There's no need for a new chain. Simply change the default unit to be millibits, nanobits, etc... (as I saw suggested elsewhere).

Increase the precision in the specifications so that the network can support increased precision.

This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor in the U.S. There is, however, no Federal statute that requires private businesses, persons, or organizations to accept it as payment for goods and/or services.[17]

The perfect thing for bitcoins is virtual goods.If my wife could buy a sheep on farmville using them I would fear for the health of my bitcoin balance lol.

My argument is based on government force, yes, in the form of legal tender laws.  This is because although bitcoins are a free market now, if they become anywhere near popular enough to make a dent in the dollar, there will be government force in play.  My initial claim was that plucking out dollars from the economy and dropping in bitcoins would be just as inflation-riddled as today.  This is because the government force which causes dollars to be inflationary is still in play under a bitcoin system - I.e. nothing about using bitcoins eliminates the government's ability to make legal tender laws for fake-bitcoin notes (digital or otherwise).  To claim that bitcoins, if widely used, would remain a free market is naive - the government, any government, will not give up its power without a fight.


I did not say that you would not be able to take BTC for the house.  I said that if Q-BTC (Fake backless Bitcoin-denominated loans) were legal tender, then if the buyer offered you Q-BTC and you refused, the courts would give him the house anyway.  If he chose to give you BTC, then that's fine - take them and be happy he's not ripping you off with backless currency.  However, if he offered you Q-BTC, you couldn't reject it because its not real BTC.

As as "who could prove...," I can only assume that you're talking about taxation.  That very "proving" is what IRS Auditors are for....that's another discussion altogether.

I am not changing terms.  Federal Reserve Notes == Balance with Federal Reserve Bank of the US.  Equally worthless, because each is backed by nothing. 

Also, Federal Reserve Notes == Dollars, whether those dollars are printed, or not.  The granting of Federal Reserve Loans (and thus the inflation of the value of Federal Reserve Notes) by "magicking" loans is no different in its effect on the economy from printing money.  Do you think that with the Fed gives Fannie and Freddie one trillion dollars, they actually print these dollars?  No.  The dollars may or may not be printed later on, if there becomes a need for them to be stuffed in someone's pocket.  Until someone demands them as wallet-filler, though, they exist only in the form of balances in accounts.  Most dollars are *never* requested as cash, and therefore, never printed.  They're circulated by means of checks, credit and debit cards, Automated Clearing House transfers, wires, Paypal payments, etc.  As they can move goods in this "unprinted" form, they "exist," but are backed by nothing other than a loan by the Fed or another bank.  Thus, they are bank balances and nothing more, whether printed or not.

Babylon,
Credit Cards are not the same thing as Credit, not by a long shot.  Credit cards are a particular credit that is issued in a particular way by a company, and can be rejected.  However, it can only be rejected for other forms of the same backless credit. "Credit," in our discussion refers to any liquidity (purchasing power) that is not backed by items of real value.  Say, taking out a mortgage and getting "Federal Reserve Certificates" for it.  The value of the mortgage is the credit - the unit of payment is still dollars, not Visa or MasterCard.  If I take out a mortgage, a banker keys a number into a spreadsheet, and suddenly that much more money (not backed by dollars) is put into flow in the economy.  If people didn't accept credit, that's not akin rejecting Visa, its akin to rejecting Federal Reserve Notes, which we call dollars colloquially.  I can pick up dollars for a portion of this spreadsheet-mortgage, and go and spend those dollars.  Those dollars are still credit.  Even though they have nothing to do with a credit card or debit card, they're representation of value issued by a bank (the Federal Reserve) with no real value. 

Now, this does raise Bitcoiner's (and others') point that with no Federal Reserve the backless credit system would be very limited.  They advocate that it would be difficult to create such a "lender of last resort" with bitcoins.  I disagree.  It used to be (Google pictures of these) that the US Treasury printed bills that were Gold-Certificates or Silver-Certificates.  You could go to any bank, at any time, hand them a twenty and demand an ounce of gold.  (Which now costs $1,200, or 600x what it did when we were on the gold standard.  Inflation.)  This was not credit, it was commodity-backed by something with rarity, just as bitcoins have rarity.  However, now, your dollars are "Federal Reserve Note, Legal Tender" and are not redeemable for anything of value.  However, if someone offers you these Notes and you do not accept (because they're not backed, and thus worthless), the transaction is null and void.  Why did we switch to these notes?  Because the government couldn't keep enough gold on hand to back the economy.

Fast forward ten years.  The government pulls out dollars and puts in bitcoins because bitcoins are so darn neat.  (or whatever reason).  Because Congressmen don't read laws, they never read Satoshi's specification for the system, and they assume they can mint all they want.  For those who don't have computers in their places of business, they issue Bitcoin-Redeemable-Certificates.  You can walk into any bank, give them 1BTC, and get 1 of these Certificates, or, you can give them 1 of these certificates and get 1BTC.

The above scenario would be called the "Bitcoin Standard."  It is identical to the Gold Standard scenario above.  Dollars (bitcoin certificates) are backed by gold (bitcoins) held by the government.  You can hand over a twenty (certificate) and get an ounce of gold (bitcoin).

However, April 15th rolls around, and facing a new fiscal year the Congress issues an order to print more Gold Certificates so that they can have a deficit for this year's budget.  At some point, they realize they don't have enough gold to back all the dollars for the budget.  So, immediately, they invoke legal tender laws.  A bank, the Federal Reserve, is given the authority to issue a loan to the government.  This loan is paid out in "Federal Reserve Notes," because its not backed by any gold, so they can't call it a "Gold Certificate."  These notes are "credit," as they are based on a loan and nothing else.  Obviously, they're worthless.  However, a law is passed - known as a legal tender law - which states, essentially - "I know, American People, that you guys are all using Gold Certificates.  However, if someone offers you a $1 Federal Reserve Note, you MUST treat it as if it were a $1 Gold Certificate.  You can't go get gold for it, so you essentially lose $1 in gold, but you either accept the Federal Reserve Note or you get nothing at all.  To make sure people treat these identically, Gold Certificates can no longer be traded with us for gold."   People resist and refuse to accept Federal Reserve Notes, because they're worthless.  They don't get what they're owed at all, and so eventually everyone caves.  Federal Reserve Notes are treated identically to Gold Certificates, and no one is able to get their gold. Anyone who has gold sits on it and makes a mint because people like shiny metal.

Identically with bitcoins, Congress realizes that they can't print more Bitcoins, and so they can't spend whatever they want.  They create a bank that issues "Quasi-Bitcoin" loans for which no real bitcoins exist.  These loans are issued by any organization that gets a charter to type them into existence.  A law is passed: "Anyone who has our Bitcoin Certificates can no longer get Bitcoins from the government in exchange.  Also, if someone offers you a Quasi-Bitcoin, you must accept it, or you get nothing."  Now, the government can get all the Q-BTC it wants to spend whatever it dreams.  People with real Bitcoin Certificates are screwed, and everyone must accept *credit*.  People with real bitcoins?  Well, humanity has this fetish for shiny yellow metal - it doesn't have the same fetish for cryptographically-signed kilobytes - so bitcoins go the way of the dodo, or at best become pretty much what they are right now - a novelty for those who understand them.

Notice, there were not credit cards or checks involved in the above scenario.  The credit is the Federal Reserve Note, which you must accept, not Federal Reserve Notes managed by a particular company (Visa) which you can reject.  Even if you reject the Visa-managed notes, though, you have no option but to accept Notes from another source, all of which are equally backless.

What about the middle man in this scenario?.Someone pays me bitcoins at the market rate and I purchase the goods/services for them.I then sell the bitcoins so that I can buy more products for more customers(cash flow), and my customer can buy products with bitcoins without needing an account or paying transaction fees.I wouldn't intentionally make a loss as I dont consider myself a charity .This seems like everyone wins to me at this stage where you need to purchase products with fiat currency.My costs are covered by the company selling the products and this means everyone wins and no one is disadvantaged.(The only one who loses is the tax man if I dont declare the income from the sale)

The ultimate goal is to not need to transfer bitcoins to cash at all but to transfer it to real money such as gold and silver....

I sold a gift card and listed the price in dollars worth of bitcoins at the market price, but only while the Bitcoin Market was open. I didn't consider the transaction complete until I had received the bitcoins, sold the bitcoins on the Bitcoin Market and received payment for my bitcoins on the Bitcoin Market. It made the transaction a bit slower, but overall worked quite well because I got exactly the dollar amount I wanted and the buyer didn't have to pay a single bitcoin more than the dollar amount. If the buyer hadn't believed something about my sale on the Bitcoin Market, I think the administrator there might have vouched that I had really sold a certain amount of bitcoins at a certain rate at a certain time. That's not really the Bitcoin Market admin's job, but I think he probably doesn't mind going a bit out of his way for reliable traders during extenuating circumstances.

Perhaps you are right given you have received digital product (coin) however how would you declare this to the IRS as a service provider?

Would it be an exchange of services for product? Your digital coins (a digital product) for my services? At what rate would that be declared at for loss or gain? My services sell for say $19.99, you gave me 50 BTC, would that be taxed at $19.99 or declared at the rate of BTC to the USD as it is a form of currency you accept, where is the rate for BTC officially? If going on a transactional basis you have to look at the complications there, my rate is not going to be the same as another service provider's rate.

If I took 200 transactions each with different BTC payments you have to consider (especially if price varies) which is more value for loss and gain purposes and which incurs the tax if any applicable and without an established rate officially recognized, it can incur numerous taxation issues. You do an exchange at $1 per 2 BTC, I do one at $1 per $1 BTC, for the IRS this disparity moves that your rate and mine are purely individual however if I say the rate is $0.25 per 1 BTC then I say I sold it at a loss as that would come to about $5 so then I have a loss of $14.99 I can declare. Repeat that for 200 transactions, do you think the IRS would accept that or would they go for the throat and try to establish a rate more closer to my price as barter income at a loss is a full writeoff.

Of course they could scapegoat to say it's barter hence an equal trade but then where is the tax for them? You traded something for X and you got something at the same value of X, no tax gain, no tax loss... just a lot more paperwork for you and them to go through.

Isn't tax law fun?

I see:
Current Lowest Buy Price   0.1224
Current Highest Sell Price   0.05882

Meaning someone out there is wanting to sell BTC for 0.1224
And someone else is wanting to buy them for 0.05882

so if your buy price is below 0.05882 it wont show up until all the ones are sold at the better price. (better from the perspective of the seller)

LOL

Though, I'm not sure how an exchange can be "bankrupted". Any trade should always be zero-sum or profitable for an exchange; only the individual players should possibly lose out. That is, unless the exchange itself is doing their own trades and not simply acting as a mediator.

Bitcoins are digital bits, hence a digital good, when you give that to someone in exchange for something like other currencies, you are creating a sale and thus a taxable event in the eyes of the IRS, that money you have received is a payment for your digital good and thus taxable income.

Bitcoins as digital bits however provided to someone else as payment (eg. for a service or good), that could be construed as barter income to the person whom received payment however it would be a very hard stretch that would require a centrally stated and official value in a manner which has a comparable exchange rate.

Right now Bitcoin has the advantage here, there is no central authority however, if pressed, I'm sure any government could attach an intrinsic exchange rate to the currency based on the established design of there only being X possible coins in circulation which would have two advantages for Bitcoin legitimacy, one, it establishes a daily reporting rate requirement for the exchange of BTC to the currency of that government (eg. XX BTC to YY USD), two, it would make Bitcoin a legitimately recognized form of payment in the eyes of that government and force acceptance as by setting that rate and required reporting means that it becomes an officially recognized form of currency in that country and, three, it would mean that Bitcoin would have to be developed to be used in portable and mobile formats, perhaps best done through BTC bank support wherein you have a debit card loaded with BTC which can pay in both BTC and native currency with that same BTC based on the exchange rate.

To you as a service or goods provider accepting BTC now, you are simply giving away these services or goods and at this time, based on current tax law, means you get to declare them as a loss until the government can find a means of establishing a rate of exchange which starts a whole new level for BTC.

For the record I am not a lawyer, nor tax professional and thus the views I state are only based upon my personal experience and should not be taken into practice without consulting a proper tax attorney or accountant.