Buckle Your Seatbelts

[slilley]

I am a medium-term bitcoin user, having first jumped on board with mining in 2011.  I no longer mine, but I did accumulate a nice collection of bitcoin at a pretty low cost of entry.  I'd like to address a little of what is currently happening and about to happen with bitcoin.  I'm sure this is obvious to many of you also.  Right now what's happening (IMHO) is that we're entering the next phase of the technology adoption curve, where the initial early adopters are beginning to tell others and word is beginning to spread.  Again IMHO, this is likely to lead to a further 10-100 fold expansion of the fiat price of bitcoin in the near future.

Let me give you a personal example.

Since the start of this year, as the price rise started, I reached the personal conclusion that I needed to begin spreading the word about bitcoin among my circle of friends, family, and business associates.  After all, how would it look if in future years I am bitwealthy and my relatives are not, simply because they didn't get on board sooner.  Really there are only two possibilities with bitcoin: either it fails, or it takes over.  It is a superior form of money, as presumably everyone reading this already knows and I don't need to discuss.  Since it's now gone through some of the early growing pains and not failed, my conclusion (again, probably shared by a lot of early adopters) is that it's now ready for the next steps.  Not ready for the mainstream yet, primarily because of the volume, but ready to take a few more steps.  Now, add to this the fact that the writing is on the wall for the mainstream financial system.  None of us want to see our friends and family get Cyprus'd, especially not if it's preventable.  Back in 2008 the options for wealth preservation were primarily hard assets, including precious metals.  I invested in some years ago and have been pretty happy with how I've been protected against inflation, at least.  But they don't represent an opportunity for significant multiplication the way bitcoin does (when viewed as an investment).

Essentially, you are doing a disservice to everyone you care about if you don't have a conversation with them about bitcoin.  I present it in a low-key fashion.  I'm not trying to twist anyone's arm to invest in what is most definitely a high risk investment.  I make it clear that it could fail tomorrow or go down significantly.  However, the upside is beyond fantastic.  No investment like this has probably existed in the whole history of the world.  Maximum loss: 100% of your initial investment.  Maximum gain: possibly 10,000,000% of your initial investment.  If the probably of bitcoin failing is anything less than 99.9999%, then mathematics dictate that it's a good investment in exactly the same way that lotteries are a tax on people who are bad at math.

Here's the response: EVERY LAST PERSON is interested and wants to invest.  I have turned one bitcoin user (me) into more than 10 new bitcoin users who all want to invest at least 1,000 USD into bitcoin.  Many have already done so.  This is just within the last three weeks.  Now those people that I told are telling their own circle of friends, family, and business associates and word is spreading like wildfire.  Among intelligent adults who can do math, it doesn't take long to arrive at the conclusion that the best strategy is to put at least SOME assets into bitcoin.  Those whom I told first are now sitting on 100% or more gains over the last few weeks and can't believe it.  There is a tremendous amount of money out there currently drawing 0% (or near enough) interest that people are DESPERATE for any investment opportunity with a rate of return.  Even the POSSIBILITY of a rate of return.

Here's my prediction: the seeds have been planted and word is spreading like wildfire.  Right now the number of "bitcoin-aware" is probably doubling every week or two.  I know that it normally takes new ideas a long time to go mainstream, but I think many people are unaware how much monetary repression is out there and is affecting people's lives worldwide.  As I tell people, my generation (mid 40's) cannot retire.  The math doesn't work.  There is no low-risk investment out there that yields enough (after inflation) to build a nest egg.  On the contrary, all relatively low-risk investments have a negative real rate of return.  Only a fool would think that there will be anything like Social Security by the time I would be eligible for it.  So, I have gone renewable and sustainable in an attempt to live as cash-free a lifestyle as possible.  If I don't NEED money it doesn't matter so much if I don't HAVE money.  I have been fairly successful at this over the last few years, but not everyone lives on rural property and has the option to grow a garden and raise animals (for starters).  But back to bitcoin....

Yesterday something interesting happened.  I heard from a business associate that they were now planning on cashing out a $50,000 CD that's paying virtually zero interest and putting all of it in bitcoin.  Now, if this was someone retired and that was their whole life savings I would discourage it as far too risky, but this is someone who can afford to put that kind of money at risk.  Keep in mind that this was someone who hadn't heard of bitcoin two weeks ago.  I have at least one local business in town buzzing where almost all of their employees are getting in.

Now let's do some math.  Ten times more bitcoin users, each investing 10 times more money, gives 100 times rise in the bitcoin price.  However, price is set at the margin so it's not really that simple, but you get the idea.  Also, more and more people are beginning to see the writing on the wall for the financial system and are beginning to move not just out of greed or a desire for a higher return on investment, but out of fear that somewhere else is going to be the next Cyprus and this show has a lot longer to play.  Those who study understand that fractional reserve banking is the definition of a ponzi scheme and will fail when it can no longer expand.  That point was reached in 2008 and only running the money pumps at ever-increasing speed has kept the Titanic afloat since then.  Again, old news to everyone on this forum I hope.

Here is what has begun to happen.  A TSUNAMI of money has begun to move into alternative assets.  Anything that looks like a lifeboat will be swarmed with passengers from the sinking Titanic.  Bitcoin is going to get a large share of this, because unlike gold and silver that will hold their value and go up (probably a lot, but by a limited amount), bitcoin is going to MULTIPLY by 10x, 100x, or even 1000x.  Sooner than you might think.  Obviously this is just one opinion and I can't claim to know, but I'm watching this psychology take hold day by day among the people I'm talking to.

And then there's the other side of the bitcoin (so to speak....).  Which is that as all this money flows OUT of banks, brokerages, and stock markets it's going to make them weaker and help catalyze the very thing that bitcoin is designed to work around, which is the failure of the fractional-reserve, fiat currency ponzi scheme.  Bitcoin could literally be the thing that brings down the system.

I also have an ulterior motive.  When the day comes that the banks close here in the US, I have some hope that enough bitcoin "critical mass" has been accumulated here in the small town I live in that we can go bitcoin and keep functioning, at least somewhat.  I have read news articles about hard-hit towns in Greece rediscovering the power of local currency.  Now imagine if that local currency was bitcoin, so all the towns using "local currencies" could trade with each other as well!  Within the next week, I hope to have at least two local businesses set up to accept bitcoin.  There's now a small town in central Texas with probably one of highest bitcoin adoption rates per capita of anywhere on the planet, and all with just a few weeks of effort by one dedicated bitcoin enthusiast and evangelist.  Let's see, 10 in a town of 6,000 is about 166 per 100,000.  Next week it'll be higher.  How good can you do in your location?  If you value your friends, family, and business associates, talk to them right away and let them know about bitcoin so they can get on board to reap the maximum reward from (A) the protection of being insulated from inflation, theft and bank failure, and (B) the rapid appreciation in price.

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[MaxCoins]

Nice post. Thanks.

I have told everyone I can to get in as well, with only what they can afford to lose, as well, of course.

[itsunderstood]

[...]

There's now a small town in central Texas with probably one of highest bitcoin adoption rates per capita of anywhere on the planet, and all with just a few weeks of effort by one dedicated bitcoin enthusiast and evangelist.  Let's see, 10 in a town of 6,000 is about 166 per 100,000.  Next week it'll be higher.  How good can you do in your location? 

[...]

Thanks for an awesome post slilley.

I find it hard to disagree with anything you wrote.  Particularly do I agree with the part about how the recent Cyprus actions of the clueless IMF Europower will inflate bitcoin.  You are right.

I am curious to know more about how small businesses can use bitcoin, for complete abandonment of banks as such.  Can you send me a PM or explain (since we are both newbies here at this forum and have to type here) as to how you might get that going?

I suppose it all has to do with one or two of your bitcoin conversion people, deciding to offer payroll in BTC?  Then perhaps they could be lucky enough to get their creditors/suppliers to accept BTC for bills of lading and so forth?  Your post is great, I think your thread has real potential.

[AnonyMint]

Indeed and this first mover advantage is great for the cause, but it is a problem if suitable competitors don't come fast:

https://bitcointalk.org/index.php?topic=160612.0

Litecoin doesn't fully address the threat either.

A competitor that fixes the threat, also inherently removes the threat from Bitcoin. A win-win for all.

[knight22]

This is EXACTLY how I am seing this. Thanks for sharing!

[AnonyMint]

This is EXACTLY how I am seing this. Thanks for sharing!

Were you replying to my post immediately above yours or to the OP?

[knight22]

This is EXACTLY how I am seing this. Thanks for sharing!

Were you replying to my post immediately above yours or to the OP?

OP

[slilley]

Thanks for all the replies.  I suppose I should have de-lurked long before now, but I try to follow Abraham Lincoln's advice that "It is better to remain silent and be thought a fool, than speak and remove all doubt."

@Vladimir:  excellent point.  I wasn't seeing the money transfer that way.  Obviously the money goes SOMEWHERE, fiat only gets destroyed when debt gets paid off or defaulted on.  If the fiat gets redeposited into someone else's bank somewhere then as far as the banking system as a whole is concerned, it's a wash.  When people start cashing out stocks to buy bitcoin it might be different.

@AnonyMint:  yes, I read your other post and it left me thinking about your points there.  In the long run it could indeed be unhealthy.  I don't think anyone has raised this issue before.  In my opinion, this kind of open discussion about bitcoin is part of what makes it so powerful, all of us together can be smarter than any of us individually.

@itsunderstood:  the logical first adopters (for these second-tier folks beyond the early adopters) are the people I do business with.  I fix computers and sharpen knives.  I'm already sitting at people's computers doing service calls, and most of the people are my long-time clients who know me pretty well and trust my opinion.  Many of them are also local small business owners.  So far I've already done one service call paid with bitcoin.  I had to get the client set up with bitcoin and sell them some of mine first, but I'm looking upon that part as "pro bono" work.  The businesses I'm hoping to get set up are the ones whose services I personally use and I do some bartering with already.  As in, my barber, my chiropractor, and probably soon my mechanic, I think the CV joints in my car are starting to need replacing.  None of those own "chain store" businesses or have real point-of-sale systems requiring payment integration, so for them deciding to accept bitcoin is as easy as making the decision to do so and have me help them set up a wallet (again, pro bono).

Did you see this article over at Zero Hedge?

http://www.zerohedge.com/news/2013-03-29/caught-cyprus-crossfire-small-businesses-suddenly-zero-cash

(excerpt)
The most of circulating assets on our business Current Account are blocked.  Over 700k of expropriated money will be used to repay country's debt. Probably we will get back about 20% of this amount in 6-7 years.  I'm not Russian oligarch, but just European medium size IT business. Thousands of other companies around Cyprus have the same situation.

The business is definitely ruined, all Cypriot workers to be fired.  We are moving to small Caribbean country where authorities have more respect to people's assets. Also we are thinking about using Bitcoin to pay wages and for payments between our partners.
(end excerpt)

So far the business owners I'm dealing with don't really have other employees, mostly very small service businesses.  The concept of paying wages in bitcoin is probably a few more steps down the road, as the workers are going to have to want that as an option.  What I'm trying to leverage immediately is to get paid for MY services in bitcoin, and the only way I can do that is get all my clients set up with wallets and as bitcoin owners.  Once they get started and begin educating themselves, I suspect the idea of expanding the use of bitcoin in their own business will occur to them all on its own.

I'm also beginning to prepare for when the banks here begin looking shaky and my main client comes to me wanting to begin doing the majority of their banking (and perhaps payroll) in bitcoin.  I'm thinking of suggesting a dedicated bitcoin workstation in a separate office, running linux, bitcoin-qt and the armory client.  Also with a dedicated local printer and webcam/scanner for paper wallets.  Here's where suggestions from people with more experience and technical familiarity with bitcoin would be helpful:  should there be just one workstation that is online 24-7 to maintain sync with the blockchain, or also an additional one that is offline only for generating private keys?  As a consultant, I want to be able to suggest the highest degree of security that is also practical and cost-effective. 

[itsunderstood]

@itsunderstood: 

Did you see this article over at Zero Hedge?

http://www.zerohedge.com/news/2013-03-29/caught-cyprus-crossfire-small-businesses-suddenly-zero-cash

Indeed I did.  The Cyprus situation is going to make bitcoin jump no doubt even more than it has.  One thing also to consider, is that stocks, can perform splits, to keep the share price down.  However BTC can't split, so its not really fair to compare, say, GOOG stock at 700 USD per share, to bitcoin at 600 USD per coin, because A: Google split their stock, and B: their float is 329 million shares.  So based on this, if bitcoin can attract even 10 billion dollars of black market capital (which is what kept the banks afloat in 2008 anyway) then the price of bitcoin could easily go to 1000 per BTC or more.  It's all about the underlying market, and google has not yet opened their own silk road.

I feel there is also some great movement of capital in the form of hedge fund managers, who are going to try and buy very large blocks of BTC, probably by buying out some of the early hoarders.  I wonder what the data is, on the larger amounts held?  I suppose exchanges like MtGox are considered the market makers, and therefore are the ones with the true power, but I wonder how that power could be destroyed/altered and then scooped up by others?

If MtGox is in Japan, what could force them to sell out, and who would have the material (Chinese gold?) to buy them out?  That's what your post makes me ask.  1: Who are the top ten market makers in BTC, and 2: How would these be squeezed or leveraged out.

In the case of Potatoes, for example, when they squeezed the potato futures market back in the 70s, the dudes had the McDonalds account, so they controlled the buy side there, and they just oversold the short side, thereby squeezing the markets.  I wonder when BTC futures will begin trading, and will there be more shorts versus longs?  I think it is a presumption that futures trading serves to prevent market volatility, which BTC suffers from and will surely continue to do so?  Just thinking out loud.

Also, since just the first batch of 300 avalon rigs will produce a total of 60 billion hashes per second, which is almost equal to the whole of the existing BTC mining network of "old", then the question would be, how will this hyper-space jump in mining power for some few mining cartels, affect the future pricing of BTC?  These are questions to answer, especially if you seek to protect the money of your people, like small business owners and such.  As you mention, BTC is only for money people can afford to lose, but there are actually more political reasons for shifting to BTC than other reasons.

Haham hey, are any of your Texas bitcoin converts, lawyers, who accept their fees in BTC?  I am guessing not. 

[slilley]

Yes, you bring out some more good points.  My main worry is that bitcoin has now reached step 3 on the "Gandhi Acceptance Curve".  I.E. "First they ignore you, then they laugh at you, then they fight you, then you win."  It is foolish to think that the existing banking system (and government) won't eventually perceive bitcoin and other cryptocurrencies as an existential threat.  Obviously, the easiest point to attack the system is at the fringes; the exchanges.  Just imagine a "Kim Dotcom" style takedown of all the major exchanges, who suddenly find their DNS domains seized regardless of where they are located physically.  Until some major exchange begins operating Silk Road style, through Tor, Freenet, I2P, or some such then we have a point of severe vulnerability.  Eventually I predict that they will all have to do so.  Game theory suggests that there is almost certainly a "black Friday" or "black Monday" or whatever day it is, coming to the bitcoin system when the authorities launch a coordinated attack.  I hope to spur more discussion about what to do now to begin to prepare for this before it happens to ensure as much robustness as possible.  Right now if Satoshi Dice by itself is stressing the system then it shouldn't be hard for authorities with money as no object to create ridiculous transaction volume and spam the blockchain causing an effective DOS attack on the network.  Or for that matter, just flood the network in an attempt to saturate bandwidth.  How resilient is the network right now against this kind of attack?  Has any testing been done?  I don't know the answers to these questions, but perhaps someone who does can chime in here.

I think the best thing that can be done at this point is to spread the word and help the bitcoin ecosystem grow as big as possible as fast as possible.  Bureaucratic inefficiency will ensure that the regulation process will always be a step or two behind, and hopefully the technological innovation can always stay a step or two ahead.  But make no mistake, it is a chess game and the objective is checkmate.  As has been said so many times before, the more actual real world businesses that accept bitcoin, the less the risk that the exchanges represent.

By way of example, let me include this reply I wrote previously in a private email to a friend:


1.  You're in Cyprus, and you have EUR10000 in the bank and BTC1000 bitcoin.  The authorities close the banks over the weekend and threaten to take 10% of your balance.  You now have EUR9000 in the bank (which you can't get into) and BTC1000 in bitcoin which you can.  The bitcoin price in euros is about EUR57 right now.

2.  You book a flight out of the country because you think things are going to get worse.  Thankfully you kept enough cash on hand to do this.  At the airport, the authorities are checking luggage with a metal detector and seizing gold and silver.  Maybe you will get it back someday, maybe you won't.  They also have cash-sniffing dogs.  Since you're not carrying gold and silver or large amounts of cash, they don't bother you.  Perhaps you go to stay with relatives in Turkey.

3.  Upon arrival, you find a local bitcoin dealer using your smartphone and cash out a small amount of bitcoin back into euros for immediate expenses.  Then you open a local bank account and begin a larger transfer of bitcoin back into euros using an online exchange with a lower commission.  Eventually they reopen the banks in Cyprus and you are able to transfer the remaining EUR5000 (after the bank failed and was reorganized) into your new account.

4.  Six months later, the authorities have now found out about bitcoin and they are not happy that they can no longer steal from the people at will.  You get a visit from a stern-looking men with the government tax authority, who tells you that your online activity indicates that you're a bitcoin user, but that your assets were not declared.  You realize that you should have been smarter about the internet and how to use it anonymously (Tor, VPN connections, etc.) but you apologize that you forgot to do this when you entered the country.  He demands that you declare your assets now.  You say that you have BTC0.5734 on your phone (which by then is worth about EUR300) and you show your phone as proof.  He demands to know the password so this can be verified.  So you give him the password to your "spare change" spending account that has BTC2.5734 and log in to your computer and print out an account summary.  You do not reveal that you have another account (with a different password) that still has BTC870 in it, now worth almost EUR500,000.

5.  Every time there are new bank runs, new capital controls, or new money printing the price of your bitcoin keeps going up.  Everyone in the world wants some.  Things aren't so good in your new country by now, and your relatives all wish they had bought bitcoin back when it was only EUR57.  Since they need money right now, they offer to sell you their house for bitcoins.  By now a lot of local merchants are starting to accept bitcoin directly, but since they are officially "illegal" now, you have to know who to ask.  All of them are so glad to finally be able to get their hands on some bitcoin at any price, since all the major online exchanges are either shut down or have moved to really out-of-the-way foreign jurisdictions.  The largest exchange is now in Zimbabwe, where bitcoin has become the official state currency.

6.  You're in Turkey, and you have EUR10000 in the bank and BTC870.  The authorities close the banks over the weekend and threaten to take 10% of your balance.  You have EUR9000 in the bank (which you can't get into) and BTC870 in bitcoin which you can.  The bitcoin price in euro is now EUR200000.  The European Central Bank has started printing money like crazy and now nobody wants euros any more.  All the other central banks have been doing the same thing too.  The price of everything has reached unbelievable levels and hardly anybody has a job any more.  Your relatives are doing ok only because they now have some bitcoin, thanks to you.  You own their house, their car, and all their assets, but at least all of you have food and clothes.

7.  Your whole family books a flight out of the country because you think things are going to get worse.  You are able to make arrangement with the authorities in Zimbabwe to immigrate there, since everyone in the world wants to but hardly anybody has bitcoin.  This costs you BTC100 per person in your family.  At the airport, the authorities are checking luggage with a metal detector and seizing gold and silver.  Maybe you will get it back someday, but it's highly doubtful.  People are being very clever about how they hide even small amounts now.  They also have cash-sniffing dogs and all electronics are scrutinized for bitcoin apps.  Since you knew this in advance, all your coins are in 2 "brainwallets", where you have memorized the passphrase that generates the bitcoin private key.  A small amount in the first one, in case you are forced to disclose it, and a much larger amount in the second one.  Since your family doesn't look quite as poor and desperate as everyone else, you are able to get through security with only a good-sized bribe to the security guards, who know that you must have bitcoin even though they can't prove it.

8.  Upon arrival in prosperous Zimbabwe, you are taken by limousine to the "new citizens center" where you are treated like royalty.  With the whole world economy in ruins, the only places that are able to operate are those that have bitcoin.  Africa, due to its mobile phones and history of bad governments, was an ideal place for bitcoin to take off and now it's the only prosperous continent on the Earth.  Since the supply of bitcoin is forever limited, all the bitcoin you bring into the country's economy will forever give them a larger share of world commerce, so they are only too happy to solicit new citizens with bitcoin.  Bitcoin is accepted seamlessly everywhere and your money can no longer be stolen or devalued by the government.  You are now so wealthy your living expenses are just pocket change and your whole family can enjoy the best of Africa.

[itsunderstood]

[...]

It is foolish to think that the existing banking system (and government) won't eventually perceive bitcoin and other cryptocurrencies as an existential threat. 

[...]

Game theory suggests that there is almost certainly a "black Friday" or "black Monday" or whatever day it is, coming to the bitcoin system when the authorities launch a coordinated attack.

[...]

How resilient is the network right now against this kind of attack?  Has any testing been done?  I don't know the answers to these questions, but perhaps someone who does can chime in here.

[...]

it is a chess game and the objective is checkmate. 

Good points above.  I agree on all counts.  Especially since the whole "profession" of mining, is about to be submarined, in that all the old mining gear is essentially junk now that avalon and ASICs are available.  In locomotive terms, its like steam locomotives have just encountered the first diesels...  Then come the electrics (thomas the train analogies always work).  So how will this disappoint the old miners?  They'll be obsolete.

It's a no brainer that the evil forces can build a death star to whack bitcoin upside the head.  But I am also wanting to discuss it more, to shake out the true strategy.  Your points above are all excellent.

Oh and as for bitcoin futures, I did some more reading and found out they already exist:  http://news.slashdot.org/story/12/09/30/2345206/bitcoin-gets-a-futures-market

In the old days of futures trading, it was the good ol' boys rich guys who were the only ones allowed to trade futures "to provide stability"  ..But I am pretty sure that icbit is not able to sell themselves as being stabilizers for bitcoin, its all just speculation at this point. 

By way of example, let me include this reply I wrote previously in a private email to a friend:


1.  You're in Cyprus, and you have EUR10000 in the bank and BTC1000 bitcoin.  The authorities close the banks over the weekend and threaten to take 10% of your balance.  You now have EUR9000 in the bank (which you can't get into) and BTC1000 in bitcoin which you can.  The bitcoin price in euros is about EUR57 right now.

2.  You book a flight out of the country because you think things are going to get worse.  Thankfully you kept enough cash on hand to do this.  At the airport, the authorities are checking luggage with a metal detector and seizing gold and silver.  Maybe you will get it back someday, maybe you won't.  They also have cash-sniffing dogs.  Since you're not carrying gold and silver or large amounts of cash, they don't bother you.  Perhaps you go to stay with relatives in Turkey.

3.  Upon arrival, you find a local bitcoin dealer using your smartphone and cash out a small amount of bitcoin back into euros for immediate expenses.  Then you open a local bank account and begin a larger transfer of bitcoin back into euros using an online exchange with a lower commission.  Eventually they reopen the banks in Cyprus and you are able to transfer the remaining EUR5000 (after the bank failed and was reorganized) into your new account.

4.  Six months later, the authorities have now found out about bitcoin and they are not happy that they can no longer steal from the people at will.  You get a visit from a stern-looking men with the government tax authority, who tells you that your online activity indicates that you're a bitcoin user, but that your assets were not declared.  You realize that you should have been smarter about the internet and how to use it anonymously (Tor, VPN connections, etc.) but you apologize that you forgot to do this when you entered the country.  He demands that you declare your assets now.  You say that you have BTC0.5734 on your phone (which by then is worth about EUR300) and you show your phone as proof.  He demands to know the password so this can be verified.  So you give him the password to your "spare change" spending account that has BTC2.5734 and log in to your computer and print out an account summary.  You do not reveal that you have another account (with a different password) that still has BTC870 in it, now worth almost EUR500,000.

5.  Every time there are new bank runs, new capital controls, or new money printing the price of your bitcoin keeps going up.  Everyone in the world wants some.  Things aren't so good in your new country by now, and your relatives all wish they had bought bitcoin back when it was only EUR57.  Since they need money right now, they offer to sell you their house for bitcoins.  By now a lot of local merchants are starting to accept bitcoin directly, but since they are officially "illegal" now, you have to know who to ask.  All of them are so glad to finally be able to get their hands on some bitcoin at any price, since all the major online exchanges are either shut down or have moved to really out-of-the-way foreign jurisdictions.  The largest exchange is now in Zimbabwe, where bitcoin has become the official state currency.

6.  You're in Turkey, and you have EUR10000 in the bank and BTC870.  The authorities close the banks over the weekend and threaten to take 10% of your balance.  You have EUR9000 in the bank (which you can't get into) and BTC870 in bitcoin which you can.  The bitcoin price in euro is now EUR200000.  The European Central Bank has started printing money like crazy and now nobody wants euros any more.  All the other central banks have been doing the same thing too.  The price of everything has reached unbelievable levels and hardly anybody has a job any more.  Your relatives are doing ok only because they now have some bitcoin, thanks to you.  You own their house, their car, and all their assets, but at least all of you have food and clothes.

7.  Your whole family books a flight out of the country because you think things are going to get worse.  You are able to make arrangement with the authorities in Zimbabwe to immigrate there, since everyone in the world wants to but hardly anybody has bitcoin.  This costs you BTC100 per person in your family.  At the airport, the authorities are checking luggage with a metal detector and seizing gold and silver.  Maybe you will get it back someday, but it's highly doubtful.  People are being very clever about how they hide even small amounts now.  They also have cash-sniffing dogs and all electronics are scrutinized for bitcoin apps.  Since you knew this in advance, all your coins are in 2 "brainwallets", where you have memorized the passphrase that generates the bitcoin private key.  A small amount in the first one, in case you are forced to disclose it, and a much larger amount in the second one.  Since your family doesn't look quite as poor and desperate as everyone else, you are able to get through security with only a good-sized bribe to the security guards, who know that you must have bitcoin even though they can't prove it.

8.  Upon arrival in prosperous Zimbabwe, you are taken by limousine to the "new citizens center" where you are treated like royalty.  With the whole world economy in ruins, the only places that are able to operate are those that have bitcoin.  Africa, due to its mobile phones and history of bad governments, was an ideal place for bitcoin to take off and now it's the only prosperous continent on the Earth.  Since the supply of bitcoin is forever limited, all the bitcoin you bring into the country's economy will forever give them a larger share of world commerce, so they are only too happy to solicit new citizens with bitcoin.  Bitcoin is accepted seamlessly everywhere and your money can no longer be stolen or devalued by the government.  You are now so wealthy your living expenses are just pocket change and your whole family can enjoy the best of Africa.

AHAHAHA, AWESOME

Yeah, man you really can write!  Outstanding game anaylsis here, and probably very true.  I liked the following points:

CASH SNIFFING DOGS:  Totally true, and also, all police dogs can be taught to 'indicate' at the owner's queue, so all drug dogs are fraud, in fact.  Cops will give the queue to the dog, to 'indicate', even though the dog has not actually scented anything.  So in essence, when things get that bad, it will be great to be a cop, so long as you can dodge bullets and rocks, haha.

THE ILLEGALITY OF TECH:  This one is already building, and I know that when you talk about bitcoin, you can see the fear of the unknown, in the eyes of people.  As I have written in AnonyMint's thread, soon the word itself will be displayed on the media in a negative light and associated with criminality and [insert meme here] which causes evryone to have a jingoist knee-jerk reaction.

AFRICA AS FIRST ADOPTER: You know, "Blackhawk Down" is one of my favorite movies.  One of the funny scenes in that movie is how the little kid sitting on the hillside outside their base, uses his shitty 900mhz cordless phone, to alert the bad guys that the US is coming.  This indicates a key component of your analysis, in that these third world nations, who already have established a corrupt police bribe type system, will be much quicker to adapt to the shitstorm, because we in the US and the West, will be stuck processing the collapse of society.  People in Africa will process it in 24 hours, whereas it will take Americans and Europeans months to process the collapse, and the digital money world, seconds count!

[spacegoat]

I think you're right on too.

one thing that has been brought to my attention is a potentially devastating blow to the bitcoin community with butterfly labs possibly heisting over 100million dollars for their claimed products with backorders.  there is much info on it.  they are offering money making machines for next to nothing and people all over the world are falling for it and ordering, they've sold thousands of these in preorders, and have been promising to deliver since august of 2012.  when I was looking they had promised to deliver by the end of march, now they are pushing back to end of june. 

sounded like a scam to me, so I did a ton of research on it.  and here's what I came up with from reading through the forums

brian micon youtube video -shows CEO's reaction to brian micons doubt that they are legit.
I've read multiple threads stating that the CEO of said company is a convicted felon for mail fraud already, for 25 million.  this is what THEY DO!?

the whole thing smells of scam to me.  I lived on the streets of NYC and LA and I know scammers, I can read minds fairly accurately, if you want to give it a shot watch the CEO talk to the public carefully delivering exactly what they want to hear.)  (I have a 75% rate of mind reading, from lots of ayahuasca experience)(so I don't trust him lets just say that) 

but many customers just rant and rave about this imaginary product they are getting and stand up for him even though many have been yannked around since august.  with promises.  and now they are up to something like 120 million and the number rises everyday how much they are heisting from people.

if they are legit, their products will revolutionize BTC mining, and simultaneously boost the BTC economy drastically with stability and a good future(IDEAL SITUATION).  if they are a scam, and we collectively recognize this, BTC value will plummet immediately. 

two ways to go.

which would provide a good opportunity to buy up BTC cheap before it recovers in the next few years.  or I am feeling like litecoin might end up being more trusted as its not tied with silk road and such.  so this is how I'm playing my cards

I am waiting until realization of said product is delivered or realize its a scam, and I am immediately trading out for litecoins if it is scam.  lite coins should surge ahead while bitcoin collapses.  then I am going to buy up btc and possibly 5X or 10X my investment.

this is just what I am visualizing.

but the originating post in this thread I agree with in the long run, but we have much growing pains to go through in this economy.  its not necessarily going to be just investing in coins and sitting on them.  its going to be like riding a bull.  I prefer to ride bucking mammoths.  or diablos.

anyway.  not to pop the hype, but being realistic.  the BFL issue has hardly been discussed as repercussions to the bitcoin community.  the BFL people are always elusive and make these PR announcements that are completely what you want to hear but say absolutely nothing, like george W bush would do in a press conference. 

anyway, just wanted to ask if anybody saw any holes in my theory with BFL and the repercussions with the BTC economy.  if they successfully heist 130 million from the BTC economy that's 13% of the entire economy stolen.

but my paranoia could be just paranoia and they could be just assholes that have no tact with public relations, but who are going to deliver said product...

look into it and get some media on their asses put some pressure on em... and be smart with your money people

[slilley]

I'm peripherally aware of the BFL issue but I haven't taken the time to get informed in detail.  I don't know that it would be a big problem for the market price, since those dollars already weren't spent buying up bitcoins but went to BFL instead.  If that amount came out of the market now it would certainly cause major problems, but it's only money that never went in, in the first place.  Or am I missing something?  If my central hypothesis is correct (see the OP) then there is plenty of new money headed toward bitcoin very soon.  The major media mentions this week can't hurt.  As I write this the "bitcoin bonanza" story is still front page news on cnbc.  With the potential user base of "bitcoin aware" folks doubling rapidly, I think that within the year most people in the US will have heard of it for the first time.  To use a line from the Matrix, "it's going into replication".  The bitcoin user base will now be best displayed on a log chart.  Eventually as with all new technologies the exponential phase will end as saturation begins, but if I'm right that could be as soon as this year too (the beginning of saturation, not the end).

I sincerely hope more players than Avalon are eventually able to start shipping ASIC's and ratchet the difficulty way, way up to secure the system.  If an investment of a measly few million bucks is enough to control the system right now then we have a big problem.  The miners (hopefully) knew from the beginning that it was a competition dominated by economics.  I started getting bitcoin by mining soon after I found out about it.  I took what money I could scrounge and bought 2 5850 cards.  I was pleased with the ROI and the cards paid for themselves but not much more as the difficulty soared.  I would have done much better by buying coins outright at the price then, but I thought mining was interesting and I'm not really sorry.  I learned.  Hopefully others have/will have a similar experience.  I still have the 2 cards and they are good for gaming, I wouldn't have spent that much on a "frivolous" purchase just to play games with.  I'll soon be building a new PC and perhaps I will find someone who is interested in exiting mining with a top-end card to sell for a good price.  Market economics at work yet again.

[itsunderstood]

Enjoyed this EBay description for a batch 2 ASIC Avalon rig:

I have a pre-order from batch 2, scheduled for late April delivery.
Specs are 65-70 GH/s, and consumes roughly 600 watts.   
Will ship 3-day to winning bidder once I receive the unit, international will take longer. 

here are the terms:

You are purchasing ONE Pre-Order Unit. This unit is from Batch #2 on February 23, 2013 I have ordered total of 5 units.
I have already sold one, and am selling one more. (A copy of actual receipt will be provided to buyer).
Once FULL payment is made by cash, cashier check, bank wire, or bitcoins, I will sign a release of interest and notarize the transfer of one Avalon ASIC unit in your name.

You agree to AVALON Sales policy which is strict and can be found on their website.  ALL SALES FINAL, NO REFUNDS. Not responsible for crap. Awesome return policy huh?

ONCE RELEASED it is yours to do whatever and the contract is now between YOU and AVALON. I will not be held liable if they go out of business or if bitcoin goes belly up.

This is a straight forward change of ownership on an ITEM that is not physically here or delivered yet.

THE ONLY RESPONSIBILITY on my part is to forward the Avalon machine to the agreed place  WHEN I receive it.  No guarantees when that will be!

On Mar-28-13 at 17:23:20 PDT, seller added the following information:

Ebay has informed me that Bitcoin is an unacceptable form of payment.  Thus, the winner of the auction must use paypal, or cash in person. 

This supersedes the payment methods in the description. 

Hmm, too bad we Americans outsourced all our chip factories and are dead in the water.  How much VC would we need to buy an old Texas Instruments factory and get it running by summer? 

[itsunderstood]

Haha this auction for 100,000 also was interesting..

http://www.ebay.com/itm/Avalon-ASIC-Bitcoin-Computer-Bitcoins-EVERYONE-MUST-READ-/130879996721?pt=LH_DefaultDomain_0&hash=item1e790e4331

TO MAKE THIS LEGIT I AM OFFERING 1 UNIT FOR SALE for $100,000 (so this auction can stay up)

So eBay do not remove!

eBay do not remove! Freedom of speech!

I am Currently HIGH PERFORMANCE SELLER (used to be called P-O-W-E-R S-E-L-L-E-R) on eBay and just been screwed over by them. I want to pass this important message to everyone. Please read cut and paste to other chat rooms for forums.

But what I really want to do is To make everyone aware below:

BEWARE OF FRAUD of fake Avalons for sale

EBAY DOES NOT ALLOW SELLERS TO OFFER BITCOINS AS PAYMENT

(The said we must take paypal)

PAYPAL RESTRICTED MY ACCOUNT

(Cause I was selling bitcoins)

EBAY HAS REMOVED ALL THE BITCOIN SELLERS

(The ones now are new sellers or sellers that haven't been taken down)

EBAY HAS REMOVED ALL HISTORY OF SELLING BITCOINS

(Check out my feedback, click on a buyer and notice its deleted)

I recently sold my machine on eBay the sale went fine. HOWEVER, I have noticed since then other auctions have been posted using my info or cut and pasted my auction. Beware of these sellers. I was contacted by a bidder who won a auction and it was fraud.

eBay has taken down all of my BITCOINS auctions. In fact they have taken down all of the REGULAR sellers of bitcoins They have deleted our ads saying bitcoin is not currency and we posted in the wrong section. By deleting our ad, it also prevents us from contacting our current customers. But if you look at our ebay feedback you can see we sold Bitcoins for the last 3 months. But if you browse eBay history, It does not show sales of bitcoins on ebay.

PAYPAL now has restricted my account, and gave me an excuse about how they needed more info which they have. I believe this is a stall tactic. I had several sellers contacted me with the same problem. Also they don't allow you to accept bitcoins as payment on ebay.

For the record, MY AVALON computer did sale to a real person. IN FACT I ACCEPT BITCOINS INSTEAD OF PAYPAL.

How eBay can try to block us from accepting BITCOIN is  clear sign they are AFRAID! The fact they own paypal, they have restricted my account. They strong arm me by holding my paypal money hostage.  Ebay have block me from selling bitcoins, says I am to listed it under information and not money or goods, and paypal has restricted my account saying it has to be a Tangible item.

PASS THE WORD ON

As of today, IT is going to be very hard to buy Bitcoins.

CALL or TEXT ME if you have questions

Spread the word, bittalk, reddit whatever..

Look at my feed back. Its real. And now eBay/Paypal is screwing me over.

Sorry for the sloppy typing. Please pass the word.

I think that this is the first rumblings in an all out war on bitcoin.

When will there be a bitcoin auction site like EBay?  Or will that be the thing that makes LiteCoin move ahead?  Seems like a race to replace EBay and PayPal has begun.  Should be an interesting year.

[frga13]

When will there be a bitcoin auction site like EBay?  Or will that be the thing that makes LiteCoin move ahead?  Seems like a race to replace EBay and PayPal has begun.  Should be an interesting year.

check http://www.bitmit.net/

[MatTheCat]

Wow! Here is a true Bitcoin evangelical preaching to the converted!

Here's the response: EVERY LAST PERSON is interested and wants to invest.  I have turned one bitcoin user (me) into more than 10 new bitcoin users who all want to invest at least 1,000 USD into bitcoin.  Many have already done so.  This is just within the last three weeks.  Now those people that I told are telling their own circle of friends, family, and business associates and word is spreading like wildfire.  Among intelligent adults who can do math, it doesn't take long to arrive at the conclusion that the best strategy is to put at least SOME assets into bitcoin.  Those whom I told first are now sitting on 100% or more gains over the last few weeks and can't believe it.  There is a tremendous amount of money out there currently drawing 0% (or near enough) interest that people are DESPERATE for any investment opportunity with a rate of return.  Even the POSSIBILITY of a rate of return.

Here's my prediction: the seeds have been planted and word is spreading like wildfire.  Right now the number of "bitcoin-aware" is probably doubling every week or two.  I know that it normally takes new ideas a long time to go mainstream, but I think many people are unaware how much monetary repression is out there and is affecting people's lives worldwide.  As I tell people, my generation (mid 40's) cannot retire.  The math doesn't work.  There is no low-risk investment out there that yields enough (after inflation) to build a nest egg.  On the contrary, all relatively low-risk investments have a negative real rate of return.  Only a fool would think that there will be anything like Social Security by the time I would be eligible for it.  So, I have gone renewable and sustainable in an attempt to live as cash-free a lifestyle as possible.  If I don't NEED money it doesn't matter so much if I don't HAVE money.  I have been fairly successful at this over the last few years, but not everyone lives on rural property and has the option to grow a garden and raise animals (for starters).  But back to bitcoin....

Yesterday something interesting happened.  I heard from a business associate that they were now planning on cashing out a $50,000 CD that's paying virtually zero interest and putting all of it in bitcoin.  Now, if this was someone retired and that was their whole life savings I would discourage it as far too risky, but this is someone who can afford to put that kind of money at risk.  Keep in mind that this was someone who hadn't heard of bitcoin two weeks ago.  I have at least one local business in town buzzing where almost all of their employees are getting in.

See what you are describing, that is the classic scenario for a market cornering bull trap. Just one big player consistently ensures that the price increases constantly, eventually all the little piggies come flooding in looking to make a fast buck. Some of them get on and off the train timely enough to do so, but most are slaughtered when the puppet master pulls the bottom out of the market.

Impossible you cry, the surge of mass demand from millions of little piggies will keep the price always afloat!

But keep what afloat?

In case everyone has forgotten. Bitcoin was not intended as an investment vehicle, but as an alternative currency. Any currency that can fluctuate in value by as much as 25% in any given day, without such a fluctuation being seen as abnormal, is no currency at all. In short, this wild upsurge and the accompanying volatility is an impediment to the growth of the economic activities that underpin the value of Bitcoin, and that is with Bitcoin on the up, when Bitcoin is on the way down, it will wipe out many individuals conducting a business using Bitcoin as a means of transferring value in real world economic transactions.

I personally don't believe that this upsurge has come about as a result of the free market in the ideal sense of the word, but rather as a result of market manipulation. Here is a great thread discussing a very plausible agenda as to why Bitcoin is being manipulated: https://bitcointalk.org/index.php?topic=160512.40

Whilst this insane upward price discovery is great for all of those who have got into Bitcoin even as recently as just 2-3 weeks before now, Bitcoin is NOTHING without the economic activity (predominantly black market) which underpins it. And if the volatility being manipulated into the market successfully kills off that, then all those rushing in with $50K, will be left holding a big bundle of digital '18th century Dutch Black Tulip Bulbs' that are no good for nobody. Perhaps many little men can greatly enrich themselves before the day of reckoning comes and perhaps Bitcoin will increase in value multiple times before then also, but people really shouldnt delude themselves with their own wishful thinking as to the nature of this beast.

The concept of Bitcoin, has at least in theory, the power to liberate mankind. But Bitcoin in reality, has been infiltrated, hi-jacked, and is being sabotaged.

[itsunderstood]

When will there be a bitcoin auction site like EBay?  Or will that be the thing that makes LiteCoin move ahead?  Seems like a race to replace EBay and PayPal has begun.  Should be an interesting year.

check http://www.bitmit.net/

Good start I guess.  Thanks!

[Pangia]

Posts: 1




 






Please help me understand what was written about Bitcoin on www.TickerForum.org

Today at 02:34:37 AM


 #1
 

--------------------------------------------------------------------------------

Take a look at what a blogger wrote regarding Bitcoin. If he's right then Bitcoin's future may not be bright.

I am re-posting a "Ticker" that the author/owner of a blog known as Tickerforum (www.tickerforum.org) wrote regarding Bitcoin.  He adamantly opposes Bitcoin and points out several "flaws" in Bitcoin. 

Based on what I have read on the BitcoinTalk forum, I believe that his logic is flawed, but don't know enough to negate what he's saying.  Can those of you who have a more thorough knowledge of the intricacies of Bitcoin take a look at what he wrote and share your thoughts?

His essay is titled "BitCon: Don't" and it is pasted below.

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

http://market-ticker.org/akcs-www?post=219284

BitCon: Don't
   

Ok, I've been asked enough times, here it is -- my view and analysis of "Bitcoin", which I have taken to calling "Bitcon."  That probably deserves an explanation....

Let's first define what an ideal currency would be.  Currency serves two purposes; it allows me to express a preference for one good or service over another, and it allows me to express time preference (that is, when I acquire or consume a good or service.)

All currencies must satisfy at least one of these purposes, and an ideal currency must satisfy both.

The good and service preference is what allows you to, possessing a dozen eggs from a chicken, to obtain a gallon of gasoline without finding someone who has gasoline and wants eggs.  That is, it is the ability to use the currency as a fungible intermediary between two goods and services, one of which you possess and the other of which you desire.  Without this function in an economy you have only barter and poor specialization, with it you have excellent specialization and a much-more-diverse economic picture.

Time preference is the ability to choose to perform a service or sell a good now but obtain and consume the other part of the transaction for yourself later.  With a perfect currency time preference has no finger on the scale; that is, the currency neither appreciates or depreciates over time against a reasonably-constant basket of goods and services.  Since technological advancement tends to make it easier to produce "things" in real terms, a perfect currency reflects this and makes time preference inherently valuable.  This in turn forces the producers of goods and services to innovate in order to attract your economic surplus from under the mattress and into their cash registers, since not spending your economic surplus is in fact to your advantage.  Today's fiat currencies intentionally violate the natural time preference of increasing productivity, but even yesterday's metallic standards did a poor job of representing it.  The problem here is the State, which always seeks (like most people) to get something for nothing and what it winds up doing instead (since getting something for nothing is impossible) is effectively stealing.

Unfortunately Bitcoin, as I will explain in detail, also does a*****-poor job of satisfying either of these requirements.

But before I get to that, I want to first demolish the argument for using it that is going around in various circles and media these days -- the idea that it is stateless (that is, without a State Sponsor) and this is somehow good, in that it allows the user to evade the tentacles of the State.

This is utterly false and, if you're foolish enough to believe it and are big enough to be worth making an example of you will eventually wind up in prison -- with certainty.

All currencies require some means of validation.  That is, when you and I wish to transact using a currency I have to be able to know that you're not presenting a counterfeit token to me.  Gold became popular because it was fairly difficult to "create" (you had to find it and dig it out of the ground) and it was reasonably-easy to validate.  The mass and volume were easily verified and other materials of similar mass and volume had wildly-disparate physical properties and could be easily distinguished.  (The recent claims of "salted" bars with tungsten notwithstanding!)  With only a scale and a means of measuring displacement of a known thing (e.g. water) I could be reasonably-certain that if you presented to me something claiming to be one ounce of gold that it in fact was one ounce of gold.  It therefore was "self-validating."

Likewise, dollar bills are reasonably self-validating.  I can observe one and if it appears to be a dollar bill, feels correct and has the security features I can be reasonably certain that it is not counterfeit.  The Secret Service can determine with a fairly high degree of certainty (and very quickly too) whether a particular bill is real as they can verify the serial number was actually issued and that a bunch of the same serial numbers are not being seen in circulation, but for ordinary commerce this is not necessary; the bill itself has enough unique features so for ordinary purposes it is self-validating.

Bitcoin and other digital currencies are different -- they're just a string of bits.  To validate a coin, therefore, I must know that the one you are presenting to me is unique, that it wasn't just made up by you at random but in fact is a valid coin (you were either transferred it and the chain is intact or you personally "mined" it, a computationally-expensive thing to do), and has not been spent by you somewhere else first. 

In order to do this the system that implements the currency must maintain and expose a full and complete record of each and every transfer from the origin of that particular coin forward!

This is the only way I can know that nobody else was presented the same token before I was, and that the last transfer made of that token was to you.  I must know with certainty that both of these conditions are true, and then to be able to spend that coin I must make the fact that I hold it and you transferred it to me known to everyone as well.

Now consider the typical clandestine transaction -- Joe wishes to buy a bag of pot, which happens to be illegal to transact.  He has Bitcoins to buy the pot with.  He finds a dealer willing to sell the pot despite it being illegal to do so, and transfers the coins to the dealer.  The dealer must verify the block chain of the coins to insure that he is not being given coins that were already spent on gasoline or that Joe didn't counterfeit them, and then he transfers the pot to Joe.  There is now an indelible and permanent record of the transfer of funds and that record will never go away.

This creates several problems for both Joe and the dealer.  The dealer can (and might) take steps such as using "throw-away" wallets to try to unlink the transfer from his person, but that's dangerous.  In all jurisdictions "structuring" transactions to evade money laundering or reporting constraints is a separate and unique crime and usually is a felony.  Therefore, the very act of trying to split up transactions or use of "throw-away" wallets in and of itself is likely to be ruled a crime, leaving any party doing that exposed to separate and distinct criminal charges (along with whatever else they can bust you for.)

Second, due to the indelible nature of the records you're exposed for much longer that with traditional currencies to the risk of a bust and in many cases you might be exposed for the rest of your life.  In particular if there is a tax evasion issue that arises you're in big trouble because there is no statute of limitations on willful non-reporting of taxes in the United States, along with many other jurisdictions.  Since the records never go away your exposure, once you engage in a transaction that leads to liability, is permanent. 

Third, because Bitcoin is not state-linked and thus fluctuates in value there is an FX tax issue.  Let's say you "buy" Bitcoins (whether for cash or in exchange for a good or service you provide) at a time when they have a "value" of $5 each against the US dollar.  You spend them when they have a "value" of $20 each.  You have a capital gain of $15.  At the time of the sale you have a tax liability too, and I'm willing to bet you didn't keep track of it or report it.  That liability never goes away as it was wilfully evaded and yet the ability to track the transaction never goes away either!

Worse, most jurisdictions only permit the taking of a capital loss against other gains, and not against ordinary income taxes.  This really sucks because it's a "heads you pay tax, tails you get screwed" situation. This is the inherent problem that gold and other commodities have as "inflation hedges"; the government always denominates its taxes in nominal dollars, not inflation-adjusted ones.  The only currency against which there is no FX tax exposure is the one the government you live under uses and denominates its taxes in.  That is why the government's issued currency will always be the preferred medium of exchange irrespective of all other competing currencies.

Incidentally, all of this exposure which you take with Bitcoin is very unlike transacting a bag of pot for a $100 bill -- or a gold coin.  Unless you're caught pretty much "in the act" once the pot is smoked and the dealer spends the $100 the odds of an ex-post-facto investigation being able to disclose what happened and tie you to the event fades to near-zero. 

This never happens with a Bitcoin transaction -- ever.

If that dealer is caught some time later, but still within the statute of limitations for the original offense, you could get tagged.  And if the statute of limitations has expired you're still not in the clear if you had a capital gain on the transaction.

There isn't any way to avoid these facts -- they're structural in all digital currencies.  And they don't just apply to buying or selling drugs -- they apply to any act that is intended to evade a government's currency or transaction controls.  The very thing that makes Bitcoin work, the irrefutable knowledge that a coin is "good" predicated on digital cryptography, is the noose that will go around your neck at the most-inappropriate time.

Those who are using Bitcoin as a means to try to foil currency controls or state prohibitions on certain transactions are asking for a criminal indictment not only for the original evasion act itself but also the possibility of a money-laundering indictment on top of it, and the proof necessary to hang you in a court of law is inherently present in the design of the currency system!

Now let's talk about the other problems generally with all such currency systems in terms of an ideal currency and how Bitcoin stacks up.

First, the ability to use Bitcoin to express good and service preference.

Here the fundamental problem of wide acceptance comes into view.  This is the problem that the proponents of the system are most-able to address through various promotional activities.  Unfortunately it also leads to deception -- either by omission or commission -- of the flaw just discussed.  To the extent that the popularity of the currency is driven by a desire to "escape" state control promotion of that currency on those grounds when in fact you are more likely to get caught (and irrefutably so!) than using conventional banknotes is an active fraud perpetrated upon those who are insufficiently aware of how a cryptocurrency works.

Cryptocurrencies have a secondary problem in that because they are not self-validating there is a time delay between your proposed transaction using a given token and when you can know that the token is valid.  Bitcoin typically takes a few minutes (about 10) to gain reasonable certainty that a given token is good, but quite a bit longer (an hour or so) to know with reasonable certainty that it is good.  That is, it is computationally reasonable to believe after 10 minutes or so that the chain integrity you are relying on is good.  It approaches computational impracticality after about an hour that the chain is invalid.

This is not a problem where ordering of a good or service and fulfillment is separated by a reasonable amount of time, but for "point of transaction" situations it is a very serious problem.  If you wish to fill up your tank with gasoline, for example, few people are going to be willing to wait for 10 minutes, say much less an hour, before being permitted to pump the gas -- or drive off with it.  This makes such a currency severely handicapped for general transaction use in an economy, and that in turn damages goods and service preference -- the ability to use it to exchange one good or service for another.  What's worse is that as the volume of transactions and the widespread acceptance rises so does the value of someone tampering with the block chain and as such the amount of time you must wait to be reasonably secure against that risk goes up rather than down.

Then there is what I consider to be Bitcoin's fatal flaw -- the inherent design and de-coupling of the currency from the obligation of sovereigns.  Yes, obligation -- not privilege.

Bitcoins are basically cryptographic "solutions."  The design is such that when the system was initialized it was reasonably easy to compute a new solution, and thus "mine" a coin.  As each coin is "mined" the next solution becomes more difficult.  The scale of difficulty was set up in such a fashion that it is computationally infeasable using known technology and that expected to be able to be developed in the foreseeable future to reach the maximum number of coins that can be in circulation.  Since each cryptographic solution is finite and singular, and each one gets progressively harder to discern, those who first initiated Bitcoin were rewarded with a large number of easily-mined coins for a very cheap "investment" while the computational difficulty of "extracting" each additional one goes up.

That means that if you were one of the early adopters you get paid through the difficulty of those who attempt to mine coins later!  That is, your value increases because the later person's expenditure of energy increases rather than through your own expenditure of energy.  If that sounds kind of like a pyramid scheme, it's because it is very similar to to how the "early adopters" in all pyramid schemes get a return -- your later and ever-increasing effort for each subsequent unit of return accrues far more to the early adopter than it does to you!

The other problem that a cryptocurrency has is that it possesses entropy. 

Entropy is simply the tendency toward disorder (that is, loss of value.)  A car, left out in the open, exhibits this as it rusts away.  Gold has very low entropy, in that it is almost-impossible to actually destroy it.  It does not oxidize or react with most other elements and as such virtually all of the gold ever dug out of the ground still exists as actual gold.

Fiat currencies, of course, have entropy in both directions because they can be emitted and withdrawn at will.  We'll get to that in a minute, and it's quite important to understand.

Bitcoin exhibits irreversible entropy.  A coin that is "lost", that is, which the current possessor loses control over either by physically losing their wallet or the key to it, can never be recovered.  That cryptographic sequence is effectively and permanently abandoned since there is no way for the entity who currently has possession of it to pass it on to someone else.  This is often touted as a feature in that it inevitably is deflationary, but whether that's good or bad remains to be seen.  It certainly is something that those who tout the currency think is good for the value of what they hold, but the irreversible loss of value can also easily lead people to abandon the use of the currency in which case its utility value to express goods and service preference is damaged, quite-possibly to the point of revulsion.

This is not true, incidentally, for something like a gold coin.  The coin can be lost or stolen but unless it's lost over the side of a boat at irretrievable depth it can be recovered and the person who recovers it can spend it.  What constitutes "irretrievable depth" has a great deal to do with exactly how many coins might be there too -- what's impractical for one coin is most-certainly not when the potential haul reaches into the thousands of pounds!

I mentioned above about fiat currencies being able to be issued and withdrawn.  There is often much hay made about the principle of seigniorage, which is the term for the "from thin air" creation of value that a state actor obtains in creating tokens of money.  Seigniorage is simply the difference in represented value between the cost of emitting the token (in the case of paper money, the paper, security features and ink) and the "value" represented in the market.  There is much outrage directed at the premise of fiat currency in this regard but nearly all of it is misplaced because people do not understand that in a just and proper currency system the benefit of seigniorage comes with the responsibility for it as well, and it is supposed to be bi-directional.

That is, in order for time preference to be neutrally expressed, less the natural deflationary tendency from productivity improvement, the government entity issuing currency gets the benefit of seigniorage when the economy is expanding.  But -- during times of economic contraction they also get the duty to withdraw currency (or credit) so as to maintain the same balance, as otherwise the consequence is inflation -- that is, a generalized rise in the price level and the destruction of the common person's purchasing power.

That this is honored in the breach rather than the observance does not change how these functions are supposed to work, any more than the fact that we have bank robbers means we shouldn't have banks.  This, fundamentally, is why currency schemes like Bitcoin will never replace a properly functioning national currency and are always at risk of becoming worthless without warning should such a currency system arise, even ignoring the potential for legal (or extra-legal) attack.

Simply put there is no obligation to go along with the privilege that the originators of a crypto-currency scheme have left for themselves -- the ability to profit without effort by the future efforts of others who engage in the mining of coins.

Those who argue that state actors creating currencies get the same privilege are correct, but those state actors also have the countervailing duty to withdraw that currency during economic contractions associated with their privilege, whether they properly discharge that duty or not.

For these reasons I do not now and never will support Bitcoin or its offshoots, nor will I accept and transact in it in commerce.  I prefer instead to effort toward political recognition of the duties that come with the privilege that is bestowed on a sovereign currency issuer in the hope of solving the underlying problem rather than sniveling in the corner trying to evade it.

The latter is, in my opinion, unworthy of my involvement.

[itsunderstood]

^^^ To respond to the cut and paste above, this guy is talking about felony and laws and so forth, and a good percentage of the population knows that that's all bullshit, since weed should be legal.  Lawyers are performing violence against the human race, and this guy is either rich and can afford to use law as a weapon or shield, or he's not able to see that a lot of laws are just controlling bullshit.

His points about transactions being recorded, are somewhat salient, but not enough to stop what bitcoin represents.  I hate lawyers, and I love guns, so what does that say?  Many people will never agree with me.  Crypto, from the outset, has been seen as an enabler of crime.  But in fact, the very essence of crime is, doing what the authority says you can't do.  In Russia or China, the government is the biggest criminal, and the USA is tilting down that road as well.  The minute the banks of the US get raided like Cyprus, pretty much all lawyers will have to run for cover, because guns and crypto will be far more valuable to them.

When the banks crash, as they must, the US military will be running the courts.  Traditionally, gold and silver were mostly used to pay soldiers in booty (See David Graeber's (sp?) fine youtubes on debt) and so the question essentially becomes this:  How many US soldiers, reservists, or militiamen, are bitcoin enabled and crypto proficient?  That's the only essential question for the next 20 years.  Lawyers as such, have inflated their profession beyond all human concern, and so they have in essence, debauched law itself.  Law, will have to find its own center after the banks collapse.  I think it will do so, but we will have to go through a sort of "Liberty Valance" type of era, where lawyers are mostly seen as vermin.  Just my two cents.

[spacegoat]

^^^ To respond to the cut and paste above, this guy is talking about felony and laws and so forth, and a good percentage of the population knows that that's all bullshit, since weed should be legal.  Lawyers are performing violence against the human race, and this guy is either rich and can afford to use law as a weapon or shield, or he's not able to see that a lot of laws are just controlling bullshit.

His points about transactions being recorded, are somewhat salient, but not enough to stop what bitcoin represents.  I hate lawyers, and I love guns, so what does that say?  Many people will never agree with me.  Crypto, from the outset, has been seen as an enabler of crime.  But in fact, the very essence of crime is, doing what the authority says you can't do.  In Russia or China, the government is the biggest criminal, and the USA is tilting down that road as well.  The minute the banks of the US get raided like Cyprus, pretty much all lawyers will have to run for cover, because guns and crypto will be far more valuable to them.

When the banks crash, as they must, the US military will be running the courts.  Traditionally, gold and silver were mostly used to pay soldiers in booty (See David Graeber's (sp?) fine youtubes on debt) and so the question essentially becomes this:  How many US soldiers, reservists, or militiamen, are bitcoin enabled and crypto proficient?  That's the only essential question for the next 20 years.  Lawyers as such, have inflated their profession beyond all human concern, and so they have in essence, debauched law itself.  Law, will have to find its own center after the banks collapse.  I think it will do so, but we will have to go through a sort of "Liberty Valance" type of era, where lawyers are mostly seen as vermin.  Just my two cents.

david graeber is great
it seems that much gnarly shite will go down in the next 20 years- will bitcoin or cryptocurrency survive?  max keiser's theory that bitcoin could take over is pretty nice, I like the idea, I like the idea of the establishment just sort of killing over nice and easy as we turn our backs on it, giving way to a common sensical means of open source human evolution..

[slilley]

Again, thanks to everyone for the replies.  Debate is a healthy thing and anyone who is so hardened in their ideas that they aren't willing to listen to contrary points of view has a problem, in my opinion.  It is a sign of intelligence and maturity to consider that you might not know everything and be open to new information.

That said, I think the ultimate argument in favor of bitcoin adoption by the masses, in the near future, is that THE TITANIC IS SINKING.  Just ask people in Cyprus if they wish they had known about an alternative, ANY ALTERNATIVE, prior to their money being stolen.  Bitcoin has flaws.  It's not a perfect system.  Perhaps others are better, and as time goes on its limitations will become more clear.  Hopefully with the collective intelligence and effort of the community we can overcome the limitations as they appear and make it a usable tool for the masses in the future.  However, right now it's the "least worst" alternative currency system in existence and as such the leading candidate for the masses of panicked people concerned about the safety of their assets to panic into.  No doubt gold and silver will get some of the money flow, but gold and silver don't enable modern electronic commerce to continue the way bitcoin does.  In the above-referenced article regarding the small IT business in Cyprus, they didn't say that they were planning to start paying employees in gold or silver, they planned to start paying in bitcoin.  Why?  Again, I think it's obvious that as a payment system bitcoin has tremendous advantages over the precious metals, while also acting as a store of value.  Also, it's hard to argue with the fact that as an investment, the precious metals might have an appreciation potential of 10-20x in dollar price.  Yes, gold and silver are heavily manipulated and suppressed and ample evidence exists to support that theory.  Market demand will eventually overwhelm the price suppression scheme, leading to some fantastic gains in dollar value.  But on the other hand, bitcoin has an ultimate appreciation potential of perhaps 1000x or even more.  There could easily be another 10-20x appreciation just this year.  Also, just try crossing any border in the near future with large amounts of precious metals (and the definition of large amounts is changing rapidly).  Bitcoin alleviates all those problems.  If you're a panicked investor or even regular joe looking to get out of the banking system AND you're informed about bitcoin enough to understand these things, where are you going to put your money?

The fact of the matter is that we will find out soon enough which of all the theories is correct.  The crisis of confidence in the banking system brought on by the debacle in Cyprus is, in my opinion, a bridge too far.  I think the fuse has been lit, and although it will take a while to play out in all its facets, ultimately now the public has been put on notice that they can't really trust the system any more.  If trust is destroyed, why use a bank at all?  I personally came to the conclusion more than two years ago that the banking system was untrustworthy, so I set out to find alternatives.  First I started banking like an illegal alien, cashing all checks at the originating bank if possible, asking for cash whenever possible, getting money orders to pay bills.  I obtained a prepaid debit card and began to use it for all online purchases, funding it with cash immediately prior.  I don't leave quantities of money anywhere except in my personal possession.  I still have a traditional bank account from before and it occasionally comes in handy, but mostly to me they are just a check cashing service and it irks me every time I have to wait for a check to clear before I can withdraw the money.  When the banks close they will get very little of my assets.  As a side note, I also did the mental arithmetic early on that this lifestyle necessarily leads to having significant quantities of cash or other assets in one's personal possession.  I have a legal state-issued concealed carry permit and the only place I am not armed is the shower.  Anyone wanting to "acquire" my assets will have to do it the old fashioned way, at considerable personal risk.

My research into money and the banking system led me to an understanding of fiat currency and fractional reserve banking.  It became apparent to me that the whole thing, all of global finance, is just one massive ponzi scheme pulled over the eyes of humanity to blind them from the truth.  It is destined to fail, and like all ponzi schemes will fail shortly after the redemption requests begin to exceed new money inflows.  This happened in 2008 and of course the money pumps were turned on to keep the ponzi going, but this is not without side effects and consequences.  Now we are seeing the beginning of the endgame.  Hopefully most everyone on this forum knows all this already, so I won't rehash it any more.

But my research also led me to bitcoin.  I was stunned.  I spent a good two days back in 2011 just trying to wrap my mind around the concept so I could get an understanding of how it worked.  I scrounged every last penny I could get my hands on to buy in with.  Literally: I cashed in my change jar $50 and $100 at a time and bought bitcoin with it.  Now I'm pretty pleased with how my spare change has done.  I started mining too but only came out slightly ahead versus my initial investment on that score.  For the first time ever, instead of being chained to the deck rail of the sinking Titanic, now there was a LIFEBOAT to get into.

Now we're at the place where Joe Q. Public is close to where I was several years ago.  The banking system is looking shaky and more people are slinging around terms like "fiat currency" and "fractional reserve banking" in conversation.  Even out in public now it's not uncommon to overhear conversations like this going on.  So the ground has been plowed and is ready to be planted with the seeds of knowledge that people need to hear.  What I'm doing is trying to save as many as I can and hopefully have a whole (small) town with the nucleus of a functioning bitcoin economy before the banks close here.  All I can do is plant seeds, but right now the bankers and the evening news are doing a great job of watering them and helping them grow.  I want this town to be a "bitcoin Mecca" to coin a phrase, one that will continue to function in the collapse that's coming.

I am now contemplating running an anonymous bitcoin public service announcement in the local newspaper, something like "Haven't heard about bitcoin yet?  Go to weusecoins.com and find out!"  I want to prime the pump and get people ready.  My personal friends and family have already heard all this from me directly, but there's a bunch of other folks here that haven't.  Some of them will google "bitcoin" or visit the weusecoins website and begin educating themselves.  Perhaps not many, but each one that begins learning is a seed that's growing and will then reach out and touch their circle of friends, family, and associates.

If my experiment in "bitcoinizing" this town is successful, then perhaps eventually some of the other bitcoin early adopters might prefer to relocate to a place where they are wanted and appreciated, and their bitcoin assets will stimulate the local economy at a time when most everything else is falling apart.  I want to become the "Zimbabwe" in my earlier example and emulate the historical example of the "Miracle of Worgl", which occurred in Worgl, Austria from 1932-1933, in the middle of the Great Depression.  This town successfully dealt with unemployment and poverty by issuing a local currency even while the towns around them were suffering badly.  The experiment ended when the central bank shut down their currency, and they went back to being just as miserable as everyone else.  For more information, see:

http://ingienous.com/?page_id=6673
https://en.wikipedia.org/wiki/W%C3%B6rgl

Here in this small rural Texas community we have significant agricultural production, so as long as the farmers can keep farming the town will be able to eat regardless of how bad the economy gets.  I personally eat our own home-grown pork, beef, chicken, and eggs.  It's free range, grass fed, hormone free beef.  I can look out my window and count my cows and decide which one will become dinner next.  So all of you other bitcoin people that enjoy your city lifestyle, what will you be eating when the banks close and the grocery stores go empty?  Dried beans and rice?  Perhaps you might consider a move.  Here your bitcoin might buy you a real steak dinner, for the moment at my house if nowhere else.

[No 1]

what the crap did i just read?

[StephenJH]

At least some creative thought was used. I liked the read. I agree completely as long as people aren't buying bitcoins instead of food... unless they're fat.

[itsunderstood]

[...]

Yes, gold and silver are heavily manipulated and suppressed and ample evidence exists to support that theory.  Market demand will eventually overwhelm the price suppression scheme

[...]

Also, just try crossing any border in the near future with large amounts of precious metals (and the definition of large amounts is changing rapidly).  Bitcoin alleviates all those problems

[...]

Now we are seeing the beginning of the endgame.  [...] I want this town to be a "bitcoin Mecca" to coin a phrase, one that will continue to function in the collapse that's coming. [...]  If my experiment in "bitcoinizing" this town is successful, then perhaps eventually some of the other bitcoin early adopters might prefer to relocate to a place where they are wanted and appreciated

[...]

Great post slilley, I snipped it to identify some key points.

One point 1 about gold and silver being suppressed, this is documented fact that since Bretton Woods, the US has tried to hold gold at 35 dollars per ounce.  Once it was allowed to float in the 1970s, it rose, but they controlled it via leasing schemes.  And on this point I wanted to ask if anybody here has read Jim Rickard's analysis of how the Chinese might perhaps be secretly behind a lot of the Cayman/Bermuda gold leasing front companies, and how at some precise moment, China could demand physical, while also triggering their secret hedge funds to do the same?

Jim's theory would surely result in GLD being halted, and probably FOREX itself would implode.  However, not a lot of paper longs realize that the law allows them to be paid of in USD when and if the exchange implodes.  That's a fact which came up in the Potato Squeeze Default of the 1970s, anybody who is long paper, when the exchange is squeezed, can be settled out in USD if default occurs.  I doubt many of the GLD investors know this, they think they will have some sort of recourse when China destroys the GLD forex market.  But no, they will get USD as a settlement, no gold will be available.  Jim's scenario is absolutely correct, imo.  Its straight up financial war endgame, when the Chinese demand physical delivery and reveal their secret hedge funds.  BOOM goes forex, and the tears of all the paper longs will be a huge river, as they have to accept a devalued (by what % nobody knows) USD, on the day/week that this all goes down.

As to point #2 above, yes you made great points about this with cash sniffing dogs and so forth, when the other shoe drops and the elites grab for the bank accounts here in the US, cash will be essentially like carrying drugs and stop and frisk, roadside confiscations, etc, will escalate.  Naturally this is where bitcoin will have a distinct advantage, as one can store their wallet on a micro-SD card, or even a physical paper wallet which folds into roughly the same size.  Easily hidden on the body.  And again, this means that the stop-and-frisks and the vehicle searches, will become far more invasive as a result, since that all-powerful microsd card, is the needle in the haystack for the future asshead authority who has the power to search you and/or your children, because they also might have something on their person.  I am being purposefully overt here, as to what the searching powers will do, to make the point that frankly, you probably already know.  But one element that makes it truly frightening is how the masses will put their heads down and submit to absolutely ANYTHING, to get through that checkpoint.  They will submit utterly, and yes, they will allow their children to be privately strip searched, anything at all, just to save their lives and get through the checkpoint.  So those who are operating on your level, will have to think several moves ahead, as you already know.

Your third point above, wherein you describe the idea of a whole town that runs on bitcoin, makes me consider the dangers of clustering, and also the dangers of the least-informed or weakest link, in the community:  You said you have read the "I am a Central Bank" thread here at this forum, and so have I, I recently replied to it.  The OP of that thread is correct when he describes the ends, that the money-issuing class will go to, to make bitcoin submit. 

Therefore, I would say that it is prudent to proceed with caution as to how sunny the world will be, when the shit hits the fan.  I mean, frankly, the simple tactic I would use if I were gameplaying a commander against your bitcoin mecca, would be to have a sniffing drone above your town, and dialing in the VPN or just wait for someone on the fringes to not use a VPN, and then after x number of days when I have a good IP thumbprint of the town and specifically, the nature and size of the bitcoin wallets of the town, I could just destroy it utterly, and use the previously captured data to then collect from the bitcoin wallets of the dead. (I also do have a plan to defeat this, PM me for details if you want to talk further )

Sure this is mad max type gameplay, but its important not to underestimate the nature of a covert war which is being waged all around us.  I am saying that when this war goes hot (when US depositors at street level have their bank accounts frozen), the evil powers will conduct war using low-morality warfighters (or imported Hessians) who are told that whatever they kill, they can keep.  So since you describe yourself as being already in the correct defensive mindset, I am sure you are having your friends assume the same mindset.

Probably when the US decides to pull a Cyprus event, they will try to roll it slowly, so that the majority of the people think to themselves "Oh well sucks for them, but MY bank is still safe!" although this contagion may or may not be controllable, as banks scramble.  But the point is that with Cyprus, we have crossed the rubicon, and there is no way to go back.  Depositor confidence has been wrecked.  But my point is that when there is wealth that cannot be hidden (like bitcoin traffic), it is sure that there will be Sheriff of Nottingham types on the hillside, who will know that by taking your town, they can make their gold pile richer.  As a commander who understands how to field armies that live on booty collected, I could assume that collecting data on the town ahead of time, would be the key point, such that once I have a few private keys sufficient to pay my soldiers, I can lay waste to the whole town.  So make sure to keep your people informed as to how they engage with their bitcoins.  If they are not discreet, the scent of money might call the wolves, and if their private key can be gotten, then their elimination could be seen as more likely.

[DirtyGoldMan]

Cryptocurrencies have a secondary problem in that because they are not self-validating there is a time delay between your proposed transaction using a given token and when you can know that the token is valid.  Bitcoin typically takes a few minutes (about 10) to gain reasonable certainty that a given token is good, but quite a bit longer (an hour or so) to know with reasonable certainty that it is good.  That is, it is computationally reasonable to believe after 10 minutes or so that the chain integrity you are relying on is good.  It approaches computational impracticality after about an hour that the chain is invalid.

This is not a problem where ordering of a good or service and fulfillment is separated by a reasonable amount of time, but for "point of transaction" situations it is a very serious problem.  If you wish to fill up your tank with gasoline, for example, few people are going to be willing to wait for 10 minutes, say much less an hour, before being permitted to pump the gas -- or drive off with it.  This makes such a currency severely handicapped for general transaction use in an economy, and that in turn damages goods and service preference -- the ability to use it to exchange one good or service for another.  What's worse is that as the volume of transactions and the widespread acceptance rises so does the value of someone tampering with the block chain and as such the amount of time you must wait to be reasonably secure against that risk goes up rather than down.

I am newly aware of Bitcoin (1 week now ) and believe it has many appealing characteristics as a future currency. Although I don't agree with most of the pasted opposition, there was one point made (quoted above) that has me conflicted. For a crypto-currency to ever become successful in the normal operation of society, transactions must be conducted rather quickly, if not instantaneously. I'm finding it rather difficult to even obtain BTCs let alone imagine them one day being used in normal commerce with literally millions of global transactions occurring every second. I'm sure this has been discussed in detail many times on this forum, so someone please provide the prevailing wisdom to this problem.

[lukestokes]

Great thread. The big question I have is... when? When will the river card flip with the chips on the table? Schiff said last year things would collapse during the middle of this year. How long will people have to make a move? What will the final warning signs be?

My friends are starting to wake up as well. The Matrix is being pealed back. Just weeks ago, some of them thought their bank actually stored the money they deposited. Now they are asking me how to get into Bitcoin.

My company is trying to help in any way we can. Last week we (FoxyCart.com) launched support for a  Bitcoin payment gateway. I've also blogged about Bitcoin. I encourage others to do the same and share the post with your friends.

I do still have concerns about how easily the market will be manipulated. Prices going all over the place certainly will not help promote stable commerce... then again, if we're talking thousands of dollars per BTC and we're doing commerce with fractions of a BTC, it might be OK.

[slilley]

DirtyGold,

I suspect that the author of the quoted article hasn't actually used bitcoin personally.  While the confirmation delay is true, the initial transaction notification is near-instant like email (typically about 2 seconds).  For most small transactions this is good enough.  Especially for things like retail point-of-sale where you might have customers in line.  For buying larger or more expensive items there aren't usually people waiting in line and a 10 minute delay isn't a deal killer.  For depositing into OKpay, they wait for 6 confirmations so that's roughly an hour.  You wouldn't want to wait that long if you're waiting in line, but to make an online purchase I don't mind planning my life an hour ahead.

The single most powerful argument in favor of bitcoin isn't words, it's a demonstration.  Most people when they see it used, begin to "get it" immediately.  Why can't all money be this easy?  When I set new users up with a blockchain wallet, I zap them some pocket change as a demonstration.  If they have an android phone, I do this phone-to-phone so they see both the phone and the computer update, all within a couple of seconds.  If you already have a wallet address, post it and I'll send you some pocket change too.

The real reason it's hard to obtain bitcoin is that it's so superior that nobody really wants to take fiat for it.  At best, guaranteed fiat like cash or bank wire works, but inferior reversible forms like Paypal and credit cards are right out of there.  I also act as a broker and will sell people some of mine, but I'm not trying to cash out of bitcoin for fiat so I then go do a bitinstant transaction to refill as soon as possible.  As long as I do this quickly enough I'm not taking much risk of the market moving in price.  I charge a suitable commission to cover my cost and risk and I explain this to new users.  I'm also happy to show them how to fund through bitinstant, coinbase or other methods themselves if they prefer.  Of course, those times I need a little fiat in my pocket all I have to do is choose how much bitcoin to buy as a refill, if I buy less than I sold then I keep the fiat difference.  Right now I'm deriving a decent side income from this as a business, enough to pay for lunch out most days at least.  And remember, this is only in one small community.  There's a lot of room to grow the user base.

The growing transaction volume will, in time, present a significant challenge to the system.  With blocks only every 10 minutes and the blocksize limited, we will sooner or later run into problems keeping up.  The system is going to have to grow and evolve to meet the demands placed on it, but I'm confident that bitcoin has attracted some of the best minds on the planet to bring the innovation required.  If bitcoin ultimately fails, its deficiencies will be corrected in the next system until we have something that does succeed.  I know other crytocurrencies exist, but right now bitcoin has such a market lead that it's basically bitcoin's race to lose.  Unless there's a major problem with it, most of the money seeking a new virtual currency home will find its way into bitcoin because it's more widely distributed and mature than any of the alternatives.

[slilley]

Luke,

At the risk of being overly wordy in replying to my own thread, I would suggest that the answer to the question everyone wants to know "when".... is "soon".  That's about as precise as anyone can be.  Think about it, if you'd known about the banking system years ago and then saw a newspaper from March 2013 with the current headlines, you'd know that the collapse was imminent.  We've been boiled slowly and the normalcy bias is strong, but things have now taken a decidedly dangerous turn and these topics are beginning to filter into the mainstream consciousness.  You're seeing it yourself.

What will the final warning signs be?  That's easy, just open a browser tab and check the news.  It really requires very little to get from where we are now to outright instability.  Personally, I'd give it a matter of months, probably sometime this year, when the banks in the US close for the first time.  Of course, I've thought that for a while now and I've been surprised that the band aids and duct tape have held it together for this long.

In the sense of "when should I begin pulling money out of the bank and consider moving to a rural area", again that's an easy one to answer.  The best possible time was several years ago, when you could have sold your city real estate for a good sum.  The second best possible time is now.  Remember, the people in Cyprus didn't get any advance warning (although the warning signs were there to see for those who were paying attention).  I personally "panicked" about 10 years, although going broke after the dot-com boom was definitely a precipitating factor in moving "back home" to our family land.

[Alonzo Ewing]

Yesterday something interesting happened.  I heard from a business associate that they were now planning on cashing out a $50,000 CD that's paying virtually zero interest and putting all of it in bitcoin.  Now, if this was someone retired and that was their whole life savings I would discourage it as far too risky, but this is someone who can afford to put that kind of money at risk.  Keep in mind that this was someone who hadn't heard of bitcoin two weeks ago.  I have at least one local business in town buzzing where almost all of their employees are getting in.
 theft and bank failure, and (B) the rapid appreciation in price.

I've been speculating for over 15 years, and I lived through the Dot-com bubble.  The anecdote above is not reassuring, but rather, worrying.  That is the kind of thing that happens near tops.  The wild frenzy over the last week in which "elevator boys" give Joseph Kennedy investing advice says we're very close to a top, at least time-wise, if not price-wise.

[OpenYourEyes210]

Great post! I'm 24, and I try and get my friends to get in on bitcoin all the time, family also. So far no one has because they're "too broke". I know how that is, I personally sold 25 ounces of silver to buy my bitcoins... And that was really hard! But I know it will all be worth it down the line 

[buddhacoiner]

The awareness, understanding and adoption of bitcoin is on the rise.  As the community continues to increase in size bitcoin becomes further legitimized and thus its value will rise.  Further, all the nuances relating to initial 'difficulty' of adopting a bitcoin way of life will slowly be solved (more user friendly, or let's say easier-to-understand-for-the-layman, wallet systems, etc.)

The best thing bitcoin proponents can do at this point, as mentioned above, is to spread the word.  Friends, family and FACEBOOK!  I would like to see some large marketing company begin a massive social media campaign devoted to spreading the beauty that is bitcoin

[slilley]

Alonzo,

Thanks for that reminder, you have a point.  I lived through those "bubble" days not as a speculator, but as an employee with retirement funds in the stock market, only to see my financial future pretty much go up in smoke between losing jobs and the market plunge.  Indeed, mania is what a top looks like.  I did some long and hard thinking after reading your post to see if indeed your argument might be correct and this might be "irrational exuberance" and probably a market top.  The conclusion that I reached is that although there is indeed a mania taking hold, it's only the 0.1% of investors that have actually heard of bitcoin that are starting to become manic.  When this number climbs above 50% then I'll start to get worried.  For now I still think we have only just entered the second phase of adoption, which is when the initial more-or-less linear curve of early adopters starts to give way to an exponential curve as each person spreads the word and the number of adopters multiplies with each time interval.  This will, of course, give way to saturation as eventually most of those to whom bitcoin will mean anything have heard of it and either accepted it or rejected it.  But given the number of blank stares I still get from even the fairly-well-informed people I know, it's still early on in the game.

[itsunderstood]

[...]

The wild frenzy over the last week in which "elevator boys" give Joseph Kennedy investing advice says we're very close to a top, at least time-wise, if not price-wise.

Well, buying any of Joe's stock picks might not have been wise, but buying stock in his kids would have been a good investment, if you like horseracing.  

Seems like both precious metals, and Kennedys were taken off the market in 1963, so I guess that was the top.

[caujiahai]

This is exactly how I am seing this. Thanks for sharing!

[Jet Cash]

Why have you joined this forum
Please clear off and stop polluting it with your worthless necro bumps