ECB paper on Bitcoin and virtual currencies

[molecular]

Bitcoin holders and active Bitcoin users are a totally different statistic. We were talking about the relatively active userbase which probably is somewhere between 50 000 and 150 000.

Oh if we are talking regular users I think the 10K would be spot on. I would like to buy my groceries with BTC, but its not happening yet.

50-150k would likely include users who have used it now and then, but not weekly by any means. The estimation becomes very difficult if you include degree of "user".

Even savings/hoarding is a kind of use and the other reason I include them is because they make up sleeper-bitcoiners: In the event of high inflation or other crisis they would be likely to switch to BTC since they know about it and have a client etc..

Also; it may actually be bad the ECB is noticing us so soon. We could be set back a year or two if they crack down hard right now. Dunno.

the ECB will not "crack down" at all. They are just not in that business. Other arms of the same beast 'd be used for that.

For ease of argument, let's call a certain group of mostly men "the establishment" (the old money) and let's consider their options assuming they have identified bitcoin as a threat to their plans (of a "new world order" or something):

• crack down hard: will generate loads of publicity and might even spawn discussion about what money is, how it works etc... and as a result leave us with an educated public => very bad
• sneakily manipulate public opinion in such a way that bitcoin can maybe even be blamed (at least in part) for the bad shit that is going to happen. More generally: manipulate opinion in such a way that the public will say: "we have enough, look at the rich and the poor: capitalism has failed, we need more central authoritarian control, a world government that runs shit for us and fixes prices at affordable levels so our children can live long and prosper"

[molecular]

Well, I never liked the term they called Bitcoin a 'virtual currency scheme'. Somehow I thought it had a bit of a negative connotation.

you mean it sounds like: "vapormoney scam" ?

[pyra-proxy]

Well, I never liked the term they called Bitcoin a 'virtual currency scheme'. Somehow I thought it had a bit of a negative connotation.

you mean it sounds like: "vapormoney scam" ?

agree whole heartedly here ... scheme naturally makes one think scheming or to scheme and while their use of the word is more akin to the definition that aligns with a system, the scheming term humans often get in the back of their mind when they see the word feels more like the definition akin to scam i.e. to scheme as opposed to a scheme

[molecular]

good assessment with road runner image by sunnankar in another thread about this: https://bitcointalk.org/index.php?topic=121187.msg1306412#msg1306412

[Grinder]

Grinder

Can you be specific?

If you mean the positive sides about Bitcoin it says this on page 21: "Users have several incentives to use Bitcoins. Firstly, transactions are anonymous, as accounts are not registered and Bitcoins are sent directly from one computer to another. Also, users have the possibility transactions are carried out faster and more cheaply than with traditional means of payment. Transaction fees, if any, are very low and no bank account fee is charged."

It also mentions other sides of Bitcoin which are more neutral, but which have some positive consequences which can be focused on. It would be would be much more constructive to look for these than the "Look how clever I am, I found a tiny issue that in some respects is slightly incorrect"-attitude that a lot of Bitcoin users have.

[Binford 6100]

Very tough even to try to regulate Bitcoin...

just wait for an ambitious bureaucrat who wants to climb the career ladder and chooses bitcoin as his agenda

Not so tough to regulate Bitcoin-fiat gateways. They already regulate the living daylight out of fiat.

[pyra-proxy]

Very tough even to try to regulate Bitcoin...

just wait for an ambitious bureaucrat who wants to climb the career ladder and chooses bitcoin as his agenda

Not so tough to regulate Bitcoin-fiat gateways. They already regulate the living daylight out of fiat.

Could be wrong here but I always assume when people say "tough to regulate bitcoin" and comments akin to this they are referring merely to the fact that bitcoin could exist and function as a black market medium, i.e. impossible to shut it down without global supporter cooperation.  This is actually a good argument for why governments should NOT regulate it if they are smart enough to connect the dots... essentially all those bad things they fear could happen will become the primary use of the system (drug trade, money laundering, terrorist organization funding, tax evasion, etc), while left unregulated or even mildly supported the uses for good can thrive and by the very nature that bitcoin is less anonymous than cash governments can then use the system to much more easily find the negative users in the system (as has been proven in past case studies on the anonymity factor of bitcoin), if it goes dark however I can't see a scenario where tracking negative users is as easy since most users would be using it for these purposes and they would all be purposefully doing things to avoid detection (i.e. common practice to use TOR based coin mixers, binary tree balance dispersion, most servers head to anonymous style hosting etc. whereas currently many of the ins and outs of the system are public and well known and a majority of users are satisfied with the current level of anonymity and there is a certain level of self-policing going on if nothing else than for the purposes to shut down scams as quickly as possible.)

The misguided perception here is a possible failing to see that with government regulation in several key jurisdictions (Euro, U.S., China etc.) then Bitcoin becomes "effectively" shutdown in that it will not be able to garner general public acceptance.  While the 2 points are individual, they go hand in hand with each other.

[Carlton Banks]

crack down hard: will generate loads of publicity and might even spawn discussion about what money is, how it works etc... and as a result leave us with an educated public => very bad

You forgot to mention a secondary permutation to this one: crack down hard, and also crack down hard on reporting of the crackdown. Maybe in countries where Bitcoin is more widely used, like Finland and Germany, it would be impossible to stop the stories becoming news. But it's not difficult to prevent those stories from reaching countries where Bitcoin is not as widely used. Then, all you have to do is quell your German and Finnish dissenters, and Bitcoin is officially discredited as illegal money.

[SebastianJu]

http://www.dgcmagazine.com/the-old-radical-how-bitcoin-is-being-destroyed/

I wondered why some here suggested to bind bitcoin to a dollar or so. I mean when this happens then bitcoin wouldnt be a protection against fiat-crashs and somewhat useless because in most cases you would be better to use usd then anyway. Why change in btc?

But i dont quite understand the author. I mean when governments all over the world want to kill bitcoins they effectively should have success. Not because they can block it but they can make it practically useless. I mean nearly all websites for bitcoin are .coms. Can be cancelled. Exchanges .com... are gone. Shops that allow bitcoin... gone... less use for bitcoins. Somewhere have to come updates to the wallet... the developer could be catched. They could make changes into wallet that most users adapt automatically.

And even when there will be other developers that create a fork and a wallet with encryption and so on (could be learned from some previous p2p-projects where isps wanted to make them useless) then... what could be done with btc? I mean a currency lives from its possibilities and his value. The value can be stopped from falling at some point. But useability? How big would the use be when you have to fear the government and could only pay someone in hidden? I think that could practically kill bitcoins.

How you imagine this would work in such case? And are there precautions? I doubt the developers, for example, are anonymous. At least the downloadplace isnt and the software there could be replaced from government.

What do you think?

[nobbynobbynoob]

The value can be stopped from falling at some point. But useability? How big would the use be when you have to fear the government and could only pay someone in hidden? I think that could practically kill bitcoins.

Ask anyone in the drug trade, where we know that government prohibition coupled with extremely strong enforcement has destroyed the value of cocaine and heroin.

[Carlton Banks]

extremely strong enforcement has destroyed the value of cocaine and heroin.

Precisely the opposite, in fact. Increased arrests and seizures push the price upwards, thanks to our old friend supply & demand.

Edit: switching sarcasm detector back on...

[db]

I mean, if merchants accept both bitcoin and EUR for payment, then bitcoin actually _does_ inflate the FIAT money supply, right? For example: let's say there €100 money supply. Now one bitcoin is mined and people value it at €10 for whatever reason and all merchants accept it as payment just like a €10 bill. Didn't we then just effectively inflate the money supply to €110?

The euro can take damage from being outcompeted but the minting rate of the competitor is not relevant. It is all about the relative demand for payments using the two currencies. If no one actually paid in bitcoin (even though all merchants accepted it) the euro market would be completely untouched. Minting of new bitcoins would only increase the bitcoin denominated prices but not affect the euro denominated prices. If everyone paid in bitcoin instead of euro then euros would be just as worthless no matter how many bitcoins were minted or not minted.

[misterbigg]

Ironically, the Bitcoin section of this paper is the most well written, accurate, and easily understood description of the virtual currency that I've seen. Anyone who is writing or speaking about Bitcoin should definitely crib some of that paper.

[BCB]

Jon Matonis,

Gives a great interview about bitcoin and contributes to the discussion of "defining" bitcoin and identifying how is it distinct from other "electronic" or "digital" currency.

http://www.financialsense.com/financial-sense-newshour/guest-expert/2012/10/31/jon-matonis/bitcoin-crypto-currency-is-digital-gold-the-future-of-money

[nobbynobbynoob]

Jon Matonis,

Gives a great interview about bitcoin and contributes to the discussion of "defining" bitcoin and identifying how is it distinct from other "electronic" or "digital" currency.

http://www.financialsense.com/financial-sense-newshour/guest-expert/2012/10/31/jon-matonis/bitcoin-crypto-currency-is-digital-gold-the-future-of-money

Looks at my end to be guarded by a US$ paywall - ironic, much?

[BCB]

If they were SMART they would have offered BITCOIN as a payment option!

Here you go:

http://downloads.payloadz.com/217507/fsn2012-1031-1-matonis.mp3?AWSAccessKeyId=012NFZM3D44FSG20CP82&Expires=1353426926&Signature=6%2BbqHxlKBDW9T9OReXOi4SnDLzc%3D

[evoorhees]

Grinder

Can you be specific?

If you mean the positive sides about Bitcoin it says this on page 21: "Users have several incentives to use Bitcoins. Firstly, transactions are anonymous, as accounts are not registered and Bitcoins are sent directly from one computer to another. Also, users have the possibility transactions are carried out faster and more cheaply than with traditional means of payment. Transaction fees, if any, are very low and no bank account fee is charged."

They also forgot another positive side... users use Bitcoins because they can't be debased through inflation

[BCB]

@ Grinder  this is continuation:

bitcoin is way more real than FIAT money.

I wouldn't use "virtual" at all, because it implies "not really existing, just hot air".
** I dont' agree as virtual just means it exists but not in a physical sense. 

the Euro is  neither "real" nor is it "money".
*** this is where I have a problem  You can make that statement but unless you clearly and simply explain it the "average Joe" is going to think you are a "neerdy Bitcoin Supporter".  As far as they "average joe" is concerned their dollars and euros may be devalued by inflation, but they can still use them to PAY TAXES and buy stuff. 


There is no way you're going to be able to convice average Joe about this, though, and it's not really important at all.

Nitpicking on issues like this will make Bitcoin supporters look unnecessarily nerdy, and lower the chances of convincing the public that Bitcoin is a good idea.
***Again I'm not nitpinking, I'm saying we have to clearly and simply define our terms so as the a broader media and public discovers Bitcoin we have a clear defininton of:

1.  what it is
2.  How is it different

Or else those terms will be defined for us by a misinformed or even hostile media/governments


Instead we should just use terms like this in the way other people are most likely to understand, and focus on what Bitcoin can do better than other currencies.
***YES!

[molecular]

@ Grinder  this is continuation:

bitcoin is way more real than FIAT money.

I wouldn't use "virtual" at all, because it implies "not really existing, just hot air".
** I dont' agree as virtual just means it exists but not in a physical sense. 

the Euro is  neither "real" nor is it "money".
*** this is where I have a problem  You can make that statement but unless you clearly and simply explain it the "average Joe" is going to think you are a "neerdy Bitcoin Supporter".  As far as they "average joe" is concerned their dollars and euros may be devalued by inflation, but they can still use them to PAY TAXES and buy stuff. 


There is no way you're going to be able to convice average Joe about this, though, and it's not really important at all.

Nitpicking on issues like this will make Bitcoin supporters look unnecessarily nerdy, and lower the chances of convincing the public that Bitcoin is a good idea.
***Again I'm not nitpinking, I'm saying we have to clearly and simply define our terms so as the a broader media and public discovers Bitcoin we have a clear defininton of:

1.  what it is
2.  How is it different

Or else those terms will be defined for us by a misinformed or even hostile media/governments


Instead we should just use terms like this in the way other people are most likely to understand, and focus on what Bitcoin can do better than other currencies.
***YES!

Although I don't quite know who wrote what, I pretty much agree my usage of the terms is not fit to communicate with the masses.
I also agree with that last sentence.

[Roger_Murdock]

The fact that the founder of Bitcoin uses a pseudonym -- Satoshi Nakamoto -- and is surrounded by mystery does nothing to help promote transparency and credibility in the scheme.

Good point. I mean, it's not like the founders of the current monetary scheme, er... I mean "system" cloaked their activities in secrecy and used pseudonyms when they got together and planned it at Jekyll Island. What's that? Oh, they did? Yeah, ok, but that was years ago. Still, you gotta admit that the current operations and decision-making process of the Federal Reserve is a helluva lot more transparent than some open-source software that absolutely anyone can review or modify. Right?
 
Edit: And of course, that comparison is really unfair to Satoshi. The planners of the Federal Reserve tried to keep their involvement anonymous to deceive the public. My guess is that Satoshi simply wanted to preserve his privacy and/or avoid becoming the target of violence from the assholes whose racket is rightfully being challenged by Bitcoin.