Bitcoin is failing. It's doing more or less what I've been predicting for the past 2 months. It'll hover at around $10 for a while longer as it is a psychological barrier to break before it goes under it.
Reasons for this failure are numerous but one of the primary reasons is that the process of mining bitcoins IS NOT productive work. Neither is the role of securing the network. Both these (in a society) would be referred to as 'socially necessary functions', but they are not productive. There is a critical distinction to be made here. I hope the members of this forum can recognize it, since I believe this is the primary flaw of the system and if resolved would really give BitcoinII the incredible potential that we all hoped it would have had the first go around. Yet, the more time we spend not recognizing this failure and stamping our feet in disagreement and denial isn't helpful and will only prolong the day before progress can be made.
The currency must fundamentally represent useful work. I'm curious if there would be a possible way to use certificates and this technology to have the 'coins' or units of value store useful work rather than simply meet all the other requirements of what a currency must do. Because, Bitcoin does, quite successfully, do nearly everything else that is required of it as a currency.
This is the strength of the fractional reserve system or better yet simply debt-issued central bank credit. Take Putin's Russia or Korea or many other nations whom have issued debt into the system to provide for useful work. Our banking system is presently totally out of control due to lack of regulation and a central bank that works for Wall St., but in the past and in other parts of the world a bank operated as a means to grow the economy by directing credit to useful enterprises. If we choose not to have a deflationary monetary standard (and there is a lack of reasons as to why we should, but this is a point of another discussion) the money must originate from somewhere. In the present Bitcoin system it is issued simply for providing the necessary service of securing the network, yet that isn't of itself enough (or at all fair) to constitute it being worth anything. Debt issued currency, used properly in the Hamiltonian, Friedrich List style of dirigistic high-value high-capital intensity work creates wealth. Such is how many nations have rocketed themselves to 1st world status in the course of a few generations. But in the Bitcoin system the primary recipient of the currency isn't providing useful work, they function similarly like a bank - charged with the task of securing the system.
If there would be someway of 'securitizing' useful and productive work that was performed and could be exchanged through the infrastructure in a Bitcoin like fashion that would be something that could shake the system to its core.
Of course this would probably be harder than just becoming politically active, reading a few dozen history books, a few dozen economic books and then coming to the correct solutions regarding our problems. But if there are people here that would like to direct their energy in this direction (Bitcoin, or Bitcoin-like solutions) then this is how to make the system actually functional.
Ever wonder why Gavin's visit to the CIA came to naught? Why it completely dropped off the radar of the political establishment? I think they had a few analysts figure out what it was and where it was going and then realized that it would implode on its own and simply went about their business.
What IS the difference between a necessary function and productive work? Do you mean productive as in producing something new as opposed to maintaining what exists?
There is no way to automate such a process if this is what you mean so we either need a comitee of the entire bitcoin community which would get bogged down as most rule by comittee does, or a central authority which is anethema to what alot of people believe bitcoin is about.
Of course If I am wrong about what you mean by productive work you can ignore all that bit.