Suppose you wanted to start a geographically localised bitcoin economy

[Etlase2]

I never said that printing money is necessary to make people spend money, so I don't know what you're disagreeing with.

Too many people confuse economic theory with "predicting the future" when it reality all it does, and (honest) economists do not claim otherwise, is fit the facts into an equation.

Saying it isn't scientific or is a social science is really tired. Just as with physics, the models have gotten better and the equations more complicated over time. However, in some senses, predicting what the universe will do is much easier than predicting what people will do. This, again, does not invalidate economic theory. Just like Einstein did not invalidate Newton--he made a better model. It just means that all of the variables are not obvious.

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[JusticeForYou]

I never said that printing money is necessary to make people spend money, so I don't know what you're disagreeing with.

Too many people confuse economic theory with "predicting the future" when it reality all it does, and (honest) economists do not claim otherwise, is fit the facts into an equation.

Saying it isn't scientific or is a social science is really tired. Just as with physics, the models have gotten better and the equations more complicated over time. However, in some senses, predicting what the universe will do is much easier than predicting what people will do. This, again, does not invalidate economic theory. Just like Einstein did not invalidate Newton--he made a better model. It just means that all of the variables are not obvious.

I see your points. However, there are two schools of thought on economics. Sociology is sometimes more apt than statistics.

i.e. Given enough data you 'might' be able to tell me where I will spend $5 tomorrow to within a certain degree. There are to many unknown unknowns to be very precise. However, if I drop an apple from 6 feet it will hit the ground in the same amount of time when I do the same thing the next day.

So comparing Economics to Newton might not appropriate in this case.

[Etlase2]

So comparing Economics to Newton might not appropriate in this case.

Sure if you want to use a scenario that fits within Newtonian mechanics. But that defeats the purpose of the example, now doesn't it?

[benjamindees]

Velocity is just a crude approximation of economic interdependence and thus complexity.  It is not an end in and of itself.

[3phase]

1. Buy virgin blocks of bitcoin from a miner and transfer all of them to a green address
2. Create casascius style physical bitcoins. They just need to be very hard to counterfeit.
3. Develop customized hardware/software that separates your green bitcoin from "tainted" bitcoin
4. Declare the value of your green bitcoin much higher than the bitcoin market.

Could I ask for a little more explanation?
Why would they need green addresses?
Would they accept only BTC coming from the green address to circulate? What happens when someone brings in BTC from somewhere else?
Why should they artificially increase the value of bitcoin from their green address?
Would that be an "isolated" blockchain? Could they drop the existing blockchain altogether and fork a new one, starting with a genesis block containing only the original bitcoins in the green address?
How would that be different from starting another alternative cryptocurrency?

I am really intrigued by these thoughts, and I've seen you mention them in another thread too. Have you written more about it anywhere else?

Thanks in advance.

[cbeast]

1. Buy virgin blocks of bitcoin from a miner and transfer all of them to a green address
2. Create casascius style physical bitcoins. They just need to be very hard to counterfeit.
3. Develop customized hardware/software that separates your green bitcoin from "tainted" bitcoin
4. Declare the value of your green bitcoin much higher than the bitcoin market.

Could I ask for a little more explanation?

Why would they need green addresses?

If you want a local Bitcoin economy, you want to keep your island of Bitcoin separate from the rest of the network.

Would they accept only BTC coming from the green address to circulate? What happens when someone brings in BTC from somewhere else?

Outside Bitcoin would be like trying to spend any foreign currency within your borders.

Why should they artificially increase the value of bitcoin from their green address?

Because it would deter someone from spending it outside your "green zone."

Would that be an "isolated" blockchain? Could they drop the existing blockchain altogether and fork a new one, starting with a genesis block containing only the original bitcoins in the green address?

No. It would be the same block chain every one else uses. It would still have a globally based resistance from attack.

How would that be different from starting another alternative cryptocurrency?

Your country would be to weak to create a strong enough network to resist other great powers. Besides, all other cryptocurrencies are inferior to Bitcoin.

I am really intrigued by these thoughts, and I've seen you mention them in another thread too. Have you written more about it anywhere else?

I don't even remember all the stuff I write. I've almost responded to my own postings.

[Seal]

There's a lot of good threads in this post... How did the eurozone countries eg Greece for example transition to the euro in the first place?

Would that be a good model to switch countries to bitcoins?

[fergalish]

There's a lot of good threads in this post... How did the eurozone countries eg Greece for example transition to the euro in the first place?  Would that be a good model to switch countries to bitcoins?

This is exactly what I'm asking about.  The Greek govt (and by proxy, the Greek people) implicitly trusted the EU not to flood Greece with worthless euros.  I guess they were also hoping that all of europe wouldn't suddenly go to Greece and spend their euros there.  There are no such guarantees with bitcoins.  If some Greek community decides to adopt bitcoin instead of creating their own local currency, then ALL of bitcoindom could start buying there (e.g. online shops etc), and the area will be flooded with bitcoins, making it hard for regular traders to find equilibrium prices.

So, my opinion, is that the switch to euro involved a trusted central bank authority.

cbeasts solution is similar to what I suggested above, except he wants to continue using the electronic nature of bitcoins, whereas I suggested using 'the athenian bitcoin bank' which issues paper currency backed by its bitcoin reserves.  Both systems assume that traders will honour the local bitcoin pseudo-currency, and either refuse or impede transactions with 'foreign' bitcoins. (this is what would give the 'green' bitcoins greater value - in the geographical zone of interest, more traders are willing to accept them, therefore their value increases).

[unclescrooge]

I like this topic.

First starter, we must have easy physical payment system: bitcoin credit card system, mobile phone system, bitcoin bill?

The problem with the first is that it's difficult/expensive to develop.

The problem with the second if that if it uses smartphone, not everyone will be able to use it. It could be sms based, but that's not very convenient/secure

Then ther's the third option. I don't find it very convenient (but i've never liked cash anyway), but that would be the best option.

What d'you think?

[hazek]

Even if you think the bank is unnecessary, is it possible that initial localised adoption might trigger increased localised bitcoin velocity and therefore inflation?

Just thinking.

Inflation != rising prices of goods sold for bitcoins
Inflation = increase in supply of bitcoins


Before you do any more thinking, you should recheck your foundation and make sure it's correct.


If prices actually rose it wouldn't be bad for the merchants because they wouldn't lose money by charging more bitcoins, they'd actually increase their purchasing power. Rising prices would be bad for their potential customers holding national and other currencies because suddenly they wouldn't be able to afford those goods anymore. But even this would get solved eventually as the merchants who now charge higher bitcoin prices and are increasing their bitcoin balance sheets can pay their employees more bitcoins who can then in return afford the higher prices again. Also eventually other merchants elsewhere would see the benefit of charging in bitcoins and would start to compete with that local economy which would drive the prices back down..

The key here is there is no one out there robbing these economies by creating more bitcoins out of thin air.

[Etlase2]

Inflation != rising prices of goods sold for bitcoins
Inflation = increase in supply of bitcoins

Before you do any more thinking, you should recheck your foundation and make sure it's correct.

How many times is this going to appear on this board? There are two definitions. Yours is not right, they both are. It is almost always possible to determine from context to which form of inflation someone may be referring. This is so inanely pedantic and is such a waste of everyone's time to read.

[cbeast]

I like this topic.

First starter, we must have easy physical payment system: bitcoin credit card system, mobile phone system, bitcoin bill?

The problem with the first is that it's difficult/expensive to develop.

The problem with the second if that if it uses smartphone, not everyone will be able to use it. It could be sms based, but that's not very convenient/secure

Then ther's the third option. I don't find it very convenient (but i've never liked cash anyway), but that would be the best option.

What d'you think?

Paper bitcoin bills will have a lot of flexibility to offer. For one thing, they can be complex documents. I imagine that bills will have script transactions encoded as QR. For instance, a checkbook can be created that escrows a balance to a check that is secured by a m-of-n (i.e. 2-of-3) transaction with a personal keycard. The vendor cashing the check scans the bit check and keycard, then sweeps the change to the next check in the checkbook and gives you a receipt. Your money is completely private and secure.

from this thread: https://bitcointalk.org/index.php?topic=74978.0