[Blog Post] Surprise: The US Dollar is a Virtual Currency

[evoorhees]

Our latest blog post... enjoy!
http://blog.bitinstant.com/blog/2012/10/18/surprise-the-us-dollar-is-a-virtual-currency.html

[Steve]

To drive the point home with my kids, they get paid their allowance by me updating a google doc spreadsheet.

[evoorhees]

To drive the point home with my kids, they everyone gets paid their allowance salary by me their bank updating a google doc spreadsheet.

FTFY Steve

[Steve]

To drive the point home with my kids, they everyone gets paid their allowance salary by me their bank updating a google doc spreadsheet.

FTFY Steve

I should also mention, that as far as my kids are aware, their balance is 100% backed.   

[stevegee58]

"Trust me.  I have a PhD in Economics."   

[allthingsluxury]

To drive the point home with my kids, they everyone gets paid their allowance salary by me their bank updating a google doc spreadsheet.

FTFY Steve

I should also mention, that as far as my kids are aware, their balance is 100% backed.   

Hah very nice Steve. The funny thing is most people can't seem to grasp this concept. Bitcoin is vastly superior to most modern day fiat currencies. At least it is limited in quantity and can't simply be doubled by adding a few zeros, like most modern day virtual currencies (Ie. the US Dollar, etc.).

Good blog post evoorhees.

[hazek]

Wow that blog post is so full of win it's unbelievable. I think it's really well written and maybe just maybe people might not experience too much cognitive dissonance reading it to be able to actually wake up to the truth - that they already are using a virtual currency.

It's funny just the other day I tried to explain this to my parents, and guess what, I wasn't successful at all. But your blog posts has now armed me with a few more analogies and arguments that give me the confidence to try educating them again 

[bg002h]

Well written and worth the read.

[mobile4ever]

To drive the point home with my kids, they get paid their allowance by me updating a google doc spreadsheet.

I am guessing they can not print it out more than once.

[Roger_Murdock]

Wow! Excellent post! And I loved the ending:

So, while dollars and bitcoins are both virtual, which is actually more real?

Indeed. Bitcoin: it's not just "real money," it's the realest money.

[Come-from-Beyond]

Wow! Excellent post! And I loved the ending:

So, while dollars and bitcoins are both virtual, which is actually more real?

Indeed. Bitcoin: it's not just "real money," it's the realest money.

Money doesn't need to be real. It's a medium of exchange. "Which is actually more real?" makes no more sense than "Which is actually more green?". A dollar looks more green to me than a bitcoin but color of money doesn't really matter.

[Roger_Murdock]

Wow! Excellent post! And I loved the ending:

So, while dollars and bitcoins are both virtual, which is actually more real?

Indeed. Bitcoin: it's not just "real money," it's the realest money.

Money doesn't need to be real. It's a medium of exchange. "Which is actually more real?" makes no more sense than "Which is actually more green?". A dollar looks more green to me than a bitcoin but color of money doesn't really matter.

Well, I think it depends on what we mean by "real." In its purest form, money is information. If I'm holding a ten dollar bill, that's supposed to be a way of credibly conveying that I have provided value for which I have yet to receive any kind of "real" satisfaction, i.e., good and services with which I can directly satisfy my wants and needs. Of course, it doesn't necessarily mean that. I could be the central banker with a government granted monopoly on new money creation. Holding bitcoins, which cannot be counterfeited, is a much more credible signal of having given value in the past, whether that value was in the form of auditing and securing the blockchain or providing goods and services. Bitcoin is as close to the Platonic ideal of money as we've yet come. And it's in that sense that I call it the "realest" money.

[Come-from-Beyond]

Well, I think it depends on what we mean by "real." In its purest form, money is information. If I'm holding a ten dollar bill, that's supposed to be a way of credibly conveying that I have provided value for which I have yet to receive any kind of "real" satisfaction. Of course, it doesn't necessarily mean that. I could be the central banker with a government granted monopoly on new money creation. Holding bitcoins, which cannot be counterfeited, is a much more credible signal of having given value in the best, whether that value was in the form of auditing and securing the blockchain or providing goods and services. Bitcoin is as close to the Platonic ideal of money as we've yet come. And it's in that sense that I call it the "realest" money.

I think I got u. Unfortunately a lot of bitcoins seem to be "unreal". A lot of people suspect that MtGox uses fractional-reserve trick. If it's true then bitcoins on a MtGox account r less "real" than bitcoins in a personal wallet. OP didn't mention this in his blog post. In the future a bitcoin can be as "real" as a dollar is.

[Roger_Murdock]

I think I got u. Unfortunately a lot of bitcoins seem to be "unreal". A lot of people suspect that MtGox uses fractional-reserve trick. If it's true then bitcoins on a MtGox account r less "real" than bitcoins in a personal wallet. OP didn't mention this in his blog post. In the future a bitcoin can be as "real" as a dollar is.

I understand that concern but it seems to be much, much less of a problem with Bitcoin. First of all, the Bitcoin "monetary base" can't be expanded beyond 21 million coins. And there's much less reason to expect that fractional reserve banking will significantly expand the money supply. With dollars you put them in a bank to keep them safe from theft (not needed with BTC, in fact you're INCREASING your risk when you're not in possession of your coins) and to facilitate payment at a distance (already built in with BTC).  There's just much less need for traditional banking. And FRB only expands the money supply if people treat the debt instruments as the equivalent of money and trade them in place of money. I guess some people might make payments by transferring from one Mt. Gox balance to the next, but most people are going to want to take direct control of their coins. (I am way too paranoid to hold a sizable balance on an exchange for any length of time.) Finally, there's no equivalent of FDIC insurance to create moral hazard such that people have no incentive to worry about the solvency of their "banks." (Or did I miss the government bailout for Bitcoinica depositors?)

[Fjordbit]

I should also mention, that as far as my kids are aware, their balance is 100% backed.   

This reminds me of when I was a kid, I had the same thing where my mom was supposedly keeping track of it. Well, one day after literally years of saving I had over $1,000 and wanted to take it out to buy a new computer. My mom didn't have it.

I asked for cash from then on.

[evoorhees]

Well, I think it depends on what we mean by "real." In its purest form, money is information. If I'm holding a ten dollar bill, that's supposed to be a way of credibly conveying that I have provided value for which I have yet to receive any kind of "real" satisfaction. Of course, it doesn't necessarily mean that. I could be the central banker with a government granted monopoly on new money creation. Holding bitcoins, which cannot be counterfeited, is a much more credible signal of having given value in the best, whether that value was in the form of auditing and securing the blockchain or providing goods and services. Bitcoin is as close to the Platonic ideal of money as we've yet come. And it's in that sense that I call it the "realest" money.

I think I got u. Unfortunately a lot of bitcoins seem to be "unreal". A lot of people suspect that MtGox uses fractional-reserve trick. If it's true then bitcoins on a MtGox account r less "real" than bitcoins in a personal wallet. OP didn't mention this in his blog post. In the future a bitcoin can be as "real" as a dollar is.

If your accusation against Gox is true, that is a matter of Gox's credibility, not Bitcoin's as a technology or currency. Say we're using gold coins as money, I think we'd both say gold coins are real. If a bank is taking gold coin deposits and issuing non-real coins or claims on coins that don't exist, then it is not the fault of gold, but of that particular bank.

Gox's accounting practices have nothing to do with Bitcoin being real.  And for the record, I don't believe for a second that Gox is using fractional reserve.

[bg002h]

To drive the point home with my kids, they get paid their allowance by me updating a google doc spreadsheet.

Your kids doing well with this still? Have you paid them in a fixed btc or fixed usd amount? If the Number of coins per week decreased over time, how did they respond to that? If they noted value of their allowance going up with time, how do they respond to that?

[Richy_T]

I should also mention, that as far as my kids are aware, their balance is 100% backed.   

This reminds me of when I was a kid, I had the same thing where my mom was supposedly keeping track of it. Well, one day after literally years of saving I had over $1,000 and wanted to take it out to buy a new computer. My mom didn't have it.

I asked for cash from then on.

It would be a freakish coincidence if you happened to be German

[Monster Tent]

Well, I think it depends on what we mean by "real." In its purest form, money is information. If I'm holding a ten dollar bill, that's supposed to be a way of credibly conveying that I have provided value for which I have yet to receive any kind of "real" satisfaction. Of course, it doesn't necessarily mean that. I could be the central banker with a government granted monopoly on new money creation. Holding bitcoins, which cannot be counterfeited, is a much more credible signal of having given value in the best, whether that value was in the form of auditing and securing the blockchain or providing goods and services. Bitcoin is as close to the Platonic ideal of money as we've yet come. And it's in that sense that I call it the "realest" money.

I think I got u. Unfortunately a lot of bitcoins seem to be "unreal". A lot of people suspect that MtGox uses fractional-reserve trick. If it's true then bitcoins on a MtGox account r less "real" than bitcoins in a personal wallet. OP didn't mention this in his blog post. In the future a bitcoin can be as "real" as a dollar is.

If your accusation against Gox is true, that is a matter of Gox's credibility, not Bitcoin's as a technology or currency. Say we're using gold coins as money, I think we'd both say gold coins are real. If a bank is taking gold coin deposits and issuing non-real coins or claims on coins that don't exist, then it is not the fault of gold, but of that particular bank.

Gox's accounting practices have nothing to do with Bitcoin being real.  And for the record, I don't believe for a second that Gox is using fractional reserve.

Unless theres a run on Gox no one will ever be entirely sure of that.

[jerfelix]

Well, I think it depends on what we mean by "real." In its purest form, money is information. If I'm holding a ten dollar bill, that's supposed to be a way of credibly conveying that I have provided value for which I have yet to receive any kind of "real" satisfaction. Of course, it doesn't necessarily mean that. I could be the central banker with a government granted monopoly on new money creation. Holding bitcoins, which cannot be counterfeited, is a much more credible signal of having given value in the best, whether that value was in the form of auditing and securing the blockchain or providing goods and services. Bitcoin is as close to the Platonic ideal of money as we've yet come. And it's in that sense that I call it the "realest" money.

I think I got u. Unfortunately a lot of bitcoins seem to be "unreal". A lot of people suspect that MtGox uses fractional-reserve trick. If it's true then bitcoins on a MtGox account r less "real" than bitcoins in a personal wallet. OP didn't mention this in his blog post. In the future a bitcoin can be as "real" as a dollar is.

If your accusation against Gox is true, that is a matter of Gox's credibility, not Bitcoin's as a technology or currency. Say we're using gold coins as money, I think we'd both say gold coins are real. If a bank is taking gold coin deposits and issuing non-real coins or claims on coins that don't exist, then it is not the fault of gold, but of that particular bank.

Gox's accounting practices have nothing to do with Bitcoin being real.  And for the record, I don't believe for a second that Gox is using fractional reserve.

Unless theres a run on Gox no one will ever be entirely sure of that.

I could definitely imagine a company like Mt. Gox, who is holding a lot of Bitcoins on account for people, accidentally locking themselves out of one of their reserve cold storage wallets (or having one wallet stolen by an employee).  At that instant, they have fractional reserves.  But they could easily set aside a small portion of profits each day to re-fund that wallet.

Which would be worse?  Announcing to the world, "We locked ourselves out of one of our wallets, but rest assured...." (potentially causing a run that puts them out of business), or to quietly build the reserve back up?