"Ashish Goel...who is developing his own peer-to-peer currency"

[ashish]

jhansen: No. PageRank can get amplified by spammers/bad actors. If you get fooled into making a link to a spammer X, and then X links to Y and Y links to X, then the PageRank of both X and Y for you will go up dramatically because of this loop. This is one major cause of spam results in search engines.

Credit Networks are designed to be robust to this. If you mistakenly trust a bad node X for one unit, and X and Y trust each other for 10000 units, they can together only do you one unit of damage. After either X or Y buy something from you and pay you one Dollar in X's currency, you don't trust X anymore and are insulated from additional collusive fraud by X and Y.

[BitterTea]

personally, i understand, and even marginally approve of socialism applied in some areas of human endeavor:  public roads, for example (marvelous creations, which are somehow always ignored by those who claim their riches are solely the result of their own, individual effort).

Jaime, public roads aren't so great when you see them as subsidizing certain industries at the expense of urban sprawl, traffic, pollution, lack of mass transit, etc.

or health care ( individual and collective longevity having considerable impact on the accumulation of wealth - both individually and collectively).

Again, I don't see how government can improve health care. They are the reason we have medical licensing laws (artificially limits supply of doctors), health insurance laws (state mandatory policies, unable to buy across state lines), employer subsidized health care (relic of WWII wage caps, ties employees to employer's health care), Medicaid's under payment for services (subsidized by those privately insured), etc. How can additional government oversight fix the problems government causes?

[nqwi]

What you are saying is indeed correct, jhansen. People are demonstrating their confidence in bitcoin by buying it with US Dollars. And that's great for the currency.

What is missing is the reverse: there is nobody who is guaranteeing that a bitcoin will return US Dollars; a bitcoin is holding its value by mutual agreement and convention. This is weaker than the US Dollar which holds its value because it is guaranteed by a powerful sovereign country.

I could be wrong of course. One could argue that the fact that the US is a country is also a matter of "mutual agreement and convention". Time will tell. Personally, I am more fascinated by the credit network/ripple model, and one of the perks of being a Professor is being able to work on what fascinates you.

What do you mean by "guaranteed". What exactly is the US government guaranteeing?

[jhansen858]

hrm sounds interesting, I'm going to make a point to read about it tomorrow.   The key ideas of course for bitcoin which I was so blown away from are the cryptographic "proof of work" idea which first attracted me to bitcoin.  I can with absolute certainty trust that you cant lie cheat or steal from me because there is too much work involved to make it practical.   Key is absolute certainty.  If an attack on bitcoin network was ever discovered, that trust would be greatly diminished.  If people ever actually lost large amounts of money due to an attack, that would be the death of bit coin. 

For any crypto currency to work, I would have to get that warm fuzzy instantaneous gratification that I got with bitcoin of trusting the proof of work that was done to ensure this currency is legit.  It doesn't have to be a cryptographic method, but that sure is a good one.

   

[Guha]

What exactly is the US government guaranteeing?

at the least that USD will be used to pay taxes? This alone seems to guarantee that demand for dollars will not entirely disappear.

[SpaceLord]

Trust of your peers?

Oh, right, that one guy with the glasses. I trust him.

[cypherdoc]

Because as we all know, the US dollar is safe & sound since it's backed by the good faith of myself and the rest of the american people.

Alot of people have been waking up to the fact that central banking is and has always been a scam.  The families who first realized they could hold peoples money and then loan it out to other people at interest are at this point worth upwards of hundreds of trillions of dollars.

The US dollar has lost some 95% of it's value since it's inception.  And this only continues to drop with questionable economic practices like quantatative easing and mass amounts of fraud.

+1

[cypherdoc]

In a true P2P currency, trust must be vested in peers.

this is where you're wrong.  the network does not rely on trust at all.  if 2 ppl or a merchant and customer waits for the block to clear, the transaction is good.  the whole public record is available to all to verify.  this is Satoshi's brilliance.

[BitterTea]

Because as we all know, the US dollar is safe & sound since it's backed by the good faith of myself and the rest of the american people.

Alot of people have been waking up to the fact that central banking is and has always been a scam.  The families who first realized they could hold peoples money and then loan it out to other people at interest are at this point worth upwards of hundreds of trillions of dollars.

The US dollar has lost some 95% of it's value since it's inception.  And this only continues to drop with questionable economic practices like quantatative easing and mass amounts of fraud.

Not to keep this off topic, but for anyone skeptical of this claim, I highly recommend watching the video The Creature From Jekyll Island.

I was as secretive, indeed I was as furtive as any conspirator. Discovery, we knew, simply must not happen, or else all our time and effort would have been wasted. If it were to be exposed that our particular group had got together and written a banking bill, that bill would have no chance whatever of passage by Congress…I do not feel it is any exaggeration to speak of our secret expedition to Jekyll Island as the occasion of the actual conception of what eventually became the Federal Reserve System.

We were told to leave our last names behind us. We were told further that we should avoid dining together on the night of our departure. We were instructed one at a time....where Senator Aldrich's private car would be in readiness, attached to the rear end of the train for the South. Once aboard the private car, we began to observe the taboo that had been fixed on last names. Discovery, we knew, simply must not happen, or else all our time and effort would be wasted.

If it were to be exposed publicly that our particular group had gotten together and written a banking bill, that bill would have no chance whatever of passage by Congress.

[FatherMcGruder]

Yes, the ripple model is the one I am more excited about.

I happen to be a big fan of Ripple. However, a user on one Ripple server cannot send or receive an IOU to or from a user on another server. Therefore, as it stands, users have to depend on a single, central, vulnerable provider. Hopefully that will change soon.

Anyway, Ripple is an awesome project and I hope you will contribute back to it, that you will open source your work.

[benjamindees]

What is missing is the reverse: there is nobody who is guaranteeing that a bitcoin will return US Dollars;

That's a feature, not a bug.  It ensures that there is no government force artificially subsidizing wealth redistribution, collectivization, unprofitable trade, and overpopulation.  This helps to ensure an ample supply of material resources and a high standard of living.

a bitcoin is holding its value by mutual agreement and convention.

There's no mutual agreement.  A Bitcoin is not a contract or a "note".  Its value is determined by supply and demand.

This is weaker than the US Dollar which holds its value because it is guaranteed by a powerful sovereign country.

The US has no sovereign.  Federal Reserve Notes are not guaranteed by the US government.

Just out of morbid curiosity, how do you expect an individual to "guarantee" his currency?  Suppose you print up an Ashish-note, and I trade you a watermelon for it.  Do I just get to demand something back from you in return?  What if I decide that your Ashish-note has risen in value, and now I'd like to have your house?  Would you guarantee Ashish-notes with your house?  Or does this scheme require infinite, never-ending human labor?  For that matter, why would you even want your Ashish-notes back?  Can't you just keep printing them forever, and aways find new suckers who will accept them?  I suppose you can't do that if you have to "guarantee" them?  Someone can go to court and force you to take them back?  So, then, don't ever print any Ashish-notes if you want to keep your house I guess?

[FatherMcGruder]

Just out of morbid curiosity, how do you expect an individual to "guarantee" his currency?  Suppose you print up an Ashish-note, and I trade you a watermelon for it.  Do I just get to demand something back from you in return?  What if I decide that your Ashish-note has risen in value, and now I'd like to have your house?  Would you guarantee Ashish-notes with your house?  Or does this scheme require infinite, never-ending human labor?  For that matter, why would you even want your Ashish-notes back?  Can't you just keep printing them forever, and aways find new suckers who will accept them?  I suppose you can't do that if you have to "guarantee" them?  Someone can go to court and force you to take them back?  So, then, don't ever print any Ashish-notes if you want to keep your house I guess?

You might find some appropriate answers here: http://ripple-project.org/Main/FAQ

[MacFall]

The only guarantor bitcoin needs is a market for insurance against theft by hax.

[jhansen858]

Just read the Ripple faq...

I do agree that it is an efficient model. 

The mere possibility that some one who you transacted with would not pay you back makes the system unusable from a business stand point imo.   I need to know and depend on the absolute fact that this money I have now will be honored and valid.   If I'm reading this right, this model depends on you not wanting to make people feel bad and lose trust in you when you fuck them over.   I mean, I do business with strangers that I do not or would not want to know personally.  Ripple seems to preclude this type of a transaction being possible.
 

Ripple FAQ

Why should I pay anyone back?

If you make payments through a friend and don't repay that debt, your friend will be liable to the next link in the chain for those payments. You are putting your friend in uncomfortable position of having to make good on your debts to maintain their good name. They only granted you credit in the first place because they trusted you to not put them in this position!

Simply put, if you don't pay someone back, you have hurt your relationship with them. What you have gained in financial capital, you have lost in social capital. If you go about not repaying your debts, you will soon have no one left to grant you credit. Money is useless without a community of people who will accept it.

[ashish]

Its hard to prove that bitcoins won't work or that credit networks will. I guess it will be fascinating to observe how this all shakes out in a decade or two.

It is indeed true in credit networks (as has been pointed out) that if your friend gives you an IOU and then runs away, you are left holding the bag with no recourse. So the whole system depends on choosing your friends wisely. Don't mean to oversell that model. Perhaps we/someone will figure out improvements.

It is also true as has been pointed out that bitcoin's value is supported by supply and demand. The demand is not for something tangible though -- I have a "demand" for bitcoin only if a lot of other people do as well -- hence the analogy to the tulip trade.

Am signing off this panel for now, but am always available over email (ashishg AT stanford DOT edu) and feel free to drop by our seminars: http://rain.stanford.edu and continue the conversation in person.

[Hans0]

bitcoin is Gold 2.0: Limited amount, but anonymous and uncontrollable.

bitcoin is Fiat currency like the USD. USD is not backed by Gold. It is backed by nothing.

[torbank]

In a way, anyone that participates in Bitcoin is a guarantor, voluntarily.

Isn't that clear enough?

[FatherMcGruder]

The mere possibility that some one who you transacted with would not pay you back makes the system unusable from a business stand point imo.   I need to know and depend on the absolute fact that this money I have now will be honored and valid.   If I'm reading this right, this model depends on you not wanting to make people feel bad and lose trust in you when you fuck them over.   I mean, I do business with strangers that I do not or would not want to know personally.  Ripple seems to preclude this type of a transaction being possible.

With Ripple, you only give and accept IOUs to and from trusted associates. Furthermore, you give your trusted associates credit limits and they do the same to you. If you want to do business with a stranger using Ripple, you do not give him one of your IOUs. You are a stranger to him as well and he will not accept it. Rather, the Ripple network maps out a path of trusting associates between you and the stranger through which you give an IOU, equal to the value of the product, to one (or more) of your trusted associates, who gives one to his, and his, and so forth until the stranger gets an IOU from someone he already trusts. You and your trusted associates--and theirs, and theirs, and so on--will settle these IOUs on agreed upon terms, perhaps with USD, bitcoins, barter, and perhaps only on a weekly or fortnightly basis. It may turn out that over the course of that period, you will receive enough IOUs from your trusted associates to cancel the IOUs they accepted from you.

Its hard to prove that bitcoins won't work or that credit networks will. I guess it will be fascinating to observe how this all shakes out in a decade or two.

I hope you don't think that if one does the other can't. I see the two as complementary.

It is indeed true in credit networks (as has been pointed out) that if your friend gives you an IOU and then runs away, you are left holding the bag with no recourse. So the whole system depends on choosing your friends wisely. Don't mean to oversell that model. Perhaps we/someone will figure out improvements.

I think the trick is not to accept more IOUs from your friends than you trust them to pay back. In deciding on a credit limit, you have to consider how much they could default on before it really harmed your relationship and how flexible you are in accepting reimbursement.

[nikion]

Developing one's own p2p currency must be the most profitable business this decade.

From what I've gathered on the form the originators of Bitcoin likely hold a trove of BTC which are current market value would be just shy of a half billion USD, nothing to sneeze at, of course if they tried to realize that profit right now BTC would become worthless ;-)

[andrew_jacksun]

Healthy competition between different currencies will show which currency is accepted by most of the people. The better currency survives, as long as there is free competition possible.

i disagree. but apparently you think gold and silver backed currency is not the best. inflated ego much or just elitist?