The BTC to USD rates change over the short term and the long term.

For my use case, I presuming people want to hold $10 as 10 BTB for a few days or couple weeks but to be sure they are still worth $10 when they spend them. Just like an anonymous debit card.

I was considering an in country usage case so I may need to consider additional details given creighto's international trade comments. (I'll skip that case for the moment)

Profit comes of course if the BTC savers are correct and BTC increases in value against the dollar. This seems most likely to happen if there is a huge increase in users of the bitcoin ecosystem. If the BTC savers are wrong and BTC declines against the dollar, it likely means that the Ponzi-like story is played out but there is not a sufficient increase in consumers uptake to makeup the difference. If that happens there is going to be a BTC value crash.

The real question is what are the trends likely to be?

If there is a long term up trend in BTC value than holding BTC makes cents. Holding other people's BTC makes even more cents. A sufficient buffer of BTC can smooth out minor price corrections. It also let's me automate a simple BTC cost averaging strategy.

Pitching BTB to potential users can be easier than pitching bitcoin, because you can say, "Its just like paypal or a debit card, but no fees and it's anonymous." I don't have to convince them the fed sucks.  

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If there is a crash, I can tell people I just fell victim to satoshi's Ponzi scheme, just like everyone else. I need a bail out!

So first let me point out that his particular post is not a philosophical statement, or an attempt to change the world. This post is about marketing and business profits. As distasteful as it may seem.

So I noticed an issue during the 10x value jump. One of the merchants I was interested in had not changed their BTC prices and was inadvertently asking a price 10x higher in USD than they were originally asking. Many people are not used to checking exchange rates and repricing their products daily. I personally hate the idea. I even find it annoying when traveling. I just let American express handle it.

There seems to be a very common use case that goes:
1) I give X $10 for 200 BTC
2) I send the 200 BTC to Y for a anonymous service.
3) Y gives XX 200 BTC for ~$10
4) Y buys some tacos from a guy who doesn't care how tenuous USD is because he's just going to spend them too.

So the immediate goal is to sent $10 to someone anonymously.

Now if I convert $10 to BTC, send it, and Y converts it to $11 he's happy and I don't care.
But if he converts it to $9.50 he's going to be a little annoyed. I don't want that to happen because this is not a dual, it's mutual cooperation.

Believe it or not there are lots of people who think like me.

Now, me being me. I don't want to take risk for the cash, so I'd rather create a front end to existing markets and let them take the money changing risk. I just hold virtual BTC and sell virtual BTB. I stay one level removed. (which may or may not be far enough removed.)

I'm not sure it effects your point significantly, but I'm pretty confident I remember Betamax coming before VHS. Other formats came before both but were never successful with consumers.


http://en.wikipedia.org/wiki/Videotape_format_war
http://www.mediacollege.com/video/format/compare/betamax-vhs.html

Suppose I wanted to create a system like bitcoin, but I wanted it to have a value pegged to the dollar. Let's call it bitbuck. By definition, one bitbuck (BTB) would always trade at one USD.

In bitbuck's case "like bitcoin" means that it does all the accounting and verification a la bitcoin. But it DOES NOT generate new coins with each block. Instead, an *int max* account is created in the first block belonging to the "Central BTB Reserve". A centralized service would take care of moving BTB in and out of circulation.

It is easy to see that a central bank could work if it operated in the following fashion.

1. The central bank would sell BTB in exchange for paper federal reserve notes.
2. The central bank would alway deposit the paper in a safe "piggy bank". (100% reserve on-demand access)
3. The central bank would buy BTB on-demand in exchange for the FRN in the piggy bank.

That makes in a simplified version of PayPal. Except one with zero potential for profit. However, that also makes it a money transfer service with all the hassles that come from that.

But the key feature is people understand dollars. Both working for dollars and spending dollars for things priced in dollars. There is no extra "philosophy" to cloud acceptance. There are no exchange rates to check when comparing prices.

So that's obvious and uninteresting, so far. But the real discussion I want to have is:

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What if in the above scenario, you replaced "piggy bank" with a bitcoin wallet.

So to be clear, someone buys a bitbuck and the dollar is used ASAP on one of the existing exchanges to buy the equivalent quantity of bitcoin at market rates. These coins are held in the central banks bitcoin wallet, which is just like any other bitcoin user's wallet. There is no special relationship between the two systems.

The benefit is that any merchant willing to accept bitcoins, automatically takes bitbucks as well. Since they probably already post an equivalent price in USD, they already have bitbuck prices listed.  (There are pricing issues worth discussing.)

There is potential for the central bank to profit in USD if the value of BTC rises over time.
There is a potential for loss if the value of BTC drops.

So in reality the bitbuck system wins by making bitcoin popular and loses if bitcoin fails to gain acceptance. (The risks here are worth discussing. And the likely necessity of a futures market for mitigating the risk.)

I've always thought that but your TOS points are well taken!

I think bitcoin has huge potential as an anonymous speech currency. It could replace the CAPTCHA for those times you want to speak but don't see a need to give sites your personal information.

Or for when you wanted to make donations to speakers you support that prefer to remain anonymous. Think political or religious speech gadflies.

Also, suppose you modified the TOR to support bitcoin, then you could offset the expenses of those running exit nodes, without compromising either party's anonymity. You could simply include a donation transaction when you set up the connection. The receiver can send it to any address they want.

I'm trying to come up with ecosystems where the coins can circulate extensively without being converted back to national currencies after each exchange.

Actually that was part joke and part poke at people who think that because bitcoin is designed to be deflationary in nature that makes it the perfect commodity for saving in.

I think bitcoin has already sowed the seeds of it's own destruction by using a fixed commodity/currency model. Blame John Wanamaker. Americans simply don't haggle anymore so we find rapidly varying prices distasteful. Also naive proponents of fixed currency tend to sound like they are promoting a Ponzi scheme.  They have trouble explaining how bitcoin is better than PayPal without analogies that make user sound like neer-do-wells. None of that helps  bitcoin build creditability.

That being said, bitcoin is the best attempt yet in my mind. None of these complaints are in anyway technical limitations so there is still huge near term potential even "as is".

So, I do have some ideas for you.

You've hit on the need for a bitcoin futures market. Been thinking of coding one of those up myself. It is a much more profitable way to speculate in the currency. We can talk about why it has exceptional potential for the bitcoin community.

I have another idea as well but I'll start a new thread.

Yes, you understand the issues I have with the block list now. :-)

For most people it will be "enough privacy" to just use bitcoin as designed. But if you want to say provocative things and remain anonymous while being hunted that makes things much harder.


The trusted account requires lots of users using it regularly for it to have any effect at all. That makes it akin to a bank and checking account. But an automated one that doesn't log checks. I really need to find that link. If six people use the bank they are all suspect. If six thousand use the bank, it provides some obscurity.

But I'd really like to see an implementation with the transactions totally removed from the list. There are a couple of ideas pointing to the plausibility of this. There is a thread called "not a suggestion" that discusses them.

I see what you are going for but it is going to be hard to implement. This is because of the graph nature of bitcoin transactions.

Let's start with the premise that you are trying to make this a business. And you are selling these to people who want to do something but don't want to be traced. Often that means they don't want "to get caught", which is the most important threat to you personally I presume.

So you are going to have to assume that one or more of your customers "gets caught" and see how that effects your anonymity.

Say you are selling VM's that contain 50 BTC. Assuming the client VM's are just bitcoin installations + some wallet entries (address=public/private keys) that total 50 BTC. Now if you were to sell something like this. If I bought it, the first thing I would do is think, "Hey, that guy has copies of my private keys. So they are not private at all!" So to be sure my coins didn't disappear, the first thing I'd have to do is send these coins to myself, at a completely new address so you wouldn't have the keys. If the coins weren't correlated before then, they are now.

Now assuming someone gets caught, and they say I bought this VM on the internet from an anonymous seller.

The authorities can now look back at the transaction log. They can see all the keys you included in the VM and any new keys the "caught guy" created. It is trivial to determine the creation timing of each since its stored in the block list. So the authorities can deduce, every out-point that was part of his initial VM. The associated in-points must have belonged to the VM seller (you). So they have the set of your addresses you used to create the VM. They can easily trace to see were other coins from those addresses went. They are almost sure to be VMs as well. If they see a merge structure there, that confirms a VM and gives them more of your addresses.

The more you pass coins around between your accounts, the more addresses they can correlate. The mixing patterns you describe are likely to be very obvious compared to normal transfer patterns in the transaction graph. If you mix coins that will go into VMs with coins that you spend personally, you have even more risk.

The best way for you to avoid having your accounts correlated is to buy coins in the 50 BTC quantities you will sell, and never touch the coins yourself. Just create new addresses for each 50 BTC block and have the seller's transfer the coins there directly. Then you just put each key in a VMs and sell it.

That connects your source and your customer together, but that only potentially gives away other coin addresses from the same seller.

Notice no matter what you do, if one of your customer's get caught the authorities can deduce some account that is your, and the ownership history of every coin. Your anonymity depends on who you sell to, who you buy from and your ability to remain anonymous from both of them.

There is already a poll of nationalities on the site. You could start there.

But certainly if you read for a while, you will see that the forum community has a large representation of -anarchists and various types of libertarians.

There was one liberal/socialist here, but I ran him off. (Sorry everyone.)

Most believe strongly in hard (gold/silver) currencies and there is a deep distrust of fiat currencies and the governments that create them. There is unbridled animosity toward central banks.

I however, prefer fiat currencies and think gold is better used for rapper's teeth and silicon interconnects.

I came here on the promise that bitcoin could be used as an internet cash replacement with all the privacy that goes with cash transactions. It fits in with my strategy to return privacy back to the web. However, bitcoin is slightly less private than I would like. I'm working to fix that.

If you are really interested in "investing" in the bitcoin ecosystem, I have one or two ideas you might be interested it. I'd be happy to discuss them in public or private.

Ok, so there is nothing much to add to what theymos said...

Except, that on most "digital signatures" the full certificate including the public key is included in the signature block. Otherwise they are hard to validate because there is nothing to map the seemingly random signature part to any particular person's public key.

Since bitcoin doesn't use certificates, (I think) they add the signature and public key as a separate fields in the transaction.

Hense Betamax begetting VHS, but VHS dominated the market and crowded out everything else incl disks up till DVD.

I was referring to the demand for bitcoins absent their currency-like utility.

Selling bitcoins ONLY because others will want them even more in the future, is by definition a Ponzi scheme.

I'm sure I don't understand your use case.

But if you retrying to accumulate great wealth while not being seen as a single entity, it is better if you keep your coins in addresses that don't communicate with each other. Then pay with the account with the balance that is closest to what you want to spend.

The premise of this thread is spot on, even if the examples are slightly weak.

You propose that some one comes up with a "better" bitcoin. However, that is not required. They need only come up with a "more accepted/useful" bitcoin. That is not so far fetched as the forum consensus would point out.

For example, the current bitcoin implementation is very popular among Crypto-Anarchists and libertarian revolutionaries. As an investor you are betting that this community can sway the masses to support "their idea" of better money.

A few days ago there was someone of a more liberal bent that proposed some monetary policy changes that were "fairer" from a liberal perspective.

Others have proposed changes that seem better if you prefer the idea of a zero inflation/deflation money.

All could be implemented with minor changes to the bitcoin code base. (I am a coder by trade.) So as an investor you would be betting on which group is more likely to build the most valuable consensus.

Unless you buy into the idea that there is a build in demand for bitcoins just because they exist as a limited commodity. In that case, I've got some things I think you'll be interested in... 

This seems like a point today, but 2.5 years ago I heard people making the same argument in favor of investing in California real estate.

Excellent! Charles Ponzi himself decided to come to the forum. Welcome!

How exactly is gold like bitcoins?
What makes bitcoins more like gold than say like 2008 Oklahoma collectable quarters?

I may not understand your point but this doesn't sound anonymous at all. Each transaction is logged in the block list. That makes it trivial to associate this group of nodes. By making payments from multiple nodes correlated in time you confirm the suspicion.

Somewhere I posted a simple way to have true anonymity, but it requires a trusted account that mixes coins from different people. If multiple people own the same account then no single person can be correlated with any particular payment through block list analysis.

Hear hear!

There appear to be some people who think that bitcoins represent a store of value ABSENT the acceptance of bitcoin as a commonly accepted medium of exchange. Nothing could be more preposterous. What value would it be storing?

Exactly my point. USD is much more useful as money than gold bullion is.

I think this statement is off base. The success of PayPal depends on how easily it converts to the US Dollar (et al). Bitcoin will be a success when you don't have to convert them to anything. That is the point of the exercise. Creating electronic proxies for Dollars has been done to death. It's easy by comparison.

Fresno, bitcoin is designed to be currency-like for use in a currency-like fashion. That's the point if the exercise. Merchants treat and use bitcoins as money. Markets for trading different currencies are secondary to the concept.

Digital accounting and limited edition digital commodities are trivial and uninteresting by comparison.

I saw a good definition of success when researching LETS. Int holds for bitcoin as well.

Money is hard to earn and easy to spend.
Bitcoins are easy to earn but hard to spend.

You can judge the success of bitcoin by how easy it is to spend your bitcoins on something that improves your life.

What's the point of owning 100,000 BTC if you can't buy the occasional, wine, woman or song?