Bitcoin Forum

http://www.soundmoneyproject.org/?p=7368

see 27:10

More like advocated something like it, it wasn't an outright endorsement or anything like that unfortunately.

Nice.  I like this guy.  I had seen once his speech about private coins and it was very enlightning:

http://www.youtube.com/watch?v=-gn55fTRXZw

Shouldn't this thread be in the 'press' subforum, though?

Hm yea, he mentions bitcoin once and it sounds like 'hey they tried but failed...'

I wonder what he means in specific by bitcoin having it's problems, since it does exactly as he describes 20 seconds later...

I very much disagree.  He likes the idea of a monetary policy beeing handled by an unstoppable computer.  I guess he would like the bitcoin software to be modified to do so.  This is totally a positive attitude towards bitcoin, imho.

If we believe in monetary freedom, then we should hope that more people adopt this idea of modifying bitcoin to comply to their ideas regarding monetary policy.  Everyone would just pick the money they agree with and the market find a price for them.

you can't really expect an academic economist to come right out and say we need to shift to Bitcoin. 

everything he says, IMO, comes right up to that point and stops probably as a personal hedging mechanism.  i think whats stopping him is that it might be that he believes we need a computer controlled monetary system that introduces a fixed amount of currency on a regular basis w/o interference.

i think he still has a ways to go before fully understanding Bitcoin as he says some things about it that are bizarre or incorrect.  but he does understand that it is democratic money not controlled by a special interest group and that it could solve our present problems with fiat money in an unbiased way.

Man it irks me when I see this phrase being issued.  >:(

Why? 

democratic -> pertaining to or characterized by the principle of political or social equality for all: democratic treatment.

Note that it isn't capitalized and shouldn't be confused with a certain American political party.
 

Yes that, I can't stand it. We are not equal and pretending or trying to force it on one another only leads to huge problems and actually even greater inequality and I can't stand the fallacious connotation of it being something we should strive for.

Lol

No one is being forced to use Bitcoin. The democracy is built into the system, for those who choose to participate.

Currency of the people, by the people, for the people.  :)

To me he sounded supportive of one of Bitcoin's themes, which is to automate the inflation according to a fixed set of rules and take it out of the hands of mere humans.

However, I'm not sure if Selgin fully accepts that the concepts of "central control" and "guaranteed scarcity" are simply irreconcilable. Computerising the FED would just be a fancy gimmick if banks could still exert the same power by controlling lending rates. The entire hierarchy would have to be automated -- so much for his wishful thinking about reducing regulations for his banking buddies. It boils down to 2 rational options: have the whole system nationalised and centrally controlled, or have it decentralised and uncontrollable.

I'm pretty sure he didn't mean that.  To him the issuing of currency would be defined by an algorithm depending on the spendings (assuming a computer can know these data).  The FED would have no power on it once it is launched:  he insists on the idea of throwing the key a way, so it is not ambiguous at all.

I doubt there is anyway for a computer to measure economics activities though, since money transfers could easily be fake (with no real economic exchange behind) by anyone willing to increase the money supply.  But this is an other matter.

To me a computer should be economicly blind:  its only job should be to provide money at a predefined rate, whatever the economic situation is.  Selgin doesn't agree with that, but he likes the idea of a monetary system being "human-proof".

Democracy does not equal equality, although existing states don't seem to comprehend the difference. Democracy is a way of making decisions by selecting a subset of entities or individuals from the society to make decisions for the entire society. Without is, for every decision we would need to have a referendum, which is impracticable.  The decision to choose the leaders with a unweighted majority vote of the population is our current (and imo totally flawed) implementation of democracy. Weighing towards the opinion of the more intelligent and more contributing members of society will increase the overall quality of the decisions.

Thankfully Bitcoin is not build on equality. If you mine (contribute) more your say is more heavily weighted. This is great, I am waiting for nation states to cease to exist because I don't think they will ever adopt this policy.

Each Mhash is weighted equally. So if you contribute 10Mhash of effort, you are 10 times more likely to get the reward than someone who only contributes 1Mhash. There is no loading of the dice. Perhaps that's what people meant by equality?

At least its not the type of equality that is usually present in nation states. The vote of a inbred hillbilly who never paid taxes in his life has equal weight as an educated upstanding member of society who pays loads of taxes in the highest bracket.

"Political scientists get the same one vote as some Arkansas inbred" - NOFX - The idiots have taken over

I think you are right.
I also think that Dr. Selgin understands bitcoin very well, not so much from this video as he doesn't go into its details, but from antother one I saw before. He understands how decentralized governing by an algorithm works: In the other video, he said that people accept only money (coins) that adhere to their own standard. So that if you change the algorithm (eg. altering block rewards), you created another currency that is only viable if others change their algorithm in the same way.

Now what I think he would like, judging from this video, is a currercy that is controlled in the same way as bitcoin (decentralized) but with a different algorithm. First he discredits a money supply where the inflation is predetermined. He prefers an algorithm that tracks GDP. Unfortunately he doesn't give any insights as how this should work technically. Here are my ideas:

Personally I think there are two main difficulties in implementing this. The first is the control algorithm. We cannot control the desired state directly (GDP), let alone independently. There are many other states that we may or may not want to control. (Economics is too complex. I think the whole point is that if we focus on only one state - GDP - and control it properly everything else will be fine).
One of the other states is the money supply. In Bitcoin we have an input that directly controls that state: Block rewards. But it can only increase it.
So we need a model for the economy that tells us how the states and inputs relate, and then find a control law that governs the desired state by controlling the inputs. One of the questions is if this system is controllable at all, we may need more inputs.
One thing to make the system more controllable is if we also can invent a way that destroys bitcoins when a block is created. And does anyone else have an idea about which other inputs might be used?

The second problem I foresee is that the state measurement must be automatic. Currently the GDP is yearly published by government agencies.  But the algorithm must be able to determine the GDP without the interference of humans. Selgin explicitly states that a system like this brings only stability if there is absolutely no human in the loop that can act unexpectedly. Also, this measurement must be accurately performed often: Delays in control systems make them harder to stabilize. A yearly publication is probably too slow. Maybe monthly publications/measurements are fine, maybe this is possible, in fact I don't know how often this is currently done.

And, as somebody else mentioned, we must be very careful to measure the actual state, not a proxy (like the sum of all transactions in stead of only those that represent economic activity).

Any other ideas?

I sounds to me like he wants the currency to remain stable in price, so if you have X units that can buy Y units of a basket of goods then in 20 years that same X units will buy that same Y units of the basket. That would make planning much simpler, for businesses and retirement. But it can't work. There's no way any central authority can possibly know enough to manage the money supply, no matter how much computer power it has.

The only way to manage a money supply is to not manage it at all - that is, to let the free market manage it via the interactions and choices of everyone.

+1

There is no such thing as a free market and never will be. You can only mitigate the circumstances that restrict trade. That is a matter of politics.

Well if he's so smart, why doesn't he invent a digital currency that does what he wants? It can't be that hard, just define the system very precisely, and there's your skeleton code -- half way there! As it stands, he's just being a smooth-talking critic in front of a camera.


All these massive requirements are built on top of the urban legend that a currency must grow (and shrink) to keep pace with an ill-defined concept of economic growth. What if a revolutionary new product or industry is created that transforms the economic landscape, thus changing the very definition of economic growth?

Coincidentally I emailed a couple of times with Selgin about Bitcoin, and I made exactly the same argument, that adjusting money supply based on rules like the GDP targeting is unlikely to work because it depends on complex empirical data. So he's aware of the objection.

Can you elaborate on that? I don't get what you mean.

i don't think Selgin understands that what makes Bitcoin popular, at least to me, is the open source democratic nature of the algorithm.  ppl are essentially voting for the type of money supply being offered to them and the fact that Satoshi has designed a fixed supply system is what makes it popular.  the beauty of the system is that anyone is free to fork the chain and introduce any system they want; such as a fixed 2% inflation.  this has already been tried and has failed spectacularly. 

Selgin advocates writing a computer algorithm and then "throwing away the key".  i don't think he understands how biased this approach is.  first of all, whoever writes the program will have an incentive to slant the properties of that algorithm towards their own special interests.  it would be like how the insurance industry has wrote Obamacare and thus it favors their interests.  and their is no such thing as "throwing away the key" in that scenario.  the authors will always be tempted to have a backdoor.

as already said, if he believes such an inflationary money supply is needed, and if he feels a derivative of Bitcoin can be used to achieve it, then he should write such an algorithm.  i believe it would fail miserably b/c i think the ppl have wised up to how the bankers are debasing our currency.

Keynesian economists seem to think that the money supply shouldn't just be inflated according to a blind formula without any regard for the size of the economy. As a crude example, if the economy grows by 10%, the money supply should (according to them) be increased as well so that the average price of a basket of goods (CPI) doesn't go down. However, there are a lot of problems which Keynesians seem to brush off as irrelevant. For example, who decides what goods should be eligible for CPI statistics? Similarly, who decides what criteria are allowed for determining the growth of the economy? What if cars (or some other important product group) go out of fashion and start skewing CPI results?

Hence, staying in control of all the information seems very complicated and labour-intensive, and for what? The holy grail of making sure that pizza/milk/shoe prices always stay the same? Prices keep creeping up forever anyway.

By the way, this is what Selgin writes in Less Than Zero (1997) (http://"http://mises.org/books/less_than_zero_selgin.pdf"):
(emphasis added)

i think its more than just writing a computer program and pretending to throw the key away.

its making the computer program enforce the rule of the majority of participants who will respond to the program in a favorable way if it doles out justice in monetary policy.  by allowing participants to contribute their own computing power to the network is the means of voting and making the network secure enough for a financial system.

cypherdoc is right, you need a network behind the rules embedded in the code to make sure those do not change or if they do that they have unanimous consent.

I'm not sure what Selgin is talking about is even possible to invent.

Guys, of course I agree with you that it's not that simple. I'm just pointing out that Selgin is not only aware that the money supply (well, in his case, since he's a fractional reservist, the monetary base) must be immune to political pressure, like the Austrians usually are. He also, unlike many other Austrians, sees that a synthetic source for this immunity can work just as well, if not better, than a naturally occurring source. This is a big step forward, as plenty of other Austrians I emailed with have some mental block against this. Well at least Hoppe is somewhere in the middle, he indirectly admitted (if I got that right) that an invented commodity is hypothetically acceptable.

i think Selgin believes "someone" (who undoubtedly will have a vested interest) can set up a desktop computer, program it for 2% inflation, hardcode the software so that the algorithm can't be changed, and then tie the global financial system to it.  

he doesn't realize that what makes Bitcoin work is the sheer size of the distributed network (which protects it) and open source nature (democracy at work) of the no inflation algorithm that ppl have voted to use and support with their money, time, effort, ingenuity, software, and hardware.

UGH. No, no, no and no!  >:(

The only thing at work is voluntary collaboration. There's no majority ruling over a minority and I'm baffled how people somehow keep seeing this. Isn't it true that even if 99% of people switch to a protocol with different rules than the rules in Bitcoin, Bitcoin still exists for the 1% and still has the same rules?!

This is NOT democracy at work.

I believe Satoshi's white paper referred to the hashing algorithm as analogous to casting votes, so I guess that's one similarity. And some democracies allow a minority government. E.g.: New Zealand has had a few of those.

But anyway, I don't think it's that important to put a label on it. What if someone came along and said "wow! Bitcoin is great, it's got elements of Marxism and Islam, and Tao te Ching all rolled into one!"? I'd just roll with it.

You are right, just saying the words makes no difference and I should just ignore it even if it's not correct.

But with the word democracy I just can't help myself. It's one of those words that's responsible for so much evil and suffering in world and yet has an immensely positive image which is something that makes me want to throw up every single time I run across it and I'll be damn if I have the chance to object if I'm not going to use it whenever it's being applied to something wonderful and absolutely not evil and despicable unlike a democracy.

^^ I share this sentiment

What you seem to dislike most about what you see as "democracy" is what is called the tyranny of the majority.
It is usually guarded against, among other measures, by enshrining the rights of individuals and minority groups in
things like constitutions and charters of rights etc. ( Getting elected officials to pay attention to such inconvenient
documents is another matter that we shouldn't blame on the concept of democracy itself. )
 
The tyranny of the majority is something, it seems, that the wealthy few complain about the most, when it looks
like they may have a little of their overwhelming power reigned in slightly.

Don't confuse the concept of democracy with what is claimed to be a shining example of it.  
For example if places like the U.S. and Canada had true democracies, where the majority of its
citizens had a fair say in the setting of policy, then marijuana would be legal. A lot of things
would be different.

What would you see as a better system to have instead of a constitutional democracy?
A benevolent monarch like one might find in fairy tales?
Or perhaps you are an anarchist...  no danger of anything like mob rule with that. ;)

Remember that a key prerequisite to having a good democracy is an informed populace.
In an anarchistic system that would be even more important. And in case you haven't
noticed a lot more money has been going into the military than things like schools... at least
since Eisenhower gave that warning.  With the rise of the neocons the dumbing down of
our Western nations has been taken to new levels.
Is that because of democracy or because of the lack of it?  

Of course no system will be perfect which involves people trying to get along with each other...
what's that famous quote... democracy is the worst form of government, except all the others
that have been tried.

+1

Please everyone: stop saying bitcoin is democratic.  It is not.

Damn straight. It's a false dichotomy of course, but if I had to choose I'd prefer the Arkansas inbred to be ruling over me than the political scientist.

I think that "cypherdoc" is pretty dumb, but we already know that. Selgin on the other hand is actually educated and doesn't come off as a dipshit every time he speaks, so I'm pretty sure he is aware that the "computer" from Friedman's original idea is just a tongue-in-cheek metaphor for legislation with an algorithm to determine the money supply.

Actually, in "Quasi commodity money", Selgin argues that inelastic supply can be achieved in different ways than legislating it. As a non-Bitcoin example he mentions printing money and then destroying the plates.

Actually, the "computer" fed is not an inelastic supply.
Actually, any change to government-sponsored money is going to require legislation.

Non-sequitur.

Depends on what you mean by "change". If it's too crappy (e.g. hyperinflation or banking system collapses), it may stop being used irrespective of legislative changes. Does that count or not?

no one listens to you so why do you keep talking?

i'm using the term "democratic" in its purest sense in that Bitcoin does not allow any one group to steal from another thru the inflation tax.  how difficult is that to understand?

Because what you describe is certainly not democratic. What Bitcoin actually is is: honest, free of coercion, voluntary, sovereign and regulated by market consumers, none of which is synonymous with democratic.

democratic [dem-uh-krat-ik]     Origin http://dictionary.reference.com/browse/democratic
dem·o·crat·ic   [dem-uh-krat-ik]
adjective
1. pertaining to or of the nature of democracy or a democracy.
2. pertaining to or characterized by the principle of political or social equality for all: democratic treatment.
3. advocating or upholding democracy.
4. (initial capital letter) Politics.
a. of, pertaining to, or characteristic of the Democratic party.
b. of, pertaining to, or belonging to the Democratic-Republican party.

dem·o·crat·ic  (dm-krtk) http://www.thefreedictionary.com/democratic
adj.
1. Of, characterized by, or advocating democracy: democratic government; a democratic union.
2. Of or for the people in general; popular: a democratic movement; democratic art forms.
3. Believing in or practicing social equality: "a proper democratic scorn for bloated dukes and lords" (George du Maurier).
4. Democratic Of, relating to, or characteristic of the Democratic Party.


And before you make a post saying Bitcoin is democratic because of socio-economic or political equality of all it's users I really hope you realize that actually is not the case. Bitcoin users much like people in general aren't equal, they aren't even equally bound by Bitcoin's rules since those mining hold the power to change their rule enforcement to favor one group over the other.

The only thing the people equally have is the freedom to start using Bitcoin, that's it and there's nothing democratic about that.

Lets try a little etymology:
Democracy, from the Greek demokratia "popular government," from demos "common people," + kratos "rule, strength"

Bitcoin is very much democratic.    :P

Yeah? Bitcoin is/has a government?  ::)

I'm trying really hard to restrain myself from using some nasty adjectives for your argument.  >:(

this whole definition is self referencing except for the part about social equality which i agree with.

what evidence to you have that miners have changed the rules to benefit themselves?  i don't see it.

and as long as Bitcoin doesn't get debased casual users won't be abused by others using Bitcoin such as miners.

Miners have the ability to do so while casual users do not. Where in these facts do you see your eulogized democratic equality is my question..?

i asked you for an example of when miners have "abused" this supposed advantage?  don't have one?  then forget your argument.

in fact a great example of when they were forced to capitulate was when Deepbit eventually had to support Gavin's BIP 16 due to the majority opinion.

again, if miners abused their power, casual users would cease to use Bitcoin resulting in tanking of the entire system to the miners loss.

Do we need to get into definitions of "govern" as well.   ::)

A few synonyms should suffice:
control, sway, influence, conduct, supervise, superintend.

Bitcoin is supervised by the common people.
Who are these "common people" allowed into that position?
Whoever wants to participate...
i.e. it is democratic. 

what is referred to as a "frozen brick" fiat system - at least once the supply freezes in 2030.  George is a very passionate instructor and my friends and I feel we received excellent training at UGA. An honest money should either hold its purchasing power or (preferably) increase in value over time.

+1. The "government" in this particular example is the set of rules and concepts that binds together the Bitcoin ecosystem. As you know, anyone that does not follow the rules gets kicked out, but if a majority of the network change a rule, that is what starts getting accepted.

Wrong. If majority starts enforcing a new rule, it's no longer bitcoin. It does not matter how few people use the original code, they can still use it in their own fork. There is no government, there's just a tool that has rules that you either use and follow or you don't, there are no buts.

I'm sorry to squash your delusions, but what I am telling you is HOW THE SYSTEM ALREADY WORKS. Remember P2SH? Remember how NOT implementing it caused blocks to be rejected? That is because a MAJORITY of the miners changed their code to make it happen, and those that didn't lost out.

P2SH tightened the rules of what would be accepted.  You are right that a majority can enforce this.  If a majority wanted to loosen the rules, the more restrictive ruleset could continue on as a separate fork since the new transactions would be rejected by those miners who decided not to upgrade.

Precisely.

Forking is an unwanted byproduct that results in the ability to double-spend. This is a good thing in what way?

Making mere statements doesn't make a thing a thing. So before you ask silly questions make sure you got the facts right. Fact is forking isn't what you say it is.

Actually it is, because coins can be spent on both sides of a fork, unless the protocol change is so radical that it invalidates the coins themselves. And in that case, there is no reason to fork it, it would be simpler to start over on another blockchain.

Actually you are right. But you are wrong asking the question "This is good in what way?"

It's irrelevant whether or not it's good, the original question was whether or not Bitcoin is or has a government and the ability to fork it, what ever this would actually mean for the value of the system, proves it does not. If I want to use Bitcoin, I can, however I cannot force others to use my version of Bitcoin even if I modify the original Bitcoin and have enough rule enforcement power which is something a government could do.

why are u getting so "hung up" on the definitions of what ppl are trying to say?  such as "democracy" or "government"?

such as, i know exactly what rjk is trying to say when he says the governing rules of Bitcoin are the source code and algorithm which govern the Bitcoin community and network.

i also am convinced that democratic principles apply to Bitcoin.  miners can try to subvert the system to their benefit if they want but if it violates the wants or desires of the majority of users, they will simply leave.  no users, no network, no miners.  period.

users are not "forced" to use Bitcoin.  they have a choice unlike USD's here in the US which have to be used for a variety of purposes, taxes being one.

Because people and their delusions are responsible for most of bad outcomes in the world and I'm doing my damn best to avoid delusions being perpetuated in Bitcoin.

What bitcoin is: Honest, strict, free of coercion, voluntary, regulated by market consumers (a free market), sovereign, without entitlement of equality between users ect.

What bitcoin isn't: democratic, a government, being governed by people, promoting equality of any kind

Good job.    ;D

Look... I can edit your posts so they say something completely different too.

But can you read my edits to determine what point they are trying to get across?

Many of the words and concepts hazek uses to describe bitcoin are synonyms for "democratic". 
 

That is exactly what I'm trying to dispute and disagree with, do I need to paste dictionary definitions again?

those definitions were worthless as i've already said.  self referencing.

@Portnoy:
Can you please point to an existing democracy that can by described by even one of these terms?

Precisely my point.

Oh so that's your big point?  Because a good real world example doesn't exist that nullifies the concept?    lol 

We usually use words that describe what is to describe what is and not what isn't.

well you don't.

huh?

I can point to many. I will only choose one to make the point: My girlfriend's book club.
 
Do you and hazek think that "democratic" is a term that should only refer to the political governance of nation states?   lol

If the book club has a ruler(s) it can't be described by any of the adjectives I listed. And to answer your question: of course not.

It has no ruler. No central authority. It is democratic like bitcoin.