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Author Topic: If bitcoin succeeds....so what?  (Read 3506 times)
naorai
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June 18, 2011, 11:28:05 PM
 #21

the way i see it:
main disadvantage: infinite inflation - which isnt necessarily always good.
main advantage - decentralizing the currency can do a lot of good to a lot of people, mainly outside the usa and Europe

naorai
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June 18, 2011, 11:28:23 PM
 #22

If bitcoin really succeeds, I guess it will be regulated in a way that it becomes at least very difficult to use it anonymously. A 'worst case' scenario which comes to my mind:

The government creates a new law which makes it mandatory to register all your bitcoin addresses at a newly founded bitcoin regulation office. They'll put all those addresses into a database which then can be accessed publicly via the internet so that everybody can check if an address is properly registered or not (the names of the address owners will not been published, but some governmental institution like e.g. the tax authorities will of course have acces to them). Then it will be made illegal to transfer money to or receive money from non-registered bitcoin adresses. So if you create a bitcoin address without properly registering it, it's not only illegal, you'll also have trouble to find people to accept bitcoin transfers from this address (because they will check the public address database before e.g. accepting you as a customer in your shop).

To make things easier in everyday life, the government could start to distribute a 'secure bitcoin client' which automatically complies to these rules. For instance, if you create a new address, the client registers it immediately. If you send money, the client automatically checks the public database and only allows the transaction if the receiving address is also a registered one.

Given the existence of such a government database which relates all legal bitcoin addresses to the actual names of the owners, the architecture of the bitcoin network will turn the currency into a perfect tool for surveillance. If authorities want to have a list of the things which I bought on the internet within the last ten years, they don't have to bother with getting data from online payment services etc. They just look up my bitcoin address(es) from my database and check the blockchain ...
SeriousWorm
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June 18, 2011, 11:34:29 PM
 #23

If bitcoin really succeeds, I guess it will be regulated in a way that it becomes at least very difficult to use it anonymously. A 'worst case' scenario which comes to my mind:

The government

Yeah, but which government? You're forgetting BTC is an international, Earth currency, not one directly tied to a country.

Also, there's nothing stopping you from sending money from an "unregistered" address to a "registered" one. How can the receiver "refuse" to accept the payment (well, unless you're using the "authorized" client)?
BTC Economist
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June 18, 2011, 11:34:48 PM
 #24

Graduate degree in econ and the OP is what you have to show for it? The education system have failed you miserably or the troll university you attended have done you much good.

Very curious to know your training in economics.

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martinH
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June 18, 2011, 11:52:06 PM
 #25

Quote
Yeah, but which government? You're forgetting BTC is an international, Earth currency, not one directly tied to a country.

Let's just assume e.g. the US government. Of course, this would only affect US in the first place. But they could for example offer foreign (web) shops to register some receiving address to the US list of 'legal' addresses in order to allow US citizen to legally transfer money to them. This would be no big deal for a foreign web shop to do, because they can still keep all their other addresses away from US regulation so they loose nothing from this. But on the other hand they can open their shop for a big market with 300 millions of people by doing so. If this works, the US government could establish their regulation concept without hurting international trade too much, even if other nations would not cooperate.

But I can easily imagine that other governments will like bitcoin regulation and surveillance a lot. So I don't see any reason why there should not be similar regulations in most countries of the world or even international agreements on bitcoin regulations (like for money laundering).

I don't say that this scenario will happen. I'm only saying that it's not unlikely to happen.
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June 18, 2011, 11:54:47 PM
 #26

If bitcoin really succeeds, I guess it will be regulated in a way that it becomes at least very difficult to use it anonymously.

I agree.  Bitcoin will not survive if it remains anonymous as drug/gun trade would tarnish its reputation and adoption.  Governments would ultimately aggressively pursue bitcoin users.

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BitCoinsForGold
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June 19, 2011, 12:54:06 AM
 #27

reputation of "the bitcoin" only matters as much as the integrity of the currency, not what its used for.

People need to quit associating the use of the bitcoin with "illegal" stuff as a bad thing, or just say the same thing about all currencies

Bitcoins - are used to buy to buy drugs and guns, and good stuff too, like video cards and everything else in the trade section
Euros - are used to buy to buy drugs and guns, and good stuff too, like video cards and everything else in the trade section
USD - are used to buy to buy drugs and guns, and good stuff too, like video cards and everything else in the trade section

What a currency is used for means nothing as to the integrity of the currency
vector76
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June 19, 2011, 01:07:49 AM
 #28

What a currency is used for means nothing as to the integrity of the currency

It's not about the integrity of the currency, it's about the real world in which the currency operates (or doesn't).

If someone on ebay asks you to pay using Western Union, they are almost certainly trying to defraud you.  Western Union itself is completely legit and has good integrity.

And that's not even considering law enforcement's potential presumption of guilt by association with bitcoin.  It's not hard to imagine a scenario where using a bitcoin exchanger tends to get you audited by the IRS even if you are 100% legal.  It would be wrong, but it's the world we live in, not the world as we wish it were.
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June 19, 2011, 01:52:03 AM
 #29

I have been getting excited about bitcoin, but now I'm not so sure about it.  Think about if bitcoin is successful.  If many merchants decide to accept bitcoin.  What will happen?  Well....the big banks will still be the big banks and hold the most bitcoin.  Sure, a few early adopters will get rich much like the founders of Google and other companies got rich, but the rest of us?  Not so much.  We'll just be paying more with bitcoins and less with dollars.  Our lives might be a bit easier since payments are easier, but as we've seen lately we still need banks and we'll still get gouged with fees.  We'll just be getting taken advantage in terms of bitcoins rather than dollars. 

Now, onto the Fed situation.  Yes, bitcoin is deregulated.  I know many think this is a chief benefit of bitcoin, but nobody really knows.  Opponents of bitcoin would argue that deregulation is going to make the currency very volatile and as most people are risk-averse, this means most people would rather not live in terms of bitcoins.  Maybe bitcoins will be stable.  Who knows? 

My point is the main change that would result from wide adoption of bitcoin is the unknown.  Our lives won't get much better.  We'll just be in for a surprise.  Now I like reading a good thriller as much as anyone else so this isn't the worst thing in the world, but it certainly isn't the utopia some people make it out to be.
The best thing is that banking secrecy will have real meaning.  Plus Ben Bernanke can't just steal the value of everyone's savings by counterfieting more money.
Tx2000
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June 19, 2011, 02:21:06 AM
 #30

So what?

Choice, that's what.
Richard Andreassen
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June 19, 2011, 02:45:46 AM
 #31

I don't get it... you're doubting bitcoin has value? Isn't that crystal-clear already? Even thieves are after them! Cheesy

Scarcity alone is not enough, but being scarce + being desired by some people is enough to attribute value to any resource.

Yes they have value because they are desired.  Tulip bulbs were valuable because they were desired, and desired because they were valuable.  My problem is that if a thing is ONLY desired because other people want them, then no rational price exists.  Tulip bulbs could be $100 or $1000 or $10,000 and none of these prices is any more rational than any other price.

Actually, there is a rational price, which is the commodity value.  If it has no commodity value then it is zero.

The solution to this is to peg the value of the coins to something with stable value like gold. I think this should be possible without introducing any form of centralized authority.

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Hook^
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June 19, 2011, 02:53:43 AM
 #32

I don't get it... you're doubting bitcoin has value? Isn't that crystal-clear already? Even thieves are after them! Cheesy

Scarcity alone is not enough, but being scarce + being desired by some people is enough to attribute value to any resource.

Yes they have value because they are desired.  Tulip bulbs were valuable because they were desired, and desired because they were valuable.  My problem is that if a thing is ONLY desired because other people want them, then no rational price exists.  Tulip bulbs could be $100 or $1000 or $10,000 and none of these prices is any more rational than any other price.

Actually, there is a rational price, which is the commodity value.  If it has no commodity value then it is zero.

The solution to this is to peg the value of the coins to something with stable value like gold. I think this should be possible without introducing any form of centralized authority.
Any mechanism to do that is susceptable to manipulation.  US $ were pegged to gold, until someone decided to get greedy (Morgan, Loeb, etc.) when they made the Fed.

The beauty of BitCoin is that no central authority can manipulate it.  When enough people use it for transactions, it will stabilize.  Right now it is in pure speculation mode.
blogospheroid
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June 19, 2011, 03:06:19 AM
 #33

I thought about this for a while and I definitely see where the distribution of wealth in a bitcoin economy will be different.

There are those who are close to the fount of money, today - banks. Tomorrow, it will be those with great hashing power. Whether they will be the same is an open question.

But after the greatest part of the bitcoins are generated, then future money will be given to those who are providing services to those in possession of coin. Mining will become unprofitable.

Who will be the new institutions here? The ones with the greatest trust. No one knows, but the first few reputable banks/clearing houses in the bitcoin world can get a HUGE competitive advantage. One aspect people have repeatedly mentioned is that most people will not need banks to do transfers and can do transfers themselves if they pay a moderate fee to miners.

In the world of governments, if large resource producers want only gold or bitcoin, then the entire sovereign bond market changes. Every government comes into the situation that the euro nations are in now - you cannot print your own money. Default is the only option out. This will make people very careful in lending to governments.

Richard Andreassen
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June 19, 2011, 03:18:09 AM
 #34

I don't get it... you're doubting bitcoin has value? Isn't that crystal-clear already? Even thieves are after them! Cheesy

Scarcity alone is not enough, but being scarce + being desired by some people is enough to attribute value to any resource.

Yes they have value because they are desired.  Tulip bulbs were valuable because they were desired, and desired because they were valuable.  My problem is that if a thing is ONLY desired because other people want them, then no rational price exists.  Tulip bulbs could be $100 or $1000 or $10,000 and none of these prices is any more rational than any other price.

Actually, there is a rational price, which is the commodity value.  If it has no commodity value then it is zero.

The solution to this is to peg the value of the coins to something with stable value like gold. I think this should be possible without introducing any form of centralized authority.
Any mechanism to do that is susceptable to manipulation.  US $ were pegged to gold, until someone decided to get greedy (Morgan, Loeb, etc.) when they made the Fed.

First of all; I do not believe in the conspiracy theory about the Fed that it was somehow created to enrich bankers or some nonsense like that. The original purpose was merely to be an insurance policy against bank runs. A lender of last resort.

I do however think that "power corrupts" and that creating such an entity inevitably leads to the abuse of the power it has been given. This is what happened to the Fed (and I do think it should be abolished).

The beauty of BitCoin is that no central authority can manipulate it. 

That is true, but I believe it is possible to make it stable in value without any form of central authority. If this is the case then it would not be possible to manipulate the mechanism.

When enough people use it for transactions, it will stabilize.  Right now it is in pure speculation mode.

It might become stable eventually within some broad range, like +/- 10-20%, but I don't think that is good enough to have a viable currency. Long term planning based on the value of bitcoins would be impossible.

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CamelToeBob
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June 19, 2011, 12:09:56 PM
 #35

the way i see it:
main disadvantage: infinite inflation - which isnt necessarily always good.
main advantage - decentralizing the currency can do a lot of good to a lot of people, mainly outside the usa and Europe

naorai

You're the second person ITT to make the hyperinflation conclusion but neither of you have mentioned how to arrive there. Can you explain how you got there because I'm not seeing it? How is the currency going to be devalued to that point?
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June 19, 2011, 12:46:19 PM
 #36

the way i see it:
main disadvantage: infinite inflation - which isnt necessarily always good.
main advantage - decentralizing the currency can do a lot of good to a lot of people, mainly outside the usa and Europe

naorai

You're the second person ITT to make the hyperinflation conclusion but neither of you have mentioned how to arrive there. Can you explain how you got there because I'm not seeing it? How is the currency going to be devalued to that point?

I think we can just assume he's mixing up his words and meant deflation.

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June 19, 2011, 02:15:46 PM
 #37

I think the uncertainty of the future regarding security and Bitcoin is not enough to stop the draw of being part of money 'owned by no one' and that unites the world in a way that is of literal biblical proportions.

"It's in Revelations people!"
This alone makes the question of 'so what' .. not really mattering.  The so what comes in the satisfaction of doing things different.   I think

Anduril
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June 19, 2011, 03:34:45 PM
 #38

If Bitcoin becomes more successful, it will be declared illegal, just like Liberty Dollars.
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June 19, 2011, 05:58:17 PM
 #39

the way i see it:
main disadvantage: infinite inflation - which isnt necessarily always good.
main advantage - decentralizing the currency can do a lot of good to a lot of people, mainly outside the usa and Europe

naorai

You're the second person ITT to make the hyperinflation conclusion but neither of you have mentioned how to arrive there. Can you explain how you got there because I'm not seeing it? How is the currency going to be devalued to that point?

I believe they mean that, if bitcoin strongly succeeds somewhere, the current currency in use there would be replaced, and as consequence it would lose value, making all prices quoted on it to go up.
It would only cause hyperinflation like that if bitcoins adoption grows really fast in that nation, what I find very unlikely.
philipp
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June 25, 2011, 06:03:05 PM
 #40

Hyperinflation.
Everyone will want to get rid of their remaining fiat currency as quickly as possible. Many people will end up with bags of dollar bills and nothing to eat.
Maybe the governments will step in and offer to buy fiat currency at a fixed rate (and subsequently destroy the bills and coins) using tax Bitcoins, so fiat currency holders won't end up starving.
The transition period will feel like after a world war. After a few years the wounds will have healed, power and welth will have shifted to new owners, just like a few years after the world wars.

Philipp


Can you explain how you came to the hyperinflation conclusion?

Not a hyperinflation of Bitcoins, a Hyperinflation of all remaining fiat currencies. When bitcoin succeeds people will want to buy them, resulting in lots of dollars being put onto the market, thus the value of the dollar will fall.

Philipp
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