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Author Topic: Re: Bye bye bitcoin (Split: Morality of Bitcoin vs. Fiat Discussion)  (Read 5065 times)
murraypaul
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October 17, 2013, 11:42:57 AM
 #61

1. Bitcoin is currently in deflation not inflation (the little BTC inflation is defined by the protocol with 25 bucks for each block)

I think you mean the other way around.
Bitcoin may eventually be deflationary, but currently it is much more inflationary than USD, EUR or GBP.
(In terms of money supply, I don't think there is any meaningful measure of pricing inflation for Bitcoin, because almost nothing is priced in it.)

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October 17, 2013, 11:45:46 AM
 #62

1. Bitcoin is currently in deflation not inflation (the little BTC inflation is defined by the protocol with 25 bucks for each block)

I think you mean the other way around.
Bitcoin may eventually be deflationary, but currently it is much more inflationary than USD, EUR or GBP.

No - I mean what I wrote. Bitcoin is far below its real potential current value. Since the inflation of Bitcoin is very low - 10 BTC every 10 minutes - it is in deflation mode.

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murraypaul
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October 17, 2013, 11:48:26 AM
 #63

1. Bitcoin is currently in deflation not inflation (the little BTC inflation is defined by the protocol with 25 bucks for each block)

I think you mean the other way around.
Bitcoin may eventually be deflationary, but currently it is much more inflationary than USD, EUR or GBP.

No - I mean what I wrote. Bitcoin is far below its real potential current value. Since the inflation of Bitcoin is very low - 10 BTC every 10 minutes - it is in deflation mode.

You're contradicting yourself, surely?
If it has inflation, even if it is low, how can it also have deflation?

Anyway, your 'very low' inflation figures:
Total Bitcoins in existance: 11,856,350
Bitcoins created per year: 25*6*24*365 =  1,314,000
That is more than 10% increase in total Bitcoins in existance per year.

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October 17, 2013, 11:51:11 AM
 #64

Some points:

1. Bitcoin is currently in deflation not inflation (the little BTC inflation is defined by the protocol with 25 bucks for each block)

2. Printing fiat money is theft for sure because the inherent inflation (printing money is inflation) takes the buying value from all existing money of the same fiat sort

3. The statement 'little inflation drives the economy' is not the full truth. It implies that people are scared of loosing their money and put it back into the economy circulation. The bad side is that it also implies interest which feeds people who already own enough fiat money. And the real negative point with that again is that it creates a steady money flow from the poor debted people to the rich wealthy ones. More worse - if the state is debted (the current case) then the whole economy is threatened just by the inflation mechanics. -- One may argue that the Bitcoin deflation has a similar problem because the early adopters profit from the deflation value increase. That is true. But it is not a similar problem because the deflation stops slows down and may stop some day. Then nobody makes profits just from owning the Bitcoin anymore.

4. One very big problem is the equity covering quote for banks. In Germany it is 7%. That means if a bank has 7000Euro in its safe the bank is allowed to credit 100.000,- Euro to debitors. Inherently the money multiplies multiple times over a credit chain with multiple banks. This creates a big imbalance between real money and credited money with the well known risks - Lehman Brother was a typical szenario. With Bitcoin this i not possible - you cannot create virtual money - you own the Bitcoin or not - finish.

Lehman would not have gone under if it was typical.

http://www.prefblog.com/?p=2377

Its central issue was not leverage - it was AAA assets that were actually junk.

To call printing fiat money or inflation "theft" is injecting morality and emotion where it doesn't make sense.  Is it "theft" if a creditor can't repay their debts so the saver loses their capital?  Of course not.  Likewise its not theft if both parties have chosen to use fiat currency and inflation reduces the principal.  

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October 17, 2013, 12:03:24 PM
 #65

I can tell you about a few fiat currencies that are not forced on people and that are commonly used.
The USD is one of them, the EUR another. In many countries across the world, it may even be illegal to use them, but they are used nonetheless.
Or how about a privately issued fiat currency that's accepted and traded worldwide? Think Bonus Miles.
You seem to be using the term 'fiat' to mean 'unbacked.'
The rest of us are using the term 'fiat' to mean the official definition: "a formal authorization or proposition; a decree". Money forced on you by people with the power to compel you.
I've never seen your particular use of the word "fiat", but that may be a language issue.
Fiat money has been defined variously as:
  • any money declared by a government to be legal tender.
  • state-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.
  • money without intrinsic value.
I tend to use the term "fiat" by the first two definitions, the third being a little too general for my taste.
Also, we seem to have a very different view of states/authorities. I don't see "people with the power to compel you" but rather a society with self-chosen rules.


I repeat: no one forces you to hold any currency, as far as I know.
That you're required to use it for a short period of time when it comes to settle your bills, is an inconvenience, no more, no less.
When the coercion to use the money is that pervasive (and invasive,) people will also hold onto stashes of it. That's just human nature. And the people who make use of this scam know it.
If it's so attractive for them to hold it, I fail to see where they are forced. There's a huge difference between making a good offer that you willingly accept and forcing you to accept my offer.
Your whole argument is centered on the fact that "the government" forces you to hold their money. Which is clearly not the case. They force you to use it for certain acts like paying taxes etc., but it's perfectly legal for you to keep your live savings in whatever currency or commodity you prefer. It is highly convenient for you to keep at least a large share of your day-to-day savings in the greenback, which is why you actually hold on to your Dollars. But that's not being enforced by anybody. That the Dollar depreciates in value over time is a fact and probably even stated explicitly (actually, i'm unsure about the Dollar, but the Euro has a target inflation rate of 2%, which is no secret, but publicly announced). The choice is yours. No force involved.


It could be considered coercion, when you're forced to use it.
It could be considered fraud, if someone actually made a promise about its value and devalues it later on (but in reality, no one makes such a promise).
The coercion makes it theft.
Wrong again. If anything, taking value from you by force is robbery. This may seem like nitpicking on my side, but i think it is important to use the correct legalese when you accuse someone of something.


If Bob approaches Alice and *forces* her to accept his IOUs in exchange for her goods and services, and to use them in her dealings with others, then produces and distributes so many more IOUs that the ones Alice has are only worth a tiny fraction of their original value, you can argue all you want about how it's not theft but when he's locked up like a common thug for it, most of society will have little sympathy for him.
First of all, you're over exaggerating a lot here. Dollar inflation has been around 2-3% over the last decade, with spikes into the 5.x range and also short tendencies of deflation. That's a little worse than the situation of the Euro, but still a pretty stable currency for any practical use. Calling this "worth a tiny fraction of their original value" is like accusing someone of mayhem because he pinched you in the cheek.


Fiat is a really good concept. I've used fiat all my life and it served me quite well.
Fiat, as defined by the second usage above, is NOT a good concept. You say it has served you and everyone you know quite well. I'd argue it has served you all abysmally.
Sure, you could make use of it. It was *functional*.
It had to at least be that for the scam to work. But it also resulted in the loss of quite a significant portion of your wealth through inflation over just the last few decades. Worse, it didn't just cause that wealth to evaporate, it enabled the theft of that wealth by insiders who quite literally profited at your expense. I can only imagine you feel fiat has served you well because you've never had the real option of living in a (well-off) society that didn't revolve around it. And of course, those profiting from it would like to keep it that way.
I've been aware of the target inflation rate of 2% for at least the last 20 years of my life, which is even a little longer than the period of time where i had any significant income myself. The overall economic progress of the society i live in has given me access to a good school system, affordable, quality health care, decent housing, parenting needs for my sisters (i don't have kids of my own), a solid retirement plan for my parents, etc. I cannot deny, though, that over the last few decades things got a little worse where i live compared to the welfare state of the 70ies. Also, my own retirement plan looks grim, compared to what my parents could expect. But all in all, I cannot complain.

One of the key elements for the success of the economic system that made all this possible was a slightly inflationary currency which made hoarding a little less attractive than spending. That's just the kind of lubricant that keeps an economy's motor going.

If you think of profit in the very narrow sense of gathering more value, you might just keep to your theory of "inflation is theft". If you value your own quality of life over monetary accumulation, though, maybe you could get over it and think of that broader picture.


Acknowledging the ills of fiat is hardly FUD. There's a reason 2008 happened and that the global economy is still on shaky ground.
2008 did not happen because of fiat. Actually, fiat was not even damaged as badly by the outcome of the ongoing financial crisis as were other instruments of our economy. It got bruised, though, that's for sure.


Avoiding all that nonsense is kinda the entire point of Bitcoin.
I beg to differ. I'm (compared to the majority of the bitcointalk crowd) a longtime user and also holder of a tiny handful of bitcoins. I've never regarded bitcoin as a way of avoiding fiat. It can be complimentary currency, it's got benefits of its own, its elegant and useful in its own right, but the strength of bitcoin is not as a replacement of fiat money, but rather side by side with each other.

Yeah, well... I'm gonna go build my own blockchain, with blackjack and hookers. In fact, forget the blockchain!
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October 17, 2013, 12:10:21 PM
 #66

What do governments pay their soldiers, contractors and employees in? What do they pay tax returns, SS and other non-employee obligations in?
When purchase orders for tanks and ammunition (or staples and printer ink) are issued, what will be spent?
Actually, a lot of governments pay for their tanks in U.S. Dollars or Euros, not their own respective currencies Wink
In some countries, at least the presidential guards are paid in Dollars as well. Lips sealed

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October 17, 2013, 12:15:02 PM
 #67

...snip...


Avoiding all that nonsense is kinda the entire point of Bitcoin.
I beg to differ. I'm (compared to the majority of the bitcointalk crowd) a longtime user and also holder of a tiny handful of bitcoins. I've never regarded bitcoin as a way of avoiding fiat. It can be complimentary currency, it's got benefits of its own, its elegant and useful in its own right, but the strength of bitcoin is not as a replacement of fiat money, but rather side by side with each other.

This is absolutely right.  Bitcoin isn't useful for buying milk and potatoes and its never going to be.  Its very useful for doing stuff you don't want to talk about and as such its future is secure.  Just as we have Dollars, Pounds and Euros for use in various situations, we also have Bitcoin for use in the right circumstances.

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Valerian77
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October 17, 2013, 12:16:11 PM
 #68

>> No - I mean what I wrote. Bitcoin is far below its real potential current value. Since the inflation of Bitcoin is very
>> low - 10 BTC every 10 minutes - it is in deflation mode.

You're contradicting yourself, surely?
If it has inflation, even if it is low, how can it also have deflation?

I see inflation and deflation as independend concepts. Many people see inflation as the rise of prize levels - I just see it as the increasing amount of money (OK - in econmical terms maybe not 100% accurate). Deflation is the process of of an under valued currency adapting to its real buying value due to the limited amount of money (Again - maybe not 100% accurate in economic terms).  Economically the terms inflation (increasing prizes), disinflation (decreasing inflation) and deflation (decreasing prizes) are just bound to the prize level.

If you see inflation as increasing amount of money and deflation as the rising value of money then both concepts can exist side by side without contradiction which makes more sense.

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murraypaul
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October 17, 2013, 12:25:28 PM
 #69

I see inflation and deflation as independend concepts.
[...]
Deflation is the process of of an under valued currency adapting to its real buying value due to the limited amount of money (Again - maybe not 100% accurate in economic terms).

Ok, but if you are going to use such non-standard meanings for terms, you might as well say so straight off (or find another word for it), to avoid wasting time, as we have just done.
A standard dictionary definition is:
Quote
Economics . a fall in the general price level or a contraction of credit and available money (opposed to inflation ). Compare disinflation.
Whereas disinflation is:
Quote
Economics .a period or process of slowing the rate of inflation.

Quote
Many people see inflation as the rise of prize levels - I just see it as the increasing amount of money

In which case I'm still confused as to how you think Bitcoin has a very low level of inflation.
More than 10% per year is not very low.

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October 17, 2013, 12:28:38 PM
 #70

What do you think would happen if the government requested bids for an interstate highway and every contractor refused to accept their money, demanding gold instead? What do you really think would happen if every gun manufacturer in the country suddenly refused to sell arms to the military, or to policemen? Do you *honestly* believe they'd just throw up their hands, shrug and say "oh well," and voluntarily expire as a "sovereign" entity? The very thought is ludicrous, and I'm sure you could dig up a historical example or two of exactly what happens when a government is denied in such a manner.
On January 29, 2009, Finance Minister Patrick Chinamasa announced that all Zimbabweans would be allowed to conduct business in any currency as a response to the hyperinflation crisis. Fromhttp://en.wikipedia.org/wiki/Zimbabwean_dollar

I could probably dig up dozens, if not hundreds of cases where a government simply had to accept the fact that their currency was no longer accepted by the people, but research is always a little time consuming.

Yes, governments have also reacted differently, namely by outlawing foreign currencies, leading to imprisonment and worse. No use denying that. But speculation on what would happen in the U.S. if it came to it - well,
Quote
The very thought is ludicrous

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October 17, 2013, 12:36:45 PM
 #71

Quote
Many people see inflation as the rise of prize levels - I just see it as the increasing amount of money

In which case I'm still confused as to how you think Bitcoin has a very low level of inflation.
More than 10% per year is not very low.

This is now - wait for 2033 - then the inflation is very low:


If you compare this curve to the USD inflation curve you will see what I mean.

One remark on the term 'inflation' - we are talking about economics not physics. This term as many others undergoes a process and has never defined scientifically unambiguous - eg. http://bit.ly/16d4Aky. But I see the point ...

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murraypaul
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October 17, 2013, 12:53:06 PM
 #72

Quote
Many people see inflation as the rise of prize levels - I just see it as the increasing amount of money

In which case I'm still confused as to how you think Bitcoin has a very low level of inflation.
More than 10% per year is not very low.

This is now - wait for 2033 - then the inflation is very low:

Which is what I said in my original reply to you:
Quote
Quote
1. Bitcoin is currently in deflation not inflation
I think you mean the other way around.
Bitcoin may eventually be deflationary, but currently it is much more inflationary than USD, EUR or GBP.

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October 17, 2013, 12:59:50 PM
 #73

3. The statement 'little inflation drives the economy' is not the full truth. It implies that people are scared of loosing their money and put it back into the economy circulation. The bad side is that it also implies interest which feeds people who already own enough fiat money. And the real negative point with that again is that it creates a steady money flow from the poor debted people to the rich wealthy ones.
The modern concept of credit has empowered a large share of the general population and made our society much more pervious for members of their respective classes. The rise of the middle classes at the beginning of the modern ages compared to the middle ages was largely due to the possibility of acquiring wealth without owning land, enabled by lending.
Interest as part of the process of lending is not, contrary to common belief, a "freebie" for the haves from the have-nots. Also, interest is not created "out of thin air" but well-defined by the opportunity value of the credit.
Lending can make the rich richer and the poor poorer, but it also works the other way round.


4. One very big problem is the equity covering quote for banks. In Germany it is 7%. That means if a bank has 7000Euro in its safe the bank is allowed to credit 100.000,- Euro to debitors. Inherently the money multiplies many times over a credit chain with multiple banks. This creates a big imbalance between real money and credited money with the well known risks - Lehman Brother was a typical szenario. With Bitcoin this is not possible - you cannot create virtual money - you own the Bitcoin or not - finish.
The most common misunderstanding about Bitcoin is:

"there will never be more than 21 Million bitcoins". True or false?

Well, unfortunately, false for most use cases.

I've personally lent a bitcoin or two to someone.
For any economist in the world it is clear that i thereby created bitcoins.
Not "physical" or "digital" ones, sure, but "deposit" bitcoins.

In the future, banks might adopt Bitcoin. Let's just assume for the moment that they do, and that they treat it like any other good ol' currency. Legally, they are free to use fractional reserve on bitcoins the same way they do with the Dollar. And you damn well bet they will. After all, that's how they make money and get their little bonuses.
And people will use those "deposit" bitcoins, just the way they use their "deposit" Dollars and Euros today. And why wouldn't they? It served them well. So, for any practical reason, we should not think of the number of bitcoins as being limited to 21 Million. It just doesn't make sense.

We would have to rephrase our statement a little to make it true:
"there will never be a monetary base M0 for the bitcoin currency larger than 21 Million".
True. Wink

Yeah, well... I'm gonna go build my own blockchain, with blackjack and hookers. In fact, forget the blockchain!
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October 17, 2013, 01:14:56 PM
 #74

(OT - better split the thread, again!)
Why do a lot of people keep wanting bitcoin to work for buying small mundane things?  It's wealth storage, security, ease of transfer.  What about current monetary systems makes you want to use bitcoins for coffee.  You will never have your entire life in BTC.  That's silly.  There's investments, real estate ownership, heck even works of art so use bitcoin for what it's good at because it certainly isn't good at buying coffee since you can't trust 0-conf anyways.
Of course you can trust a 0-conf transaction for something like coffee. You can check against most obvious double-spends with software which quickly checks mining queue and blockchain for doublespends, which already exists and is implemented by most services accepting no or few confs. $x coffee, however, is much different than the $xxx-$xxxx transactions you can use personal checks for, which are much easier to defraud with.

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October 17, 2013, 03:26:23 PM
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Quote
Many people see inflation as the rise of prize levels - I just see it as the increasing amount of money

In which case I'm still confused as to how you think Bitcoin has a very low level of inflation.
More than 10% per year is not very low.

There is 0% inflation. There are 21 Million Bitcoins and there will never be anymore. That about 9 million BTC haven't been issued with makes no difference.

If anything there is slight (?) deflation with some Bitcoins are forever untransactable due to the private keys being lost. This deflation is very hard to measure however.
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October 17, 2013, 04:08:15 PM
 #76

There is 0% inflation. There are 21 Million Bitcoins and there will never be anymore. That about 9 million BTC haven't been issued with makes no difference.
That just 2 posts below my: Roll Eyes
The most common misunderstanding about Bitcoin is:

"there will never be more than 21 Million bitcoins". True or false?

Well, unfortunately, false for most use cases.

I've personally lent a bitcoin or two to someone.
For any economist in the world it is clear that i thereby created bitcoins.
Not "physical" or "digital" ones, sure, but "deposit" bitcoins.

In the future, banks might adopt Bitcoin. Let's just assume for the moment that they do, and that they treat it like any other good ol' currency. Legally, they are free to use fractional reserve on bitcoins the same way they do with the Dollar. And you damn well bet they will. After all, that's how they make money and get their little bonuses.
And people will use those "deposit" bitcoins, just the way they use their "deposit" Dollars and Euros today. And why wouldn't they? It served them well. So, for any practical reason, we should not think of the number of bitcoins as being limited to 21 Million. It just doesn't make sense.

We would have to rephrase our statement a little to make it true:
"there will never be a monetary base M0 for the bitcoin currency larger than 21 Million".
True. Wink

Yeah, well... I'm gonna go build my own blockchain, with blackjack and hookers. In fact, forget the blockchain!
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October 17, 2013, 04:13:16 PM
 #77

The most common misunderstanding about Bitcoin is:

"there will never be more than 21 Million bitcoins". True or false?

Well, unfortunately, false for most use cases.

I've personally lent a bitcoin or two to someone.
For any economist in the world it is clear that i thereby created bitcoins.
Not "physical" or "digital" ones, sure, but "deposit" bitcoins.

In the future, banks might adopt Bitcoin. Let's just assume for the moment that they do, and that they treat it like any other good ol' currency. Legally, they are free to use fractional reserve on bitcoins the same way they do with the Dollar. And you damn well bet they will. After all, that's how they make money and get their little bonuses. And people will use those "deposit" bitcoins, just the way they use their "deposit" Dollars and Euros today. And why wouldn't they? It served them well. So, for any practical reason, we should not think of the number of bitcoins as being limited to 21 Million. It just doesn't make sense.
Very interesting point.

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October 17, 2013, 06:20:46 PM
 #78

(OT - better split the thread, again!)
Why do a lot of people keep wanting bitcoin to work for buying small mundane things?  It's wealth storage, security, ease of transfer.  What about current monetary systems makes you want to use bitcoins for coffee.  You will never have your entire life in BTC.  That's silly.  There's investments, real estate ownership, heck even works of art so use bitcoin for what it's good at because it certainly isn't good at buying coffee since you can't trust 0-conf anyways.
Of course you can trust a 0-conf transaction for something like coffee. You can check against most obvious double-spends with software which quickly checks mining queue and blockchain for doublespends, which already exists and is implemented by most services accepting no or few confs. $x coffee, however, is much different than the $xxx-$xxxx transactions you can use personal checks for, which are much easier to defraud with.
I suppose if you say "trust" but don't mean 100% trust like bitcoin is meant to be then sure but you are talking about now where transaction quantity is much lower then if bitcoin starts getting accepted at every local coffee shop.  I'm not certain it would be that easy to check against double spends if there are millions of transactions per second.  Also human beings are like water if there is an advantage to be had people will scam for coffee just as easily as they shoplift now.  I just don't see bitcoin being useful or for that matter designed for it when you get 1st confirmation in 10min lower now but could be higher if diff falls of a cliff.  If anything I think the desire to make it more accepted as a payment method instead of something more unique will create more issues.  Sure with larger adoption you get a higher exchange rate which benefits current holders.  The more mass populace jumps into it without going through the learning process of encryption and other unique bitcoin properties the more scams will proliferate which then leads to calls for tighter regulation which then leads to an actual confrontation with governments over such regulation since bitcoin by design doesn't subject itself to easy regulation.  If one wants bitcoin to succeed long term you'd want such a confrontation to come as late as possible to have a larger more distributed network and also much more educated holders who aren't easily swayed by government edict.  If one wants to have the biggest profit possible as soon as possible then promoting bitcoin coffee payments is certainly more profitable.  Now there is an interesting morality question for bitcoin proponents.  Do you want more people to use bitcoin even if they don't get it or don't you?
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October 17, 2013, 07:02:58 PM
 #79

Quote
Many people see inflation as the rise of prize levels - I just see it as the increasing amount of money
In which case I'm still confused as to how you think Bitcoin has a very low level of inflation.
More than 10% per year is not very low.
There is 0% inflation. There are 21 Million Bitcoins and there will never be anymore. That about 9 million BTC haven't been issued with makes no difference.

That is an interesting definition of 'are'.
There are currently just under 12M Bitcoin in circulation. There will eventually be 21M Bitcoin in circulation.
In the next year the amount of Bitcoin in circulation will increase by 10%.
Of course it makes a difference that the other 9M don't actually exist yet.

BTC: 16TgAGdiTSsTWSsBDphebNJCFr1NT78xFW
SRC: scefi1XMhq91n3oF5FrE3HqddVvvCZP9KB
wingding
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October 17, 2013, 09:57:22 PM
 #80

Bitcoin is not a currency. It can best be compared to rare football game card collecting. It has no value except for the imaginary value assigned to it by a small flock of enthusiasts. (Of course there is an very interesting and new technology behind it, but that is a completely different story)

                                   
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