Btc purchases should be a few percentages cheaper due to lower processing costs. So: Why Bitcoin? Imagine saving 3% off from every deal you make from Bitcoin affiliated stores. Yes - that is correct, you pay 3% less than when paying with your credit card. An average consumer spends (insert correct amount) X USD every year on online shopping, by using Bitcoin you save X USD each year, money that you can spend on your loved ones, home improvement, or paying off that credit card debt.

This message is intended for "sheeple" wherever they may be, not rational, critical thinking humans. (sheeple are more abundant)

Having looked at the Directive again, I do not know what qualifies as "funds"; could Btc be funds which the issuer receives and serves as the basis of the stored monetary value? I seriously doubt that Btc can qualify as "funds", however I sent an e-mail to the legal department of EU asking for the definition/scope of "funds".

2. "electronic money" means electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions as defined in point 5 of Article 4 of Directive 2007/64/EC, and which is accepted by a natural or legal person other than the electronic money issuer;

If it does qualify, there would be no unsurmountable legal hinderance because the funds could always be redeemable.

Services PLC (the name of the money issuer):

Issues 1000 EuroBit (Eurobit being the name of the electronic money)
A customer purchases 1000 EuroBit for 1000 Btc

At any point of time a customer can redeem Btc for EuroBit, and since the money is issued/redeemed at par value, the risk/opportunity of devaluation/appreciation rests with the customer - the same as if actual Btc were held.

A "slight" problem is that the Directive stipulates that any electronic money issuer must have 350.000 Euro of initial capital, about half a million USD.

I actually find this article offensive; the whole argument of a picking a currency to use as a global reserve uses false premises, and the argument that any currency could be decoupled from an economy makes no sense whatsoever, and the final argument that the example of Bitcoin shows that decoupling currency from an economy does not make it any more stable is just plain riddiculous - the only comparison the hack on Mtgox could claim is when predators speculate on currencies and lower the price many times below it's actual value.

The value of gold is relative to the scarcity/abundancy of it and difficulty/ease of mining it. The whole conception of gold being a "hard asset" is flawed, although the flawed conception is not apparent either in theory or practice today. From the 16th century and onwards, gold primarily facilitated trade. Adam Smith showed that mercantile nations, which hoarded gold instead of freely circulating gold for trade pruposes, restricted trade. The object of political economy thus became to increase exports and restrict foreign goods for home consumption, which increased the gold reserves.

Regarding issuing paper money to facilitate trade, Smith and David Ricardo and others argued that, a paper currency which falls below the value of gold and silver does not sink the value of those metals; they exchange for an equal amount of goods as when paper money was of equal value.

i.e.:

1 oz gold = 1000 USD; 1 oz gold = 100 hours labour; 10 USD = 1 hours labour
1 oz gold = 1200 USD; 1 oz gold = 100 hours labour; 12 USD = 1 hours labour

However, with the decoupling of gold from USD, gold is no longer a facilitator of trade, but instead becomes a goods that falls or rises in value in comparison with USD. If the gold standard was returned macroeconomic stability would be enhanced (well, at least if the US closed its borders, but for the sake of the argument I exclude foreign trade).

The traditional explanation of inflation is when the amount of money put into circulation exceeds the amount of new goods/services in circulation. With a gold standard, inflation is restricted, or almost not possible. However, if government contracts debt of say 200 USD, and the creditor wishes to withdraw the gold, the gold reserve is depleted. The more debt that government contracts, the more the gold reserve is depleted, which was the cause of going of the gold standard.

Now to the title of the article: Bitcoins: Does an Internet Currency Mean the Doom of the Dollar

It could. As the amount of Bitcoins is known a priori, and can be calculated to minute detail at any given moment, Bitcoin could certainly replace dollars, and also replace gold. In fact, I believe it would be better than gold. All other commodities and services would simply adjust, more often lowering in value than increasing, relative to the amount of Bitcoins. The problem with cycles, depression and prosperity, stems largely from hoarding/releasing gold, issuing/contracting USD (through many means), which is hopelessly obfuscated in neo-liberal economics.

Well, actually there are a number of other things I am lacking: I have no programming experience whatsoever, my comprehension of security is updating AVG and not opening any funny mail files. However, the op of this thread has opened my mind to an alternative to an exchange, and some kind of paypal service may be simpler to manage in compliance with the law. Anyway, I am looking forward to receiving information from you.

Cheers!

Have I missed something - is there proof that 250k Btc was stolen during the hack against Mtgox? I know somebody suggested that the amount of Btc that Mtgox should have had was substantially more than 424k, but that was the last I heard.

If by bitcoin-to-bitcoin transcation you mean two indivduals and not a "payment serice provider" or exchange/or any kind of "paypal" service, then you are correct.

I am not sure how applicable the "Apple Stockholm Syndrome" is to Bitcoins, but boy is the term applicable in its own right. 10 +

Actually, I sent an e-mail today to the Swedish "Financial Institute" (rough translation) asking which licenses are required to open an exchange within the remits of the law. Any answer that I recieve will very likely be of help when applying it to other services. The problem with a "paypal" service (or any service as I see it) is that it does not fit under any clear definition. I am absolutely positive it will be viewed as an electronic money, and that US regulations have provisions that describe and/or relate to the functions and mechanisms of Bitcoin. The largest hurlde is likely to be the fact that no-one at all "issues" Bitcoins, or that all "miners" issue Bitcoins. The issuer is subject to the most stringent regulations, so of course it is not possible to comply with such regulations if every "miner" must comply. However, there may be some way to define an "issuance" that could be in accordance with the law. Maybe if the "paypal" service (having it perform services that subject it to bank regualtions would be very unnecessary - capital requirements/all kinds of regulations) receives "bitcoins" but actually exchanges it into some other "money" which it issues and transfers that to businesses - just some wild speculation without aforethought as to a possible way around the "issuer" issue.

Thank you for the translation. I have been able to do some rudimentary research thanks to the translation. It appears to be that the German legislation is subsequent to EU legislation, and as such is applicable in the whole of the EU, although Germany have apparently opted to adopt more stringent rules than required; it is not relative to Bitcoin per se, although I am absolutely positive that when the legislative or judicial branch consider Bitcoin, it will view it as being an electronic currency due to the fact that it does perform functions of electronic money; i.e. you can purchase goods/services with bitcoins. So I believe it is, by extension, relevant to Bitcoins. Or to put it in another view; when there exists very specific regulation regarding electronic payment, will the same authorities not subject Bitcoins to legislation if Bitcoins become used in a wider manner than today?

Directive 2005/60/EC (money laundering and terrorist financing) applies as follows:


Germany is applying Article 5 and adopting more stringent regulations. However, any country in the EU could adopt more stringent regulations, and it is not obvious why Germany would adopt more stringent regulations and, thereby perhaps hamper the very large car sales branch, if other nations were not implementing such adoptions.

Regarding e-money; EU's legislative view on electronic money is set out in the Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 (on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending). This specifically states that electronic money must be redeemable by the issuer.

However, regulations pertaining to “Paysafecard” are subsequent to the Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market; which states:


I have not yet fully comprehended this Directive, although as this Directive pertains to “Paysafecard”, and there is a limit of EUR 30 of which the scope of the Directive does not apply, I am under the impression that the German regulation is applying this Directive, maybe also in accordance with Article 8 of the money laundering act, which would thus require require customer identification.

The Bitcoin bank you are proposing would has valid and useable functions. Setting aside technical problems and trust issues, the main problem is legality. Business owners would not accept payment in Bitcoins if it were outside the law. This is also the biggest problem for Bitcoin to become more widely used in society. Only a very limited amount of people would be interested in switching their VISA/Mastercard etc. for Bitcoin payment if it was not 100% above water. Until your proposal works within the remits of the law, I do not think it will be a viable business. However, if it can comply with the law, I have no doubt that investors would be interested, as the market potential is large.

Hi Sukrim, I would very much appreciate if you would translate the article; as you say these google translations only allow readers to grasp the information contained rahter than understand it.

EDIT: ONLY THIS PARAGRAPH IS DIFFICULT TO UNDERSTAND

"With "e-cash" payment systems such as the EU-developed system of research funds are paysafecard to buy digital goods as intended. This credit can be purchased at a retail outlet, which paid for the Internet if the retailer accepts Paysafe. In future, point of sale such as dealers take over the customer's identification and hold for a possible audit. Unlike the cash deposit to accounts of third parties, which from 1000 € (previously € 15,000) are subject to reporting, there is no minimum for e-money limit. If it would, one could no longer be paid anonymously on the Internet. In addition to the aforementioned fee anonymizers this applies, for example, users who use the paysafecard in the Sony Playstation Network, and therefore the least affected by the recent data losses were."

Due to the massive funds involved in drugs, a lot of corruption occurs in connection with drugs. Gary Webb exposed a CIA operation which sold cocaine from a South American guerilla to LA gang members which in turn exploded the crack epidemic. Recently, planes involved in CIA transports of suspected "terrorists" to and from secret detention centres have been proved to transport cocaine. Afghan heorin, the amount of corruption is immense, Karzai's brother is widely accepted to be a very major actor in that trade. In the 80ies, much of the construction in Miami would not have taken place in absence of cocaine trade.

Of course corruption takes place in many other spheres; in Italy the Comorra control waste management and "dispose" of the waste in "unorthodox" manners, and in some areas cancer prevalence has increased by 30%. The control could not occur without collusion with parts of the authorities. The Comorra have even invested some money in the resurrection of the World Trade Centre.

EDIT: And then there is Mexico too.

The crossed out line is due to no actual evidence; I just checked.

"Vienna-based UNODC Executive Director Antonio Maria Costa said in an interview released by Austrian weekly Profil that drug money often became the only available capital when the crisis spiralled out of control last year.

"In many instances, drug money is currently the only liquid investment capital," Costa was quoted as saying by Profil. "In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor.""

http://www.reuters.com/article/2009/01/25/financial-un-drugs-idUSLP65079620090125

"Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were "the only liquid investment capital" available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result."

http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims

I disagree with the premise that Bitcoins "represents a shift in the way that we organise ourselves". The internet has allowed many new channels in which people can organise themselves, and leveraged new power to internet users. However, there is no "shift"; some Bitcoin users share the ideology of a "money" that is not controlled by the financial elite, whereas some want to make money. Neither of these concepts are new, so the reasons for organising have not changed. Nor has the way people organise themselves changed, i.e. spreading the word, opening up forums were discussions can be held etc. So the only thing that has changed is the mechanism of the "money" and the venue were interested parties enter into dialogue and exchange "money".

As to important men making decisions in our best interests and making rules on how money should be distributed; I cannot remember whether it was Plato or Aristotle who said that laws are enacted once wealth in society is unequally shared, and that the more uneven the share is, the more number of laws are enacted.

Bitcoins can, at best, be a means for executing exchanges of goods and services; the Bible sets rules for society in many spheres of life.

I agree with the first part; faith on my part will only exist when there is an actual economy that works in practice. Before then a number of occurences could happen that would render an actual working economy impossible, of which protocol failure and legal problems (which would target the exchanges) are two occurences that spring to mind. "The abolishment of the Federal Reserve and a return to a gold backed dollar" is a wet dream, but not even in a parallel universe is it a possibility.

I posted a critique of your suggestion that 100 Btc deposited in one bank could be lent and result in 200 Btc deing deposited in banks.


You have not addressed my critique, but instead injected concpets of "central bank money/21 million coins" and a 1000 USD contract. Are you going to address my critique of your sugguestion which is as follows:

"Let us say that: a bank accepts deposits and receive 1000 Btc from various depositors. They give loans, but owing to the fact that they do not have Btc or rather the codes that Btc are made up from, they can never lend more than 1000 Btc. If the bank lends 1000 Btc no depositor can withdraw any Btc; which means that 1000 Btc equals 1000 Btc and not 2000 Btc.

Let us say that the depositors did recieve checks amounting to 900 Btc (100 Btc kept as a reserve). Business A receives a check of the sum 200 Btc. Naturally, Business A wants to withdraw the amount from the bank with immediate effect; business A has many liabilties in USD. If the bank has already lent 1000 Btc 900 Btc it cannot pay out the sum of 200 Btc which the check holder is claiming."

I am saying that there is no possible way in any kind of viable banking operation that fractional reserve could be implemented; and that due to this circumstance, there is no possible way that 100 Btc deposited in a bank account could by any means equal 200 Btc in bank deposits.

Instead of all kinds of speculation regarding how the Flexcoin Bank will operate, can you please enlighten this forum as to:

How the Bitoin will be used/invested?
What safeguards are there against the use/investment being lost?
If Flexcoin bank is hacked and Btc stolen, what would the implications be for depositors?

You introduced the "central bank money/21 million coins" theme, not me, and I am not confused by the concepts. Yes, of course a Btc bank could in theory operate on a fractional reserve basis, but they would be bankrupt within days of writing checks, unless they injected new capital and bought Btc to meet liabilites, making it a very unprofitable business.

Say you sign a contract with me today owing me 1000 Btc, and at the date of maturity, Btc have appreciated in value 25%, the monetary debt value is higher. Of course, if the value decreased the monetary debt value would be lower. No business proprietor would accept a check from a Btc bank which operates on a fractional reserve scheme, rendering it impossible to operate such a bank in practice.

I find this staggering to believe; so a vast amount of people are interested to hand over Bitcoins to an entity of which next to nothing is known, apart from that is says it will pay interest. There is a reason as to why people deposit money in a high street bank instead of with a street vendor who also promises to pay interest on any funds received.

finnthecelt the founder

I posted this question in another thread (http://forum.bitcoin.org/index.php?topic=21615.0;all)

How will flexcoin use the Bitcoins? The FAQ does not give any information on this subject. What safeguards are there against flexcoin making bad investments and being unable to give deposits back? I am not accusing flexcoin of operating any scam - however, further information would be useful to understand how flexcoin operates.