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1  Economy / Economics / Why the laws of market will scale bitcoin no matter what we think on: March 05, 2016, 04:43:16 AM
Bitcoin will scale, or it will die.

All expectations in the success of the bitcoin protocol to be a decentralized, hence trustless solution to help us solve the problem of "coincidence of needs" in trade aka, pure abstract money, as well as a global, permissionless, unalterable record of a value-owner pair ledger record rests on some axioms:

Abstract

- That while such properties are indeed very valuable (=economic utility), the value is coming from utility, scarcity is an already given base assumption of the unreplicable ledger entries, and any monetary system depends on the time preference of the economic actors https://en.wikipedia.org/wiki/Time_preference;
- That scarcity is not the prerequisite of value, only if subjectively valued utility emerges with actors! aka value is an "and" relation, not an "or" relation to the scarcity vs utility; scarcity never gives value by itself;
- This is a chicken/egg problem: at what point of time of (bitcoin) adoption we are allowed/restrained to introduce scarcity, without hampering more "value added" users to join the system aka. how much users and invested economic value we need at which point the consensus can arrive about the economic/technical/political limits of the network can be agreed upon;
- All the variables can and will change in time, simultaneously or one by one: there will be new technologies that allow 2x-5x-10x-100x more transactions/sec to happen; there will be new political circumstances arise by the user base to force new rules - not independent of technical ones(!) (NOT ones like 21mil+ coins, that is obviously will never reach consensus, due to the incentive system of game theory); market forces can alter the course of development, human action, goals (like the "global reserve currency vs. coffee shop transaction problem");
- Anyone who seriously dealing with bitcoin must be REALLY open minded: the infancy of the internet taught us some lessons, just check out the IPV4/bandwidth prophecies;
- Anyone who thinks that 7tx/s or even 700tx/s is a good backbone for the birth(!) of a (even just) global settlement or payment system is delusional. There are 7billion people, if everyone does only 1 economic tx/day ("1 bread please"), that is 7bill/24/60/60=81k tx/second (which would equal about 23,730 MB data per block with 300kb avg. tx size); humans do more trade than most realize!

My point is, the bitcoin network needs to be - in time, gradually updating (hardforking) - more robust just to facilitate even a 1/10,000 of the global financial volume. We need a fee market in time, and we need coffee shop buys till that time arrives. But, since there are - obviously - no market economists in the developer team - exl. Satoshi who/whom were obviously had one -,the most inclined and influental economical actors such as miners will decide.

And that is good.

This, after all, is a backbone for a global economic system, based on cold, calculating, merciless, profit* oriented will. Anyone who can not fathom this, will be swept away, ironically, in the name of the common good, because, the common good is a system with the least fraction, least waste, most freedom of choice combined with the latest technology. Cypher punk is right because it is freeing us up to act as we see fit, and economically sound in the present, not because it is "punk"!

Technicals

Think about the technical facts:

If bitcoin has at least 1 million active users in the "western world" right now (North America, UK, Eu, Australia, East coast mainland China, Japan, SK) and if only 1/10 of those invested users has realistically 10MB/s net with free 200GB HDD and Core3+ CPU, we would see 100,000 nodes running. It is not technicality that restricts node operation, it is either the lack of incentives or knowledge that withholds 90%+ to contribute. My futurist vision is that if bitcoin really does became an international (even if just settlement) currency with 1-1000 k tx/s+ than every major supermarket, shopping mall, dealership, commerce office, small shop, hotel, airline, manufacturing industrial park will run a full node in their server room (it can not possibly costs more than a few thousand dollars/year, they spend more on whore parties for top salesmen at christmas, and i know that as a fact!), just as they run a "credit card database" server today. That is decentralization.

Hundred thousands of companies, malls, offices running full nodes, all around the world in different juridical districts maintaining the bitcoin blockchain. That is way more decentralized than anything today's ~6k-12k nodes. Not to mention, that with technological development (and even without it, now i could run a 1GB/block TODAY with no real costs other than a new 300$ 6TB HDD for a year) when storage price, bandwidth increase, RAM/CPU capacity increase by 10x alas in 10 years, a home user can do it.

So, the technical side of "fear of centralization" just does not stand, knowing the present facts, and has no clue what might be possible in the future. (I am in my 30s, and remember running progs from magnetic tape..)

Economic law(s)

About the economical considerations.

There was never a commodity remotely anything closer to be regarded as a "near perfect market driven good" than bitcoin is in the recent thousands of years. Why? The exchange information is instantly available for everyone all around the world in live to observe without censorship, and while some state intervention may distorts the local price (Chinese price is higher due to capital controls for example), being a purely abstract "commodity", and 24/7 globally tradable good whitout a third party's premission (well, exchanges are 3rd parties) it is still one of the freest priced goods in the world. That said, the current price says that this whole network worths 6,242,860,400 USD at the time i type this.

Check https://en.wikipedia.org/wiki/World_economy It says the 2014 World nominal GDP was ~ 77.6 trillion USD. That is 12433x more value created (half of it is tax founded corruption/construction crap, i guess) in one year than bitcoins market cap total so far. Which means, that just to capture 1% of yearly total economic growth -not total WEALTH of the world - bitcoin needs to growth alas 124x in market cap., which is 50,344$/BTC. (at the time i write this BTC is 406$). Of course, bitcoin is more than its price, it has an invested 1billion$+ in future returns research, altcoins, sideprojects, the knowledge of 10k+ professionals etc. as well, but that is not my point. My point is:

Do not think/hope bitcoin will stay the same as it is today. Just as it is radically not the same thing as it was 3-4 years ago. To get a glimpse of a chance to even being the new "digital gold", or the base for swift, low cost trustless network for solutions such as sidechains, LN, and whatever, it AT LEAST has to penetrate into the 1% economic activity area (which is still laughable....). To think that a network where coffee purchases are argued to be/regarded as spam today(!) in an economic reality where the whole network did not even penetrated the 0,01% of global economic activity is self defeated thinking, and i am sorry, but read some economic statistics. BTW, Starbucks market cap is 86,76billion $ https://finance.yahoo.com/q?s=SBUX. So, a coffee shop multi has ~14x times market cap than bitcoin.

I know that today's as of 05.03.2016 the fee is set to 0.00015 - my wallet software automatically adjusted to this as the right value from 0,0001 from last week - did 100% included me in the next block, i just did a tx. so i know, there is no hung up if i pay; that is 1/3 of the price of a cigarette in my country - am totally OK with it, still laughable cheap. Yet, if 100million+ (1,4% of global populace) want to transact, it does not matter how high they bid the fee, there is still only max 7tx/s. or 14tx/28tx/s whatever silliness.

We can not seriously base a global value reserve system on anything less than, say like 10,000tx/s. Read some statistics on http://www.realtor.org/field-guides/field-guide-to-quick-real-estate-statistics.

Only in the US there were 4,940,000 real estates changed hands in 2014 in the US, reported in this one real estate agency site (that should be great enough in value to be recorded in the blockchain if it is only a settlement layer. Or not? Only Aircraft carrier sales are OK?)

How about if only the 49,400,000 residential estates exchange/year goes on to the blockchain (excluding commercial, industrial, development, agricultural etc., estate exchanges, which are 10x more as well in price and volume) for the record from the today's theoretically maximum ~220,000,000 tx/year (7*60s*60m*24h*365d)? So, if technical limits of only real estate exchange is - 7tx/s vs 70tx/s of real economic, high value worldwide trade get priced out (timewise, not costwise!!) due to "algorithmic constrains fee market, not by cost but by unworkable confirmation times of months", than what is a "not spam"?

Math:

If we accept math: there is n tx can be done in a year. It does not matter how many fee market players pay, if there are n+x txs, x will not be included in a YEAR's time, because it physically cannot be. If n=220mill, and x equals anything more than >1-5% of n, whom are bitcoin users, holders, than x will look for another alternative - people are more annoyance drived than cost drived! :-) ). Which equals the theoratical very maximum of bitcoin users worldwide to 1 person/1year/1tx to: ~220,000,000 user. There is a MAX 220 million user (people) to transact ONCE per YEAR on the bitcoin network with today's specifics. That is 3,14% of global populace if they only blockchain once per year....think about it.

And why would any everyday economic actor would use this payment/settlement/whatever network and invest, speculate, hoard bitcoins if he can not even buy a frigin' house for it in without >3+ months confirmation time lineup? Delusional thinking, or, we invent a "fast" settlement layer, upon the slow one. Except, that utility comes from economic value exchange, not from arbitrary scarcity. If bitcoin can not be used for at least a few times (1x-5x) in a month to pay recurring expenses with a max few hours of feedback with low fees, it has failed in 99,9% of the populace, and will never reach that 99,9%, and will stay in the 400/max 4000$ area.

Bitcoin MUST grow alas a 100x times in users which will kick in 100x value roughly (utility gives value). That means more robust in the "dull, omg coffee shope buys" payment system area, to even reach gold's market capitalization of "shiny stuff with excellent headphones and a CPU heat dissipator jewelry :-)".

I know and well aware, that the network capacity can not be increased ad infinitum, hence there will be and has to be an evolving fee market. There is no infinite in physics of the real. My argument is, that "we", the network, is faaaaaar away from the the point of diminishing return (where the energy required to do additional increase gives less observable useful return then invested), and that every economic system will stretch - given it is controlled by economic aka rational self interest rather than a political one - until it reaches equilibrium of the maximum of profit margin for most actors. As an economic historic (yeah, waste of carpenting time Smiley ) i saw this pattern 1000 of times, and bitcoin is no exempt of this rule.

I argue, it either grows bigger in the near future, and again, and again till it reaches near economic equilibrium- at least a 100x-1000x bigger! by technical capacity limits before it has to introduce physical scarcity -, by necessity, or it goes away. The market will scale bitcoin, it is so far the most perfect abstract of money, and no amount of theology can block it.

In the spirit of a good wager,i am more than eager to receive your feedback, regarding the economic,technical, political arguments on why i am wrong/almost/spot on.


*profit; z = a thermodynamic law necessity. Any system based on mater/energy must unceasingly spend energy (=action) through time to even maintain the present state of itself compared to any future moment; as well as: 'must acquire n+x energy through action, where n is the original energy state before the action in "frozen" time; x (per definitum greater than zero) is the used up energy to execute the action in non zero time; hence to reach at least equal past energy state, it must reap z which is at least is n+x energy from x action, or it will perish. Any action giving the energy equation which is: z>n+x, is a probable energy state for the actor to continue the existence travel through time. In short: profit.
2  Bitcoin / Bitcoin Discussion / The problem is choice itself regarding blocksize on: June 22, 2015, 08:14:15 PM

        First of all, we tend to forget how awesome is the fact, that we have a debate over the nature of the “block size limit solution”. Some are pro some, are contra, some are agnostic, and yet we fail to grasp how amazing is the very fact that we have an open debate about the economic-technical policy of our p2p money system!

Think about it for a moment, and imagine the same raving debate going over how the FED should or not raise interest, money supply etc. Isn't the debate itself is a proof how open Bitcoin is?
   I have tried to approach the subject from a less technical angle, focusing on the principal choices behind the Kbs. I may be wrong, but I think the problem is choice itself: whichever side “wins” majority, it will – probably irreversibly – set the Bitcoin network on a course of two mutually exclusive fate.

   An example of those two options are as follows.

   A “small”, elite, 1MB (or 8/20 as well in the near future) block size'd blockchain will render bitcoin's usage as “digital gold/ledger”, an asset literally held for store of value and proof of existence, open only for value transfers and economic activities requiring the waste amount of security and immutable nature of the blockchain. This version would be valued for its world class trust less consensus security, which is also very scarce for acquiring.
   Why? Because if free market allowed to work it's ways, than the insanely high demand of transacting directly on the blockchain will increase “miner fees” beyond what micro and “grocery” value transactions can afford, – those will literally die out from the blockchain, moving to semi centralized services, offchain payment processors, sidechain networks validating them only in bundles, or just utilizing a transaction focused altcoin for everyday, small value transfers.
   The “elitecoin” approach would make the Bitcoin network less focused – or able - on transaction speed, confirmation speed and used more as a long term savings account, a technically manageable fully validating node on every serious (value wise) bitcoin holders “home PC”, a digital gold-like depository, walled and secured on cold storage devices, paper, maybe in a bank vault for irony's sake.

   The other path to walk would be the “Bitcoin WesternMasterVisa”, enabling dynamic blocksizes – if that technically feasible to implement -, where, if major adoption happens, hundred thousands of transactions will happen every second, from 2 $cents tippings on reddit to 200M$ company sells on the “Blockchain Nasdaq”.
   This type of bitcoin would be very different from the first one. The enforced neutrality regarding the transacted amount of bitcoins in a sea of potentially several MB per second limits fees way below today's “dust limit”, reducing individual transaction cost to fractures of pennies, but a million of them for every block. This implementation has a high cost for individually validate the blockchain – which is not good for decentralization some may say, but to be fair, the average user – now the overwhelming majority of the users, assuming this hypothetical mainstream adoption - would not care.
   Let me repeat that: the average user will not run nodes anyway, as of today they are not running one, no matter the hardware or knowledge factor it requires!
   This approach would preserve the aspect of “one network for all transaction”, which we are familiar today, but with a cost: huge data centres as acting nodes servicing thousands, millions of SPV wallets around the world, effectively marginalizing individual user's voice on the network, delegation consensus decisions on the hands of a few powerful central point (“few” in the sense of versus millions; still thousands of organizations would have to collaborate!).

   No matter which path we choose with upgrading the protocol – we have to evolve for sure -, we will reach a “point of no return”, a size of adoption where drastic changes can not reach consensus any more, yet, we will have to take the first step now if we want to scale up the network. Unintended consequences all over the way.

   Hence, my opinion regarding the block size debate beyond technicalities is:
the problem is choice itself, for it will be (most likely) final for the fate of Bitcoin.
3  Economy / Economics / How can Bitcoin bring pure capitalism vs today's Western socialistic system. on: March 22, 2015, 01:26:03 AM
„Anyone in the possible charge over a society's economical output will promote socialism, for They hope going to be in charge of distribute it's output with unquestionable authority, hence in the best position to take for Themselves.”

There is a myth so imprinted among the populace in the West, it is hard to counter it, even with plainly visible facts and common sense, which is:

that the current system is a „capitalistic society, daunting for profit*1” (spoiler alert: it is not).

I try to summarize what i want to express, and elaborate later in retrospec. Simple fact: Capitalism thought to be (at least in the non acolyte marxians) a system based on:

- private control of the means of production – which is insufficient to say, since uber, arbnb, and cryptocurriencies emerged,  anything can be a means of production (capital tool);
- from that basic principle theses facts follows: all natural resource use, producing commodities and granting services are made/implemented by people with personal title to the means and a stake on the selling of those (very important! A 1 man PoS alt coin basically :-);
- it is based on voluntary exchange, excluding force. Both parties are free to say no, may it be employment or trade (selling one's time/workforce, commodity/goods, service). And no, the need to feed yourself is not forced on you by capitalism, it is forced on you by nature, reality itself (blame entropy if you want!).

Anyone who goes into a shop and buys anything can deduce that half of the exchange is in fiat money (which is..lets net get into it:). Fiat money comes from a central, monopolistic entity backed by the law enforcement (guns;force) of the State – even if it is a private institution, it is still a monopoly, granted by the State* through mostly anti democratic means (*may it be by historical age of a king, emperor, ministers, whatever).

How can anyone call today's economic and societal/political system capitalism?

This whole system of monopolized, centralized, regulative, than deep captured by „money without risk corps” , crony, corporative, banking, debt based system based on future income where nX=cool (n= totality of present output)*(X increase rate in % of n minus interest rate; which is a mathematically = impossible, because it is more profitable to get interest from central bank for holding State debt than invest in 'n'  - economic activity -  therefore, 'n' stays constant or minus through time) reminds me more and more to another system: socialism ( i have actually lived in it, so please spare me the „theory”; i had to experience it in reality; and this Western world one walks like a duck...) Examine the facts.

- half of EVERY transaction (plus instantly added taxes like VAT, income tax, etc etc.) is controlled by a monopoly good, made and augmented by an appointed institute (C. banks) by the central planner. Monopoly of the medium of exchange is the anti thesis of a free market;
- all through the western world (definitely in Europe) on average MORE THAN HALF of the individual „free citizen's” labor efforts gets collected as taxes by a central monopolistic institution – State - into a big pool. (Everyone according to his ability, all to his needs..familiar?)
these are then distributed by a „wise council by the people (proletariat)” not based on merit, but by „need”. By monopolistic, non-profitable (hence uneconomical by default*2) institutes like:
Healthcare, Social security, Education (lol), Law, Police/Fire/Military, Infrastructure and Public „spending”, Legislation and Oversight, boards upon boards referring to boards of regulation of other boards, committees.....

Shrinking freedom of choice (how do i marry and contract, how do i educate my child/myself/how do i do business, how do i save for retirement, how do i manage my future, etc) is a symptom of increasing collectivism. It is not up to the individual to bare the risks of life – which is a basic fact of the REAL world backed by quantum physics*3, and basically, everything we know about the universe -, but let us vote in „protectors” who will decide for us. That is, the statist, the Keynesian, the central planner idea. This is today's reality. Socialism.

Enters Bitcoin (and bitcoin, the currency).

Bitcoin, the protocol, potentially frees us from the problem of trust, which prevented us from doing p2p transactions in the last whatever thousands of years (may it be the transfer of value, or title, of proof of existence, the truth, etc.), making the trusted 3rd part obsolete. It basically cancelled all the – otherwise misguided – reasons for socialistic (communally owned) institutes. Bitcoin made the  hierarchy of power based on force dealing with trust issues* obsolete (*State).

Bitcoin IS classic, pure capitalism, down to its core. It is:

- open and 100% voluntary to join or leave at any time and space;
- it is the perfect manifestation of private property*4! No entity can have an individual judgement, or exclusion of anyone else (this is backed by pseudo.anonimity and cryptography- http://en.wikipedia.org/wiki/Cryptography);
- it is resilient to any single institute to take over (even the forces of the State, based on local consensus), and this ability grows over time – anti fragility;
- it is natural result of the global free market "ecolution" (economic evolution), where every human being is connected (just like in the real physicality of the world, 6 steps and you reach anyone. http://en.wikipedia.org/wiki/Six_degrees_of_separation );
- Bitcoin is capable to adapt and improve, just like nature through evolution (the twist here is it is acting like a natural phenomenon, although it is entirely in the digital space! The ingenious of the human mind should overwhelm You);
- it can end the false premise of the current madness of debt based monetary system. In a bitcoin economic setup, only real savings (withhold consumption) can finance new endeavours, granting that only real NEEDS for consumption will and can be served by resource users (the others will fail.);
- it gives back the people the power over their financial freedom, with a great but sweet cost: they HAVE TO learn how to live independently, and consciously once again, which will eventually end all chance for opportunistic parasites, dictators, populists to gain any power. Individual responsibility is a good thing in the long term, otherwise we got Hitlers and Stalins!

*1 Sadly, many people stuck in the XIX century when analyzing capitalism or money (blame the the guy who invented the world and meaning (!) holocaust for this http://www.orgonelab.org/MarxEngelsQuotes.htm; it is Marx). Studies show that the concept of money, hence the concepts of economics and property relations are already understood and individually internalized even by little children: http://darkwing.uoregon.edu/~harbaugh/Readings/Kids%20social%20development/Children%26Economics.pdf.
„If you want to understand the why the principle of private is so natural and immutable by all the living things, take a walk in a rural village and listen how the dogs bark at you (..for passing by their „private property”...)”

*2 Profit is not a moral concept. Profit is a mathematical necessity for survival. In physics, equilibrium means statical state, immovable object at absolute zero without any gravitational influence – nothing in the universe has this ability. Any living being (including humans) trying to survive by burning X Kj of energy to obtain X Kj of energey by „feeding”, will die for the simple reason that feeding itself is increasing its entropy, which requires additional, external energy to restore (you have muscle burn=damaged muscle cells). While in human society, profit means an increase of the overall well being, in nature it means survival to the individual (X+y energy from the hunt to recreate past entropy+energy to continuation of existence). Physics itself refutes a profitless world.

*3 quantum physics found that the basic behavioral principle of the universe – building as a bottom-up system - is uncertainty. http://en.wikipedia.org/wiki/Uncertainty_principle
This found of mathematical uncertainty combined with the principles of the workings of network effects says us that the more we increase the elements (in this case people on Earth) in a system it is getting exponentially harder to find equilibrium spots.

*4 Private property is the essence of incentive to work your maximum. Even a 5 year old knows this; just visit any state run institute (probably already had) and see the difference between the motivational level/attitude/support level of the employees there versus a private institute. I think i do not have to bring more proof than that Smiley
Alas:
http://en.wikipedia.org/wiki/Hernando_de_Soto_Polar , and Patrick Byrne's (he is the CEO of Overstock) speech regarding innovation, business and crypto revolution.
https://www.youtube.com/watch?v=vFOpSTodk_U
4  Bitcoin / Development & Technical Discussion / Programmed self-destruction and how to prevent it on: June 24, 2014, 01:43:51 PM
Dear fellows!

I have read this http://arxiv.org/pdf/1405.0534.pdf , which was not a merry read, and despite the fact that i am an absolute fan of the blockchain technology, the distributed network idea, the empowerment of the individual, and almost full in BTC - financially and carrier wise, i am rather alarmed.

Even if the above paper has some bad arguments from time to time, the underlying ideas seems to be correct which are (TLDR):
1. centralization of mining through ASIC, and it's effect on entry level users, broader adaptation,
2. pooled mining, and the arise of need to trust on pool operators and "big money miners",
3. how diminishing return of block rewards will threaten the system - there is a case study analogy of Unobtanium, and Doge/LTC -,
4. the non-incentive way of running full nodes - hence their numbers begun to drop, again lowering security and decentralization,
5. the Longest Chain Rule and it's consequences on transaction speed (transactions vs. block creation, should require 2 different methods from an engineering standpoint).

These aforementioned arguments conclude the self destructing behavior of the whole network, that is the paper all about.

My thoughts:
Mining.
So, while from an economic stand point i love the idea of deflation monetary policy of bitcoin, from a (human) behavioral angle it is indeed not good for mining, follows:
- after awhile, only the most expensive and specialized machinery will be profitable to run, if ever to make a RoI, which is NOT the average user, hence the emerge of big cloud mining operations!
- this is not the original idea of "1 cpu, 1 vote", and goes against decentralization and network neutrality! Entry level mining - and so the incentive to adopt the network - would be impossible for the average user.
- at the end, only big corporations with huge capital (banks? o.0) - whom are tied to physical and known places, under a known jurisdiction!!! - will mining, and we have our central point(s) of failure situation again!

My questions to the way more "code minded" people :-)
- I am almost sure that ASIC mining has to go. It is a huge issue, given the capital brought into it. But what than? Is it possible, that the nodes themselves, given they are fully connected to the network (8+ connections) would create the new blocks, not using anything else, but their home PC (and yes, company bot nets by employees Smiley ), lets say CPU power? Is that "codeable", to keep the encryption, and preventing specialized hardware to emerge at the same time? How this will effect the block generation speed? The reward dispensation, the intentional inability to form pools?

- i understand, that this might be a radical, and or impossible to do proposition.
- this would also require the blockchain to be smaller, or reformed, the bloating is enormous. It might help fungibility, to loose old records, hence no coin would record "taint" in the long run!
- how about a negative incentive, an avoidance of cost reward system? Like: there is a built in transaction fee (dynamic with volumes!), but if you are running your node, you "collect" free transaction tokens/volume.
- the transaction fees either get "destroyed" -> deflation, which could be balanced out by nodes "mining" new blocks -> inflation. This is the seeming erasion of the hard cap!! in a controlled way, there will be always new coins, in the same rate as they gets destroyed by transaction fees. (so block reward would be a floating number).
- or they redistributed along the running nodes based on a rule (the hard cap can stay).
- i understand that peercoin has a hybrid PoW/PoS method, but it still has the huge diminishing return of block rewards, which causes hashing power to drop fasterer, than PoS system builds up, and or distribution gets screwed up (see the paper for data).

TLDR:

Separating miners and "average currency users" undermines - pun intended:) the idea of network neutrality, ALL participants who run a full node with the full blockchain should be automatically be "miners", hence an average home computer could contribute and get rewarded, the entry level SHOULD be for the average Joe. Without this, we are going to see central points of failure, and disinterest from the general user of the currency, for they are can not be real contributors - and lack "voting power" - on the networking!

I am waiting for suggestions, or explanations why this whole argument is wrong/correct Smiley
5  Economy / Economics / How clueless central banks are? This. on: June 07, 2014, 02:26:24 PM
I have just read this: http://www.coindesk.com/central-bankers-digital-money-institution-control/

TLDR: the central banks like bitcoin, the technology, for the part of it's cheap and fast way of moving money; (not so much for the property transfer)
They want to implement it because, quote
 "they posit that central banks could issue their own digital currencies that would benefit from the institutional backing of a central bank." italics are mine.
FEDCOIN  Grin you know you want it, right? Except the part where they already issuing currency, which is already mostly in digital form, not in bills..

Fascinating!
They still do not get the whole idea, that distributed network was an answer for their corruptible, co-opted, single point of failure system, and that the very core principle
of bitcoin and the blockchain solution was decentralization!

Are there anyone here working in finance/banking to explain to us, do they really can not understand cryptos, which are going to destroy their business? Kodak 2.0 ?
6  Economy / Economics / Bitcoin economy without fiat vs government force on: June 05, 2014, 11:37:15 PM
Hello!

The subject is really simple. Let us say, that there is a grocery shop in the corner in your city. Hypothise :  We are in the future, and this shop decides to go full on btc, so no fiat-> bitcoin conversion in business. It (tries to) buys products in it, pays bills/rent/employees in it, and accepts bitcoin ONLY from customers.

After all, that would be the future perspective and goal of this whole "experiment of betterment of the world"  Smiley.

My problem is (well actually i am fine with that scenario above): Government.

All the dealings of these hypothetical business are made in bitcoins. The ledgers are only on the blockchain. How the government can coerce taxes out of such a business? How can/will they control, regulate, "bureaucratise" the everyday working of such a business, since the whole operation is out off control (no dollar ever make an exchange, so how do they deduce taxes? How they enforce regulation, since this business is "not existing" in the dollar world). They can not practically enforce the huge blob of regulations and fines etc., with such a company, since it is dealing in an "alternate dimension". Well, regarding the finance part.

They still can call some cops/commando, anything to seize the shop, or arrest the managers, let us say, for money laundering or illegal trading etc..
Remember, the government has the monopoly on initiating force, and ofc they going to use it - after all, that is how they can get your stuff, by threat of force.

I am thinking about the solutions for this rather pragmatic question, because, while money/currency can be fully digitized, the actual physical goods can not be, alas, can be the object of physical force.

One scenario is ofc, that by the time the above mentioned shop reaches bitcoin only status, the government already crumbled, USD hyperinflated, etc etc.

I am looking for suggestions, and theories, because i think this is a rather pragmatic and utmost important question. Looking forward for a fruitful conversation!

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