How to fix bitcoin

[steelhouse]

Bitcoins are based on nothing. It takes cpu or gpu time but you are are still creating money out of nothing.  The dollar could have been based off if you jog 1 mile around a track, but in the end the dollar would still be based off nothing. The dollar is valuable only because it is fiat, demanded to be used by the U.S. government. 21 million of these bitcoins are going to be created out of nothing.

You can use public key private key encryption to create a digital coin similar to bitcoins. But, who cares you all you have is wasted hard disk space.

Money will only work if vendors of goods are willing to accept it. Now some of the vendors are selling junk, socks, or trading computer time you have some vendors. But the reality is the bitcoin is still based on nothing. It is not backed by anything nor demanded to be used by government. Thus, if the vendors tire of it, it will crash. I predict the bitcoin will fail and be worth $0.01 in 10 years. Now, if a critical mass of vendors exist creating a market as old vendors drop out and new vendors come online to replace them it could work.

If the 21,000,000 bitcoin was based off say 100 pennies minted before 1981, you could say there will always be a vendor of last resort, you could convert your bitcoin for pennies. That is my suggestion to the bitcoin folks.

If I was running bitcoin I would set-up a 1% tax on transactions. Where would this money go? It would be use to add more metals to back up the currency. Thus over time each of the 21,000,000 bitcoin might be backed by 100 pennies, 1 ounce of silver. Where did the 1 ounce of silver come from, the 1% transaction tax over years.   Then maybe you could buy an island with it an create your own country -tax free government free.  I wonder it is is possible to buy land somewhere and create your own country.

The current bitcoin can be fixed by just demanding the $0.01 transaction costs go to buy wealth to back up the currency.

[M4v3R]

I think there should be a separate subforum for these kind of posts

[WakiMiko]

Nobody is "running bitcoin". There is no central authority.

[gigabytecoin]

I think there should be a separate subforum for these kind of posts

Many forums have "newbie" sections. It would be a good idea for us so we can quickly move posts like this to that area.

[epii]

Where did the 1 ounce of silver come from, the 1% transaction tax over years.   Then maybe you could buy an island with it an create your own country -tax free government free.  I wonder it is is possible to buy land somewhere and create your own country.

I think there should be a separate subforum for these kind of posts

It sounds like perhaps it belongs in this one.

[PLATO]

It sounds like perhaps it belongs in this one.

[eMansipater]

Just one question for you steelhouse--what or who backed the money cowry?  There is plenty of precedent for currencies with no other use than as currencies.  All that is required is that they be limited in supply, fungible, and easy to transport.  As a purpose-built currency, BitCoin beats out cotton-linen pictures or little printed squares of plastic any day.  That's all it needs to succeed.

[steelhouse]

Just one question for you steelhouse--what or who backed the money cowry?  There is plenty of precedent for currencies with no other use than as currencies.  All that is required is that they be limited in supply, fungible, and easy to transport.  As a purpose-built currency, BitCoin beats out cotton-linen pictures or little printed squares of plastic any day.  That's all it needs to succeed.

Shell money was fiat money. "In northern Australia, different shells were used by different tribes, one tribe's shell often being quite worthless in the eyes of another tribe."  Fiat money is money that has value only because of government regulation or law.

[MoonShadow]

OMG, this has already been hashed out bazillion times...

Funny!

Imagine how old this kind of stuff gets to those of us who have been here a long time.

[rezin777]

I'll try again, since you stopped responding to the old thread, and started a new one.

No offense but bitcoin is not backed by anything.   There is no government forcing its use.  How can bitcoin go to anywhere but to zero? What would be exciting if a country adopted it for its currency.

I consider bitcoin to be commodity money in a way. It derives value from it's properties, which are quite useful. As long as there are like-minded people, it will have value.

What would be exiting is if all states were to suddenly disappear!  

The intrinsic value of a bitcoin is zero, that is where it will go with no iron hand.

Arguably, the only things that have intrinsic value to humans are the those which are required to survive. Everything beyond that is subjective. You seem to favor gold. What is it's intrinsic value to a human being? I can live my entire life without ever needing gold. There is no iron hand giving value to gold. Yet it has properties that make it useful for many things and thus people assign value to it. The same can be said for bitcoins. Because you do not see their value, or because no state is enforcing their value, does not make them worthless to all.

What gives gold value? What gives silver value? What gives copper value? What gives anything value? People give it value. Period. If I see that bitcoin has properties that I can use, I value it. As long as there is a community that shares that opinion with me, it will have value.

What is your goal in trying to convince others that bitcoin has no value?

[trentzb]

If I was running bitcoin I would set-up a 1% tax on transactions. Where would this money go? It would be use to add more metals to back up the currency.

How would "more metals" back up a currency? Do you mean it would give value to a currency or make a currency more desirable? If yes, what gives value to those metals or makes them desirable? Or do you mean that limited availability of such metals would/could limit the amount of the available currency?

[Gavin Andresen]

Stuff is valuable because it is either useful (like hammers) or we think it is pretty (like Picasso paintings); the more rare, useful, and/or desirable something is, the more valuable it tends to be.

We know how rare bitcoins are.  It remains to be seen how useful they are.  I think they're pretty useful as both a convenient way of paying for things and as a long-term store of value, but it will take time to convince most people that they're useful for those things.

[eMansipater]

Just one question for you steelhouse--what or who backed the money cowry?  There is plenty of precedent for currencies with no other use than as currencies.  All that is required is that they be limited in supply, fungible, and easy to transport.  As a purpose-built currency, BitCoin beats out cotton-linen pictures or little printed squares of plastic any day.  That's all it needs to succeed.

Shell money was fiat money. "In northern Australia, different shells were used by different tribes, one tribe's shell often being quite worthless in the eyes of another tribe."  Fiat money is money that has value only because of government regulation or law.

The money cowry was used in Africa under no particular jurisdiction in a purely p2p fashion.  If bitcoin proves as comparatively useful as the money cowry did in its day, it too won't need a backing or a fiat.

[iya]

Bitcoins are based on nothing. It takes cpu or gpu time but you are are still creating money out of nothing.

The concern is valid, but with backing you need auditability and with that you loose anonymity and security.
There has been a well working 100% anonymous currency backed by 100% gold - now it's controlled by the government.

If the 21,000,000 bitcoin was based off say 100 pennies minted before 1981, you could say there will always be a vendor of last resort, you could convert your bitcoin for pennies.
...
The current bitcoin can be fixed by just demanding the $0.01 transaction costs go to buy wealth to back up the currency.

You can actually do that right now, with no changes to Bitcoin:
Just mine or buy a new block and claim to buy back every coin from that block for $1. If people believe that you'll honor your promise, these coins will trade at a premium whenever the market rate for normal Bitcoins is below $1.
You've just created Bimetallism inside the existing Bitcoin protocol!

[steelhouse]

OMG, this has already been hashed out bazillion times...

Funny! Imagine how old this kind of stuff gets to those of us who have been here a long time.

I am not here to be a troll.  Has there ever been a currency that was not commodity based or fiat?  Shells were fiat based.  You have to admit, coins decreed as valuable, with nothing behind them seem to be what they are intrinsically nothing.

[steelhouse]

What gives gold value? What gives silver value? What gives copper value? What gives anything value? People give it value. Period. If I see that bitcoin has properties that I can use, I value it. As long as there is a community that shares that opinion with me, it will have value.   What is your goal in trying to convince others that bitcoin has no value?

My goal is to see why bitcoin does not go to zero.  Gold silver copper are all actually all fiat currencies, the government gave it value and demanded its use.  Bill Still even said gold is a fiat currency.

[steelhouse]

How would "more metals" back up a currency? Do you mean it would give value to a currency or make a currency more desirable? If yes, what gives value to those metals or makes them desirable? Or do you mean that limited availability of such metals would/could limit the amount of the available currency?

The melt value of a penny before 1982 is 2.7 cents and a value of a nickle in the US is about 7 cents.  That is the market rate of those metals.  The value is the worldwide demand for those metals to build stuff.  What is to prevent someone making a clone of bitcoin and calling it bbitcoin.  If each bitcoin was backed by 100 pennies, it would have a $2.70 value on the world exchange.  Thus owning the bitcoin you know you would get the pennies.

[BitterTea]

I am not here to be a troll.  Has there ever been a currency that was not commodity based or fiat?  Shells were fiat based.  You have to admit, coins decreed as valuable, with nothing behind them seem to be what they are intrinsically nothing.

Ah, I see the problem. You misunderstand the word fiat.

Fiat money is money that has value only because of government regulation or law. The term derives from the Latin fiat, meaning "let it be done", as such money is established by government decree. Where fiat money is used as currency, the term fiat currency is used.
Today, all national currencies are fiat currencies, including the US dollar, the euro, and all other reserve currencies. This trend began with the Nixon Shock of 1971, which ended the backing by precious metal of the U.S. dollar.

Shells, gold, and Bitcoin are not fiat because they are not declared valuable by a government. What would happen to the U.S. dollar if it wasn't backed by the "full faith and credit" (as if that is worth something) of the U.S. government? It would become worthless. What would happen to gold if the U.S. government stopped accepting it as payment? I bet practically nothing.

edit... Another

Historically, money originated as commodity money, based on physical commodities such as cowrie shells, copper, gold, or silver, but fiat money is based solely on faith in the government issuing the money.

Bitcoin would fall into this category, commodity money, regardless of the fact that it is a designed commodity money.

[trentzb]

What is to prevent someone making a clone of bitcoin and calling it bbitcoin.

Absolutely nothing at all.

[steelhouse]

Funny!  Imagine how old this kind of stuff gets to those of us who have been here a long time.

Being here a long time and seeing the same questions over is not an answer.  Mob rule is not reality they still burned witches in Salem.  I realize it all depends on merchants, if merchants leave bitcoin is done and there is no intrinsic value thus you have nothing.  So technically if the number of total merchants is rising so can bitcoin.