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Author Topic: The Future of Bitcoins as a legitimate currency  (Read 1679 times)
Lucky24
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June 12, 2011, 07:56:13 AM
 #1

I'm starting a new thread here in the hope of bringing some light to the current problem of bitcoin exchanges.  For an excellent overview of the problem, please read Falkvinge's article here: http://falkvinge.net/2011/06/10/bitcoins-four-hurdles-part-four-exchanges/

It is quite evident that the recent downturn is a direct result of three occurrences: profit-taking, bad press, and Dwolla failure. 

The first two are obvious.  At a high of $31.40, even long-term traders saw an opportunity to make significant profits, and they took it.

Furthermore, the two US Senators who 'want to shut down bitcoin' headline was plastered all over the internet, perhaps prematurely.  In fact, the Senators are far more concerned with shutting down the Silk Road than with bitcoin, a point that is obfuscated by the press because they want to sell a story.  Instead of quoting the senators calling for the fall of bitcoin, they are quoted saying reasonable arguments that the silk road was a clearinghouse for anonymous transactions over the internet.  Which is obvious - the Silk Road had obvious illegal activity that could be easily prosecuted under US law under anti drug-trafficking law.  Indeed, lets look at the quote from the PCWorld article:
Quote
"The only method of payment for these illegal purchases is an untraceable peer-to-peer currency known as Bitcoins. After purchasing Bitcoins through an exchange, a user can create an account on Silk Road and start purchasing illegal drugs from individuals around the world and have them delivered to their homes within days. We urge you to take immediate action and shut down the Silk Road network."
  (Emphasis mine).
They specifically did not say they were looking to shut down bitcoin.

Finally, and most importantly, is the problems MtGox had/has with transfers with Dwolla.  It can take over a week for money to be available for MtGox purchases, and the failure of automated withdrawls until Friday means that for the weekend, for all intents and purposes the exchange was broken.  It's reassuring the problem was fixed within one business day, but there is a reason most exchanges operate only during business hours - it's exceedingly if not impossible to freely exchange money during the weekend.  This disruption just happened to occur over the weekend, and during a very-much-needed correction.

If MtGox does not freeze trading until Monday morning (when money will again begin arriving in investors accounts), bitcoins will continue to fall in price.

Of course this does not change the long-term bitcoin market. These types of growing-pains are common in new industries. However, the emerging nature of the technologies behind bitcoin are what will ultimately define its success or failure.  It's imperative that an enterprise the size of Mt.Gox show maturity by creating close partnerships with those companies both above and below them on the value-chain - the disruption with Dwolla is an excellent example of the difficulties of distributed networks.

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max3t
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June 12, 2011, 09:36:41 AM
 #2

In the short term I see two big problems:
  • You can't (easily) change btc anonymously to USD and reverse
  • You can't pay amazon with btc
  • The prices are not stable at all

You can't expect normal people to construct a hidden network of btc-trading when it's illegal to use btc, can you? Can you employ a shop which accepts btc when btc is illegal? No.
I personally wouldn't trust many of my friends because they may be to naive.

I don't expect anything, but I am listening at 18WN5YRGaBKGPus4n8QHuF7YnyzyDxMRQ6 Wink
killer2021
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June 12, 2011, 09:42:30 AM
 #3

In the short term I see two big problems:
  • You can't (easily) change btc anonymously to USD and reverse
  • You can't pay amazon with btc
  • The prices are not stable at all

You can't expect normal people to construct a hidden network of btc-trading when it's illegal to use btc, can you? Can you employ a shop which accepts btc when btc is illegal? No.
I personally wouldn't trust many of my friends because they may be to naive.

These issues will be worked out overtime, as the market matures. Right now, the word is just spreading like wildfire of this new system. Give it 1-2 years before its, "noob friendly."

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Gregers
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June 12, 2011, 10:14:04 AM
 #4

The thing I don't understand is that on Mt. Gox, it says that the bitcoin is a commodity?
max3t
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June 12, 2011, 10:15:28 AM
 #5

killer2021, I would like to share your optimism, but I think the use of bitcoin is already illegal and will be prosecuted in 1-2 years time.

State needs control, state loses control, state enforces control. As always. But maybe I'm to pessimistic now. We'll see

I don't expect anything, but I am listening at 18WN5YRGaBKGPus4n8QHuF7YnyzyDxMRQ6 Wink
killer2021
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June 12, 2011, 10:20:54 AM
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killer2021, I would like to share your optimism, but I think the use of bitcoin is already illegal and will be prosecuted in 1-2 years time.

State needs control, state loses control, state enforces control. As always. But maybe I'm to pessimistic now. We'll see

I am not underestimating the power of the state to write and enforce laws. However, you have to understand that there has been nothing like bitcoin. Everything in the past has been centralized, so it was easy to shut down that central person/business etc. With bitcoin, who exactly do you prosecute? How exactly are going to prosecute someone living in africa or russia who owns and operates an exchange?

In the USA the law moves slowly. I am sure it will take YEARS before any, even basic, laws get passed to stop bitcoin.

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officialsavage
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June 12, 2011, 10:22:48 AM
 #7

In the short term I see two big problems:
  • You can't (easily) change btc anonymously to USD and reverse
  • You can't pay amazon with btc
  • The prices are not stable at all

You can't expect normal people to construct a hidden network of btc-trading when it's illegal to use btc, can you? Can you employ a shop which accepts btc when btc is illegal? No.
I personally wouldn't trust many of my friends because they may be to naive.

These issues will be worked out overtime, as the market matures. Right now, the word is just spreading like wildfire of this new system. Give it 1-2 years before its, "noob friendly."

I agree, if btc continues to grow the way it is now, we will see a "noob friendly" system in that time.  BTC is going to be known as a historical game changer for online retailers in the future.
max3t
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June 12, 2011, 10:28:19 AM
 #8

With bitcoin, who exactly do you prosecute? How exactly are going to prosecute someone living in africa or russia who owns and operates an exchange?

I'm not a lawyer but there are laws to control the flow of "values" (think about taxes or import restrictions).
Bitcoin is anonymous (to the state) and though the law cannot be "fulfilled". So the use of the currency will be forbidden for everyone.

I don't expect anything, but I am listening at 18WN5YRGaBKGPus4n8QHuF7YnyzyDxMRQ6 Wink
max3t
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June 12, 2011, 10:31:51 AM
 #9

I agree, if btc continues to grow the way it is now, we will see a "noob friendly" system in that time.  BTC is going to be known as a historical game changer for online retailers in the future.

Amazon will never accept bitcoin. See paypal declared bitcoin as illegal already. (OK paypal is expected to be deeply routed to the government, but most of the global players are)

I don't expect anything, but I am listening at 18WN5YRGaBKGPus4n8QHuF7YnyzyDxMRQ6 Wink
newmont
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June 12, 2011, 11:44:46 AM
 #10

The thing I don't understand is that on Mt. Gox, it says that the bitcoin is a commodity?

BTC trades like a commodity - not a currency. Currencies, except in times of massive crises have extremely low volatility, in part because they are so widely held. not so with BTC
¢A$HÅ
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June 12, 2011, 12:21:59 PM
 #11

I thought the reason bitcoin's USD value dropped so drastically was because SilkRoad was closed to new registrants since the peak at 31.50 or whatever. Not so?

Ruxum
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June 12, 2011, 12:59:17 PM
 #12

Being able to buy life's necessities in your local market in countries around the world would make it a legitimate GLOBAL currency. 

Can you buy bread in Ireland?  Eggs at the market in Thailand? 

The question is how to get the masses to use it...

Lucky24
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June 12, 2011, 01:35:52 PM
 #13

Being able to buy life's necessities in your local market in countries around the world would make it a legitimate GLOBAL currency.  

Can you buy bread in Ireland?  Eggs at the market in Thailand?  

The question is how to get the masses to use it...

This actually is hindered by bitcoin's fundamental value of deflation.  Fiat currencies partly get their value due to the assumed stability given by such a widely circulated "commodity".  This stability is from both (hopefully) well-thought out adjustments in supply/demand by the issuing government, and by the widely used nature of a central currency.  Indeed this was the thinking behind the US Constitution's declaration that the federal government would be the only governing body allowed to issue currency.  A single currency greatly simplifies the task of quickly assigning known *relative* prices between goods.  Now, the founding fathers obviously couldn't predict the massive power the internet would bring to the citizenry to upend government power.

That is, of course, assuming internet neutrality is declared an unalienable right of the people.  I am not worried as much about government intervention specifically against bitcoin directly, as I am about a growing tide of corporate interests looking to break up the internet as we know it, wanting to carve it into fiefdoms of media conglomerate control (a la cable television).
mg101
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June 12, 2011, 01:43:56 PM
 #14

The question is how to get the masses to use it...

if btc survives over the next 6-12 months, it will grow. due to the potential for creative use, certain governments will do what they can to stop btc, but there will be safe hosts, somewhere - just look at tpb, leaks, etc etc...

what we need for greater acceptance is that legitimate businesses start accepting btc. unfortunately there is no way for them to use this as cashflow. there are obvious difficulties with converting back to local currency, especially in any volume, so i think this would require a big leap of faith, from a business perspective.

how many btc users own businesses, and would be prepared to accept this as payment?
BrewProof
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June 12, 2011, 01:44:40 PM
 #15

I agree, if btc continues to grow the way it is now, we will see a "noob friendly" system in that time.  BTC is going to be known as a historical game changer for online retailers in the future.

Amazon will never accept bitcoin. See paypal declared bitcoin as illegal already. (OK paypal is expected to be deeply routed to the government, but most of the global players are)

U cant use paypal as an argument to apply to amazon because amazon doesnt accept, nor is affiliated with paypal.  go eat some tacos and ponder the meaning of BTC.

NEVER UNDERESTIMATE THE VALUE OF A GOOD TACO!!

Please donate bitcoins so I can buy more tacos:
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gmk80
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June 12, 2011, 05:32:00 PM
 #16

Quote
State needs control, state loses control, state enforces control. As always. But maybe I'm to pessimistic now. We'll see

State enforces control... People go to another state. Easy. Take your bitcoins with you. Oh, and don't be the last one out.
anarchogasm
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June 12, 2011, 05:51:07 PM
 #17

It's all about educating people. It takes a while to explain to noobs about cryptography, proof of work, anti-inflation, peer-to-peer transactions etc; once they "get it" they get super excited about the potential. But most people just don't get it yet, even the libertarians (who should be super excited about it) don't seem to get it -- see Lew Rockwell's post here: http://www.lewrockwell.com/blog/lewrw/archives/89471.html The masses need to be educated! I'm doing it one person at a time...

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