Bitcoin Forum

I know I'm very new here in terms of post count and all that.  I'm a long-time lurker (since 2010 when Robert Prechter did a special report on bitcoins in his monthly newsletter), and I am also a long-term holder of bitcoins (mining on a dual-core CPU at that time, generating about 50btc per month, and made some purchases around $.10-$.15/BTC way back then).

Oh, how things have changed.

Bitcoin is very, very viable long-term.  It's only weakness is that it hasn't been selected as a commodity and then assigned a monetary premium by an organic and complex market, but instead was simply created with the intent of being used as a unit of exchange and account.  The trade-off, however, is total decentralization - no clearinghouse, no depository for gold or silver that may or may not actually have it, etc.  I am a long-time precious metals investor (Thanks, in part, to my love of the Austrian school, and my distrust of all artificial monopolies - including those in currency), and I think that precious metals will again become the "gold standard" for money in the world as state-monopolized money lose all credibility and confidence.

That being said, you still have the fight against human nature when you are dealing with PM's in the digital age.  Anybody can start a gold depository or silver depository and set up a financial network on top of it.  The trouble with it is that all you have to go on is a quarterly or monthly audit, and hope that "your" metal is still sitting exactly where it's supposed to be.  There are a ton of such services, and the scams are being exposed out the woodwork over the past few months.  Strong, legitimate companies are few and far between - GoldMoney, SmartMetals, and several others seem to be very legitimate allocated holdings.  Peter Schiff's new EuroPac Bank has allocated holdings with a linked debit card that converts your metals to whichever currency you happen to be spending.

If you don't know who Peter Schiff is, check out "Peter Schiff was Right" on youtube.  If you are interested in signing up for an allocated metals account at his bank in the West Indies (sorry, NO US Citizens thanks to Dodd-Frank), here's a link (yes, I will get a small headhunting fee as I have been an account holder since about 2 days after he opened the bank lol):

http://secure.europacbank.com/register_alt.php?ra=248e844336797ec98478f85e7626de4a (http://secure.europacbank.com/register_alt.php?ra=248e844336797ec98478f85e7626de4a)

The other disadvantage to gold and silver is that they are physical goods, and they must move through the physical world.  A central depository could set up a worldwide network to distribute redeemable certificates (digital or otherwise), but eventually the metal has to follow, which is far slower and prone to serious security risks.  This can be a burden in a world of instant transactions.  Bitcoin solves this problem - 25 minutes and you've got your asset, free and clear.

My background is in finance and economics, which is sort of funny because I had to "unlearn" a lot of what I learned (in the future, mainstream economics (Keynes, Chicago, etc.), as it is practiced today, will probably be held in the same esteem as blood-letting doctors are regarded by modern medicine, or flat-earth "astronomers" are regarded by their modern counterparts).  Thankfully I was still young enough and saw several international financial crises that mainstream economics were absolutely blindsided by, while a certain few people seemed to be saying "yeah, I told you so".  I'm sure most here are subscribers to the Austrian school, or at least to the tenants of praxeology and free markets, so I'm not going to go on a huge diatribe about it.

Anyway, the big question is going to be - where do we go from here?  There is a massive scandal unfolding as we speak which will likely shake bitcoin to its core along the lines of the Mt. Gox hack last year and the fold-up of the online wallets and the recent bitcoinica hack and collapse (along with your money).  My suspicion is that we will see bitcoin make a new low relative to the lows it put in after the initial blow-off last year. This will likely be the last single-digit move we see for a very, very long time.  This is the last "is survival possible?" time for bitcoin.  If we can make it through the coming storm, the future is wide open.

This is the "trouble-cycle" of bitcoin.  The community is so optimistic and so ready to push the envelope, which is amazing.  But it leaves us prone to getting burned and ripped off, and the anonymity that is so key to bitcoin can also be a deadly enemy.  It seems that every few months, someone comes along and offers a "new" idea, consolidating a whole bunch of bitcoins and then taking off with them, either through their own maliciousness or through being careless with what becomes a very, very low-hanging fruit for attackers.  These bumps and scrapes will hopefully push the community to come up with its own self-regulating mechanisms and hoops through which legitimate opportunities and offerings will gladly jump to better serve their customers.  This is one of the areas I am very excited to bring some ideas to the table for the community.

From where I'm sitting, bitcoin is one of the avenues of the future.  I do think that local and regional economies will embrace privately-minted money once nation-states have destroyed faith in their promises-on-paper.  The entire planet is over-leveraged on promises to a level I can only call insane.  Your bank book is only a promise to hopefully have the money on hand if you decide to come in and withdraw it.  Actual cash will be king, and all bitcoins are cash, which is key.  Bitcoin will bridge the gap of instantaneous transactions that we have come to expect, which commodity money can only truly do within the same central depository institution.  It is the "perfect" unit of exchange and account.

I want to bring what I can to the bitcoin community.  The more goods and services that are offered in bitcoins, the stronger and more viable this money will become.  I'm keeping everything pretty close to the chest right now, but I will say that in any avenue of finance or services that I offer, my own personal information will be fully available.  I will not hide behind an anonymous username, behind "forum rep" or anything silly like that.  Every venture that I start, I will personally hold at least a 10% stake in it, up to 100%, and anyone who wants to do business with me can know who they are doing business with.  But again, this is all for much later - I just basically wanted to write a bit of an intro, what I think is happening with BTC right now, and say hello to everyone here.

My own goals are very ambitious.  I want to be here to help take bitcoin to the next level, along with any competing currency that has the same merits.  I want to see 1 in 100 people on this planet actually know what the word Bitcoin means.  This is one of the greatest tools of economic freedom that has ever been available, and we need this, all of us.  Bitcoin is to money what Gutenberg was to education and free speech.

Lets do it

Great post, well written. Doesn't really provide much in terms of new information but it's a really nice summary of the current state of events. Jennifer Lawrence gives it a hearty thumbs up...

Greetings.

Nice post, and you are correct - elements of greed are hard to root out of any system. My belief is as adoption increases the depth of market should as well, which should dampen any volatility. We're just too 'new' still in terms of the current BTC market to not be affected by large trades.

I'm here for the long haul too, so I suspect we'll see improvement in this area over time.

Thanks for such a great (and encouraging) post.

I wonder why this is posted in 'Speculation'.
...

I totally agree with this great post. Let's see what happens next... shall we? :)

Your speech was encouraging and inspiring.  I too am an ardent fan of Austrian economics, Peter Schiff, Ron Paul, and other like-minded individuals.  Bitcoin is the greatest invention since the internet, and if we do our part, people will soon realize this and further contribute to this young & growing economy.  May Bitcoin and all other tools of liberty succeed.  For freedom!

Well put. Yes, it might best be posted in discussion than speculation, but that's a minor quibble.

Your comments about precious metals still requiring some sort of custodial representation are spot-on. There is no other practical way to make the monetary metals function efficiently in a modern market environment.

In mentioning Franken-Dodd - it was the final straw that pushed me to participate exclusively in Bitcoin, remaining in traditional markets only to the extent absolutely required and a disposable play fund. Counterparty risk will push the world over that edge in due time, so being this far ahead will allow early adopters to ride that wave.

I guess you guys are sort of right about posting in "discussion", however my background and focus are more on the financial side of things, which I generally consider "speculation", so I just tossed it in here.  If a mod feels like moving it elsewhere, by all means! :)

One of the things I would like to set up is an actual ratings system for bitcoin securities and institutions.  One of the things that bitcoin entrepreneurs are going to have to get over is some of their anonymity.  People need to have a recourse, and I want to set up a rating system and a sort of BBB for bitcoin businesses, who I can vet based on their operations, actual cash and bitcoin holdings, etc, and rank them on viability and on trust.  Kind of like BBB meets Yelp, for bitcoin businesses.

I am also looking at other opportunities to make dealing in physical goods with bitcoins a lot safer, even over distances.  I'm not saying more than that about that specific venture right now, but my goal is to set up a sort of network for bitcoin that brings good, moral entrepreneurs and customers into the fold and leaves the scammers and tramps (old definition, here) out hanging in the wind.  Sort of a "digital, gated society" that offers security and recourse in the even of a dispute.  And, because my background is mainly in investing, I want to offer investment opportunities that are very transparent and give long-term holders and adopters a place to put their coins and generate a yield (an actual, real, achievable target and full breakdown of allocations and holdings, all done through offshore accounts that are untouchable by western governments, and all with a minimum 10% ownership by myself or any other "insider").

This is something I've been cooking on the back burner while I wind down my own business operations in the physical world.  The climate is becoming a disaster to do business where I am, and I almost feel bad for the fellow who's buying me out, because of the legislative shitstorm and army of bureaucrats that will crash down on his head as of next year.  But, it is what it is, and I am shifting myself over to the last realm on earth that is a truly free market - the digital one.  I can't begin to explain how excited I am for bitcoin and for the digital economy, which has been growing by double digits YoY since it sprung up in the 1990's.  And that is on the back of a fiat currency and draconian financial system.  How much more do we have to look forward to now that money itself is back in our hands!

Don't be so quick to dismiss gold and silver. They both have their place. If you flee to a lesser developed agrarian country (which is more resilient to a failure of fiat money), some precious metal coins can be very handy for acquiring goods and services. The advantage is that metals are widely accepted by street merchants (ironically, except in the G20 countries).

Some precious metals could be a good hold over until fiat has completely destroyed itself and the Bitcoin economy becomes pervasive.

Great post. Bitcoin is still experiencing significant growing pains but they will get better through time as we learn and go forward. What we need is people like you who want to build this economy and create true progress!

nice post OP and i share your outlook on pm's and Bitcoin.  good luck.  :D

I absolutely agree with this.  PM's will get food to your mouth and a roof over your head while fiat is dying.  My focus on bitcoin is philosophical, economic, and even a bit philanthropic.  Bitcoin is international money.  It can facilitate international trade across institutions while a central-depository PM currency will take days to do this on any transaction outside of its own institution.  This is what makes it brilliant.

For philosophical and economic reasons, it is simply because bitcoin is a moral money, much like anything else the market voluntarily elects i.e. gold, silver, etc.  It is because when the market (whenever I say "market" in any conversation I have on here, this is my condensed term for "all of the voluntarily interacting human beings making choices all of the time") chooses the money, the market flourishes.

What we have seen in the digital economy is growth that only existed in the physical economy for a short time - the Gilded Age, where true economic expansion in production under gold and silver increased at a rate beyond anything in the scarce realm before, or since.  We are in the Gilded Age of the digital economy, and more and more scare resources are being brought into it for that reason.  Already, millions upon millions of man-hours of former labour are now instantaneous and infinitely-replicatable in the digital realm, freeing up untold riches in human capital and that most precious commodity - time.  It's the most beautiful thing for the human race that has happened in ages.

The philanthropic aspect is sort of a two-edged sword (and I'm holding the hilt!).  On the one hand, I want to cut off the mechanism that allows states to hire people, ship them off to other countries, and pay them to murder hundreds of thousands of innocent civilians.  War is not possible without currency monopoly, at least any war that violates the NAP is not (pre-emptive/aggressive).  Can you possible imagine how it would work out if the US government had to actually extract every dollar it uses to pay the Offensive Military directly from the hands of taxpayers?  There is no way.  The "Great Society" would die on the vine as it should, because there is no way you could tax what has been monetized directly from the hands of productive people.  They wouldn't stand for it.    This is why no "true believer" progressive ever talks about abolishing central banking, only "reforming" it - they know their vision of every second of life being managed by "experts" and being "equal" for all, is absolutely impossible under market money.

What we have now is that people know something is wrong, in their gut, they are a bit resentful of how much is being stolen directly from them, and they instinctively have the impulse to speculate because their store of "value" buys less and less every year.  Imagine if tax-by-central-bank became an actual attempt to tax!  It would be the Whiskey Rebellion all over again (and damned straight!), with the good guys likely winning.

On the other hand, there is only one key to actually stopping men and women from signing up to head off and kill other people in other countries for the sins of their governments or tiny factions therein.  That key is trade.  People do not kill each other when they do business together and make money from each other.  "when goods and services cross borders, soldiers won't".  It is extremely hard to propagandize me that all Chinese are evil cannibals who want to murder me for being randomly born in an arbitrarily fined geographic region, when just last night I was on the phone with Wong and we worked out a very good deal to get some stuff shipped over for me.  This is why you see economic sanctions, always, before you see military action - it is part of the "consensus" upon which our society has disgustingly set the foundation for its morality.  Our latest example is Iran, and military action is sure to follow unless the bond market does what I am praying it should, and forces the US government to shrivel up and die (disclosure:  I am fully leveraged short in long-term treasuries as of about 2 weeks ago, along with Japanese long bonds, German bunds, and France long term debt).

Bitcoin is something that can usher in world piece as a two edged sword - it removes the monetization possibility that enables war, and it keeps people in the rational world, where they do business together and benefit each other.  Rational people are that much harder to propagandize, and would revolt if their economic success were cut off because of politicking.  It really can be a tool that could re-shape so many paradigms of society.

Sorry for the rant.  My fingers need a break.  Once I get typing about this stuff it's hard to stop...

Honest money: the principle benefit of bitcoin.

I loled...

i totally agree with this and it's my supposition that this entire rise off the $2 level has been driven by this market instinct and NOT pirate.  i'm constantly amazed by how ppl around here panic based on such concocted theories and comments from a ponzi schemer and scammer.

In general, people have very predictable preferences.

1 - They are in control.
2 - They aren't in control, but someone is.
3 - No one is in control, shit just happens.

People can obviously see that #1 isn't true for most things, so they go with #2 because they like it better than #3.  This is why insane conspiracy theories are so common and popular.

Although your ideas are possible on paper, I just don't see bitcoin becoming the saving grace that ends all wars. The powers that be will do whatever it takes to preserve that power. If they see bitcoin as a threat to their power then they will shut it down or demonize it. They already have a tight grip on your strings, I don't see them letting go anytime soon.

The powers that be are bankrupt and about to subject to the sledge hammer that is the laws of economics.  I'm not all that worried about them - I just want to help people move on as fast as possible and get humanity morally sound and civilized as fast as possible again...

I hope you're right. I think society will always be ruled by a group of elite people no matter what happens. I guess I'm just pessimistic. Or maybe I'm giving the people at the top of the pyramid too much credit. idk.

Where can I read more about this debit card?  I don't see anything in the service announcements or service discussion sections.

Edit: found it in bitcoin discussion: https://bitcointalk.org/index.php?topic=101838.0

Well, that's something I would be interested in contributing to at some point.   Let me know if there are any topics you guys are looking for people to write on, and I'll let you know if I can do anything to help.

It's a long way to death from a bond market crash, and that historically acts as a trigger for war rather than prevention. Thankfully, it also signifies completion of a cycle and the failure of whatever dominant power is struggling to maintain its relevance.

Other than that part, I agree wholeheartedly. Bitcoin is like the transition from wind to coal to oil-based power sources, making a lot of traditional systems break due to incompatibility.

Didn't say anything about the assholes and idiots that flourish in today's society. When has a Bitcoin lied to you? You either have it or you don't. How you acquire and lose it is up to you. In short, people are a problem.

I agree with this 100%. The only way to end aggression is through the use of force (ironically). There is no lasting, peaceful way to prevent other people from coming and trying to take your shit by force (under the pretense of the "greater good").

You only have as much liberty and freedom as you are willing to defend physically.

Coreadrin,

I agree with everything you have written in this excellent thread. I would, however, like to add one more thing to the long list of bitcoin's benefits: Bitcoin enables a sustainable (i.e. steady state, zero growth) economic paradigm. This is because bitcoin -unlike paper money- is not backed by interest-bearing debt.

I a world that is starting to hit physical limits on resource availability a monetary system which is not based on debt its an essential thing. Precious metal is not ideal because of the issue with the custodian (who might issue more certificates than there is physical pm in stock to back), but with bitcoin everyone can and should be his own custodian. Problem solved.

If it is allowed to survive and prosper, bitcoin is truly one of those rare once-in-a-century inventions which has the potential to make the world a better place.

You said something about starting a rating agency.
How will you prevent corruption of such a powerfull organisation?
Is this even preentable and if not, is such a false sense of security still valuable to the community?

S&P and Moody's entire business model is easily corruptible.  They are Banana Republic ratings agencies, and I hope that individual investors continue to realize what a sham they are (they are regularly paid the companies whose securities and debt they rate).

Egan Jones is more like the business model I would be looking to bring to Bitcoin.  In my book, those guys are heroes.  They have been around for a long time, and remain uncorrupted against their alleged competition, because of the business model that they chose to adopt (i.e. their business model is buy-side driven, whereas the other ratings agencies are sell-side funded).  The investing public can petition us to rate a security, and I can contact the security issuer and tell them that I have a bunch of investors lined up, but they want to see more than a business prospectus and feel-good idea.  Investors wouldn't have to pay for the rating unless the business or individual agreed to be rated.   There are other services I will be offering in conjunction to a straight ratings agency that will provide investors with some insurance against scamming and poor business models.

This is where many scammers will fade away.  A lot of them can talk a good game, but if someone were to go through and dissect their operations, the holes are pretty obvious (If I were asked to rate Pirate, for example...).  If they refused to allow their business to be rated, I would actually post up on our ratings page that the business in question issued a refusal or we received no response from them, including screenshots of the conversation, if applicable.  Our ratings would be based on whether an investor or buyer would be able to obtain any sort of recourse in the event of a collapse or fraud, on top of the potential gains/losses from operations, and whether the business idea really is a good and viable one.

The other side is that a business could come to us and pay a small fee, submit their full business plan, financials, executive experience, etc., and we would assign them a rating and an outlook based on a host of criteria (all of which will be posted up so consumers can see what our grading is based on).  This would be a one-time arrangement where a business would agree to receive whatever rating we assigned it based on our analysis.

I am not saying this is a be-all, end-all for the bitcoin community and the infant securities market, but it is one tool in a toolbox that can be employed to protect members of the bitcoin community, and I want to be a part of that.  If someone comes along with an even better idea, they take my business and the community is even better off for it.  I of course have selfish intentions at the root of all of this - income, for starters, and that my underlying bitcoin investments from way back in the day will increase drastically if we can add stability and security to bitcoin and encourage millions of dollars of new products to enter the bitcoin markets.  But this is a mutual-benefit arrangement, which, last I checked, is the definition of human progress.

While i'm glad to hear you'd be using a different model than Moody's and the other rats, i'm still worried.
By implementing your idea YOU would become the corruptable entity.
You could make or break businesses.
Your incentive will still be to tell your clients what they want/pay for, only difference is that the client is the other side.
Instead of paying you to look good, businesses could pay you to look less good.

By shuffling stuff around you have not fixed anything, you just managed to move the problem (temporarily) out of view.

Nothing you wrote will be enough to prevent corruption, it will just prevent the specific scam the current global rating agencies were running.

Ratings would preferably be decided upon by an open group process where there is an exchange of experiences and where there is a place for an investigator.

The real problem with Moody's etc is perhaps not the fact that they rate businesses, but that the world looks solely to them for answers in times of uncertainty.
The intrinsic power flowing from such a position should be considered very very carefully.
For one, it would be unwise for the community to trust a newcommer to the community with such a task.

So i would still like to hear an answer to my previous questions.
-How will you prevent corruption of such a powerfull organisation?
-Is this even preventable and if not, is such a false sense of security still valuable to the community?

Ever heard of Ghandi?

He and his followers broke the spirit of the British military not with force, but by refusing to fight back.  You can only beat a pacifist so many times before you feel like scum.

Of course I have. And history shows that the Ghandi outcome is the exception rather than the norm.

I agree that business ratings should be in large part determined by the reputation from customers using their service, however I think it's necessary to provide "expert" analysis of the business model as well as transparency in the given field of the company. To beat a dead horse, there are quite a few people on the forum that believe Pirate is running a legit company, even though they don't know his business model (or worse, don't care that it's shady as long as they see returns), that would give BS&T good reviews on a peer-only based site.  It would be nice to have a few (Bitcoin)BBB type agencies running independently to cross-check each other, that provided customer reviews based on the service as well as analyzing their business model and providing information on how the business is actually run. This may create a "central failure point" if the (B)BBB became corrupted, but some of that risk "should" be mitigated with intelligent research and due diligence. I wouldn't dump any amount of money into a company w/out first investigating them, but a website I could go to as a starting point would be a big help.

I currently go to school and work full time as well as maintaining a mid-sized mining farm (which will look like cpu mining once ASIC is released >.<) so I don't have enough time to play the market or spend inordinate amounts of time researching investment opportunities, and having a place I could go to get ideas on opportunities sounds much better than earning 0% in my wallet.dat.

Any system built on Bitcoin will have the possibility of corruption, you cannot avoid human nature. The trick is how to mitigate that possibility and provide accountability in the event, however unlikely, it occurs.

If you read my earlier posts, what I'm essentially going for is BBB + Yelp for bitcoin-denominated businesses.  I.e. a p2p review system that customers who have done business can leave a review (provide proof of transaction).

My work would be more on a valuation/financial analysis side.  i.e. Are these operations able to generate positive cashflow, what sort of return could investors expect based on similar business models, what experience does ownership have, is their marketing plan viable and professional, is there any insurance against fraud or theft (i.e. certain amount of capital left in third party escrow via a bond, etc.), what sort of dispute resolution is offered (i.e. judge.me) for a dispute between customers and business or investors and business (if any), is the owner of the business forthcoming with his own personal information to help expedite disputes, etc. etc. etc.

There would be essentially a full checklist of hoops through which a business must jump in order to receive an AAA rating, weighted upon how much damage it can do to customers or investors - each minor knock takes the business down within its tier, each major knock bumps it down a tier.  Again this is a work in progress, and I am using the existing models of legitimate ratings agencies and research firms as a template to go on, with the main focus being on recourse and saleable, insured assets in the event of a bankruptcy, etc.

On top of that, I would assign what valuation models deem to be a fair value per share, for companies that are in the IPO stage or secondary offering/bond offering/etc.  So if John's VPN Service is trying to IPO his shares at 2btc when valuation models show they are only worth 0.5btc, I will point this out.

Your insinuation that this gives me the power to make or break businesses is sort of hilarious.  First of all, I am a complete unknown here.  So I would imagine for the first while that the majority of the community would just completely ignore me, which they have every right to do.  Even if people start paying attention, valuations only get you so far and the future is not crystal-ball-capable (if it were, I would be living on my own private island right now and would want for nothing, ever.).  Ratings agencies make mistakes all the time, however the good ones are far more likely to predict future trends and forecast business results with success.  I am only human, but if the difference between me doing a valuation and writeup on a company saves a miner a few grand worth of coins that can be put to more productive uses, it is within my own best interest to do this, outside of any payment I might receive for the service:  I have a fairly substantial bitcoin holdings, and the more legitimacy this economy receives, the more goods and services are brought into the fold and people are protected or at least alerted to bad risk, the more those coins go up in value.  I like to think of it as working towards an earlier and earlier retirement...

As far as corruption goes, anyone on the interwebs is absolutely free to compete with me.  Maybe someone comes out with a way better model that asses risk more effectively.  Who knows.  This is not meant to be some great sword with which a business can be instantly cut off from funding by the community, unless they are a likely scammer/tramp.  This is just like you hopping on to the BBB website and checking out a local roofing company before you hire them, or visiting yelp before you order a flower arrangement for your mother back home, etc.  Just a check and balance, which bitcoin desparately, desparately needs. 

As far as ratings go in terms of quality, that stuff is very transparent.  A business has to know which hoops to jump through and which to not.  However, I won't show my weightings in each category because then a business could just "game" the system, only doing things that are given the most weight while still leaving themselves a loophole through which to scam customers.  It will be a sort of checklist that says "if you have all of these things, you will be rated with the highest reliability and security in the eyes of your customers", but the weight each thing is given will not be disclosed.

The nice thing about bitcoin is that compliance is optional - businesses could decide to just go at it on their own, and they might do okay, or not, but there would be less risk because they could just fire up a website for $100 bucks and a bunch of free software, and off you go.  So we could see the adoption of regulations, but most of those regulations will be imposed from the consumer side - businesses that do the best by the consumer survive and thrive, those that fail the consumer die off.  When regulation is voluntary is when it is most effective, because it's not about gaming the system anymore, but serving the customer.  The hoops aren't arbitrary and static, either, and customers will be able to weigh in on this stuff alongside the business community.

The majority of the weight, as far as I can see, would come from the p2p side - customers reviewing the business.  The professional analysis would largely fall on the partnership/investment/debt purchase side of things, with the exception being the sort of BBB aspect to it, which is merely the "gate" to the community.

Only because nobody else has been willing to take a beating without raising their own fist.  The principle works, but violence is easier.

If anything this just shows that the economics of violence have been such that extortion has had a profitable ROI and the cost of protection has been too high. The Information Age in general and Bitcoin specifically are great force multipliers which have greatly lowered the cost of protection and largely made violence unprofitable.

BLOGDAIL makes a compelling case (http://irdial.com/blogdial/?p=3086):


If you are a member of the aggressive criminal gang then having the productive cows refuse to produce or disappear is a real problem. However, if you are a productive cow then it only makes sense to disappear to Atlantis (http://www.youtube.com/watch?v=WSYw7dA0wVY).

I so much enjoy reading this thread; really. Before learning about BC, I've discussed an idea with a friend of mine (he's into stock exchange business). I've asked him to imagine how the perfect monetary system would look like. I proposed a saying from Alvin Toffler who predicted ''the society in order to preserve itself should be evolved into a hypersociety and declare money obsolete''.

There was a huge brainstorming that night; I guess the red wine from Nemea, Greece helped a lot; but there was a conclusion. We've came along to the fact that a certain productivity factor should arise. One that should baptise each and everyone's effort for the community to evolve, with a certain grade. Not one should be left without one. Grades should be given to everyone, regardless how small or big they were. Even animals and plants should be graded.

We agreed that the grades should reflect money... well not really; points taken should get you more to the ''respect'' rate of the society system. The more respected, the louder the voice you'd had in order to make a decision for the society to maintain its evolvement. And then... it came to me. I've proposed that the ''points'' should be measured in ''Energy''. Joules, W/h, kW/h and so forth. For instance you are a plumber and fixed a hose; how much hours did you spend? A. Your points should be: (A_hours_spent x Productivity_Factor)=Points_taken. Productivity factors should -of course- include the quality of work done; but that's a different chapter...

The only worry of ours was how could you fix a system that incorporates high security, viability and most important; the 'inability' of someone to create some points out of thin air... and then came BitCoin... and here I am! :)

Actually, what you are describing is essentially what the market does when it is allowed to organically and voluntarily select what it wants to use as money.  Instead of a mathematical equation assigning "figures" to productivity and quality and such, you've already got one - it's called profit.

The more scarce/desired the thing I am offering, the more I am likely to make in profit.  All things equal, in a society where interactions between humans are voluntary and non-coercive, my contribution to my fellow man can literally be measured in terms of how much money I make.  Walter Williams likes to call money "certificates of performance" - the more you have, the more you've done, in terms of giving your fellow man what he wants and needs, and the more desired and necessary the thing, the more you succeed.  This in spite of the fact that capitalism is, when you boil it down, a conspiracy to drive profits down to 0 (if it is allowed to).

Nicely put; capitalism has blown up in our faces... Let's wait and see. I really wonder where this whole thing is heading.

When did we have capitalism? I must have missed the memo.

Bitcoin IS capitalism!!!

Ok, that seems fair enough.

Once you start rating businesses you will be far from unknown. This is not an argument.

Untill, of course, the market needs this information and you become the God of providing a clear path through the mess (whatever mess is then currently going on).
Again, I think the problem with the big rating agencies is not that they rate, but that the whole world is looking at them in times of turmoil.

But people will inevitably use a rating agency as a crystal ball.


Yes, i'm aware of the positive sides to a rating agency.
However, I'm afraid that in times of panic or volatility (often occuring states in bitcoinland) everyone grabs for the biggest sword they can find by any means possible.

Another thing that i was thinking of was to what extent classical analysis methods can be applied to future bitcoin businesses.
I'm expecting a lot of new business models that may or may not be well analysed by real world models.
Sure, in the end its about the numbers below the line, but this needs to be evaluated by the numbers above the line and i'm not sure the old models will hold in all cases.

Anyhow, i feel satisfied with your answers so all i can say now is good luck in your new endeavour!
 ;D

Except it doesnt work.
A banker who creates a depression makes billions.
A nobelprice winner who contribute by saving millions of lives makes far less.

This still seems like a traditional ratings agency to me.  And potentially limited by opinion "whether the business idea really is a good and viable one".  But you are certainly correct that anonymity has been a bit of an Achilles heel for legal uses of bitcoin.  It is very important that the underlying protocol support pseudo-anonymous transactions but just because the capability is there does not mean that you as a business *SHOULD* be anonymous.  I have been thinking about this a lot and about how the unique properties of bitcoin can be applied to the problem.

While traditional expert-opinion based ratings will always be a part of the equation, you may want to consider the advantages the bitcoin system offers and provide services on top of that for cooperating companies.  As a simple example, it should be possible to generate real-time P&L statements instead of annual/quarterly if a company is willing to divulge its addresses.  Bitcoin and the open company http://effluviaofascatteredmind.blogspot.com/2009/03/thoughts-on-gpl-open-company-concept.html concept seem to go hand in hand.

And it would be possible to put an overlay database and network protocol on top of the blockchain data -- for example one that allows users to "rate" blockchain transactions.  As in all ratings systems this sort of network is hamstrung by the same authenticity issue that is elegantly solved by proof of work in the blockchain.  What I mean is that it would be very easy for someone to create N addresses and M artificial transactions to create artificial ratings.  However, there are many methods that can be used to ferret out these fakes.  For example, a network analysis ought to show a scale property whereas the greater bitcoin blockchain network may have different topology.  Additionally, ratings could be weighted by metrics calculated from the rater's prior activities -- for example "bitcoin days" (loosely: account balance * time you've held them), how long the rater has been active, transactions to other well-known companies, and the rater's own rating.  A combination of these techniques might be used in conjunction to produce a pretty accurate analysis.

And finally, companies who are not willing to provide complete disclosure could register with essentially an "information escrow" service, providing only that company detailed information.  Then that "trusted" 3rd party (that would be your company) could perform the real-time calculations, providing the public with details like daily/weekly money flows (and customer ratings) but every specific rating/transaction would remain private.

I think you missed a pretty huge caveat in there:  "In a society where interactions between humans are voluntary and non-coercive".  This means where there is actually a market, not a state imposing its politicized, fascist version of one.  i.e. a banker couldn't make billions if he weren't lending out 9x the money he had with an unconditional guarantee from a currency monopoly to cover his losses.  No FDIC = depositors that actually give a shit, and a market that immediately begins to differentiate between time deposits and demand deposits, etc. etc.

There are so many things I could add on to that, I could be here typing for hours.  When you have a state whose direct appropriation of wealth and spending is 40% of all economic activity, plus it imposes millions of behavior-modifying regulations upon the remaining 60% of that economy, we can hardly define that as "voluntary and non-coercive".

Taxation is possible with bitcoins as with every other means of exchange. The key phrase here is ''how much''. From my point of view what we see now is the miniature of the bolder future. Dollars won't cease to exist; Nor any other ''government / bank controlled'' money. But they will continue to grow thinner.

Exchanging something you won't be able to ''reproduce / manufacture / print'' like any other fiat money should give a huge advantage on bitcoins. My guess is that we'll eventually come to a point that no miner / bitcoin holder will be happy to exchange his/her BCs to any other fiat money. The difference will be even bigger when the total lot of 21 Billion BCs have already been mined.

Someone might say, you may want to buy gold or diamonds with your BCs. You may as well do so; but eventually you will need to buy food to live; diamonds or gold are not so safe to move around.

Taxation can be done by including tax in the price of the goods. http://en.wikipedia.org/wiki/Value_added_tax

It still has to be collected from someone, whether it's an employee, a consumer, or a merchant.  VAT just changes the point of collection, and (bonus) creates a massive black market for goods sold for cash or barter outside of the purview of this more recent imposition of immorality. 

What's to stop someone from simply moving their assets completely offshore and running things vicariously from there? (And damned right, he should)  How do you enforce taxation through bitcoin?  I hope that question never gets answered, and that every attempt to impose it rots away and gets tossed into the dustbin.

First of all, welcome to the forums! I think you are exactly one of the kinds of people that the Bitcoin community needs. I think I agree with all of your points, and it's refreshing to see them expressed with such clarity.

I'm very interested in this as well. I've been thinking about doing the same, and have heard it suggested several places. I'd really like to hear more about your thoughts on doing this.

My first thought when considering this, is that I fear it's sort of a rigged game. I mean, US Treasury bonds are denominated in a currency that is controlled completely by the Federal Reserve. As far as I can see, the Fed could (theoretically) drive up the price of Treasury bonds to any price it desires. I mean, it creates the very currency that these bonds are denominated in. As far as I can see though, it would require the Fed to purchase bonds directly from the US Treasury, instead of in the secondary market. Or am I wrong on this one? How is the price, that your short references, determined? Is this by the price in the secondary market?
This is probably the thing I fear the most. The political system isn't exactly thrilled about speculation, and I'd imagine shorting US bonds is one of the least favored speculation activities a US politician can image. I don't think it would be far fetched to imagine political action that aims to drive up the price of treasuries temporarily, to get rid of the leveraged shorts. Or am I out of line here? I'm just bothered by the opacity of this market, and I feel like I'm trading against politicians instead of the market.

With regards to the actual process of shorting the bonds, I have a fair understanding of how it works. I presume you pay an interest on borrowing the bonds from someone. At which interest rate can you borrow the bonds?
I figure this must weigh in on your decision, since a high interest rate will make your position unprofitable quicker than a lower interest rate. Do you have any time estimate on when you expect the bonds to start declining in price?

I have a core short position, but I a mostly leveraged to the max via LEAPS (the premiums are pretty reasonable short-side right now, just because the VIX is so low and the market's got this huge still-baked-in expectation of continued upside.

As far as the rigging of the game goes - you can only violate the laws of economics for so long.  The Fed has been openly purchasing treasuries since 2008 and they already ARE the long-bond market.  Twist was just the last twist of the sword in attempting to push down long-term yields.  The Fed currently holds well over 2/3 of it's entire balance sheet in long term debt (LT Treasuries and Mortgage Debt).  If these markets begin to turn, they will start having to book serious losses, which will be pretty damned embarrassing for the all-powerful ivory tower gods of money. 

You couple that with what are sure to be serious, serious shenanigans in terms of the budget, plus the fact that SS continues to pay out more than it takes in (and its balance sheet is also made up almost entirely of treasury bonds), and you've got a highly probably chance that the everyone-and-their-mother who have piled on the Treasury bubble will get wiped out.

It's a 30 year bull market.  Not many bull markets can hold out for 30 years, and this one is a doozey.  Higher participation than stocks by the average household, and by a long shot.  Check out equity outflows compared to treasury inflows over the past 10 years, and you'll basically see another dot-com/NasdAPPL in the works.  There's not much possible upside even left on Treasuries, but the way down is a long, long way.

As for the rest of the discussion on here, I think it's going to be imperative to the future of bitcoin for more and more products and services to be offered and denominated in bitcoins.  As the underlying economy grows, so will the support infrastructure (bitcoin debit cards, etc.), and so will its value.  I'm working on a little something that will make it a lot easier to bring legitimate goods and services to the market and not worry (in the meantime) about your entire profit margin getting eaten up by specs over on the Gox.  That's project #1, which will hopefully generate enough revenue that I can focus entirely on my bigger goals over the next 6-12 months.

I won't pretend I understood the majority of the terms you just used, but again I agree with your general perspective on the market. I just find the dimension of time to be so damn difficult to grasp. I mean, as far as I can figure it could all come down next year, but I could also see it running for another 10 years, albeit very poorly, and with lots of intervention of course.

May I ask how long it can take the bond market to collapse before you don't make a profit because of the premiums you pay on borrowing the bonds?

I mostly focus on the opinion of the people on the street. We all agree the fundamentals are terrible, but still, I have yet to run across anyone in my daily life (in the "real world", ie. not these forums) that really think the whole system could collapse. And if it were to collapse, I find it quite probable that most people would voluntarily give up some freedom to keep it going longer - via capital controls, for example.
Then again, I don't really know many people who are even interested in economics, so that might be why. It's like everyone agree on the logic behind why the system is terribly unstable, but they have a very hard time envisioning a breakdown of it. Even just suggesting high inflation (>5%) is considered nonsense by most people.

Like I said, most of my position is using LEAPS (long term options, essentially).  they expire worthless if they aren't in the money by the expiration date.  I'm betting on a good hop up in the VIX even if treasuries manage to eke out another rally, which should keep the time premiums on the LEAPS up high enough that it's a very low-risk play.  And even if things are looking a little iffy, you can usually roll things over another year out (when available) for not too much price difference, sometimes you're only looking at a 10-15% rollover cost which gives to another 12 months.

I don't trade on fundamentals, but they do certainly bust open the dam when it's time for the trade to roll your way.  Investing is the long, long play.  Trading is on psychology, where the laws of economics can be stretched and ignored for a while.  We had a beautiful internal divergence on a host of indicators on that latest high in long bonds, a mature pricing pattern (early adopters, early majority, majority rush, late majority, final batch of greater fools), etc.  It was a great time to short it on a contra play.

thread of the week

so nice to see some big picture debate...nice break from "oh noes, pirate is crashing teh bitcoin"



My thoughts, this is going to be a very close thing.  Bitcoin is far and away the most encouraging development I have seen in some time.  It truly does have the potential to break the current system of debt slavery.  The central banking conspiracy, however, is not going to shuffle off to the dustbin of history quietly.  The arc of history indeed bends toward freedom, but is jagged with spasms of state violence.  Much remains to be done.

I have a sneaking suspicion that the entire bond curve is as false and rigged as LIBOR. Time will tell...

I really am curious where this is going Coreadrin_47. I *think* I have the outline of your thoughts and really want to wish you all the best. It's a good bet IMHO. :)

lol have you looked at the Fed's balance sheet recently?  They are exposed to the tune of over 2/3 of their entire "asset" base in debt instruments with maturities 10 years or greater (including almost 1 trillion of long term mortgage securities, many of which are worth less than 50 cents on the dollar).

You are correct.  It is false and rigged - the Fed IS the long bond market right now, but the law of diminishing returns has and is going to keep knocking them over the head, and eventually if they start booking losses it will be a massively humiliating thing for the backstop of the country's "money" to be bleeding monetary losses of its own.  I will be laughing hysterically at them at this point, and I encourage all to join in.  This is why there is actually huge internal division among the Fed chiefs right now, if you read through their releases.  Many of them know this.  It's only a matter of time.

To the point of hyperinflation, it's not going to happen in the US.  The fed and treasury have hog-tied themselves.  They cannot instantly pay back long bonds - they must pay back as scheduled.  To pay back early means to default, and the market rejects any more debt issuance and very quickly the dollar itself.  Hyperinflation generally only lasts a couple of years, sometimes less.  It is impossible to hyperinflate and have the economy still using the same currency 30 years later, when a huge amount of debt needs to be paid off, including social security (20+ years out).  And as soon as an attempt were made to "pay off" an existing long-bond with very-debased money, the market would drop like a stone and people would just stop using dollars because that would be a de facto default.

If you look at monetary history, it is inevitable that all fiat currencies die.  This happened to the Nubians, the Romans, the British, all previous attempts in the US, and a good 15+ other instances in the 20th century alone (with cases occurring several thousand years ago, because human nature does not change, no matter how we would like to think it "evolves").  Hoever, there is a key difference between eras of true hyperinflation, and eras of high inflation of 20-50%.  The instances of hyperinflation were all instances where the political class, the State, had full control over the issue of money and credit.  Wiemer, Zimbabwe, Confederate Dollars, etc, were all instances where the government actually had control of the WHOLE money apparatus.  This is because it is the nature of the state to promise/mortgage itself out dozens of times more than it could ever afford to, and to "save face" with debasement.  The political class makes the farmers and anyone holding tangible assets win out, wipes out the banking system and eventually destroys the currency.

In instances of high inflation, it is always when a central bank or banking system is in control of the issue of what is always the largest portion of any currency in existence - promises to pay it:  Debt.  Central banks allow for high inflation to benefit the banking system at the expense of savers.  Hyperinflation doesn't occur when the government must use the banks as a proxy for its promises, only when the government itself attempts to fund them and controls the entire mechanism for doing so.  We don't have to worry about Weimer here, because the banks are beholden to the fed and the fed to the banks, with the state as a third-party benefactor (having its bonds as underlying collateral for all other credit).  We just have to worry about 20-50% annual inflation for a few years, which is still gutwrenching for an economy and easily enough to destroy a generation's worth of productive advancement, if not more. 

This all hangs on the caveat that the Fed's box of magic tricks could actually spur credit expansion with all those new, shiny reserves just sitting there waiting to explode out into the system and blow up the credit markets.

Considering that the velocity of money in USD terms has collapsed from over 25 to 5 in the past decade, I'm just not seeing it.  Ergo, cash is a safe bet for a little while, because even if the economy goes to absolute crap and credit starts to expand, everything we currently do in the brick and mortar world is currently denominated and settled in legal tender, and people calling in debts will create tremendous demand for physical cash notes, for a little while.  After that, it's look out below....

Interesting. I hadn't thought about that. Reading Wikipedia's account of hyperinflation in Weimar Germany, it sounds awfully similar to our situation today though:


Also, it doesn't mention that the Reichsbank were controlled by the government. It seems like the German central bank acted just as our central banks do today: buying up government debt to keep the rates low.
In 1937 - when Hitler came to power - however, the central bank was put under direct control of the Nazi government.

It sounds like one of those things that are very hard to stop once they begin. I mean, central banks really don't have any room to raise interest rates to 15% like they did in the 80's. 15% interest on a $15 trillion debt just isn't an option.

http://www.garynorth.com/public/images/7010a.gif

That's the key right there.  If the central bank conjoins with the government at the hip and swaps its fascist partner (stops caring about the banks), you might see something like this happen.

Until then, the Fed is pretty constrained - they essentially just swap assets around - promises to pay that are deemed more valuable for promises that are worth less.  Worthless mortgage securities for fresh AAA rated treasuries on deposit with full reserve capability.  But it all hinges on the ability of credit to continuously expand - the fractional reserve banking system cannot survive a contraction in total money + credit.  It dies.  Depositors begin to demand deposits to pay off debts, because debts become more expensive as monetary velocity decreases and total credit contracts (less promises to pay against the same physical goods and services).

The velocity of money has dropped by over 80% since the year 2000.  For every $1.00 of GDP added last quarter, it took over $2.00 in new debt.  Government spending is accounted for in total GDP, even though it is an economic distortion and malinvestment with several costs: a) the cost of removing scarce resources from the economy in the first place, b) the cost of what might have been done with those resources (cure for disease, new paradigm shifting technology, etc), and c) the cost to finally re-allocate them when the malinvestment can no longer be sustained (the bubble bursts).

This is the real estate bubble but fifty times the size.  Total M2 moneys supply for the world's reserve currency sits at about 10 trillion.  Currency and credit derivatives are over 700 trillion.  All it would take is a mere 10% in counterparty claims or defaults and the entire monetary system of the planet blows up.   

As such, I do and have always recommended having a good store of your savings in precious metals.  Precious metals are not "investments" - an investment is something that you expect to generate you a yield.  Precious metals are cash savings in another form.  Treating them this way is the only smart way to hold them.

Since nobody else is biting, i will. What do you know that everyone else is missing?

Everybody did already bite.  I was referring to the still-playing-out theft of over $5 million worth of bitcoins by one Pirateat40. 

The effects are still yet to be seen.

I believe we're gonna witness several pirate40-like cases in the near future. The reason is that while (a man's greediness) > (a man's naiveness) there always will be someone to organize a scam and get money out of it... Bitcoins or Dollars - it's irrelevant. Plus I believe his liquidation is already en route. Otherwise BC should have topped near $20+ now...

Annnnnnnnd, its gone

https://bitcointalk.org/index.php?topic=105818.0

I'd love to hear your thoughts on the european debt crisis as it obviously defines your current open positions.

Also between the two currencies, cash (lets say USD) and bitcoin. What is your opinion on holding either given they hold totally different properties in terms of inflation / deflation.

As per the EU dept crisis, its nothing more than a political game. Whoever believes otherwise, either he's blind or misinformed. From the point that Mrs Merkel, Mr Draghi or anyone, really; can make a decision to end the crisis (fiat money have the ''ability'' to be fabricated out of thin air) they simply don't do it because they are on a very precise and well sketched schedule. Germans simply don't want ANYONE to mess with their banks, because of the fact that they don't want to reveal their *REAL* debt.

I have wrote elsewhere about the future of BC. From the point of view of its existence, its meant to be a strong player; actually the strongest. Non inflatable, it's doomed to end the exchange difference between $/Eur/GBP and BC to an outrageous limit. I expect the BCs, after the upcoming ASICs invasion, to rise. If you search my posts I've written why. Of course, I may be wrong...

Where do you trade LEAPS options? I have a hard time even finding quotes for them.

I've recently pondered the idea of doing some leveraged gold speculation, and it seems to me that options are the way to go. The longest I can find them (for GLD (http://finance.yahoo.com/q/op?s=GLD&m=2014-01)) is Jan-14 though, I would really like to get something more long term than that. One can get around 5x leverage using a GLD Jan 2014 140.000 call option, but this isn't at the money until GLD rises about 2.3%. Getting around 10x leverage with the same option but with a strike price of 175.000 means GLD would have to rise 12.4% just to be at the money. I'm bullish on gold, but more than 12% in 16 months I'm not confident it can achieve. I wouldn't be that surprised if it did though.

Are you familiar with other ways of leveraged gold trading that might be more advantageous than options? Have you considered leveraged trading in precious metals yourself?

too late, the bearded one has spoken

...and said what was already predicted. MORE fiat money... YEEAAAHH!!! :S