Good news; ECB 2012/10 report on virtual currencies

[BCB]

Thanks molecular

Hadn't gotten that far yet.

LOVE this paper.

[HDSolar]

You all realize that now EU has moved out on this the US will take ten years to follow suit 

This is very good news.

[BCB]

Yes, this actually is a really good report.

hazek

[snip]This also means that since the only difference between bitcoins and dollars is that bitcoins' physical counterparts aren't legal tender that they admit dollars, euros and the rest of the fiat currencies are essentially virtual currencies.[/snip]

I don't follow.

bitcoins - virtual currency with physical counterparts (Casascius, bitbills, ect..)

euros - "electronic" currency with physical counterparts that are legal tender

Seems to me, there is only one difference between these two currencies and it's not that one is a virtual currency and the other isn't.

What is the difference between an electronic and a virtual currency...  

electronic money is like western union.  You take fiat from you bank or credit card and WU transfers it to another location electorniclly and the receiptent collect fiat  (goven't backed legal tender)

Bitcoin does the same think but it is not backed by fiat or gold and not legal tender in essense "Virtual".  It's value is preceived by the user.

[molecular]

what will happen to that mental image when the "real economy" starts using "virtual money" instead of that "real economy money"?

[hazek]

Yes, this actually is a really good report.

hazek

[snip]This also means that since the only difference between bitcoins and dollars is that bitcoins' physical counterparts aren't legal tender that they admit dollars, euros and the rest of the fiat currencies are essentially virtual currencies.[/snip]

I don't follow.

bitcoins - virtual currency with physical counterparts (Casascius, bitbills, ect..)

euros - "electronic" currency with physical counterparts that are legal tender

Seems to me, there is only one difference between these two currencies and it's not that one is a virtual currency and the other isn't.

What is the difference between an electronic and a virtual currency...  

NONE. That's my point, there is no difference. Their precious euros and dollars are just as virtual as our bitcoins, the only difference being that the physical counterparts to their virtual currency are legal tender.  

[BCB]

hazek

I still don't think you point, while an important one, is clear....

[hazek]

BTW I'm very surprised by the objectivity of this report:

3.1.4 Security inci dents an d ne gative press
From time to time, Bitcoin is surrounded by controversy. Sometimes it is linked to its potential for
becoming a suitable monetary alternative for drug dealing and money laundering, as a result of the
high degree of anonymity.9 On other occasions, users have claimed to have suffered a substantial
theft of Bitcoins through a Trojan that gained access to their computer.10 The Electronic Frontier
Foundation, which is an organisation that seeks to defend freedom in the digital world, decided not
to accept donations in Bitcoins anymore. Among the reasons given, they considered that “Bitcoin
raises untested legal concerns related to securities law, the Stamp Payment Act, tax evasion,
consumer protection and money laundering, among others”.

However, practically identical problems can also occur when using cash, thus Bitcoin can be
considered to be another variety of cash, i.e. digital cash. Cash can be used for drug dealing and
money laundering too; cash can also be stolen, not from a digital wallet, but from a physical one; and
cash can also be used for tax evasion purposes. The question is not so much related to the format of
money as such (physical or digital), but rather to the use people make of it. Nevertheless, if the use of
digital money in itself complicates investigations and law enforcement, special requirements may be
needed. Therefore, the real dimension of all these controversies still needs to be further analysed.

[hazek]

hazek

I still don't think you point, while an important one, is clear....

What isn't clear? My point is functionally their currency is virtual just like bitcoins. The only difference is the words they use to describe it and the legal tender status of it's physical counterparts.

[molecular]

Yes, this actually is a really good report.

hazek

[snip]This also means that since the only difference between bitcoins and dollars is that bitcoins' physical counterparts aren't legal tender that they admit dollars, euros and the rest of the fiat currencies are essentially virtual currencies.[/snip]

I don't follow.

bitcoins - virtual currency with physical counterparts (Casascius, bitbills, ect..)

euros - "electronic" currency with physical counterparts that are legal tender

Seems to me, there is only one difference between these two currencies and it's not that one is a virtual currency and the other isn't.

What is the difference between an electronic and a virtual currency...  

NONE. That's my point, there is no difference. Their precious euros and dollars are just as virtual as our bitcoins, the only difference being that the physical counterparts to their virtual currency are legal tender.  

I think you are correct. However I doubt the authors of the papers think of Casascius coins when they say "physical counterparts".

In their mind physical counterpart to bitcoin is probably: nothing ("has no physical counterpart with legal tender status")
and physical counterpart to number in western union database is: the dollar, legal tender.

[Akka]

Wow, just read over it real quick. (I'm tired will read it in full tomorrow.)

They really have put a lot of work in this, informed themselves really well and it's written by people that actually understand bitcoin.

3 Surprises in one article, I'm stunned. This is great.

[BCB]

molecular

good point.

hazed, I see you point and your statement may or may not be true, depending on your stance but for now euros and dollars, despite how many physical specimens exist relative to the total balance outstanding, are still legal tender and bitcoin is not.  I think that is the salient point here.

[hazek]

 I think that is the salient point here.

It's not, it's that both, functionally, are a virtual currency.

[iain]

lol @ bubbly bubbly bubble graph on page 26

bubbles blowin' down into negative USD/BTC territory... bubbles reaching back in time just by, uh, being circular... this graph deserves a PRIZE for inscrutability

[molecular]

Economic foundations of Bitcoin
The theoretical roots of Bitcoin can be found in the Austrian school of economics and its
criticism of the current fiat money system and interventions undertaken by governments and
other agencies, which, in their view, result in exacerbated business cycles and massive inflation.

wow!

[BCB]

 I think that is the salient point here.

It's not, it's that both, functionally, are a virtual currency.

Ok.  Define virtual currency then make your point again.  I think you are clouding the issue.  Hopefully your explanation will help clear that up.

Thanks.

[hazek]

Economic foundations of Bitcoin
The theoretical roots of Bitcoin can be found in the Austrian school of economics and its
criticism of the current fiat money system and interventions undertaken by governments and
other agencies, which, in their view, result in exacerbated business cycles and massive inflation.

wow!

They even got the correct short version of the Austrian theory of the business cycle! I know, unbelievable right?  

[hazek]

 I think that is the salient point here.

It's not, it's that both, functionally, are a virtual currency.

Ok.  Define virtual currency then make your point again.  I think you are clouding the issue.  Hopefully your explanation will help clear that up.

Thanks.

How about you define it and I'll let you know if you got it right?

[BCB]

Virtual currency schemes differ from electronic money schemes insofar as the currency being used as the unit of account has no physical counterpart with legal tender status.

 Dollars and Euro's have some physical counterpart with legal tenter status. 

You are defining "Virtual"

I'm defining "Virtual Currency"

While 97% of fiat may be "virtual" ie is does not exist in the real world, it is not a "virtual currency" as is has legal tender status.

Bitcoin is a true virtual currency.

[hazek]

Virtual currency schemes differ from electronic money schemes insofar as the currency being used as the unit of account has no physical counterpart with legal tender status.

 Dollars and Euro's have some physical counterpart with legal tenter status. 

You are defining "Virtual"

I'm defining "Virtual Currency"

While 97% of fiat may be "virtual" ie is does not exist in the real world, it is not a "virtual currency" as is has legal tender status.

Bitcoin is a true virtual currency.

Well then I disagree with your definition of "virtual", I don't think having a physical counterpart that has a legal tender status vs having a physical counterpart that does not makes the later a virtual but not the former.

[BCB]

Virtual currency schemes differ from electronic money schemes insofar as the currency being used as the unit of account has no physical counterpart with legal tender status.

 Dollars and Euro's have some physical counterpart with legal tenter status.  

You are defining "Virtual"

I'm defining "Virtual Currency"

While 97% of fiat may be "virtual" ie is does not exist in the real world, it is not a "virtual currency" as is has legal tender status.

Bitcoin is a true virtual currency.

Well then I disagree with your definition of "virtual", I don't think having a physical counterpart that has a legal tender status vs having a physical counterpart that does not makes the later a virtual but not the former.

Bitcoin is currently 10.68.  I'm going to mail you a 10 dollar bill two quarters and a dime a nickle and three pennies.
When you get it Please send me 1 btc.

now you can take that fiat money to the bank to the store to the irs and pay for or buy  something.

What can I do with the btc besides convert it for a non-virtual currency, or trade if for something else of value.