Bitcoin Bubble or New Virtual Currency?
also btw...
-Why Japan is the most interesting story in global economics right now
-Bank of Japan follows the Fed, on steroids
-The BoJ massive
-Abenomics
-Shoulda Bought Some Bank of Japan
-Trying to fix broken economics
-You Cannot Run a Public Service like a Business, and Here's Why
-How an anti-rentier agenda might bring liberals, conservatives together
-Hating on the Rentier Class
-Myth of ownership and the distribution of income
-"Saving" Versus Saving for the Future
-Why are long-term interest rates so low?
-Global Savings Glut? Global Risk-Tolerance Shortage?
-Can We Talk About the Global Investment Drought, Please?
-Interest rates: The bottleneck
-The euro crisis: The biggest problem
-The euro crisis: Has anyone seen the ECB?
-When did you get hooked?
-The end of everything
oh and graphene earbuds previously! (and supercapacitors ;)
posted by kliuless at 3:54 PM on April 8, 2013 [7 favorites]
As we consider the digital-currency phenomenon that is Bitcoin, bear in mind that there are, broadly speaking, two accounts of the origin and history of money. One is elegant, intuitive and taught in many introductory economics textbooks. The other is true...A cybernetic ledger
This brings us to the second theory of money, which Goodhart calls the "C View," standing for "cartalist" (chartalist is a more common spelling). To simplify radically, it starts with the idea that states minted money to pay soldiers, and then made that money the only acceptable currency for paying taxes. With a standard currency, tax assessment and collection became easier, and the state could make a small profit from seiginorage.
The state-coin connection has far more historical support than Menger's organic account. As Goodheart points out, strong, state-building rulers (Charlemagne, Edward I of England) tend to be currency innovators, and he could have easily added Franklin D. Roosevelt's taking the U.S. off the gold standard in 1933 or Abraham Lincoln financing the Civil War with newly issued greenbacks. The inverse is true too: When states collapse, they usually take their currencies with them. When Japan stopped minting coins in 958, the economy reverted to barter within 50 years. When the Roman Empire collapsed in Western Europe, money creation splintered along new political borders.
If money came about independent of states, as according to the M View, one would think it would outlast transient political structures. Historically, however, this tends not to be the case, a strong argument in favor of the C View.
How does this relate to Bitcoins? The electronic currency, introduced in early 2009 and popular with libertarian geeks, online gamblers and Internet-based drug dealers, is having its moment. Perhaps influenced by the banking crisis and deposit haircuts in Cyprus, Bitcoins have seen their value skyrocket in the past month, from around $33 a Bitcoin on March 3 to just over $140 today, and more than doubling in the past two weeks.
Although the creators and heavy users of Bitcoins tend to be skeptical of the security and value of state-issued fiat currency, the state-centered account for how money came about actually helps explain why Bitcoins have been fairly popular. Only with powerful computers and sophisticated digital cryptology can a private currency come close to working along side traditional monies.
If the requirement for money, whether it be metallic coins, paper backed by coins or paper backed by government promises, is that it has to be portable, durable and divisible, then Bitcoin fits the bill...
It's a remarkable success, but it won't be the future of money. Even putting aside security problems -- not surprisingly, a digital currency is a favorite target of hackers -- there's the potential that Bitcoin will turn from a way of doing anonymous, simple digital transactions and into a speculative-asset investment item, especially if it continues to soar in price. That might promote hoarding of Bitcoins by early adopters and choke off the marketplace...
Here's where a state could easily step in by just... printing more money, so that economic activity is not choked off by scarcity or hoarding. This would be totally consistent with the C View, where money is created by states to facilitate economic activity. But since Bitcoins can only be produced at a predetermined rate, deflation is a constant possibility, or that Bitcoins turn more into a commodity people buy than a currency people use.
Unlike a government fiat system, the currency also fails to provide society with a shared mutual interest for holding it. In the case of the dollar, the euro, or any other official tender, regardless of the currencies' value on the open market, holders can always be sure that tax liabilities can and must be settled in the units. This cannot be said for Bitcoin. The system is neither affiliated to a tax system, nor has recourse to the national wealth pool of any particular country.-The Memory Bank
Above all else, though, Bitcoin's worst sin is probably that it is intentionally designed to be deflationary — the very thing the system's advocates, who tend to come from the Libertarian side of the political spectrum, believe makes it so robust. The deflationary trend is achieved by means of computer protocols which adjust the economic incentive for the community to code new Bitcoins, in a way that ensures a predictable and stable rate of supply over time. At 21m, the number of units in circulation will be capped.
Bitcoin enthusiasts adore that supply is predetermined in this way, and relish in the idea that it can never be meddled with by a third party.
But a currency backed by nothing but fanaticism is unlikely to survive in the face of such rigidity. The supply constraint only heightens the chances that the emperor's new clothes will eventually be revealed as lacking.
Furthermore, when supply is finally capped, wealth will be concentrated amongst the earliest entrants so decidedly that the incentive to cash-out will become all pervading. Bitcoin miners, instead of making money from seigniorage, will be reduced to making money only from transaction fees. At this point it is said the incentives to defend the system will be diminished in favour of cheating it instead.
Given Bitcoin's dependence on maintaining an almost cult-like follower base, it's no wonder that so much has been invested in the movement's cybernetic foundation story and the myth of its pseudonymous architect Satoshi Nakamoto.
Yet, whilst preaching the idea that central authority can be replaced by a faceless yet mystical organism can come across as appealing to those predisposed to cult beliefs, it does not make for a viable alternative currency system.
Money may be memory. It may even be a belief system. But it is also a system of real-wealth allocation. Gigabytes distributed willy-nilly on the internet will never achieve that unless backed by real national wealth in the form of a government fiat system, or by being collateralised by a borderless resource like energy.
Given that, it's no surprise central banks aren't openly worrying about Bitcoin (yet). Though it must be said, there's definitely an argument that they should be reviewing how they might better plug the digital e-money vacuum instead.
-Les Bitcoin obsessives
-Interesting things I found out about Bitcoin mechanics today
-Bitcoin Bubble or New Virtual Currency?
also btw...
-Why Japan is the most interesting story in global economics right now
-Bank of Japan follows the Fed, on steroids
-The BoJ massive
-Abenomics
-Shoulda Bought Some Bank of Japan
-Trying to fix broken economics
-You Cannot Run a Public Service like a Business, and Here's Why
-How an anti-rentier agenda might bring liberals, conservatives together
-Hating on the Rentier Class
-Myth of ownership and the distribution of income
-"Saving" Versus Saving for the Future
-Why are long-term interest rates so low?
-Global Savings Glut? Global Risk-Tolerance Shortage?
-Can We Talk About the Global Investment Drought, Please?
-Interest rates: The bottleneck
-The euro crisis: The biggest problem
-The euro crisis: Has anyone seen the ECB?
-When did you get hooked?
-The end of everything
oh and graphene earbuds previously! (and supercapacitors ;)
posted by kliuless at 3:54 PM on April 8, 2013 [7 favorites]
Bitcoin Makes Journalists Say Stupid Things
posted by the man of twists and turns at 9:17 AM on April 10, 2013
posted by the man of twists and turns at 9:17 AM on April 10, 2013
The Financial Times dubbing the crash '#000000 Wednesday'
posted by rollick at 1:58 PM on April 10, 2013 [4 favorites]
posted by rollick at 1:58 PM on April 10, 2013 [4 favorites]
LOL
posted by Golden Eternity at 2:16 PM on April 10, 2013 [1 favorite]
posted by Golden Eternity at 2:16 PM on April 10, 2013 [1 favorite]
Farhad Manjoo just today posted a Slate article about how he was investing in Bitcoin. The timing of the pop keeps his record intact.
I swear, you could make a fortune using him as an investment anti-guide.
posted by COBRA! at 2:19 PM on April 10, 2013 [3 favorites]
I swear, you could make a fortune using him as an investment anti-guide.
posted by COBRA! at 2:19 PM on April 10, 2013 [3 favorites]
Bitcoin Crash: This Was Entirely, Utterly Predictable, Everyone
It's false that "the current crash is what happens when you create a crypto-currency" however. A crypto-currency based on mints issuing RSA blind signed coins should remain stable because coins represent explicit contracts with the mint.
Ain't difficult designing a block chain based system that's more stable than bitcoin either. Just give it a fixed permanent inflation rate and attach dollar denominated contracts to a large number of early coins.
Is fixed permanent inflation a good idea? Absolutely! In bitcoin-like systems, inflation reduces transaction cost, well theoretically all currency holders subsidize transactions through inflation. Isn't that a wonderful outcome?
Also, cue the conspiracy theorists (compare with yesterday).
posted by jeffburdges at 2:49 PM on April 10, 2013
It's false that "the current crash is what happens when you create a crypto-currency" however. A crypto-currency based on mints issuing RSA blind signed coins should remain stable because coins represent explicit contracts with the mint.
Ain't difficult designing a block chain based system that's more stable than bitcoin either. Just give it a fixed permanent inflation rate and attach dollar denominated contracts to a large number of early coins.
Is fixed permanent inflation a good idea? Absolutely! In bitcoin-like systems, inflation reduces transaction cost, well theoretically all currency holders subsidize transactions through inflation. Isn't that a wonderful outcome?
Also, cue the conspiracy theorists (compare with yesterday).
posted by jeffburdges at 2:49 PM on April 10, 2013
- Bitcoin rival Ripple looks to make waves
- Introducing Ripple, a Bitcoin Copycat
- Bitcoin volatility caused by surge in demand, slow software
- Bitcoin Price-Drop Caused By Rush Of Interest, Not DDOS, Says Mt.Gox Exchange
posted by xowie at 7:32 AM on April 11, 2013 [3 favorites]
- Introducing Ripple, a Bitcoin Copycat
- Bitcoin volatility caused by surge in demand, slow software
- Bitcoin Price-Drop Caused By Rush Of Interest, Not DDOS, Says Mt.Gox Exchange
posted by xowie at 7:32 AM on April 11, 2013 [3 favorites]
Tyler and Cameron Winklevoss have revealed they own about 1 per cent of all Bitcoins
posted by Golden Eternity at 7:26 PM on April 11, 2013 [1 favorite]
posted by Golden Eternity at 7:26 PM on April 11, 2013 [1 favorite]
In principle, all the bitcoin detractors could get together to kill bitcoin by creating their own incompatible bitcoin fork that incorporated all the best proposed protocol mods that bitcoin cannot easily adopt now.
I'm kind of surprised that this hasn't happened yet. Maybe this crash will cause one or more forks to spring up.
posted by octothorpe at 7:01 AM on April 12, 2013
I'm kind of surprised that this hasn't happened yet. Maybe this crash will cause one or more forks to spring up.
posted by octothorpe at 7:01 AM on April 12, 2013
I'd completely forgotten about ripple! Yeah, they might cream bitcoin if they've done their homework. I always liked their trust paths idea way back when people first started talking about them a couple years ago. I'm happy they're pushing the idea harder, but nervous it's going to be owned by Silicon Valley VCs.
posted by jeffburdges at 7:28 AM on April 12, 2013
posted by jeffburdges at 7:28 AM on April 12, 2013
I have to say, it would help my self-esteem enormously to invest in currency referential to the Grateful Dead as opposed to Magic the Gathering. Perhaps fractional Ripple units will be known as 'Garcias'.
posted by xowie at 7:47 AM on April 12, 2013 [2 favorites]
posted by xowie at 7:47 AM on April 12, 2013 [2 favorites]
here's an update from felix salmon on ripple :P
posted by kliuless at 8:08 AM on April 12, 2013 [2 favorites]
At the end of my big piece on bitcoin, I conclude that we need "a universal payments system with no friction or interchange costs", which can learn from bitcoin's mistakes. And this morning, the company responsible for one possible such system — OpenCoin, which is responsible for developing Ripple — announced that it has closed its angel funding round, with support from the likes of Andreessen Horowitz, Lightspeed, and Founders Fund.cheers!
I've been playing around a bit with Ripple, and I think it's extremely promising. It's very early days yet, but Ripple already has clear advantages over bitcoin, and if various merchants and developers start to converge on the Ripple ecosystem — which, like bitcoin, is all open-source — then I think it could genuinely become the first real way for anybody in the world to pay anybody else in the world, immediately and about as frictionlessly as possible.
posted by kliuless at 8:08 AM on April 12, 2013 [2 favorites]
So, How Much Bitcoin Value Has Vanished as of This Minute?
With bonus schadenwinkle calculation.
posted by sparklemotion at 11:49 AM on April 12, 2013
With bonus schadenwinkle calculation.
posted by sparklemotion at 11:49 AM on April 12, 2013
If your currency exchanges are subject to the whims of botnet owners, who largely maintain botnets for the sole purpose of making money...whichever exchange that employs CloudFlare first wins?
posted by antonymous at 11:56 AM on April 12, 2013
posted by antonymous at 11:56 AM on April 12, 2013
Tyler and Cameron Winklevoss have revealed they own about 1 per cent of all Bitcoins
posted by Golden Eternity at 3:26 AM on April 12 [+] [!]
I prefer Gawker's choice of headline.
posted by rollick at 2:18 PM on April 12, 2013 [2 favorites]
posted by Golden Eternity at 3:26 AM on April 12 [+] [!]
I prefer Gawker's choice of headline.
posted by rollick at 2:18 PM on April 12, 2013 [2 favorites]
- Why Bitcoin crashed, and how Ripple might avoid the same fate
- Ripple: Getting Started Guide
- Big-Name Investors Back Effort to Build a Better Bitcoin
- How Ripple Works - Gateways and Pathways
posted by xowie at 8:32 AM on April 13, 2013 [1 favorite]
- Ripple: Getting Started Guide
- Big-Name Investors Back Effort to Build a Better Bitcoin
- How Ripple Works - Gateways and Pathways
posted by xowie at 8:32 AM on April 13, 2013 [1 favorite]
-To coin a phrase
-Blogs review: Understanding the mechanics and economics of Bitcoins
-Bitcoin and the nature of money
-Dan Kaminsky on bitcoin
posted by kliuless at 9:54 AM on April 13, 2013 [1 favorite]
-Blogs review: Understanding the mechanics and economics of Bitcoins
-Bitcoin and the nature of money
-Dan Kaminsky on bitcoin
posted by kliuless at 9:54 AM on April 13, 2013 [1 favorite]
Bloodbath at bullion hub, gold price crashes to multi-year lows
Paulson loses $300 mn as gold declines
Hmm. Gold was just $350/oz only ten years ago, but I would be really surprised if it ever falls below $1000 again in my lifetime.
posted by Golden Eternity at 12:09 PM on April 13, 2013 [1 favorite]
Paulson loses $300 mn as gold declines
Hmm. Gold was just $350/oz only ten years ago, but I would be really surprised if it ever falls below $1000 again in my lifetime.
posted by Golden Eternity at 12:09 PM on April 13, 2013 [1 favorite]
"The price collapse hit not just speculators but also merchants who sold goods or services for Bitcoin at the peak."
posted by jeffburdges at 3:02 PM on April 13, 2013
posted by jeffburdges at 3:02 PM on April 13, 2013
The Bitcoin Bubble and a Bad Hypothesis
The sudden drop in the value of Bitcoins, the hot new Internet currency, has added urgency to the question of whether Bitcoin is the way of the future, or just another bubble. Not to keep readers in suspense, the answer is a bubble, but a particularly interesting example of one. In particular, Bitcoin represents what ought to be the final refutation of the efficient-markets hypothesis, which still guides most regulation of financial markets.posted by the man of twists and turns at 2:15 PM on April 17, 2013 [1 favorite]
Ars Technica:“Taming the bubble”: investors bet on Bitcoin via derivatives markets
posted by the man of twists and turns at 6:43 AM on April 22, 2013
posted by the man of twists and turns at 6:43 AM on April 22, 2013
45 percent of Bitcoin exchanges end up closing - "Good luck getting your money back!"
posted by the man of twists and turns at 8:24 AM on April 27, 2013 [1 favorite]
posted by the man of twists and turns at 8:24 AM on April 27, 2013 [1 favorite]
MTGox in $75 million lawsuit with Coinlab
Popcorn anyone?
posted by humanfont at 6:13 PM on May 2, 2013 [2 favorites]
Popcorn anyone?
posted by humanfont at 6:13 PM on May 2, 2013 [2 favorites]
I hear Coinlab got suspicious when MtGox started hedging by dumping bitcoins to rebuild its Magic card supply.
posted by jeffburdges at 2:46 AM on May 3, 2013
posted by jeffburdges at 2:46 AM on May 3, 2013
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posted by diogenes at 6:17 AM on April 4, 2013 [3 favorites]