Bitcoin Forum

List of things required for a true 'quant' currency:

1) No relationship to anything in the real world either physically or economically.
2) Inner workings can only be understood by programmer types or crypto-geeks
3) You can trade it over computers and never have to integrate into society or meet people.
4) Can be traded at super high frequency by computer programmes.
5) Entire currency can be understood in purely mathematical and statistical terms.
6) Currency can be created by solving mathematical equations quickly.

What Bitcoin appears to be is a giant 'quant fund' exercise which is bound to crash as it has no fundamental value in the long run.

Bitcoin is totally doomed as the majority of those involved have no idea about really basic economics or why currencies exist.

I will predict the future of Bitcoin:

It will turn into a 'bot-war' of geeks trying to perform ultra-fast quant computer trading and eventually the market will dry out as real traders become bored with it as its volatility reaches absurd levels. The entire concept of trade is exchange of different physical commodities - it is why people used to risk sailing half way around the world to bring back goods.

Bitcoin is a bit like Pogs as in they are very exciting to own and trade when your 10 years old - then you grow up and realise they are pointless and have no value.

http://en.wikipedia.org/wiki/Pogs (http://en.wikipedia.org/wiki/Pogs)

Duration until Bitcoin tanks: About 3 months.

Ignore at your own peril.

  

Bitcoins have value. They are a currency (because people are willing to trade goods/services for them) that provide unique, valuable features:

- they are a way to instantly send money across the world with very low fees <- this is valuable
- they are decentralized; no authority can freeze or seize your assets <- this is valuable
- they are pseudo-anonymous; contrary to traditional financial systems <- this is valuable

You can't argue against the above. These features alone give them at least some value... and I would argue a LOT of value.

OP - you say most Bitcoiners don't understand economics, and then you go on to suggest that increased trading will produce more volatile markets? 

And you post a link to pogs... which are a commodity unlimited in supply, indivisible, non-fungible, and non-durable. A silly comparison to Bitcoins.

Maybe your own economics and understanding of money needs a bit of work?

The myth with Bitcoin is that since a finite amount of coins are available this somehow benefits the consumer or empowers people.

All Bitcoin will lead to is a deflationary economy in which asset prices continuously drop killing investment. I actually suggest you go and learn some economics instead of further math or programming.

The comparison to Pogs was clearly psychological.

- they are a way to instantly send money across the world with very low fees - Already exists without risk of Bitcoin exchange rate fluctuations.
- they are decentralized; no authority can freeze or seize your assets - Also applied to gold
- they are pseudo-anonymous; contrary to traditional financial systems - Also applies to credit cards

This whole Bitcoin 'project' is a purely quant phenomena. Its inhabited by mathematicians and physicists who appear to be slightly detached from the economic realities of this world.

About 30% of the world have internet access. Internet currency. Great idea.



 

Pick up your hand bag and clear off. Hundreds of millions of people don't even have access to banks. Bitcoin serves a purpose for some people.

Lol nice one.

Miss all the important points and pick up on the last.

Quant boy.

This should be in Speculation :)

Wait, Bitcoin "leads to deflationary economy where prices drop" or "dies in 3 months"? You have to pick only one here.

- Name it. And if you mean bank transfer, don't be so delusional. It takes several days, costs upward from 50 bucks, not possible in some countries, and generally not feasible for any shopping. Name something that is at least close to btc in speed, cost, and lack of regulation.
- Right, but gold is hardly liquid, robbery-prone, and non-transferable.
- Credit cards are pseudo-anonymous? You got to be kidding here right? Or you are making it too easy. Calling the system which was invented to log and associate all financial transactions to an individual "anonymous" is pretty silly.

Sorry, you are completely wrong on all your "important" points.

Asset prices do drop in a deflationary economy. If you are attempting to challenge this assertion please explain.

It does not cost me '50 bucks' to transfer money across borders. It costs the current spread quoted in the FX markets which most traders would consider worth paying to avoid Bitcoins volatility.

Why are guys all so against people 'logging' your financial transactions. Some proof of payment tends to be quite useful in the real world. Its why we have invented things called receipts.

Real World Scenario:

1) I buy a book of Amazon for 10 Bitcoins.
2) I send Amazon 10 Bitcoins.
3) Book never turns up.
4) I ask Amazon where my book is.
5) Amazon ask me to prove I paid for the book then they will send it.
6) I can't because transactions are anonymous.
7) Entire system fails as no legal recourse exists. Welcome to reality.
 
You can see here that the entire premise of Bitcoin being anonymous has just been totally destroyed in 7 points by someone without a Phd in Computer Science or even A-levels. It is open to systemic fraud and confidence will never materialise.

Its not surprising that the entire Bitcoin 'project' was thought up by a cryptographer in a lab somewhere.

 

Amazon will and should sign their payment address. You now have your proof.

in this hypothetical situation when you buy a book of Amazon, Amazon can provide you a receipt with unique bitcoin address and delivery address, signed by its private key. then you will be able to prove that the payment has been sent to that address, but the book has not been delivered (and it doesn't matter who ordered the book, paid for it or was going to receive it)

'in this hypothetical situation when you buy a book of Amazon, Amazon can provide you a receipt with unique bitcoin address and delivery address, signed by its private key. then you will be able to prove that the payment has been sent to that address, but the book has not been delivered (and it doesn't matter who ordered the book, paid for it or was going to receive it)'

Very technically clever but instantly the entire system then fails to be 'anonymous' if Amazon refuse to accept the key is correct. Also just to further bring you into reality - you would have to provide an address for them to send the book to.

You guys are living in an entirely theoretical world. Wake up.

GPG signing works only in theory?

Try to understand that when two people trade they both require proof of the transaction so as to have legal rights if either side does not pay. Its why we invented banks.

Bitcoin does not provide this very basic requirement.

I'm not entering into a discussion about passing keys or codes around as it is what you would call a 'recursive' argument. At some point proof will have to be provided of the transaction in both directions if either party fails to pay.
  

Banks were invented to help a handful of people control most of world's resources. Banks acting as third parties in transactions aren't the only thing banks do. Wake up Neo

Nutter!

I would humbly disagree with you here. The public key is made available to the world so amazon cannot deny that the key is is wrong since they will put it in global circulation. The maths and technicalities are complicated, granted, but thats why its equivilant is forensics. But true, anonymity cannot be guaranteed with Bitcoin, especially when you buy stuff in the real world, its just very difficut, not impossible. You can go through the delivery company check their records to see if it had been delivered.

Q: Who is going to make Amazon pay you?
Ans: A court which requires evidence of transactions.

1)
Quick google search suggests that "pogs" indeed have value, that can be trivially expressed in U.S. Dollars.

Another quick search suggests that even   weirder things, such as age-riddled postage stamps, do have value (and fairly exuberant one at that)

2)
The fact that OP later tries to make an argument regarding "deflationary" economics suggests that the OP has some pretty weird assumptions about the nature and eventual extent of "bitcoin economy" and generally does not seem to realize that something that is essentially infinitely divisible can not operate in a manner entirely similar to "usual"  deflationary currencies (which were quite limited in their division ability), which is what makes this experiment in quasi-deflationary system interesting (also, in my humble opinion, considering bitcoin to be a currency is somewhat inaccurate).

Conclusion:
OP has presented no novel arguments and has fairly bizarre assumptions both as to "target" extent of "bitcoin economy" and value in general. OP has presented a fallacious argument that extends the behavior of typical "deflationary" currencies to something that, by its nature, can be neither really "deflationary" nor really "inflationary". OP also apparently believes that Bitcoin transactions are, by their default state, anonymous, which is simply factually incorrect (OP can educate himself using Block Explorer, which can be found via powers of Google).

OP's motives for posting his "warning" on this particular forum are completely indecipherable to me (I am, of course, operating under assumption that OP is sincere in his claims)

OP is thus best ignored.

Thank you, and have a nice and very safe day.

Goodbye.

Op is a troll

Q: Who is going to make Amazon pay you?
Ans: A court which requires evidence of transactions.

[/quote]

As I said, it's a matter of technical forensics. If you had the signed address and you have the address you sent the BTC, you can check this on the blockchain with tge timestamp, compare to the timestamp on the receipt to have a convincing case. It's not impossible to find the truth on the blockchain.

@ Gabi

Well, that is  definitely a very plausible proposal :)

I have a keen interest in bitcoins but remain skeptical of the immense value people attribute to them and the real world usefulness of bitcoins, but even I don't agree with some of the points the OP has written.

I do agree that bitcoins are a trader's dream.  The trade and value can be manipulated at will.  The market is apparently free of the usual laws regarding trading as no government takes bitcoins seriously.  This is both a positive and a negative.  There's nothing stopping well executed fraud.  Just try explaining to your local police department that someone took your bitcoins and see how far that gets you.

We are seeing a race between bots on MtGox.  While the frequent volatility excites traders and allows easy profits to be picked off by the savvy, it makes bitcoins completely unsuitable for serious trade.  Imagine a merchant changing their price by 10% almost every day.

Single point of failure?  Sure.  It's MtGox.  By volume it's ten times larger than the next larger exchange.  Hack or close down MtGox and converting bitcoins to currencies becomes very difficult.  MtGox is in a position to be the market maker.  While it was dead in June some other exchanges closed down as there were no price signals available.  Could other exchanges open or take over?  Sure.  But again you're back to one or a few points of failure.  Does closing down exchanges close down bitcoin?  Of course not.  But it makes bitcoins simply not very useful.

Will bitcoin be dead in 3 months?  I have a hard time believing that.

Rewriting trader prices automatically is simple.

Now, if you keep the bitcoins you receive for goods and services instead of converting them to something else instantly, a price drop would screw you over. Yes, your prices will adjust in less than a second. The bitcoins in your wallet won't.

Auto-selling the coins you receive at best possible price is also doable, but then a price rise will make you very, very sore (despite the fact that from strictly pragmatic point of view, you get exactly as much USD for your goods and services as you wanted)

Best option would be a bot that manages the salesmen's accounts adjusting their prices and trading their coins in accordance with market behavior and "risk settings" the salesmen set when creating their accounts with bot service (so that bot can play "riskier" with the account holders that are willing to allow somebody's bot to carry out more risky, but potentially more lucrative, operations with their accounts)

I wonder how hard would such rent-a-bot service be to create.

Doesn't make much sense unless money supply doesn't decrease. Which is not the case. If it's killing investment, why are the asset prices dropping? Bitcoin is not a closed system, people can just switch to any other currency, this increases asset prices.


Learning economics is overrated. You learn life, and that gives you insight in economics. Most people around me are 35+ economists with nice degrees who work in banking and academia. Bankers like the idea of Bitcoin and academicians don't. Go figure... ;)

I'd probably disagree with wobber here, but wouldn't call him a nutter either. Banks were invented to provide a function that is obviously needed. On the other hand, modern finance industry is all about resource allocation. And a handful of people control it.


It's very hard to define tanking. If you can do that, I want to open a bet so that everyone can stand behind their words.

If it can't be defined, we can do it like this... X months later (3-12), I'll give you USD 50 (10 bitcoins at the current price) and you give me 10 BTC (50 USD at the current price), regardless of the parity. :)

I believe I have pointed out a very important fact:

The anonymous nature of Bitcoin removes any recourse to law when trades fall through unless you are going to remove its anonymous nature.

'And a handful of people control it.'

Yes the banks shareholders - you can go and buy a share if you want and have a vote.

What a novel idea! Surely nobody in history has ever been smart enough to think up such a scheme?

LOL. What a complete financial ignoramus you are.

http://en.wikipedia.org/wiki/Long-Term_Capital_Management (http://en.wikipedia.org/wiki/Long-Term_Capital_Management)

By the way - it crashed (in 1998).

Technically true, but practically not so simple.  Large corporations are controlled by just a few people or person equivalent entities regardless of the number of shareholders.  Have a look at the registry of any large business: it's dominated by managed funds and investment houses.  They essentially vote as a single person owning 5, 10, 15% or whatever of the business.

I own quite a few shares and sometimes vote down extremely generous pay rises for the CEO and board.  The votes are never successful as institutional investors own well over half the stock and always vote Yes.  On the one occasion where a pay rise vote was 51%+ No, the board exercised its right to ignore the vote!

And how exactly is Bitcoin going to prevent this happening?

It's not.  I never said it was.  Somebody else claimed it might ;)

Same with cash. You can remove its anonymous nature using external methods, Bitcoin doesn't prevent that. It even provides a transparent transaction history, which is easy to audit. It just provides anonymity if you need it.

Plus, I don't think we have data to support that not having anonymity provides more efficiency. You think humanity needs baby sitting. I don't. They are normative opinions, not facts. If all humanity thinks they don't need it, they won't. Otherwise they will. It's impossible to objectively measure. Maybe you can demonstrate that humans biologically need an outside threat of violence to behave morally. But I digress...


I'm not convinced. I believe in shareholder pressure. I also believe in consumer pressure. I don't believe that they work in the current state of affairs. What Cluster2k said.


There is no central bank controlling the money supply. That's the extent Bitcoin is helpful.

No one is claiming that Bitcoin can prevent such patterns in general. Bitcoin banks will be controlled by a handful of people as well. :-)

That's asset prices in bitcoin
'killing investment'?   Is bitcoin to die in 3 months or are you predicting the complete replacement of all other currencies by bitcoin?

Are you really using the hypothetical situation of bitcoin being the only currency in order to argue against it?

So far we have determined:

1) Bitcoins 'anonymous' nature is useless as to contest payment evidence of transaction is required.
2) Bitcoin does not prevent monopoly by institutional investors.

'Plus, I don't think we have data to support that not having anonymity provides more efficiency.'

Well it does provide efficiency as it tends to be quite a good incentive not to commit crime. Who is going to pay somebody when their is no guarantee that what they have bought will arrive?
 

Bitcoin will still be deflationary when other currencies exist.

0/10 trolling

bitcoin is not anonymous

1) True. Anonymity increases efficiency only if we assume that there are transactions that would not happen without it (which is the case). Being anonymous means you have to trust the vendor, since you can't prove what you are entitled to if they don't deliver. It's always a trade off.

2) True, but in proper context. Bitcoin supply will never be controlled by a central authority. I believe that this makes it more resistant to monopolization, whatever that might mean (maybe you need to clarify). It will have to be widespread for this to happen though.


I don't think you get the contradiction here. Bitcoin is inflationary when it's dying. It is deflationary when it's flourishing. So it needs to flourish to die?

The *weak anonymity* of bitcoin is an optional attribute - it may or may not be present in a particular bitcoin exchange mechanism.  
For many bitcoiners it's *not a useful feature for day to day trade*...   So what!?

It is however very good to have the ability to donate to/support causes which one might not want to publicly associate with.

Another situation where the pseudonymity is appreciated is in transfer of value between individuals who know each other.
The 'anonymity' here is not between the participating parties - but simply in that there is no intermediate party to have any record linking their identities to the addresses in the transaction.

The obvious case where anonymity is preferred by the participants is of course the black market for illicit goods/services.
Whether something is 'black market' or not will vary depending on the jurisdictions involved - so one party may be breaking laws whilst the other is not.
That the parties in such a transaction don't enjoy legal recourse against each other is hardly of concern.

That bitcoin is something of an enabler for such transactions in the first place is a legitimate concern, but it's ameliorated somewhat by the fact that Bitcoin's actual level of traceability lies somewhere between that of cash and credit cards.
If the crime is so heinous that a State would throw enough resources to follow the blockchain and subpoena for the right server records - then it's effectively trackable.

And your point is..  ?? 
What *precisely* is your argument about why this is a bad thing?   

Can you hook me up with your dealer? Whatever you are smoking, it's totally awesome.


Given massive difference in complexities, function and markets involved, inadequate analogy is inadequate.

LOL, what a bad troll you are.

Incidentally, could someone remind me if trolling is against forum rules ?  ;D

I started the thread. You have already said goodbye to us all once and failed to clear off.

Please honour your word.

I am afraid that the only authority the act of starting a thread gives you is authority to close it, so you have neither ability to set up rules of your own, nor the ability to demand another agent's departure.

Also, why do you refer to yourself in plural ? Do you believe yourself to be some kind of royalty ?

Sorry but if mtgox goes out the trading just moves to some other exchange, there's plenty. Of course, price will drop if there is a significant loss of trust, but if mtgox just says "we're closing, take your money" then there will be absolutely no problem - tradehill or something else would fill the void instantly. Converting bitcoin to currencies is trivial now without ever logging to mtgox.

I think he/she is just unfamiliar with Bitcoin, and is guilty of transcribing arguments from other scenarios.

To bemoan the deflationary nature of Bitcoin due to 'killing investment' is an inappropriate piece of transcription.
A traditional argument against a deflationary currency is that investment will be hindered due to reluctance to spend money which will be worth more in future.

For the argument that investment may stall to make any sense, Bitcoin would have to be so widespread that most of an economy's capital was tied up in it so that little other investment capital was available. (or so insanely deflationary that no investment other than bitcoin was attractive)
If the majority of the capital is still in other currencies, then from an investment perspective Bitcoin can also be considered just another asset like gold or property.

In the case where bitcoin is the dominant currency; the extent to which bitcoin is deflating would indeed act to subtract from the rate of return on investments.
I submit that Bitcoin's deflation rate will rise if the economy is vibrant (requiring more bitcoin transactions) - thus putting the brakes on borrowing and investment, but the Bitcoin deflation rate will lower if the economy slows  - making investments more attractive.

This is of course an experiment that hasn't been run with a highly divisible currency with a fixed issuance rate - but it doesn't seem helpful to have someone simultaneously arguing bitcoin will be 'dead in 3 months' whilst criticizing it for some flaw that they perceive in an alternate universe where Bitcoin has taken over the world.

You link to http://blockexplorer.com/

oh wow, i just read some of these posts

general.crackdown, you're kinda embarrassing yourself.

Here, https://en.bitcoin.it/wiki/Main_Page

If you have any questions let me know  8)

Notice how you suggest 3 mutually exclusive solutions. For example: you cannot instantly (in minutes) send gold across the world to an anonymous peer, e-gold is dead, preloaded debit cards are freezable and not decentralized, etc.

Bitcoin satisfies all 3 at once, and conveniently. That's what makes it powerful & valuable. Think of it as digital gold.

Dwolla is a possible major competitor.  Fast and very low fee ($0.25).  Based on US dollars so more stable.

How can you say this? Dwolla doesn't compare at all to Bitcoin.

- Dwolla's fee is 100x higher than a typical Bitcoin fee of 0.0005 BTC
- Dwolla is only available to 4% of the world's population (US only), compared to Bitcoin available to 30% of the world population (2 billion people online)
- Dwolla accounts can be seized and frozen, Bitcoin is immune to this
- Dwolla can reverse transfers received by merchants (see TradeHill case), whereas a Bitcoin txfer confirmed by 6 blocks pretty much guarantees it is irreversible
- Dwolla users forfeit all anonymity by having to provide a proof of ID, at least Bitcoin make pseudo-anonymity possible

This.

Because bitcoin has a practically fixed supply, prices can only drop if the economy is growing. so (price) deflation, by definition, implies a growing economy. If no one invests in the bitcoin economy, prices (in bitcoins) will go up. The only problems here are economic fallacies.

Lol..
Dwolla is US based and the World in not US :)
On the contrary, bitcoin is worldwide (an advantage)

All these things are true for all hard currencies. Well, for 1) I don't know think I know what you mean by that.

But 3) and 4) also happens to other currencies. See High Frequency Trading. Some governments think about stopping this, but they can't really do so. The only way to stop it would be some kind of fee (tax), which makes it impossible to do so. Well, Bitcoin has transaction fees. This probably makes it more resistant against something like these things. Just another nice benefit of Bitcoin. :)

Disagree. I'm the only one not embarrassing himself.

All trading systems need to be backed up by recourse to law if an individual is wronged in a transaction. Its all very well the entire world being able to see your hash code address but you would have to identify yourself in order to take legal action. The only advantage in anonymous transactions is if your trying to do something illegal.

This 'currency' is a Quant dream. Do any of you know what a Quant is?

Just to inform you all Bitcoin isn't some sort of singularity in history. Hayek theorised about free market banking and currencies years ago and it never caught on - for the same reasons Bitcoin won't work.

A question I would like you all to consider is:

If having a limited amount of currency is so obviously advantageous why don't the Federal Reserve (or any other central bank) stop engaging in open market operations?

Maybe because that would not be advantageous to them? ;)

When you say 'them' who exactly do you mean?

'Them' is quite ranging.

Yes I know some points are similar to conventional currencies. You need to fulfil them all to make a quant geek currency such as Bitcoin.

You're either a dummy or a troll.  I'm going with the latter. For a 'new poster' you're certainly passionate and (somewhat) informed about Bitcoin. So we already know you came here to argue.  But this is an old discussion.

If it's indeed the former, I'm afraid I can't help you.

Good luck!

Haha, trying to corner people?

In the scope of this discussion, it's not necessary to prove that Federal Reserve is malevolent (some people might think that, but it's not a requisite for the argument against Bitcoin's doom in 3 months). On the other hand, your question assumes the contrary. So you have to prove that it's benevolent for your question to make sense.

So why are people buying gold, if having a limit isn't advantageous? Maybe FR notes and Bitcoins serve different purposes.

On the buying from amazon:
Surly amazon would just have a public address which they declare is theirs. Then when you pay by bitcoins on amazon, after generating a new sending address, you tell amazon from what address you will be sending them payment, they associate that address with your account and send you an email as following:
Dear Customer,
This email confirms that payment will be send from: (sending address) to (amazons receiving address)
product:
date:
order number:
Amazon.

You send them the payment, the transaction can publicly be seen on http://blockexplorer.com and there we go, combined with the email there is proof and you are still anonymous because that sending address would only be used for amazon orders.

I think it would be more like that:

"Pay Button" with an URL like bitcoin://<address for THIS transaction>/<price>

Then a popup comes up, where you can enter a password for your wallet and then you can verify your payment. Amazon knows what you are paying, because the address has been generated for this transaction.

Well, maybe it will be based or HTML, hay if Bitcoins succeeds it could even make its way into HTML. By that the HTTPS certificate also proves that you are really paying Amazon and not a phisher or something.

Of course this doesn't have to be an URI. Thanks to HTML5 we have tons of way to implement this. Think about Microdata! All this is pretty much possible right now. We just have to implement it. Shouldn't be too hard. Will probably do so later.

Also we need more libraries for Bitcoin. So every developer out there can think about and implement nifty things.

neptop is right, "From" address is not applicable for Bitcoin in the ordinary use case. You can achieve it but it's not very convenient. That's why a unique address is generated on the merchant side for each transaction in order to match trades to payments.