Pros and Cons of Anonymous Digital Cash

[NewLibertyStandard]

Which of the pros and cons of anonymous digital cash do you think are most important?

For me, the most important argument for anonymous digital cash is that it allows citizens living within a non-representative government to withdraw support for their government by evading taxation.

I think that the most important argument against anonymous digital cash is that it allows powerful criminals to hide their criminal activity.

I'm not sure whether the advantage or the disadvantage is more important.

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[Sabunir]

Advantages:
- Resist/protest unlawful/unfair taxes/government
- Prevent privacy intrusions (financial records) from governments/banks/corporations
- Counter-economic force

Disadvantages:
- Criminal usage (including money laundering)
- No means of refunds or fraud insurance

Which is more important:
The advantages will always be more important as long as there are more regular users than criminal users and there are no better methods for a user to gain the advantages.

[Ensayia]

What we all have to eventually realize is that if Bitcoin spreads to a large enough audience, government is going to catch on and shut it down.

Since the currency exchange involves USD at the moment, I'm fairly certain any such transactions still fall under tax laws. Even if you tried to rectify the transaction of Bitcoins for physical objects as 'gifting', items that are given to you for free are still subject to taxation by law, even though nobody I know includes every gift they were given on their tax forms it's still technically required by law.

This information is based on my experience, so correct me if I'm mistaken.

[NewLibertyStandard]

I think that fiat currencies also have pros and cons. On the one hand, the few who have disproportionate control over the currencies can manipulate them to encourage economic growth and prevent disaster, but on the other hand, those same people can manipulate the currencies to benefit themselves.

I think it will be good to have both fiat currencies and currencies without a central authority. If people were invested in both types of currencies and if both types of currencies were usable on a daily basis, then if either currency completely failed, people would still have something available to fall back on.

Ensayia, as far as I can tell, there is nothing illegal about Bitcoin itself. There are however, in the United States at least, record keeping regulations when large amounts of money are being transfered. I don't know whether that would apply to unofficial currencies since there's no official value per bitcoin, but if those laws do apply, a person would just be bound by the same requirements to keep records of large transactions. If the government outlawed Bitcoin altogether, people would just make it even more anonymous.

[dwdollar]

It's the "Non-Criminals" who are the biggest criminals of all.  These kind of people are SO powerful they can write the law and put themselves above it.  A free monetary system would be a massive thorn right in the bottom of their a**.

[Suggester]

It's the "Non-Criminals" who are the biggest criminals of all.  These kind of people are SO powerful they can write the law and put themselves above it.  A free monetary system would be a massive thorn right in the bottom of their a**.

Provided it turns out to be spendable by not encountering an ever-increasing-price scenario.
I love crashing parties lol

[Sabunir]

This thread has moved off-topic. I am interested in reading more responses to NewLibertyStandard's initial questions.

[dwdollar]

This thread has moved off-topic. I am interested in reading more responses to NewLibertyStandard's initial questions.

Sorry, I can rant at times.  I am mostly a libertarian, so anything I say is going to be biased.  I see free exchange as a fundamental right similar to speech, arms, or privacy.  Any of those can be used for evil too.  Ultimately, it's about freedom of choice.

[fergalish]

I think that what's more important is not the *number* of honest/dishonest users, but their *economic importance*.  That is, 1 million honest users could be easily outgunned by 10 very rich dishonest users.  Look at the US$ - 300 million Americans versus just a few hundred (?) banks - and ask yourself who's winning.

Which is more important:
The advantages will always be more important as long as there are more regular users than criminal users and there are no better methods for a user to gain the advantages.

[Sabunir]

You have a valid point, fergalish. However, I think that more important than the total "economic importance" is the total human rights fulfilled. It is in the spirit of "Better to let 10 criminals go free than to condemn one innocent man".

But I suppose a counter argument is if higher criminal "economic importance" would cause more human rights violations than were prevented. So, indirectly, you may be right.

[ihrhase]

NLS...

Pros...
Free market interaction
Tax shelter

Cons...
It is illegal

If you are planning on using Bitcoin as a business you should realize that there is an inherent illicit nature to the practice of using, trading, and even promoting a currency that is not issued by the state, the state has a monopoly on currency for a reason, anything that threatens it will be playing a game with the coercive resources of the state.

Bitcoin provides supreme opportunities to its users, to see how a free market can work, to see that governments are not exactly good at mitigating the moral hazard of fiat currency, where a private generator may be better and when government is taken out of the equation, prices are drastically different.

This is as illegal as us forming a mint, and pressing silver into coins to spend in a market that operates outside the tax structure, inherently all operations using bitcoin are "Black Market", with this in mind, if illegality is an issue for an individual, cashing out now might be the best option...

Fergalish:
The difference is the banks have the coercive power of the state to protect their actions, with bitcoin, as it is an inherently illegal operation, there is no power to force people to interact with dishonest users, the dishonest types you seem to be pointing out, would shy away from a market that do not have a coercible market advantage...

Suggester:
Market exchanges need to take place for a market equilibrium to be reached, there will be a correction as more exchanges are possible, therefore utility is increased, but these are nominal...

NLS:
A "Fiat" currency is not bad because it is not a commodity currency, it is bad because of a state monopoly, if you have 5 competing fiat currencies there is more of a tendency for honest currency, this is because the dishonest ones will be deselected out of the market.  Similarly if you have a single commodity currency in the hands of the state, and this is a historical fact, the state manipulates composition if the commodity currency...

On criminal activity...
What criminal activity?
What property right violation would use bitcoin to hide itself from the state?  Seems inconvenient to me as a step to avoid detection...
If you are thinking trading state mandated contraband is criminal activity, well, then so is bitcoin, as FRN are the only state mandated currency in the US, all others are contraband...

[The Madhatter]

Haha! That was *exactly* what I was going to post. You and I are true pals now.

On criminal activity...
What criminal activity?
What property right violation would use bitcoin to hide itself from the state?  Seems inconvenient to me as a step to avoid detection...
If you are thinking trading state mandated contraband is criminal activity, well, then so is bitcoin, as FRN are the only state mandated currency in the US, all others are contraband...

[fergalish]

But I suppose a counter argument is if higher criminal "economic importance" would cause more human rights violations than were prevented. So, indirectly, you may be right.

The difference is the banks have the coercive power of the state to protect their actions, with bitcoin, as it is an inherently illegal operation, there is no power to force people to interact with dishonest users, the dishonest types you seem to be pointing out, would shy away from a market that do not have a coercible market advantage...

So it's necessary to differentiate between dishonest activity at the level of the currency (e.g. inflation, interest), and "normal" dishonest activity which utilizes a currency in an honest manner, but to trade dishonest produce or services - e.g. buying drugs at market value.  Bitcoin will be supposedly immune to the former type, but will greatly liberate the latter from the chains of state control.  We might expect, for example, significant organized crime in a bitcoin world; but we're just coming back to a political argument here - anarchy Vs state, and there are other threads for that.

[ihrhase]

So it's necessary to differentiate between dishonest activity at the level of the currency (e.g. inflation, interest), and "normal" dishonest activity which utilizes a currency in an honest manner, but to trade dishonest produce or services - e.g. buying drugs at market value.  Bitcoin will be supposedly immune to the former type, but will greatly liberate the latter from the chains of state control.  We might expect, for example, significant organized crime in a bitcoin world; but we're just coming back to a political argument here - anarchy Vs state, and there are other threads for that.

Interest is a market phenomenon, it is an application of time in economics, so I will have to disagree with your dishonest connotation to interest...

Basically if it is your opinion that the purchase or sale of drugs is "dishonest" then do not engage in such practices...

Take a less offensive example, tobacco is legal to own and grow privately in the US, but it is illegal to sell, trade or gift home grown tobacco.
If I were to sell tobacco I grew at my home, using bitcoin as a medium of exchange, am I using it dishonestly?

The use of bitcoin as a medium of exchange is illegal in the first place, why are you concerned that individuals will use it in order to trade contraband, when the medium of exchange itself holds the same legal status as a pound of marijuana?

Haha! That was *exactly* what I was going to post. You and I are true pals now.

Nice to meet you then 

[NewLibertyStandard]

Community currencies are not illegal. Buying, selling or trading legal goods anonymously is not illegal so long as profits are reported accurately. It's the job of the IRS to find those people who are not reporting profits accurately. So long as a person does proper accounting and honestly answers the questions in their tax preparation software, there's not much to worry about. In fact the tax software I use includes an optional tax help insurance in case of an audit. If a person has tax information which he thinks would set off a red flag or if he is unsure whether he filled everything out accurately he can just pay a few extra dollars and be assured that if he is audited, he'll have help straightening it out.

[sirius]

I don't think using a private currency is illegal anywhere outside some banana republics. Liberty Dollar users haven't been prosecuted. As I've understood, Liberty Dollar was shut down because it could be allegedly mistaken for the US Dollar.

[I-am-not-anonymous]

What we all have to eventually realize is that if Bitcoin spreads to a large enough audience, government is going to catch on and shut it down.

How?

[The Madhatter]

Haha! Maybe with Internet 2 (or 3?). They would just revoke your internet driver's license if you don't abide by the new rules. Hahahahah

 

[ihrhase]

Take it from someone who has done things he was not legally prohibited from doing, but someone from the Ivory Tower did not like it....

It is not a good scene...

[fergalish]

Interest is a market phenomenon, it is an application of time in economics, so I will have to disagree with your dishonest connotation to interest...

Excellent, this is an interesting debate that goes back hundreds of years.  Many people would say that inflation is a market phenomenon too.  Do you realise that any economy which permits charging interest on a loan *requires* inflation?  The rich entity charging interest gets *all* their capital back, *plus* the interest.  If no extra money is being injected into the economy (i.e. no inflation), eventually the interest charger collects all the money in circulation and the currency fails.

Basically if it is your opinion that the purchase or sale of drugs is "dishonest" then do not engage in such practices...

"dishonest" was perhaps inappropriate.  Some people *would* consider drug dealing dishonest (exploitation of another's weakness/addiction etc), but nonetheless, it's illegal, and that's what counts in this discussion.  You can argue until you're blue in the face, but the bottom line is, it's illegal, and Big Gov will restrict your liberty if it catches you.

If I were to sell tobacco I grew at my home, using bitcoin as a medium of exchange, am I using it dishonestly?

You're not using bitcoin dishonestly, unless you somehow use your economic power or prowess to distort the market to make an unfair profit.  But, that's aside from the issue of whether tobacco-dealing is illegal or dishonest, or whatever.  See the difference?
Suppose I collected $100 from each of my 9 friends, went out and bought $1000 worth of illegal substance X, then went home, and gave each of them $90 worth, and kept the remaining $190 worth for myself telling them it was more expensive than usual.  Would my friends think I'm being dishonest if they found out (ignore "courier" fees etc)?  Because I bought illegal substance X?  Or because I didn't share it evenly?

What we all have to eventually realize is that if Bitcoin spreads to a large enough audience, government is going to catch on and shut it down.

How?

Umm, let me think, I get your IP address, waterboard your ISP until they give me your physical address, then shoot out your kneecaps.  Of course, I wouldn't say it outright that I'm from the government, but I might build myself let's say a branding iron with the words "bitcoin haters group" and brand your forehead, and then claim I'm from a vigilante/anarchist group patriotically defending my country and its economy - you [not you specifically I-a-n-a, but general bitcoin pro-anarchists] could be happy at least in the illusion of having helped anarchists find a job, right?  So then, would that stop you using bitcoin?  Would you tell your friends what happened?  Do you think they'd stop then aswell?  It's all very well talking about encryption and so on, and I personally wouldn't know how to crack down on bitcoin users, but I think you're being a bit naive if you think Big Government would take it lying down.  Damn, the west went to *WAR* more than once, at untold cost, to defend its economy - hundreds of thousands of dead people, *entire countries* ruined beyond all hope of recovery, tens if not hundreds of millions of displaced people... not to mention the continued suffering by millions of overworked, underpaid, malnourished people, including children, working to construct my next mobile phone.  There you go, maybe I'd just send you to the god-forsaken middle of nowhere where there's a toilet-seat factory, and let you rot away, scratching out a miserable existence together with your former slaves.  Yeah, I'd even let you have your bitcoin then.

[ihrhase]

Interest is a market phenomenon, it is an application of time in economics, so I will have to disagree with your dishonest connotation to interest...

Excellent, this is an interesting debate that goes back hundreds of years.  Many people would say that inflation is a market phenomenon too.  Do you realise that any economy which permits charging interest on a loan *requires* inflation?  The rich entity charging interest gets *all* their capital back, *plus* the interest.  If no extra money is being injected into the economy (i.e. no inflation), eventually the interest charger collects all the money in circulation and the currency fails.

Except that inflation requires someone to add to the currency, this is irrelevant to the market's existence, just the the money's standing in the market...
Interest on loans do not require inflation, they require accumulation of wealth, if there is 100 dollars in the world and I have 10, and I give you 10 as a loan with the condition that I will receive 11 back in the future, both of us knowing that there is only 100 total dollars, there is no way you can pay me back plus interest in dollars without accumulating wealth and trading it for others dollars.

Your Strawman presumes one person holds all the money, if such is the case, I know it is impossible to be paid interest in dollars...

If I acquire all bitcoins ever produced (21M), and lend some to you, I know full well it is impossible for you to pay interest in bitcoins, because I cannot inflate, nor presumably anyone else, beyond the stated cap in the FAQ.  I would therefore logically look for something else of value to assign as an interest payment...

This of course is leaving out the logical issues of the nature of value of an exchange medium that is not being used in exchange...

Basically if it is your opinion that the purchase or sale of drugs is "dishonest" then do not engage in such practices...

"dishonest" was perhaps inappropriate.  Some people *would* consider drug dealing dishonest (exploitation of another's weakness/addiction etc), but nonetheless, it's illegal, and that's what counts in this discussion.  You can argue until you're blue in the face, but the bottom line is, it's illegal, and Big Gov will restrict your liberty if it catches you.

The arbitrary nature of your argument parallels the government's arbitrary nature of deciding what is or is not illegal...

If I were to sell tobacco I grew at my home, using bitcoin as a medium of exchange, am I using it dishonestly?

You're not using bitcoin dishonestly, unless you somehow use your economic power or prowess to distort the market to make an unfair profit.  But, that's aside from the issue of whether tobacco-dealing is illegal or dishonest, or whatever.  See the difference?
Suppose I collected $100 from each of my 9 friends, went out and bought $1000 worth of illegal substance X, then went home, and gave each of them $90 worth, and kept the remaining $190 worth for myself telling them it was more expensive than usual.  Would my friends think I'm being dishonest if they found out (ignore "courier" fees etc)?  Because I bought illegal substance X?  Or because I didn't share it evenly?

Who decides what is unfair?  Market distortion in reality requires a state mandate, since this is outside the state mandate field, that should be a non issue...
Well you lied in your example, in relation to free market logic, you have earned, through courier-ship and inherent risk of your act a 10% profit from your friends, if you stated from the get go that you charged a $10 fee for the service then they had the opportunity to decide to use you or go about the risk themselves, you would be more honest.

How would any business make any profit if they sold all products for strict cost?

[fergalish]

Interest on loans do not require inflation, they require accumulation of wealth, if there is 100 dollars in the world and I have 10, and I give you 10 as a loan with the condition that I will receive 11 back in the future, both of us knowing that there is only 100 total dollars, there is no way you can pay me back plus interest in dollars without accumulating wealth and trading it for others dollars.

I disagree.  All it requires is that economic power be non-uniform.  If we all have equal amounts of bitcoins at our disposal, then no-one can lend.  But as soon as one person becomes monetarily richer and start to make loans, he will accumulate more and more money, and therefore wealth.  In your $10 loan scenario, how can I trade anything for dollars, if all my neighbours need all the dollars they have to pay the interest on their loans too?  I'd end up bartering with my neighbours and your $100 economy would start to become irrelevant.  Of course, your thugs might beat me up to get the repayments, but they'd only do that as long as *they* were happy to accept your dollars in payment too.

If I acquire all bitcoins ever produced (21M), and lend some to you, I know full well it is impossible for you to pay interest in bitcoins, because I cannot inflate, nor presumably anyone else, beyond the stated cap in the FAQ.  I would therefore logically look for something else of value to assign as an interest payment...

Exactly!   You would start to barter too.  But it's not necessary for you to have them all.  A thousand people with 21000 bitcoins each in an economy of a million people is just the same.

The arbitrary nature of your argument parallels the government's arbitrary nature of deciding what is or is not illegal...

How can I explain myself. This thread started about the pros and cons of bitcoin, and I wanted to differentiate between dishonest use of a currency, and honest use of a currency to carry out 'dishonest' trades.  I don't mean to judge whether some things (e.g. selling home-grown tobacco) should be illegal or not - that's not what this thread is about.  I'm simply stating that some things have been declared as illegal.  Now, the sheep amongst us will consider a thing dishonest simply for the fact that it has been declared illegal; others will think about the issue and consider it dishonest in itself and so agree with the law; others again might disagree but choose to respect the law anyway; some will disagree and ignore the law; others will agree but ignore the law anyway; few might say it's ok on saturday.... and so on.  For example, I don't mind people using illegal substances as long as it doesn't interfere with anyone else (victimless crimes, yeah?); however, I have (for example) a real problem with exploitation or abuse of children - be that pedophiles, drug pushers or whatever.  Your attitude above suggests that you think it should be ok to sell home-grown tobacco, so I was just trying to find an example of something you *would* find dishonest.  Everyone draws their own line, but if you don't want to go to prison, the only line that really counts is the one the state has drawn.

Who decides what is unfair?  Market distortion in reality requires a state mandate, since this is outside the state mandate field, that should be a non issue...

No it doesn't.  There are monopolies everywhere, and where one company hasn't enough muscle for a monopoly, it can engage in price collusion with others.

[ihrhase]

I disagree.  All it requires is that economic power be non-uniform.  If we all have equal amounts of bitcoins at our disposal, then no-one can lend.  But as soon as one person becomes monetarily richer and start to make loans, he will accumulate more and more money, and therefore wealth.  In your $10 loan scenario, how can I trade anything for dollars, if all my neighbours need all the dollars they have to pay the interest on their loans too?  I'd end up bartering with my neighbours and your $100 economy would start to become irrelevant.  Of course, your thugs might beat me up to get the repayments, but they'd only do that as long as *they* were happy to accept your dollars in payment too.

1. Hogwash, it does not matter how many bitcoins I have in relation to anyone else, I can lend them if I value the future bitcoins over the present ones...

2. Strawman

Exactly!   You would start to barter too.  But it's not necessary for you to have them all.  A thousand people with 21000 bitcoins each in an economy of a million people is just the same.

Like I said to suggester, hoarding devalues the medium, and inherently destroys the whole point of hoarding...

And what you are not understanding about my points is that interest happens regardless of inflation...

How can I explain myself. This thread started about the pros and cons of bitcoin, and I wanted to differentiate between dishonest use of a currency, and honest use of a currency to carry out 'dishonest' trades.  I don't mean to judge whether some things (e.g. selling home-grown tobacco) should be illegal or not - that's not what this thread is about.  I'm simply stating that some things have been declared as illegal.  Now, the sheep amongst us will consider a thing dishonest simply for the fact that it has been declared illegal; others will think about the issue and consider it dishonest in itself and so agree with the law; others again might disagree but choose to respect the law anyway; some will disagree and ignore the law; others will agree but ignore the law anyway; few might say it's ok on saturday.... and so on.  For example, I don't mind people using illegal substances as long as it doesn't interfere with anyone else (victimless crimes, yeah?); however, I have (for example) a real problem with exploitation or abuse of children - be that pedophiles, drug pushers or whatever.  Your attitude above suggests that you think it should be ok to sell home-grown tobacco, so I was just trying to find an example of something you *would* find dishonest.  Everyone draws their own line, but if you don't want to go to prison, the only line that really counts is the one the state has drawn.

I am an anarchist.... I could tell you where the state can kiss....  But I am sure you know...

No it doesn't.  There are monopolies everywhere, and where one company hasn't enough muscle for a monopoly, it can engage in price collusion with others.

I would suggest the lecture series about American economic History "The End of Laissez Faire: 1870 to WWII".  Monopolies do not exist without state coercion to protect the monopoly status, if entry is free for all, if regulation by a state is non existent, how exactly do you propose a monopoly to exist in the essence that it does the "monopoly thing" (Cut production and raise price) and not lose market shares to new competition...

American History proves this example...

[fergalish]

I'd end up bartering with my neighbours and your $100 economy would start to become irrelevant.  Of course, your thugs might beat me up to get the repayments, but they'd only do that as long as *they* were happy to accept your dollars in payment too.

1. Hogwash, it does not matter how many bitcoins I have in relation to anyone else, I can lend them if I value the future bitcoins over the present ones...

It has nothing to do with how many bitcoins you have, except that you have an excess.  In a static economy, with no inflation and a fixed quantity and value of money, with everybody consuming what they earn, how can anyone find extra cash to pay off interest?  May I make one more example please?  If I'm still unable to explain myself, then we'll have to agree to disagree.  Here goes.  Let's imagine a $1000 economy, with no inflation.  Some people (say 50 people) eventually manage to make enough profit to be able to lend out $10 at 10% interest over one year.  Well, after a year has passed the loans mature, the 50 borrowers need to find an extra $1 each.  Some of them will have been wise, and will have made a profit on the initial capital, and won't have a problem - they might well be money-lenders themselves next year.  However, others weren't so successful, but let's imagine that they came out even - they can pay back the $10, but not the interest.  These people now have to sell something personal - their house, their car, their soul, whatever - something outside their business plan (which has already failed), in order to raise that $1, until eventually they're living under a bridge and have nothing left to sell.  At this point, some lenders don't receive the $1 interest due.  This eventually becomes such a big problem that the money issuer has to do something - all the lenders live in mansions and they still want more, and all the indebted borrowers live under bridges and revolution threatens - so he prints more money, gives the poor people government jobs, who then pay the overdue interest and go back home to live in their houses.  But then the currency devalues.  On the other hand, if more money is not printed, then Joe who lives under the bridge where mushrooms grow, starts to barter with Pat who lives under the bridge where the fishing is good - simply because neither have any more $.  And so that's the first crack in the $1000 economy.

Wait a minute, I just thought of a simpler example.  Imagine an isolated, inhabited island with potatoes for currency, with just enough potatoes for everyone to eat and none left over, and the land already producing at its maximum; on the 1st of january all contracts for the year are signed (e.g. the barber cuts hair all year long for 1 potato per person) and payment is effected as potatoes are harvested.  Now suppose some guy has a bigger stick than everyone else and so gains control of a larger share of potatoes and lends out the excess at interest.  The only way to pay him off is for someone to go hungry.

Like I said to suggester, hoarding devalues the medium, and inherently destroys the whole point of hoarding...

On the contrary, hoarding reduces the supply, and increases the value.  Look at short sellers, they flood the market with some commodity, and so devalue the commodity.  Hoarding, on the other hand, does the opposite.  If I expect dollars to be very valuable in the future, it is convenient for me to keep them, and this is a positive-feedback loop: the dollars I have withdrawn from circulation will contribute to the increase in value of the dollars.  The Chinese, Japanese etc governments are hoarding lot$ and lot$ of $$$.  That keeps the value high, not low.  If they sold all their dollars tomorrow, it would almost certainly collapse.

And what you are not understanding about my points is that interest happens regardless of inflation...

Interest and inflation are bedfellows.  Each begets the other.  Let's suppose I wanted to be nice to my friend, and lend him $100 at zero interest and let's say this could buy 100kg of potatoes.  Well, after one year when he pays me back, those same $100 will only buy roughly 95kg of potatoes.  I've not only done him a favour, I've actually paid him 5kg of potatoes for the pleasure of lending him money.  If I really want a zero balance between us, I'd have to charge him 5% interest.

Monopolies do not exist without state coercion to protect the monopoly status,

I agree that in the long run a monopoly certainly needs coercion, but I don't see why it must be state coercion.  It would be enough for one tobacco-grower to poison another tobacco-grower's plants.  No government necessary.

...that it does the "monopoly thing" (Cut production and raise price) and n...

I'm glad we at least agree that a tight commodity supply increases value and vice-versa   Now think that currency is really just another commodity which simplifies trade, no less subject to the laws of supply and demand.

[ihrhase]

I am not quoting...

1. You make many assumptions
Bitcoin as a fixed money will not have a fixed value, and this is not what a static economy is in the first place, a static economy is one where there is production, but it is the same in every given period.  So, either you assume that at some point there will be a time that there is no more products able to be added to bitcoins exchange-ability and the volume will be the same always there after.

If everyone consumes all they earn and they choose to take a loan in order to consume more or invest in a business, why is it any concern if they cannot pay, that is between the borrower and lender, if I were a lender, I would remain appraised of who does not pay, and not lend to them...

2. Your example
It ignores that bad business models ought to be met with failure, the emotive argument that someone will starve is utter crap as well.  The owner of Bitcoin will not have to issue more bitcoins, as people can opt to use other media of exchange, the worst that will happen is that the value of bitcoin will diminish, which skips ahead to another point....

You are also mixing what we are doing with a government, they are two separate and completely different scenarios...

3. Since there is no legislation forcing people to use Bitcoin and only bitcoin, if someone hoards bitcoin it makes the commodity of bitcoin less useful as a medium of exchange, and people will abandon it, this will decrease the value of bitcoin because it has NO OTHER USE other than a medium of exchange...

As for the Dollars in foreign hands...
It is inflation that caused that issue, and did nothing to preserve the value of the dollar, it was the coercive laws to use FRN's that retained the utility of the dollar, nothing retains it's value, it is why what cost a dollar 70 years ago costs much more now, even with our growth in the US economically, we could not hide the inflation of the dollar...

4. And lets take your lending your friend $100 and make it BC...
You lend your friend 100 BC and he buys 100 kg of potatoes, since there are no more BC being made, and in the course of the year more products are available in BC the value of BC increases.  When you receive your payment on your 0 interest loan and find that you can buy 110 kg of potatoes what is your position?
Did you break some moral code, because you did just reap a 10% interest?
How do you explain that this managed to happen without inflation?
Are you morally required to return to your friend 10 BC or 10kg of Potato?

Interest naturally occurs, it is caused by time preference, that is, people prefer goods now to the future, and there is a real gain, interest, when one goes in the business of trading goods now for goods in the future...

5. Without government to protect the monopoly, nothing stops others from getting into the business that the monopoly is in, and cutting the market share of the monopoly.  If you claim that people who have a monopoly would incur the costs of securing it through coercive means, well then you do not understand that this costs money and therefore is an unsustainable business model.  Much like Americans that think going to war across the globe is a good idea, they do not understand there is a price tag on this behavior, mainly because they are not paying it directly...

6. What you are forgetting about the money commodity is without legislation making it the only one, it is a substitutable commodity, there are many commodities that can be used for money, and as such it has a very elastic demand curve.  This means that supply has almost no bearing on the value of the bitcoin commodity, because people can freely move to another that can completely replace bitcoin for themselves, the value is based on demand, and that demand is based on commodity exchanges available to bitcoin...

[matonis]

Hi,

It is always amazing to me that the same people respecting the anonymity of a paper $100 bill do not seem to respect that same privacy when it is extended into a 'digital cash' equivalent. A digital bearer certificate, privately issued, would emulate the anonymity and untraceability features of a paper bill just like the ones in use today. The cryptographic technology exists now. Privacy should not be sacrificed simply for the sake of going digital.  Will paper $50 and $100 bills be outlawed next? Do not blame the providers for the actions of the users.  We do not blame the telephone company because criminals use telephones. Similarly, we would not blame Ben Bernanke or the Federal Reserve for the crimes involving suitcases of $100 bills.

RESIST DIGITAL MONEY......UNLESS IT'S ANONYMOUS!

Excellent topic and very exciting news about the momentum building for Bitcoin.  I just posted a summary on my economics blog, "The Monetary Future", which can be found at http://themonetaryfuture.blogspot.com/2010/03/bitcoin-peer-to-peer-electronic-cash.html  The blog focuses on digital online exchangers and anonymous digital currencies penetrating the market so that we may all protect our financial privacy. Should be interesting and entertaining for many on this forum.

[BitcoinFX]

Hello matonis and welcome to the forum.

A great blog from an informed, experienced and interesting individual. I look forward to reading it in depth and following your posts.

[fluffy]

I think it's funny to say it's a contra that Bitcoins can be used for fraud or illegal things. Could anyone here tell me a currency which doesn't allow me to do this?

[I-am-not-anonymous]

There's always the risk of an "Assassination Market":

http://anonym.to/?http://en.wikipedia.org/wiki/Jim_Bell#Acolytes

Although Bell never attempted to put the assassination market concept into practice, a subscriber to the Cypherpunks mailing list, musician Carl Johnson, developed Dead Lucky, a non-functional mock "assassination bot" which aggregated fictitious contributions and simulated rewards of accurate dead pool predictions. The bot was just a bare implementation of the idea consisting of a web page and email client with no backend to actually use digital cash.  Federal investigators issued a warrant for Johnson's arrest for posting three threatening messages in August 1998.  Johnson was convicted for sending threatening email messages to federal judges and Bill Gates, with prosecutors asking for a seven-year prison sentence...On October 11, 2001, Thomas C. Wales, Assistant U.S. Attorney and a prosecutor in the case, was assassinated, succumbing to multiple gunshot wounds.  The murder remains unsolved.

[BitcoinFX]

I think it's funny to say it's a contra that Bitcoins can be used for fraud or illegal things. Could anyone here tell me a currency which doesn't allow me to do this?

Quite right. However, given that Bitcoin is 'sudo-anonymous' it means that its more prone to fraud and illegal activities than many other currencies. At least in theory and hence the reason for this being a popular topic for discussion, especially in terms of prevention and limitation.

I-am-not-anonymous that is an 'extreme' example...

[Timo Y]

What we all have to eventually realize is that if Bitcoin spreads to a large enough audience, government is going to catch on and shut it down.

How?

Well, other p2p networks have been successfully shut down in the past by governments or agents given power by governments.

Measures could include:

* sabotage (eg. by setting up thousands of dihonest nodes)
* negative publicity (eg. making BC responsible for "supporting terrorists")
* shutting down/ blocking websites that offer the software for download
* imprisonment and legal threats to anyone who contributes to the software's development (eg. by using the pretext  of "facilitating kiddie pron trading")
* legal action against individual users of the software
* Introduction of draconian laws and stiff punishments that put off a large proportion of potential users.

 

[Timo Y]

PROS:

1) Resilience - there is no single point of failure. The system is more immune against corrupt government, fraudsters, criminals, bankruptcy, social unrest, technical bugs, war, or natural disasters than other systems.

2) Pervasiveness - If this system ever becomes mainstream, it will be possible to transfer cash conveniently and cheaply between places that were previously out of reach, as long as they have some sort of rudimentary internet connection. 

3) Safety and Reliability - Centralised digital currencies can be compromised. Credit cards and bank transfers can be traced. Bank accounts can be frozen. Bank employees can be incompetent. Physical cash or gold can be lost, stolen, or confiscated. If the user takes the appropriate measures, distributed anonymous currencies are the most reliabe way of sending money over long distances and making sure it gets there.

4) Speed.


CONS:

1) Social acceptance.

2) Current lack of user experience and simplicity.

3) Lack of  incentives to improve the software. Good user experience is very expensive to develop, and is difficult to achieve in a volunteer, open source model. A closed source model on the other hand would negate most of the pros mentioned above.

4) Current lack of killer apps, meaning it's difficult to reach critical mass.

[Anonymous]

Are bitcoins the property of the US ?What if I am a sovereign individual living on the seastead

 http://seasteading.org/ or

Set up servers which your customers can vpn into on the high seas where it is outside the jurisdiction of the irs.Unless the US wants to be considered a pirate nation they wont want to break maritime laws.

also this-

1. Portugal

Portugal's pleasant climate and network of golf courses are not the only reasons for many citizens setting up home on the Algarve.With no capital gains tax charge, a move to Portugal could save someone the Irish CGTcharge of 20 per cent on the proceeds of selling a company.

The strong contingent of Irish expatriates on the Algarve in Portugal makes the country an attractive and sociable tax haven for Irish citizens.

2. Switzerland

Switzerland's low-tax regime has attracted the world's super-rich. Swiss cantons can set their own tax rates, with the town of Zug offering the lowest tax rate. Former tennis star Boris Becker has moved to Zug recently to escape Germany's high taxes.

Other German nationals - Formula One world champion Michael Schumacher, whose wealth is conservatively estimated at €300 million, and former soccer star Franz Beckenbauer - also live in Switzerland.

Limerick bookmaker, gambler and currency trader JP McManus is a tax exile in Geneva. McManus and racing tycoon John Magnier, his friend, are the largest shareholders in Manchester United. McManus's wealth is estimated at anywhere up to €750 million.

Switzerland's banking system is famous for its secrecy. This confidentiality is invaluable for the publicity-shy McManus, allowing him to keep his affairs private.

3. Monaco

Monaco's warm climate and luxurious lifestyle, as well as its favourable tax regime, have attracted some of the richest people in Europe. Cardboard and packaging multimillionaire Michael Smurfit has made the principality his home. He lives as a tax exile in Monte Carlo.

The Mediterranean principality's non-existent fiscal laws have created a zone free of income tax, and of wealth, capital gains and inheritance taxes.

Approximately 340,000 bank accounts are registered in Monaco, protected by strict secrecy laws.Only a 10-minute helicopter journey from Nice airport, access to the principality is also relatively painfree.

Under a 1998 law the Monaco monarchy reduced residence qualifications for EU citizens, making ownership of property unnecessary to obtain a ten-year residency if the candidate had €7 million to invest in the country. Individuals can claim to be Monegasque if they lease an apartment in Monaco and visit the principality occasionally each year.

Boris Becker and fellow tennisplayerBjorn Borg, who have been investigated by the authorities in their respective countries (Germany and Sweden) for tax evasion, both settled in Monaco at the pinnacle of their careers. In Becker's case, the German taxman produced the scrapbooks of a 73-year-old fan whose clippings and photographs proved that the player had not been resident in Monaco at the height of his career, but was living in his sister's attic in Germany.

Monaco has also attracted multimillionaires from the world of entertainment and sport. Former Beatle Ringo Starr and racing drivers David Coulthard and Jenson Button have homes there.

4. Isle of Man, Jersey and Guernsey

The Isle of Man and the Channel Islands of Jersey and Guernsey were among the most popular tax havens for Irish citizens, given their proximity and the fact that many Irish banks had operations there. However, in recent years the Revenue Commissioners has targeted offshore accounts and trusts held by Irish residents on the three islands.

Tax information exchange agreements being negotiated by the Revenue with its counterparts in the Isle of Man, Guernsey, Jersey and the Cayman Islands will allow the Irish tax authorities to access accounts and trusts there.

Revenue chairman Frank Daly told a conference earlier this year: "These agreements will not only facilitate the exchange of bank information, but will also provide access to information about the beneficial ownership of companies and trusts."

Amusement arcade owner Jim Kennedy, who has refused to give evidence concerning allegations of planning corruption at the Mahon Tribunal, lives as a tax exile on the Isle of Man.

5. LIECHTENSTEIN

The tiny principality of Liechtenstein has managed to transform itself from a poor far ming country into a wealthy tax haven. It has just 33,000 inhabitants and is situated between Austria and Switzerland.

Switzerland defends Liechtenstein, which also shares its currency, customs union and diplomatic representation. The country has stringent banking and tax secrecy laws and its only double taxation treaty is with Austria.

Liechtenstein, like Gibraltar, attracts people looking for favourable tax rates for international companies, as they charge either a very low rate of corporation tax or no company tax at all.

The authorities in Liechtenstein have assisted with demands from the OECD that it co-operate on money laundering investigations, but the principality's laws state that the non-payment of taxes is an administrative matter and foreign investigators are not permitted to probe tax evasion.

The country's legal system also offers confidentiality. Liam Lawlor, the former Fianna Fail TD being investigated by the Mahon tribunal, used a bank account in Liechtenstein to process the proceeds of a land deal in north Co Dublin.

6. GIBRALTAR

The rock at the foot of the Iberian peninsula is a favoured destination for financiers, accountants and high net worth individuals. Irish financier Dermot Desmond is a tax resident there.

One of its major benefits is the fact that Gibraltar-registered companies pay no Vat or capital gains tax, and most companies pay corporation tax at less than 10 per cent. With a highly educated workforce and a state-of-the-art telecoms network, Gibraltar is attractive to the super-rich. It is less than two hours from London by plane.

Gibraltar offers tax exemptions to trusts, holdings and investment companies. It has been recolonised by some of the world's top banks which use the island to target rich customers.

Ireland has no double taxation treaty with Gibraltar, but the Mediterranean province is still an attractive place to establish a company, given the beneficial corporate taxation regime.

7. CYPRUS

Cyprus charges no capital gains tax and has a double

taxation agreement with Ireland. However, its distance from Ireland means that few Irish citizens choose Cyprus as a tax haven.The Mediterranean island introduced income tax this year, to bring its tax regime in line with that of other European countries.

8. Bermuda or Bahamas

Bermuda, off the east coast of the United States in the Caribbean, attracts international high fliers. Independent News &Media chairman Tony O'Reilly is believed to be a tax resident in the Bahamas.

9. British Virgin Islands & Panama

Once a hideout for pirates, the British Virgin Islands now attract more respectable visitors drawn by the islands' tax breaks. It takes a day to travel to the islands so it is not a popular tax haven for Irish citizens.

Panama also offers a lowtax regime and banking secrecy for customers who set up companies there to help them to run their business empire in other parts of the world.

Racing multimillionaires JP McManus and John Magnier used a Virgin Islands-registered investment entity called Cubic Expression to buy their shares in Manchester United.

Media tycoon Rupert Murdoch's assets are held by compan ies on the islands. Murdoch minimised his tax bill, as his liabilities and interest were paid out to the low tax jurisdiction.

Control of the company, Paisley Park Investments, which has been investigated by the Mahon planning tribunal for allegedly bribing counc i llors to have lands at Carrickmines in Dublin rezoned, was vested in holding companies based in the Isle of Man, British Virgin Islands and Panama.

10. Andorra

The small principality of Andorra, sandwiched between France and Spain in the Pyrenees, has a population of only 65,000 but is host to 13 million visitors every year.

Companies and individuals in Andorra pay no taxes other than modest annual registration fees, municipal rates and property transaction taxes. It hasno trusts orregimes for offshore entities.The principality's company ownership rules limit offshore business to wealthy individuals.

There are no exchange controls, and although money laundering legislation is designed to stop criminal activity, tax evasion is not a crime. Andorra is expected to sign up to the EU Savings Directive, which will make the principality less attractive as a place to hide money.

[ichi]

I'm a minarchist who values freedom, justice and self-responsibility.  In the current environment, privacy and anonymity are absolute prerequisites for those principles.  They've also been my favorite hobby for the past decade or so.  I remember Toto -- he was a strange dude 

Anyway, Bitcoin is just what I need to anonymously pay for services that guarantee my privacy and anonymity.  I use multiple OpenVPN-based anonymity services, and use VMs (and soon, cryptorouters) to tunnel one VPN through another.  I'm also very interested in anonymous distributed cloud storage (e.g., Cleversafe) -- much better than local encrypted storage.

The key threat is collusion among service providers, and with payment processors.  Existing "anonymous" digital currencies suffer from the defect that it's virtually impossible to fund them anonymously.  And although one can use systems like Loom to transfer value anonymously, it's still essentially anonymous barter.

It appears that such providers are starting to accept Bitcoin (and that's how I got here).  Also, with Bitcoin, it's easy to improve anonymity via transfers among multiple anonymous accounts.  I suppose that some would consider that money laundering, but so it goes.  I always launder my money, and seed it with microwaved DNA from public facilities, before I mail it somewhere

One might point out that those VPNs are rather a red flag.  However, using such services is the norm for those in my real-world trade.  Also, corporate IP cops are driving an entire generation into darknets.  There's so much encrypted porn and TV out there now that folks like me can just blend in.  And BTW, I do blend.  I'm on Facebook, LinkedIn et alia.  Nothing to see here, just move along.

So, those are the pros of Bitcoin, as I see them.

[Bitcoiner]

I'm not a minarchist (more of an agorist/panarchist), but otherwise interested in the same things as you

Could you tell me more about anonymous distributed cloud storage and things like that? I'm a little bit behind the times when it comes to these things.

"Existing "anonymous" digital currencies suffer from the defect that it's virtually impossible to fund them anonymously. "

This is what's made it hard for me to buy Bitcoins uptil now! Granted, my online poker method is not anonymous, either, but I consider it a bit better than Paypal.

I'm a minarchist who values freedom, justice and self-responsibility.  In the current environment, privacy and anonymity are absolute prerequisites for those principles.  They've also been my favorite hobby for the past decade or so.  I remember Toto -- he was a strange dude 

Anyway, Bitcoin is just what I need to anonymously pay for services that guarantee my privacy and anonymity.  I use multiple OpenVPN-based anonymity services, and use VMs (and soon, cryptorouters) to tunnel one VPN through another.  I'm also very interested in anonymous distributed cloud storage (e.g., Cleversafe) -- much better than local encrypted storage.

The key threat is collusion among service providers, and with payment processors.  Existing "anonymous" digital currencies suffer from the defect that it's virtually impossible to fund them anonymously.  And although one can use systems like Loom to transfer value anonymously, it's still essentially anonymous barter.

It appears that such providers are starting to accept Bitcoin (and that's how I got here).  Also, with Bitcoin, it's easy to improve anonymity via transfers among multiple anonymous accounts.  I suppose that some would consider that money laundering, but so it goes.  I always launder my money, and seed it with microwaved DNA from public facilities, before I mail it somewhere

One might point out that those VPNs are rather a red flag.  However, using such services is the norm for those in my real-world trade.  Also, corporate IP cops are driving an entire generation into darknets.  There's so much encrypted porn and TV out there now that folks like me can just blend in.  And BTW, I do blend.  I'm on Facebook, LinkedIn et alia.  Nothing to see here, just move along.

So, those are the pros of Bitcoin, as I see them.

[ichi]

I'm endeavoring to put all of my idle CPU resources to generating Bitcoins.  I'm currently generating ca. 4,000 khash/s total, and have a dual Xeon 5570 server that's often available.  I'm thinking of a Win 7 VM with full-disk Truecrypt.

Re distributed storage, see the Cleversafe overview.  From the "Information Dispersal Algorithms" link ...

Information Dispersal Algorithms (IDAs) separate data into unrecognizable Slices, which are distributed, via secure Internet connections, to storage locations at home or throughout the world. This collection of dispersed Slices creates a Dispersed Storage™ Network system (dsNet). With Dispersed Storage™ technology, transmission and storage of data is inherently private and secure. No single entire copy of the data resides in one location, and only a subset of the nodes needs to be available in order to fully retrieve all of the data on the dsNet.

Data on the dsNet remains private and secure in the face of natural catastrophes or failures due to hardware, connection, facility, or IT management. Moreover, the individual Slices do not contain enough information that would allow an unauthorized viewer to determine the original content.

They've become successful enough to pull their source from SourceForge, and are selling licenses for serious money: "Starting price with support for 64TB of raw capacity is $43,400 for software licenses only, ...".  See Cleversafe updates software, licensing for cloud providers.  I have dsgrid-core-src-alpha4.1.3.tar.gz, if you're interested in playing.

[D҉ataWraith]

Re distributed storage, see the Cleversafe overview.  From the "Information Dispersal Algorithms" link ...

There's also Wuala, which is P2P-based and allows you to trade local storage for encrypted storage in the cloud. You get 1 GiB free.

[Bitcoiner]

Re distributed storage, see the Cleversafe overview.  From the "Information Dispersal Algorithms" link ...

There's also Wuala, which is P2P-based and allows you to trade local storage for encrypted storage in the cloud. You get 1 GiB free.

Interesting. I've been looking for something like this: "Wuala protects your privacy: In stark contrast to most other online storage services, all your files get encrypted on your computer, so that no one - including the employees at Wuala and LaCie - can access your private files. Your password never leaves your computer."

That's why I've hesitated signing up for many of these backup services: the files are readable by the company. I wonder how trustworthy Wuala's claims are.

[D҉ataWraith]

That's why I've hesitated signing up for many of these backup services: the files are readable by the company. I wonder how trustworthy Wuala's claims are.

The system splits files into chunks and encrypts these using the chunk's hash as password, so only someone who already knows the exact file contents (or is told the hash) can access the data. There are several whitepapers and a Google Tech Talk explaining how the system works. It's quite ingenious and contains a number of fascinating (to me) innovations.

The only way for them to look at your files is to steal your password in the client. In the long run, they plan to eventually open the source up for inspection to show that they're not doing that, IIRC.

Personally I entrust most of my data to Wuala, but apply another layer of encryption on top for sensitive files such as financial information.

[ichi]

@D҉ataWraith

Cool    I'm definitely checking out Wuala.  Thank you.

[Anonymous]

I wonder if bitcoin ever got to the stage where the users could hire its own defence force,pay off politicians or fund lobby groups that would protect it and its users from government?I think the initiative to contact the EFF is a good start.Maybe bitcoin could hire marketing and promotional advertising to win the propaganda war before it even starts.....

Someone could set up an early warning system that goes out to all bitcoin users if it is triggered by a bitcoin user which would alert everyone and allow them to take defensive action or come to the aid of the person in trouble ie send in  a lawyer payed for from the bitcoin legal defense bounty swarm.....

[kiba]

I wonder if bitcoin ever got to the stage where the users could hire its own defence force,pay off politicians or fund lobby groups that would protect it and its users from government?I think the initiative to contact the EFF is a good start.Maybe bitcoin could hire marketing and promotional advertising to win the propaganda war before it even starts.....

The key is to embed bitcoins deep into society to the point that there will be huge consequences for authorities for messing with bitcoin.

Otherwise, we should raise support from our tribes, which are basically computer programmers. Get the FSF, the EFF, and the rest of hacker charities, as well everyone else and you get a united front for bitcoin. Whenever somebody tries to attack bitcoin legally, the computing world will be up in arms.

[bytemaster]

Excellent, this is an interesting debate that goes back hundreds of years.  Many people would say that inflation is a market phenomenon too.  Do you realise that any economy which permits charging interest on a loan *requires* inflation?  The rich entity charging interest gets *all* their capital back, *plus* the interest.  If no extra money is being injected into the economy (i.e. no inflation), eventually the interest charger collects all the money in circulation and the currency fails.

Let us consider this situation.  Every unit of "currency" held out of circulation equates to "demand" for that currency relative to other goods and services.  Thus as this rich person collected more and more of the currency the goods and services in the economy would fall in price until supply of money "on the market" matches the supply of goods "on the market". 

Thus, if the rich man never spent a single dime of the interest he earned then over time his savings would contribute to general deflation and the "real" interest rate that he would be charging would go through the roof as effectively every dollar of interest collected is "sequestered" and thus is identical to monetary deflation.  Eventually he wouldn't be able to lend any money because the deflation rate caused by his "hoarding of interest" would make it more profitable for people to *save* before producing instead of borrowing to produce.  If the rich man ever tried to "spend" all of this wealth all at once he would find that prices would jump dramatically back to where they were before he collected and sequestered all of that interest. 

The result is that no one gets "something for nothing".  The rich man could only lend out money at interest rates higher than the average productivity of society and thus he could only fund "risky" "high potential" projects and the result of the project will be either to A) make the person who borrowed the money much better of (along with everyone else) or B) face default as the borrower's business plan fails.

The result is that the system is self-regulating.  Any attempt to corner the market is not productive and lending at interest does not cause an economy to implode unless the money lent was conjured into existence from nothing.   

[killerjoegreece]

the two things that happen when u have anonimity is you can have Criminal usage including money laundering and also there are No means of refunds or fraud insurance which makes it a honeyspot for criminals.

[21coin]

the two things that happen when u have anonimity is you can have Criminal usage including money laundering and also there are No means of refunds or fraud insurance which makes it a honeyspot for criminals.

Wooow you just bumped up a really old post here man