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Author Topic: Bitcoin as a GET System  (Read 7986 times)
Red
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August 19, 2010, 07:49:35 PM
 #1

There has been much discussion on this site about how best to describe bitcoin to the uninitiated. Some people, favor currency metaphors, others alude to commodity metaphors. Others caution either of these as dangerous taunts to authority.

I posted the following in another thread and there was a suggestion that I write an extended article about my simile. It seems likely that my suggestion is as polarizing as any other. So to avoid any unnecessary aggravation, I'm soliciting comments in advance.

Any thoughts are appreciated.

------
I'd like to submit that I think the most apt description of bitcoin is that it is most like a Global Exchange Trading System (GETS) which is a variation on the LETS concept that isn't for hippies.

Descriptively it differs because it's community is loosely knit and global rather than an intertwined small-town. As such, there can be no commonly trusted party to operate and monitor the system, so that function is trusted to redundancy and mathematics. (block list)

LETS communities can rely on "local knowledge" of peoples historical behavior and intentions. As such it is perfectly reasonable for them to advance credit to people (negative balances) in certain situations. In a GETS community advanced knowledge of all parties and intentions is not practical or even preferred. As such, GETS operates on a zero credit policy. (no negative balances)

Also, since GETS trade globally, there is no "national currency" that can be used for equivalence. As such, GETS defines it's own unit for accounting purposes. Since this currency must necessarily vary against some national currencies, the LETS strict "no interest" principle cannot be preserved.

----
I think if people understood LETS they would intuitively understand GETS. The rest of the bitcoin details are just one possible GETS monetary policy.
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August 19, 2010, 07:55:23 PM
 #2

I think it's a good comparison and nice to understand the differences.

I didn't realize "no interest" was integral to LETS. It's pretty silly to tell people that they can't value work now more highly than work in the future.

 

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August 19, 2010, 08:13:42 PM
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It's pretty silly to tell people that they can't value work now more highly than work in the future.

This is more common than you think and not arbitrarily non-sensical. Suppose you work for a fixed salary and generally work 5 week days and get 2 weekend days off. Now if you happened to work one weekend extra it is clear that you are "owed" two days of not working as compensation. If you take those two days the next week that seems perfectly reasonable.

However, what if you decided to "bank" those two days and to not take them for five years? Say over those five years your salary increases 50%. So when you take those two days, they are equivalent to three days of work at the rate you banked them. Is this fair to the company? What if there is a recession and your salary falls 50%? Do you have the right to demand four days off-work instead of two?

More and more companies in the US are employing a use your vacation (this year) or lose your vacation strategy whenever possible to avoid these issues.

The LETS philosophy adopts this concept for everything since everything is basically "work" to them. According to the founder there is no point at all in saving in LETS credits. Credis should remain fixed in value. If you want to save in something that changes in value choose one of the numerous commodities produced and traded by members of the LETS community. That is why they stress keeping everyone's balances close to zero.

-----

Bitcoin differs greatly from LETS in this philosophy but only because of the 21,000,000 fixed bitcoin policy. Bitcoin's monetary policy could be varied (in theory) to bring it closer to LETS, but that is definitely NOT a priority of the bitcoin community.
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August 19, 2010, 10:10:11 PM
 #4

I'd like to factor Bitcoin the method from Bitcoin the useage.

Bitcoin should be a convenience owned, used, and maintained by the community.

The community can grow around Bitcoin, to be a web payment system, or an auction, or a commodity exchange, or whatever. But it must be understood that these enterprises are independent of Bitcoin. They should not be owned, operated, controlled, or promoted by Bitcoin in any way.

Keep it simple!

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August 19, 2010, 11:20:54 PM
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Bitcoin should be a convenience owned, used, and maintained by the community.
LETS is an accounting convenience owned, used, and maintained by the community. It is used to facilitate trade and wikipedia defines it as a full fledged monetary system (not barter).

I don't find the noun "convenience" used alone to be descriptive enough to be useful in this situation.

In the US there is nothing wrong with trading using whatever token you want. I use frequent flyer miles, credit card rebates, hotel and untold other points systems, karma, coupons, and many other things listed as "foo dollars" or "foo bucks". There really is no threat.

If I used any to avoid taxes or send money to terrorists they would hunt me down and ask why. But I don't do those things so I'm unconcerned.

And legally speaking, your intentions matter but your vocabulary usually don't. You can be convicted of having someone "offed" just as easily easily as if you had said "killed".
   
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August 19, 2010, 11:27:09 PM
 #6

It's pretty silly to tell people that they can't value work now more highly than work in the future.

This is more common than you think and not arbitrarily non-sensical. Suppose you work for a fixed salary and generally work 5 week days and get 2 weekend days off. Now if you happened to work one weekend extra it is clear that you are "owed" two days of not working as compensation. If you take those two days the next week that seems perfectly reasonable.

However, what if you decided to "bank" those two days and to not take them for five years? Say over those five years your salary increases 50%. So when you take those two days, they are equivalent to three days of work at the rate you banked them. Is this fair to the company? What if there is a recession and your salary falls 50%? Do you have the right to demand four days off-work instead of two?

More and more companies in the US are employing a use your vacation (this year) or lose your vacation strategy whenever possible to avoid these issues.

The LETS philosophy adopts this concept for everything since everything is basically "work" to them. According to the founder there is no point at all in saving in LETS credits. Credis should remain fixed in value. If you want to save in something that changes in value choose one of the numerous commodities produced and traded by members of the LETS community. That is why they stress keeping everyone's balances close to zero.

-----

Bitcoin differs greatly from LETS in this philosophy but only because of the 21,000,000 fixed bitcoin policy. Bitcoin's monetary policy could be varied (in theory) to bring it closer to LETS, but that is definitely NOT a priority of the bitcoin community.

The employee and employer have some agreement. It doesn't concern me whatever they decide to do. It would be wierd if 'dollars' told them what they could agree to. Likewise it would be odd if LETS told someone what agreements they could make concerning how many LETS were owed.

I mean what happens anyway?

I tell a guy that if he mows my lawn I'll give him 10 LETS, but that if he doesn't mind waiting to get paid till next month I can give him 11. How does LETS stop me form offering to 'borrow' LETS at interest (over 100% APR even)?

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August 19, 2010, 11:29:27 PM
 #7

I'd like to factor Bitcoin the method from Bitcoin the useage.

Bitcoin should be a convenience owned, used, and maintained by the community.

The community can grow around Bitcoin, to be a web payment system, or an auction, or a commodity exchange, or whatever. But it must be understood that these enterprises are independent of Bitcoin. They should not be owned, operated, controlled, or promoted by Bitcoin in any way.

Keep it simple!


Does Bitcoin own anything? How would I even tell?

So appearing on the Bitcoin wiki is promotion by Bitcoin or not?

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August 20, 2010, 01:13:38 AM
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... The employee and employer have some agreement. ... It would be wierd if 'dollars' told them what they could agree to.


I am not sure how this is done on other countries, but in the United States the contract is written on a federal form W-4, and documents the employee and his Social Security account number and the employer and his Taxpayer Identification number. It contracts both parties with the federal government to abide by a set of rules called the United States Code, the Code of Federal Regulations, and a host of others.

You cannot have the kid down the street mow your lawn as an "employee" outside of this system. Impossible.

My point: These words have consequences.


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August 20, 2010, 01:23:46 AM
 #9

I'd like to factor Bitcoin the method from Bitcoin the useage.

Bitcoin should be a convenience owned, used, and maintained by the community.

The community can grow around Bitcoin, to be a web payment system, or an auction, or a commodity exchange, or whatever. But it must be understood that these enterprises are independent of Bitcoin. They should not be owned, operated, controlled, or promoted by Bitcoin in any way.

Keep it simple!


Does Bitcoin own anything? How would I even tell?

So appearing on the Bitcoin wiki is promotion by Bitcoin or not?

Some versions of our letter to the EFF, and of the magazine article being considered have buzzwords prejudicial to Bitcoin. They are being prepared on a Bitcoin website, by bitcoin people. A reasonable and prudent observer would be able to rely on the ill-advised claims. A grand jury can certainly accept these at face value. An ambitious prosecutor can and will have a field day, using our own statements against ourselves.





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August 20, 2010, 01:31:04 AM
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I'd like to factor Bitcoin the method from Bitcoin the useage.

Bitcoin should be a convenience owned, used, and maintained by the community.

The community can grow around Bitcoin, to be a web payment system, or an auction, or a commodity exchange, or whatever. But it must be understood that these enterprises are independent of Bitcoin. They should not be owned, operated, controlled, or promoted by Bitcoin in any way.

Keep it simple!


Does Bitcoin own anything? How would I even tell?

So appearing on the Bitcoin wiki is promotion by Bitcoin or not?

Some versions of our letter to the EFF, and of the magazine article being considered have buzzwords prejudicial to Bitcoin. They are being prepared on a Bitcoin website, by bitcoin people. A reasonable and prudent observer would be able to rely on the ill-advised claims. A grand jury can certainly accept these at face value. An ambitious prosecutor can and will have a field day, using our own statements against ourselves.

Perhaps in the context of "Does Bitcoin own anything?" it should be clear whether there is an additional meaning for "Bitcoin" in this case or if it is a misinterpreted usage and "Bitcoin" doesn't fit or belong in such a statement.  e.g. similarly to say "Does this USD1 bill own anything?" or "Do dollars own anything?"
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August 20, 2010, 02:01:48 AM
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... The employee and employer have some agreement. ... It would be wierd if 'dollars' told them what they could agree to.


I am not sure how this is done on other countries, but in the United States the contract is written on a federal form W-4, and documents the employee and his Social Security account number and the employer and his Taxpayer Identification number. It contracts both parties with the federal government to abide by a set of rules called the United States Code, the Code of Federal Regulations, and a host of others.

You cannot have the kid down the street mow your lawn as an "employee" outside of this system. Impossible.

My point: These words have consequences.




I don't think we use words in remotely the same way. Impossible things have never been done. Hiring a boy to mow your lawn illegally has definitely been done.

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August 20, 2010, 02:39:02 AM
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... The employee and employer have some agreement. ... It would be wierd if 'dollars' told them what they could agree to.


I am not sure how this is done on other countries, but in the United States the contract is written on a federal form W-4, and documents the employee and his Social Security account number and the employer and his Taxpayer Identification number. It contracts both parties with the federal government to abide by a set of rules called the United States Code, the Code of Federal Regulations, and a host of others.

You cannot have the kid down the street mow your lawn as an "employee" outside of this system. Impossible.

My point: These words have consequences.




I don't think we use words in remotely the same way. Impossible things have never been done. Hiring a boy to mow your lawn illegally has definitely been done.

First you falsely claim an employer-employee relationship, then you admit to engaging in an illegal activity. I sure as hell don't want you managing my business!

You could have simply side-stepped the whole issue as I advised earlier, but you chose otherwise. I hope you will show better judgment when you're out on parole.

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August 20, 2010, 02:55:12 AM
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The employee and employer have some agreement. It doesn't concern me whatever they decide to do. It would be wierd if 'dollars' told them what they could agree to. Likewise it would be odd if LETS told someone what agreements they could make concerning how many LETS were owed.
You ducked the question by saying people can agree to whatever they want.
I suggested that it simply doesn't make sense to pay someone extra for their "delayed gratification". While you might think that delaying your own gratification is somehow noble. It doesn't benefit me at all.

Moreover, in the context of a LETS system it negatively effects the community. If someone hoards a positive balance, then others' balances by definition have to remain negative.

I mean what happens anyway?

I tell a guy that if he mows my lawn I'll give him 10 LETS, but that if he doesn't mind waiting to get paid till next month I can give him 11. How does LETS stop me form offering to 'borrow' LETS at interest (over 100% APR even)?
A LETS system is a shared credit system (according to wikipedia). Suppose a system starts everyone out with a zero balance and allows people to have up to a positive or negative 500 credit balance. So in your case if you had a zero balance you could easily pay the lawn guy 10 or 11 credits. Whatever you negotiate. The community is lending you those credits at zero interest in the hope that you will use your skills to benefit the community. The only reason you could not pay the lawn guy, is if your balance was already -490 (Which is publicly known by definition). At that point the lawn guy could have the community accept the risk for your -10 credits, or he personally could take the risk for your -11 credits. That would be up to him if he wanted to trust you for it. He would have a lot more evidence from the LETS system than most people have making those sorts of decisions today (unless they run a credit report).

The community risk in a LETS system is that people run up a negative balance and then exit the community. This means they took services from the community but did not repay with services of their own.

Say a person died with a -500 credit balance. Then by definition, there are +500 credits out there that can never be balanced. That would be the equivalent to "inflation" in other monetary systems. To bring the system into balance either someone has to take responsibility for working off the -500 credits, maybe other family members. Or the community as a whole would have to "write off" +500 credits of their expectations.
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August 20, 2010, 03:14:51 AM
 #14

I am not sure how this is done on other countries, but in the United States the contract is written on a federal form W-4, and documents the employee and his Social Security account number and the employer and his Taxpayer Identification number. It contracts both parties with the federal government to abide by a set of rules called the United States Code, the Code of Federal Regulations, and a host of others.
For anyone outside the US, the above statement is basically silliness. W-4 form is the form employees fill out specifying how much salary withholding they are ALLOWING the employer to withhold. There are mandatory withholding laws that apply to all employer/employee relationships. There are certain responsibilities each party MUST comply with, like it or not. The W-4 form is a form that shows compliance. It is not a contract. If you refuse to sign and W-4 and the employer still wants to employ you, he must still comply with the law. You must also still comply with the law whether you sign or not. It says so right on the form:

Quote
Privacy Act and Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. Internal Revenue Code sections 3402(f)(2) and 6109 and their regulations require you to provide this information; your employer uses it to determine your federal income tax withholding. Failure to provide a properly completed form will result in your being treated as a single person who claims no withholding allowances; providing fraudulent information may subject you to penalties.
http://www.irs.gov/pub/irs-pdf/fw4.pdf

The W-4 form is not a contract. That should be clear to any observer as the required part is only half a page long.

You cannot have the kid down the street mow your lawn as an "employee" outside of this system. Impossible.
Of course you can have the kid down the street mow your lawn! This is the stupidest statement I've seen on this site.

The lawn guy that cuts my lawn is NOT my employee. He is an independent contractor. If he has employees then he has to comply with the law. I certainly don't have to. Nor is the guy at the grocery store my employee because he carries my groceries to the car. Nor the waiter because he brings me my food. Please don't make Americans look like idiots.

My point: These words have consequences.
Obviously they do. Sometimes people use them to point out you are spouting nonsense.
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August 20, 2010, 03:30:25 AM
 #15

"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance."
President James Madison

Bitcoin actually resembles a monetary system called tally sticks which was in use for 800 years pre 1694.
Bitcoin is a distributed tally stick system.The block chain functions as the tally stick serving as the proof against counterfeiting and bitcoin addresses function as the notches which are denominations.

Quote
THE TALLY STICKS (1100 - 1854)


King Henry the First produced sticks of polished wood, with notches cut along one edge to signify the denominations. The stick was then split full length so each piece still had a record of the notches.

The King kept one half for proof against counterfeiting, and then spent the other half into the market place where it would continue to circulate as money.

Because only Tally Sticks were accepted by Henry for payment of taxes, there was a built in demand for them, which gave people confidence to accept these as money.

He could have used anything really, so long as the people agreed it had value, and his willingness to accept these sticks as legal tender made it easy for the people to agree. Money is only as valuable as peoples faith in it, and without that faith even today's money is just paper.

The tally stick system worked really well for 726 years. It was the most successful form of currency in recent history and the British Empire was actually built under the Tally Stick system, but how is it that most of us are not aware of its existence?

Perhaps the fact that in 1694 the Bank of England at its formation attacked the Tally Stick System gives us a clue as to why most of us have never heard of them. They realised it was money outside the power of the money changers, (the very thing King Henry had intended).

What better way to eliminate the vital faith people had in this rival currency than to pretend it simply never existed and not discuss it. That seems to be what happened when the first shareholder's in the Bank of England bought their original shares with notched pieces of wood and retired the system. You heard correctly, they bought shares. The Bank of England was set up as a privately owned bank through investors buying shares. Even the Banks resent nationalisation is not what it at first may appear, as its independent resources unceasingly multiply and dividends continue to be produced for its shareholder's.

These investors, who's names were kept secret, were meant to invest one and a quarter million pounds, but only three quarters of a million was received when it was chartered in 1694.

It then began to lend out many times more than it had in reserve, collecting interest on the lot.

This is not something you could just impose on people without preparation. The money changers needed to created the climate to make the formation of this private concern seem acceptable.

Here's how they did it.

With King Henry VIII relaxing the Usury Laws in the 1500's, the money changers flooded the market with their gold and silver coins becoming richer by the minute.

The English Revolution of 1642 was financed by the money changers backing Oliver Cromwell's successful attempt to purge the parliament and kill King Charles. What followed was 50 years of costly wars. Costly to those fighting them and profitable to those financing them.

So profitable that it allowed the money changers to take over a square mile of property still known as the City of London, which remains one of the three main financial centres in the world today.

The 50 years of war left England in financial ruin. The government officials went begging for loans from guess who, and the deal proposed resulted in a government sanctioned, privately owned bank which could produce money from nothing, essentially legally counterfeiting a national currency for private gain.

Now the politicians had a source from which to borrow all the money they wanted to borrow, and the debt created was secured against public taxes.

You would think someone would have seen through this, and realised they could produce their own money and owe no interest, but instead the Bank of England has been used as a model and now nearly every nation has a Central Bank with fractional reserve banking at its core.

These central banks have the power to take over a nations economy and become that nations real governing force. What we have here is a scam of mammoth proportions covering what is actually a hidden tax, being collected by private concerns.

The country sells bonds to the bank in return for money it cannot raise in taxes. The bonds are paid for by money produced from thin air. The government pays interest on the money it borrowed by borrowing more money in the same way. There is no way this debt can ever be paid, it has and will continue to increase.

If the government did find a way to pay off the debt, the result would be that there would be no bonds to back the currency, so to pay the debt would be to kill the currency.

With its formation the Bank of England soon flooded Britain with money. With no quality control and no insistence on value for money, prices doubled with money being thrown in every direction.

One company was even offering to drain the Red Sea to find Egyptian gold lost when the sea closed in on their pursuit of Moses.

By1698 the national debt expanded from £1,250,000 to £16,000,000 and up went the taxes the debt was secured on.

As hard as it might be to believe, in times of economic upheaval, wealth is rarely destroyed and instead is often only transferred. And who benefits the most when money is scarce? You may have guessed. It's those controlling what everyone else wants, the money changer's.

When the majority of people are suffering through economic depression, you can be sure that a minority of people are continuing to get rich.

Even today the Bank of England expresses its determination to prevent the ups and downs of booms and depressions, yet there have been nothing but ups and downs since its formation with the British pound rarely being stable.



....and so we begin the system again using bitcoin.Will it go down the same path as the original Tally Stick system?Who can tell.One thing is for sure and that is there are powerful interests out there who would shut it down as soon as they realise its revolutionary value.
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August 20, 2010, 03:36:27 AM
 #16


Moreover, in the context of a LETS system it negatively effects the community. If someone hoards a positive balance, then others' balances by definition have to remain negative.


I move to town, mow a few lawns, take a few credits, move away or die. And people are hurt?

What if I sell them all bullion and fancy cars and then move or die or hoard?

A positive balance means that you have on balance helped people, zero is neutral, and negative means you owe. It is not bad to be owed favors or services or items and not cash them in.

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August 20, 2010, 04:09:08 AM
 #17

I move to town, mow a few lawns, take a few credits, move away or die. And people are hurt?

What if I sell them all bullion and fancy cars and then move or die or hoard?

A positive balance means that you have on balance helped people, zero is neutral, and negative means you owe. It is not bad to be owed favors or services or items and not cash them in.
I understand your point of view. It makes perfect sense in reality. Say I come into a community and I teach basket weaving. If I leave and take nothing the community is richer. 

However in the case of a formal monetary system it does have consequences. A LET system is equivalent to a fixed currency system in the sense that coins, bullion or tally sticks, it someone enters the community than leaves taking the currency, then there is less currency to go around. It is monetary deflation. It makes it harder to trade.

In LETS as others' balances go more negative you have to either allow more credit to compensate for the unspent credits or change prices to compensate for the hoarded currency.

If die or formally leave the community and return your unused credits, you have the same issue as someone dying with negative credits. You still have to redistribute the good fortune, or the burden. It is much easier in a LETS system since there is central control of the accounting.
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August 20, 2010, 06:05:37 AM
 #18

Ah, this must be the thread  Wink

Red, as an old hippie, I do like the sound of GETS  Smiley

OTOH, based on my (admittedly nontechnical) understanding of both Bitcoin and economics, Bitcoin is in fact money.  If it's not, and not just inconvenient to admit that it is, I invite explanation.  Implore, even.

Although Bitcoin have no inherent worth, they resemble commodity money in that they can't be created at will through financial BS.  Or, at least, that's how I read the Bitcoin FAQs.

As I've noted, I really don't get the value of semantics here.  Bitcoin is either going to be uncontrollable, or it's going to be controlled and/or absorbed (or just shut down).  What we call it means nothing.  Indeed, pretending that it's something innocuous might be considered irresponsible.
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August 20, 2010, 07:05:36 AM
 #19

I move to town, mow a few lawns, take a few credits, move away or die. And people are hurt?

What if I sell them all bullion and fancy cars and then move or die or hoard?

A positive balance means that you have on balance helped people, zero is neutral, and negative means you owe. It is not bad to be owed favors or services or items and not cash them in.
I understand your point of view. It makes perfect sense in reality. Say I come into a community and I teach basket weaving. If I leave and take nothing the community is richer. 

However in the case of a formal monetary system it does have consequences. A LET system is equivalent to a fixed currency system in the sense that coins, bullion or tally sticks, it someone enters the community than leaves taking the currency, then there is less currency to go around. It is monetary deflation. It makes it harder to trade.

In LETS as others' balances go more negative you have to either allow more credit to compensate for the unspent credits or change prices to compensate for the hoarded currency.

If die or formally leave the community and return your unused credits, you have the same issue as someone dying with negative credits. You still have to redistribute the good fortune, or the burden. It is much easier in a LETS system since there is central control of the accounting.

It is not harder to trade if LETS are worth more unless there is some divisibility issue.

Imagine this even! Instead of one crazy old man peddling bullion and cars there is a whole stream of them. Every time before they leave they distribute the LETS back to everyone in whatever eccentric randomish method the man wants. There won't be a decrease in the money supply, but having tons of bullion and cars up for sale in LETS will surely increase their value (just in case, I'm going to say each man brings 3x the number off goods as were previously in the LETS economy).

In this case there is not less money, but it is worth more. Is it still a problem?

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August 20, 2010, 01:19:58 PM
 #20

I like the tally system analogy. I think this is the closest description so far of what we are trying to do with Bitcoin. But the tally system of old needed the power of the King to make it effective. How is this done with Bitcoin? By relying on logic.

The King can be deposed, logic cannot. It will always be either true or not true. And that makes it more reliable.

I'm afraid that I don't get the GETS system. It's an exchange, it's global, and so what? Does something like this actually exist? Who is the King that insures its stability? Do I even care now that we have a logical King in Bitcoin?



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