Bitcoin weak spot - or did nobody see this?

[smilem]

Hi, i like bitcoin for being free decentralized money system, but it has one certain flaw.

The flaw is that bitcoin is not recognized as money by world governments an as such one will never be able to
pay with bitcoins for electricity, water, gas, etc (services that government infrastructure provides)

Further the government (when they see is as a threat) will close all ways like mtgox to exchange real money for bitcoins worldwide. Since nobody will be able to get real money bitcoin value will go to zero as result there will be big losses on part of those who invested allow of real money since mining bitcoins will soon be very hard next to impossible.

So why doesn't anyone see this?

[1714940595]

1714940595

[Atdhe]

I agree that governments and central banks will go after Bitcoin or any other curency, that will be widely accepted. But they can not go after exchanges. Exchanges can always be decentralised and they will always exist if there will be 2 sides willing to exchange Bitcoin and USD (or another currency).

Some virtual currency will be used as "anchor"... as was gold used decades ago. But we must wait for the world crash.

[nafai]

bitcoin is not recognized as money by world governments an as such one will never be able to
pay with bitcoins for electricity, water, gas, etc

I don't know what country you live in, but here in the United States, although utilities are REGULATED by the government, they are not owned/provided by the government.  I pay a for-profit company for my electricity and water (don't use gas). I used to live in another state and there, too, electricity water and gas (colder state) were all privately owned.

Plus, not all transactions have to be executed in bitcoins for bitcoins to have a place in the world.  Yes, it is unlikely that utility companies will ever accept bitcoins.  Yes, it is virtually impossible that you will ever be able to pay your taxes (which do go directly to the goverment) in bitcoins.  But taxes are paid for the most part once a year. Utilities are paid for the most part once a month. The percentage of transactions that these represent are very very small -- most people buy stuff every single day, like food, gasoline, cigarettes, household supplies, etc etc etc. There are already restaurants that accept bitcoins. You can get amazon giftcards for bitcoins which represents a massive variety of stuff you can buy. Et cetera.  In fact, all you have to do is get 50% of your common transactions in bitcoins and then bitcoins are equal in utility to dollars. The only reason you'd want 100% in bitcoins is if you were trying to eliminate the use of dollars altogether. Which, I agree, will not happen. But nobody's trying to eliminate the dollar. We're just trying to give everyone an alternative. A choice. If half of all transactions were in bitcoins (i.e., as many bitcoin transactions as there are dollar transactions), I think every single person here would consider that an unqualified success.  Of course, even 50% is a very tough goal that will take a very long time and may never happen.  But who cares?  The line is arbitrary. A lot of people, myself included, would consider bitcoins an unqualified success if it represented even 10% of transactions.

Further the government (when they see is as a threat) will close all ways like mtgox to exchange real money for bitcoins worldwide. Since nobody will be able to get real money bitcoin value will go to zero as result there will be big losses on part of those who invested allow of real money since mining bitcoins will soon be very hard next to impossible.

First of all, there is no "the goverment" which has jurisdiction over "worldwide". Each country has its own government(s) that make their own rules. The US federal government could do absolutely nothing to stop the German people from buying/selling/trading bitcoins.  Heck, the US government can't even stop the pirate bay because it's hosted in Sweden which, when it comes to copyrights, doesn't give a rat's ass and tells the US government to go pound sand.

Secondly, even within a country where the government has decided to oppose bitcoins, there are always ways around it. Most business transactions/commerce happen in real-life, face to face. If you want to accept bitcoins as well as federal reserve notes (paper dollars) at your garage sale, there aren't going to be any feds standing on the corner ready to stop you if you try. If you try to pay your restaurant bill in bitcoins, and the restaurant owner decides to let you, there will be no one to stop such a private transaction.

It is already against the rules of ebay to sell bitcoins there, yet it still happens. Same with paypal. Even when the US government outlawed private gold ownership by US citizens in the 70s, not everyone rolled over and turned in their gold. Lots of people kept their gold, and continued to buy/sell it, without the approval of the government.

But they can not go after exchanges. Exchanges can always be decentralised

Well, right now, the exchanges are certainly not decentralized. The bitcoin system itself is decentralized, yes. But mtgox and tradehill and the other exchanges are not decentralized. They could very easily be shut down. The US department of homeland security and the FBI have been seizing lots of domains lately where the website is encouraging or participating in copyright infringements. That's how they shut down the poker sites, too, they seized the domains. The same thing could happen to the exchanges.

BUT, you're right, they COULD be decentralized. An exchange from dollars to bitcoins and vice versa already exists, decentralized, not really an "exchange" per se but functions as one, on silk road on the tor network. You can buy and sell bitcoins for dollars there, and it is decentralized.

It would be far more detrimental to the health of bitcoins if the US shut down the funding sites, like dwolla. Without dwolla the exchanges would be seriously hurting right now as that is by far the #1 dollar funding method for all of them, mtgox and tradehill included.

But it's a game of cat and mouse....   Who is to say who will win?

Right now, bitcoins are too small for the government to even notice or care. One day, that WILL change. But who knows what the outcome will be.

[Atdhe]

Nafai, when we talk about US government, we can see what they did with Paypal (forced them indirectly to shut down "gambling money"), what they did with Neteller and Moneybookers.

My point is that even when the companies are privately owned, government has power to force them which currency they have to accept. Once Bitcoin or another currency will be strong enough, they will use that power. Companies are not living in nowhere. They rely on state. They would not pay taxes if they would be independent for example.

Yes it will be cat/mouse game and independent currency will win, but unless there will be big surplus for merchants to accept "illegal" currency, they will not accept it. It is a bit like VAT tax and tax problem in general. Some merchants even now give you discount if you buy goods without paper and in cash. But most still do not do it even when their surplus on such transaction is in 10's of %.

Bitcoin really needs a big riot in financial world. The fees of CC companies and banks indeed are now high, but they are not high enough for independent currency to push through.

Look at UIGEA law that controls banks and does not allow them to make transactions related to gambling. The blacklist will be extended. People will be forced to have bank accounts only with whitelisted banks that will comply with state law. Most people still are not pirates with offshore banks. It will take a lot of time. People must start not to believe governments and they will believe to governments until they have a bit of bread and fun on TV.

[nafai]

My point is that even when the companies are privately owned, government has power to force them which currency they have to accept. Once Bitcoin or another currency will be strong enough, they will use that power. Companies are not living in nowhere. They rely on state. They would not pay taxes if they would be independent for example.

I don't disagree with you.

But my point, is that there are a significant percentage of transactions that occur that the government never hears about.

You are required to collect and pay sales tax when you hold a garage sale. Yet millions of garage sales happen every year and no one collects sales tax or pays it.  If people WANT bitcoins, there will always be a place to get them, and there will always be a place to spend them.

Yes, the government can certainly affect how popular bitcoins are. But, they cannot destroy them. Just like they cannot stop people buying and selling illegal drugs. Thus, the value of bitcoins will never reach zero from what the government does, if it ever goes to zero it will be because the people abandon it, not because of the government.

In fact, the government opposing it might make it MORE attractive to a lot of people.

[Atdhe]

I agree. Where people do not pay taxes, there should be a way for new currency. And the core of it should be created right there. Which is also pain in the ass, because the government will have valid argument, that bitcoin is used for tax evasion, drug trades, gambling etc. So this will be another obstacle for the new currency.

[smilem]

well companies that provide the basis like water supply, gas, electricity mostly are prive in my country too, but government owns 51% of all shares in those companies. So that means that government has total control what those companies do.

Also, don't forget that it's very easy to filter internet protocols what software is allowed what not. If there is a law in US passed to exclude bitcoin traffic so ISP will do it by law. How will you (we) trade then? By using proxy? What kind of currency is that nobody but terrorists accepts anyway?

I for one care how much transactions cost, but if the seller that has some goods i need and price is OK does not accepts bitcoins because it has been prohibited by law. I'll buy elsewhere with normal money rather then searching for another seller with same item / price combo.

Furthermore I think the inventor of bitcoin never thought about GPU mining in the first place. I want to say that in my eyes more peopple should have been given a chance to get easy money when it was easy to mine. And now its impossible in solo whatever computer you have. That way bitcoin closes itself from majority of potential future users. Come on now 1USD 14BTC ? what money is that gambling or investing might be good if the value rises, but then if the goal was "cash for internet" - bitcoin failed already.

One day somebody will say- "there was a money with 8 decimal places it's greatest strength and its cause of death (because it's hard to use when prices are in 0.00000001)

[smilem]

Oh and another thing I was thinking when you buy using paypal you bank transaction lists the payment as such, so if bitcoin is banned then how can you transfer money to your visa / master card ?

[Alex Beckenham]

Come on now 1USD 14BTC ?

Please tell me where you can buy 14BTC for a buck, I'd like to stock up on some.

[Atdhe]

well companies that provide the basis like water supply, gas, electricity mostly are prive in my country too, but government owns 51% of all shares in those companies. So that means that government has total control what those companies do.

Valid argument. Even in countries where those so called "strategic" countries are in private hands, that does not mean that much. Reverse privatisation can happen always, like it happened in Latin American countries now or after WWII in central and east Europe or even in the UK. Sometimes the former private owners get some money for it sometimes they do not, but it is not point here. Those companies can be also taken as "part of national interest" and de facto have special rules. Banks already have very different rules than normal firms and everyone thinks it is ok.

Also, don't forget that it's very easy to filter internet protocols what software is allowed what not. If there is a law in US passed to exclude bitcoin traffic so ISP will do it by law. How will you (we) trade then? By using proxy? What kind of currency is that nobody but terrorists accepts anyway?

It is not that easy and I think the pirates will always have a ways and censorship as we knew it will never happen again even when they will try hard. But yes - currency that is popular for shady trades can have psychological problem. On the other hand, we do not see a future. It can be, that all major currencies will go under and Bitcoin can be only currency that can exist, because no government can affect money supply.

I for one care how much transactions cost, but if the seller that has some goods i need and price is OK does not accepts bitcoins because it has been prohibited by law. I'll buy elsewhere with normal money rather then searching for another seller with same item / price combo.

Yes, valid argument for now.

Furthermore I think the inventor of bitcoin never thought about GPU mining in the first place. I want to say that in my eyes more peopple should have been given a chance to get easy money when it was easy to mine. And now its impossible in solo whatever computer you have. That way bitcoin closes itself from majority of potential future users. Come on now 1USD 14BTC ? what money is that gambling or investing might be good if the value rises, but then if the goal was "cash for internet" - bitcoin failed already.

No, this is not important. Money has no "inner" value. If bitcoins ever will be used, the first miners will be incredibly rich. Maybe it is a bit unfair, but we all need functional cheap money, functional independent market. The premium simply got the visionares, as the states get the value now from printing money. This has not to be socialism. Soon, money mining will vanish, until new energy sources will be invented, thus bit coin will be in other ways energy unit. Unit of Watt/horsepower/Joule. Money has to be energy, that is ok and it was written in cyberpunk literature years ago.

One day somebody will say- "there was a money with 8 decimal places it's greatest strength and its cause of death (because it's hard to use when prices are in 0.00000001)

This can be resolved with simple denomination.

Oh and another thing I was thinking when you buy using paypal you bank transaction lists the payment as such, so if bitcoin is banned then how can you transfer money to your visa / master card ?

This transaction/processor problems happen even now. I am making money as professional gambler. People usually do not see it, but I expect those problems to be tighten up. Middlemen will be needed and it will be illegal too. This way the zero transaction costs will vanish. Middleman does not work for free but for profit.

[smilem]

No, this is not important. Money has no "inner" value. If bitcoins ever will be used, the first miners will be incredibly rich. Maybe it is a bit unfair, but we all need functional cheap money, functional independent market. The premium simply got the visionares, as the states get the value now from printing money. This has not to be socialism. Soon, money mining will vanish, until new energy sources will be invented, thus bit coin will be in other ways energy unit. Unit of Watt/horsepower/Joule. Money has to be energy, that is ok and it was written in cyberpunk literature years ago.

Well the early adopters getting ritch is an algorithm flaw made on purpose (more likely) or because somebody did not anticipate something happening.

Only popular majority systems has the power, like torrents, for example. Bitcoin (how it evolves today) seems like minority illegal money system to me.

Also in my country government can make a law that trading illegal money is illegal, so no trader will be able to accept bitcoins, and no customer pay in bitcoins. The system will be more underground money system, and that no revolution in money as it would be if majority of people would use it.

Money has to be energy, that is ok

What energy has to do with illegal money?  for example you can use illegal money to buy procesing power and again have illegal money? Last time I checked processing power is not free.

The thing is in todays world the most ritch people are the most corrupt, so why make the same mistake twice?
Even now nobody owns 90% of all money? However with bitcoin early adopters will hold that money and will be able to crash the market or currency anytime.

Nobody wants a currency where one day you can buy a water bottle for 0.1BTC the next a trailer full of water bottles and a week later you can't buy anything.

Good economy, hence money system is with big middle class, now how hard would it be to make easy wbiew mode on block explorer to show exactly that? let's see how healthy bitcoin is?

No, this is not important. Money has no "inner" value.

Money must have inner value, hard to find needed stuff has inner value because of these properties. When these properties vanish money system is replaced.

First money system was salt because nobody can live without salt. It was not Gold or barter trade like they want you to believe. Read some history.

The premium simply got the visionares, as the states get the value now from printing money.

The value should arise from something we are all equal to, like time. We all die as far as I know. So the only economically just system would be something like they done with emule P2P system. take a look how queue system works there. You have to wait to download but the more you share the faster you yourself can download.

So for money system one could make something like it also. The longer you police the network then more coins you get. processing power aside, the algorithm would work in a way that even if somebody steps in with huge processing power there would not be a way to overthrow the system because of the "longer you wait"  - "more power" system.

Coins will end, but in my system anybody can grow their potential after coins end (by mining as you call it). On bitcoin system there will be huge decline in miners when coins end because normal users will not police the system, and given the enormous computer power increase every year it will be very easy to overthrow bitcoin when coins end.
The majority of population will have the processing power to do it, as we now have to create it. That is no secure or any good money system if you ask me.

Remember the minority will be rich with bitcoin so they will not be able to police the system, also users like us will always going th create more ideal money system

One thing I'd like to note is that there is always a need for motivation. So transaction cost should not vanish in any money system as a whole. Given the enormous computer power increase every year the cost could be simply time you wait for your transaction to be done. If you don't want to wait you must pay some percent from your whole transaction.

I didn't look at bitcoin code yet but in self sustaining money system everything needs to be thought ahead in time, everything must be done with self adjusting arguments and constants. There can't be no hardcoded simple values like with bitcoin. The algorithms should adjust themselves to outside influence, hence the problem making them. They would be very complex because every argument needs to be thought ahead in time what it does, when and how.

[Atdhe]

No, this is not important. Money has no "inner" value. If bitcoins ever will be used, the first miners will be incredibly rich. Maybe it is a bit unfair, but we all need functional cheap money, functional independent market. The premium simply got the visionares, as the states get the value now from printing money. This has not to be socialism. Soon, money mining will vanish, until new energy sources will be invented, thus bit coin will be in other ways energy unit. Unit of Watt/horsepower/Joule. Money has to be energy, that is ok and it was written in cyberpunk literature years ago.

Well the early adopters getting ritch is an algorithm flaw made on purpose (more likely) or because somebody did not anticipate something happening.

Only popular majority systems has the power, like torrents, for example. Bitcoin (how it evolves today) seems like minority illegal money system to me.

Also in my country government can make a law that trading illegal money is illegal, so no trader will be able to accept bitcoins, and no customer pay in bitcoins. The system will be more underground money system, and that no revolution in money as it would be if majority of people would use it.

I do not know if it was purpose or not. I do not care. The money is here. Every money always rise from nowhere and they are valid only because people accept it.

Even torrent started from zero. New currency, that is needed by world, will start from zero too. IDK if it will be this currency.

If government makes something illegal, that can mean a lot but also can have small affect. The law has sense if there is someone who can enforce it. If the trading will be legal in another country (another country server), local government can not do much about it, unless they create big wall around.

Money has to be energy, that is ok

What energy has to do with illegal money?  for example you can use illegal money to buy procesing power and again have illegal money? Last time I checked processing power is not free.

The thing is in todays world the most ritch people are the most corrupt, so why make the same mistake twice?
Even now nobody owns 90% of all money? However with bitcoin early adopters will hold that money and will be able to crash the market or currency anytime.

Nobody wants a currency where one day you can buy a water bottle for 0.1BTC the next a trailer full of water bottles and a week later you can't buy anything.

Good economy, hence money system is with big middle class, now how hard would it be to make easy wbiew mode on block explorer to show exactly that? let's see how healthy bitcoin is?

I mean that energy is good as currency stardard. Like was golden standard, but energy is more stable and it is something like "core".

The other notes are valid. But why there should be so big ups and downs in money supply (your example with water)? As the time goes on, the market should be more stable. Even if some early adopter goes crazy, he can do it only once and then money is more "spread over" to "middle class".

(Btw. it is system based on middle class that brought us to the point where we are. I do not believe in it. I believe in elites who can foresee future = early adopters. But that is another debate.)

No, this is not important. Money has no "inner" value.

Money must have inner value, hard to find needed stuff has inner value because of these properties. When these properties vanish money system is replaced.

First money system was salt because nobody can live without salt. It was not Gold or barter trade like they want you to believe. Read some history.

Sorry. Do not look at history. I studied history of currencies at university. That is past. Apparently money that exist NOW have no inner value and system still works. The only inner value of money that is needed is belief. Belief of other people that the money have value. That is bottom line. Governments stole beliefs. Even now we have options to have commodity money, but people accept fiat (paper) money.

So if people will believe that dogs shit or used Moscow train tickets have value, they will maybe use it as money. What is important with money are things like: can it be divided easily? Can it be traded/used easily? How stable the currency is (no ABRUPT inflation/deflation risks -> anticipated inflation/deflation is ok)

The premium simply got the visionares, as the states get the value now from printing money.

The value should arise from something we are all equal to, like time. We all die as far as I know. So the only economically just system would be something like they done with emule P2P system. take a look how queue system works there. You have to wait to download but the more you share the faster you yourself can download.

So for money system one could make something like it also. The longer you police the network then more coins you get. processing power aside, the algorithm would work in a way that even if somebody steps in with huge processing power there would not be a way to overthrow the system because of the "longer you wait"  - "more power" system.

Coins will end, but in my system anybody can grow their potential after coins end (by mining as you call it). On bitcoin system there will be huge decline in miners when coins end because normal users will not police the system, and given the enormous computer power increase every year it will be very easy to overthrow bitcoin when coins end.
The majority of population will have the processing power to do it, as we now have to create it. That is no secure or any good money system if you ask me.

Remember the minority will be rich with bitcoin so they will not be able to police the system, also users like us will always going th create more ideal money system

One thing I'd like to note is that there is always a need for motivation. So transaction cost should not vanish in any money system as a whole. Given the enormous computer power increase every year the cost could be simply time you wait for your transaction to be done. If you don't want to wait you must pay some percent from your whole transaction.

I didn't look at bitcoin code yet but in self sustaining money system everything needs to be thought ahead in time, everything must be done with self adjusting arguments and constants. There can't be no hardcoded simple values like with bitcoin. The algorithms should adjust themselves to outside influence, hence the problem making them. They would be very complex because every argument needs to be thought ahead in time what it does, when and how.

The value IMO can go from anything and nothing is fair. My time is much more expensive than time of uneployed guy in India for example. No system is "fair". If there would be a system based on your criteria, it can work as well. There will be for sure NOT only one currency and only the best (most believed, most survivalent) currencies will exist.

Everything with currency need not to be done ahead of time. Markets can maybe do the job on the fly. Current monetary system is nothing than ad hoc, Bitcoin has at least some credibility, because there is more big holders of money. In current system, there is only one holder - state. And state is corrupted, because politicians are buying voters votes, they need money and they create money (central bank's independence is a joke).

But I think I now see your arguments. Look at domain market. Also there were not many early adopters that got the best domains for (almost) nothing. But domain market works. The domains are going to the brands they need it (American Airlines have aa.com etc). Early adopters got their incredible money and spent it for some luxury crap. I can imagine this can happen with bitcoin too.

Ofc I do not think Bitcoin chances are high too. Your argument about "bitcoin monopolization" is indeed crucial. But we do not know what will happen. Some economic power aside of bitcoin can rise demand of internet currency and Bitcoin EXISTS. That is big surplus of Bitcoin.

[noob_jul11]

First of all, there is no "the goverment" which has jurisdiction over "worldwide". Each country has its own government(s) that make their own rules. The US federal government could do absolutely nothing to stop the German people from buying/selling/trading bitcoins.  Heck, the US government can't even stop the pirate bay because it's hosted in Sweden which, when it comes to copyrights, doesn't give a rat's ass and tells the US government to go pound sand.

I agree that each country has its own government(s); unless a New World Order comes in play.

However, if you reside in US, how does one exchange bitcoin to say, Swedish Krona? Or even EUROs? The way I understood it (from Tradehill) is, if I am in US and I sell bitcoins, I can sell them in foreign currencies; HOWEVER, I need to have a bank account in the country in whatever currency I want to sell to cash out. I don't know how would I go about opening an account in foreign country. Maybe I'm just being uninformed ...

[Atdhe]

Then you have to mine info about offshore bank accounts. Or as US citizen, you will be welcome in many banks around the world because they will think you are wealthy. (I did Czech bank account to US people in Czech republic without any paper like permanent residency).

Anyways, the trick with Bitcoin or another independent currency should be that most people (small fishes), do not have to have bank accounts where they would convert BTC to USD etc. This conversion is costly in terms of transaction fees and it should be done by third parties [e.g. you want to pay utility bill, so some processor will pay it for you and you pay him by BTC... those processors will be in permanent war with states... and this already HAPPENS with online gambling, but still it is possible to gamble in the USA; the processors simply get a premium for their risk]. As times will worsen (NWO will never come into place though), the restrictions on foreign/offshore accounts will be higher. For example I have offshore account at Barclays and I pay like 40 USD fee / transaktion like outgoing payment. That is cost for freedom.

The goal of independent currency is to make underground economy even from regular and taxed business, avoid taxes, kill the inefficient old states. I am sure most people even here do not see it, but that is where this currency will lead us all. It will be very hostile but fair environment.