If anything it might be a positive sign for bitcoin that the attackers are keen to acquire it!
On another note, mtgox.com the main exchange is shockingly unfit for purpose. If real markets could get 1 hour behind in transaction processing because of a spike in volume it would be the end of capitalism as we know it. I hope a more able exchange arrives soon.
The bitcointalk forums and /r/bitcoin are full of paranoia like this. After months of stress trying to divine market patterns, people see market manipulation and conspiracies everywhere.
The simple truth is that there was an agressive bubble. The doubling period for the price was halving with each iteration[1]. If you looked at the log plot[2], it still looked exponential! A crash was inevitable.
> On another note, mtgox.com the main exchange is shockingly unfit for purpose.
They have a big update scheduled for April 17th[3].
[1] https://bitcointalk.org/index.php?topic=171312.0;all
[2] http://bitcoincharts.com/charts/mtgoxUSD#rg180ztgSzm1g10zm2g...
MtGox has said they were subject to DDoS attacks: https://twitter.com/MagicalTux/status/317423311174909954
> If you looked at the log plot[2], it still looked exponential!
Trying to divine future price movement from looking at a graph has been proven definitively, repeatedly to be foolish.
Keynes may have been mistaken on a lot of things but he got one thing right: "The market can stay irrational longer than you can stay solvent."
My specific prediction less than a day before this crash was "At this rate, the crash is a single-digit number of days away".
The market can NOT stay irrational for long when an asset's price doubles every few days.
The efficient-market hypothesis does not have an asterisk excluding cryptocurrencies.
Truly, the capacity for people to employ cognitive bias is staggering.
I think you'll find that I'm empirically right.
This is what people mean when they say "efficient market" in this context:
> In finance, the efficient-market hypothesis (EMH) asserts that financial markets are "informationally efficient". In consequence of this, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made.
http://en.wikipedia.org/wiki/Efficient-market_hypothesis
There are variations of this hypothesis, so saying "it's dead" is meaningless unless you specify which one is "dead" and how it has failed.
Also: Empirical analyses have consistently found problems with the efficient-market hypothesis, the most consistent being that stocks with low price to earnings (and similarly, low price to cash-flow or book value) outperform other stocks. Which is presumably due to cognitive bias. http://en.wikipedia.org/wiki/Efficient-market_hypothesis
PS: It's a reasonable simplification that's useful for the average investor, but not policy makers for example.
Are they running on 1 server?
Of course this is bad design, but you have to remember that this website started out as Magic the Gathering Online eXchange. It was built to trade playing cards, not to serve as a multi-million dollar currency exchange. The trading engine was retrofitted for bitcoin, and was stuck with several bad design decisions as a result. While I agree this should have been fixed long ago, MtGox has had its hands full recently. The massive growth in its userbase, the ever-growing verification queue, and the fact that it is expected to be online 24/7 have made things difficult.
However, I suspect the main cause of today's massive has to do with this: https://mtgox.com/press_release_20130409.html
It will interesting to see what effect this policy change will have.
[1] https://www.facebook.com/MtGox/posts/455962117821534
[2] https://www.facebook.com/MtGox/posts/453409538076792
[3] https://twitter.com/MagicalTux/status/320043013420249088
http://www.facebook.com/MtGox/posts/453409538076792
"There are a few things that we can implement to help fight the attacks, such as disconnecting the trade engine backend from the Internet. By separating the data center from the Mt.Gox website, we will continue to be able to trade"
I agree there are plenty of people in bitcoin ready to be 'the greater fool' [1] but that's only if it fails... they will be self assured visionaries otherwise...
[1] http://www.amazon.co.uk/Devil-Take-Hindmost-Financial-Specul...
'The HN forums is full of smug dismissiveness like this'
It's a blip on the radar in the grand scheme of things, and tons of sites were DDOS'd and simultaneously going slow or down (bitcointalk, mtgox, bitcoincharts, bitstamp). The evidence is my own eyes and refreshing browser timeouts. Everything back to normal now.
Highly unlikely that all those sites would be bought down by "panicked" users alone.
Given profiteering DDOS attacks against casino operators are commonplace, I find it a stretch to think these attacks are not happening regularly against bitcoin sites.
Anyhow, there's a correction every once in a while. It then goes higher than before, I'm still not convinced it is a bubble afterall.
Likewise, Mt. Gox made mention of "Being DDOS'd" at certain points, but I'm a little skeptical of the claim given that their own charts show a huge jump in trade volume at around the same time.
So no, there's no real "proof" yet of it being a DDOS or just lots of panicked traders, just lots of speculation (heh, heh).
You can keep drinking the "everything's fine" koolaid, or get with the reality that currency manipulators have arrived on the Bitcoin train, and are using all the tools they have available to do their job.
https://bitcointalk.org/index.php?topic=15929.msg1793833#msg...
Also, just because MtGox had a DDoS in the past, doesn't mean they are having one now. I know first hand as someone who runs a service that has been DDoSed in the past that the moment you have server issues, all the users scream "They are being DDoSed!".
My experience here is just as irrelevant as is your own.
That being said, I'm not sure why you think they wouldn't be subject -- along with every piece of infrastructure in the bitcoin food chain -- to very large DDoS attacks. The currency manipulators are here to stay. To think otherwise is foolish and misguided, or hopeful beyond reason.
If the price starts going down, everyone will rush to their favorite bitcoin related site to see what is going on, even if they are not planning on panic selling. Would you say you have checked bitcoin related sites 5 times more than usual today? 10 times?
If the regular users of a site all decide to use it five to ten times more than usual, it is very likely to cause some slowdown.
On the other hand, if a single bitcoin related site was experiencing problems, that is when I suspect a targeted attack.
Lastly, the only thing that mtgox announcing that they have been DDoSed in the past tells us is that they are willing to announce the fact that they are being DDoSed. This would seem to make it less likely that they are being DDoSed in the absence of such an announcement.
The instant-casino-trading side of things came much later along the road. It's not crucial to capitalism to the level people might think it is.
The arch-capitalist Warren Buffet regularly says he'd be happy for markets to close for a year. Though that refers to equities and not forex, which obviously does need to stay open to allow trade to happen.
Though, to be fair, I don't have an answer myself. Many things have changed, many haven't; it depends which bits you care about how much...
you never step in the same steaming turd twice, you're not the same person and it's not the same steaming turd - RockyMcNuts
The Facebook IPO was pretty damn similar and didn't end capitalism as we know it :)
That's (probably unintentionally) sad commentary on the state of our world today. After all, this trading is just finance. Truly forging the materials or implementing the algorithms that improve our standards of living happens in on a completely timescale, where a one hour delay of some financing operation (such as getting a loan approved) makes no difference at all.
I don't think it inherently implies anything of the sort. There is nothing to suggest that they believe in Bitcoin or care about it. If your suggestions are true, the only thing we know is that they are playing a very, very easy game of manipulation for financial gain. I don't see that as a positive for Bitcoin and think you're reaching with that statement.
Just try loading mtgox.com -- it's slow. Try using it to trade. Even slower. Service is being denied. Confidence undermined. I would not take this as a vote that once the server issues are resolved, the price will continue to soar, but if I said that, it's possible that later I would be able to "told you so".
>I hope a more able exchange arrives soon.
I hope for both of those things!
what's the difference between a "selling attack" and just "selling"?
It would be possible to create a GLD-style ETF around Bitcoin and it would be as an accurate reflection of the real price as possible. But why bother?
http://bitcoincharts.com/markets/ will show prices in the major exchanges, if it's online. I had to use the Google cache.
In the short run, there are several big challenges, liquidity being a huge one. When it comes to BTC, the activities of speculators/hoarders, and the activities of free exchange and commerce, have shown themselves to be in direct opposition so far. The "store of value" and the "medium of exchange" are not mutually exclusive, of course, but for the time being, they're functionally mutually exclusive. It's not yet clear whether BTC is a currency, a buy-and-hold investment vehicle, or some schizophrenic combination of the two. It's in the best, long-term interests of BTC to stabilize and become the latter. But BTC is going to be the former for quite awhile, precisely because it's so mysterious in the public eye, there's such information asymmetry about how it works, and because the markets for BTC-based commerce are still fairly niche.
Stabilization is going to come when more businesses start accepting BTC, and accordingly, when BTC becomes more freely convertible for goods, services, and other currencies. Until then, it'll proceed apace slowly and steadily, with the occasional burst of volatility as public interest spikes and wanes, and as speculators jump in and out.
What the currency really needs is exchange volume -- not just from trading, but from commerce.
Where is gold on that spectrum? As far as I can tell, Bitcoin seems to have all the properties of gold (except that it's easier to transport.)
I'm pretty sure that gold is not considered to be a "currency" in any sense in the modern era; it's traded as a commodity, like oil. But people still can use it (or any other commodity, like oil--or, say, laundry detergent[1]) for under-the-table anonymous transactions as well.
[1] http://www.thedaily.com/page/2012/03/12/031212-news-tide-the...
It's an interesting analogy, though there are a few key differences. Gold is a physical good, it has industrial uses, and it can be made into other materials and value-added goods (jewelry, etc.). There's no intrinsic value to gold (aside from the aforementioned industrial uses), other than the fact that it's rare, shiny, and resistant to tarnish.
Once the world moved away from the gold standard, gold ceased to function like a currency and started functioning almost strictly as a commodity. The distinction between the two depends on liquidity, which depends on how freely gold can be converted for goods and services in most markets (it can't).
Interestingly, most people who buy "gold" don't actually take possession of the material; they buy and sell contracts based on gold, or they buy and sell funds invested in gold-mining operations. The idea that people can just buy strips or bars of gold, and use them to transact, is theoretically true, but practically very difficult.
[On a side note: quite a few of the people buying "gold" under the auspices that it'll hold its value if/when a Great Depression, WW3, nuclear apocalypse, etc., takes place, would be in for a rude awakening if such a scenario came to pass. Most of them don't have the actual metal, and they almost certainly wouldn't be able to access it if the shit hit the fan].
Fractional reserve banking - if it's merely backed in BTC then what's the point of bitcoin? It entirely defeats the system as people will be back to fiat currency.
Early adopters and clever nation states have the opportunity to totally turn the world upside down in a BTC backed future. They should have a significant percentage of all existing (as it's finite) BTC which would distort their actual worth. A clever North Korea - estimated GDP of $40 billion, and about $4 billion each in exports and imports - could hold an incredible amount of BTC buying power. Why would any other nation want to acknowledge them? Similarly, they'd be holding onto a financial nuclear bomb if they held enough BTC. They'd be able to almost singlehandedly alter the value (in purchasing power) on a whim with a significant enough percentage.
---
Next, you focus heavily on hyperinflation, but never once seemed to mention deflation. Or the fact that under a scenario like above, hyperinflation is almost feasible as suddenly a large amount of BTC could reenter the market. Long term it would get absorbed, but short term impacts could be severe.
It doesn't matter if they can't enforce it 100% (or even 1%). What matters is that it will kill almost all opportunities to use it as regular money for legitimate purchases by major companies etc in the future. And that it could also land your ass in jail (with ISP monitoring and such being what it is).
Why would a government do that? For one, because they don't like money systems they can not control. Second because they would argue it can be used for money laundering and such.
Time and again it has been proven that you cannot solve social issues with technology. For example a solution for private communication exists: cryptography. And yet, the government can limit what kind of cryptography you can use in your app or export, etc. And they can even throw your ass in jail if you have an encrypted file and you don't hand them the key. You have to go all the more deeper, and even that doesn't solve the issue of your dumb cousin exposing your secret in his plain text email to you.
I don't know about other governments, but I doubt the US will ever declare Bitcoin illegal (though I am told to never say never). Supporting my viewpoint, the US Treasury Department, through FinCEN, has recently tacitly approved Bitcoin: http://www.businessinsider.com/is-bitcoin-legal-2013-4
I think the US government would prefer to take the benefits of Bitcoin (startups springing up everywhere, taxable Bitcoin economic activity, etc), rather than banning it because the technology is used by a minority of users for illegal activity.
"For one, because they don't like money systems they can not control"
This is a broken argument. The US does not control the Euro, or Yen, etc, yet they do not make it illegal to trade in Euros/Yens within the borders.
They don't, but that's because Euros/Yens are backed by foreign governments that would mind this on a diplomatic level. Bitcoin is a much easier target. And most governments would agree to work together on banning it.
Also: the US might not "make it illegal to trade in Euros/Yens" but it does whatever it can to keep the Euro/Yen down. Especially before Euro got itself in trouble anyway. If any small country attempts to do mass business in Euros for example (e.g selling petrol in the currency), the US puts all of their diplomatic (and sometimes military) pressure on them to revert back to using the dollar.
>I think the US government would prefer to take the benefits of Bitcoin (startups springing up everywhere, taxable Bitcoin economic activity, etc)
Not very appealing advantages.
For one, the government doesn't care for "startups springing up everywhere", it mostly caters to established big corporate interests that can afford lobbying.
Second, the bitcoin economic activity will not be any more taxable than conventional economic activity. Actually, it would be even less. Plus, if bitcoin is banned, its economic activity will just migrate to conventional money again, it wont be lost.
Third, the US government needs to be able to print (inflated) money at will -- something which bitcoin doesn't allow.
No, that is not the reason. Replace "Euros/Yens" with "gold" in my sentence, and my point stands with gold being backed by nothing. Basically the US government is totally fine with side markets that they cannot control directly and that exist in parallel with the USD (whether it is EUR, gold, Bitcoin, whatever).
Your other argument also fails to convince me that the government would want to declare Bitcoin illegal. You say it can be used for money laundering, but gold and cash can already be used for money laundering (and even more discreetly since trading gold or cash does not leave a trail like in the Bitcoin blockchain). The US govt does not make gold and cash illegal because they realize it is silly/unenforcable/pointless and would hurt the economy more than it would manage reducing illegal activity. Case in point: the US did attempt to criminalize possession of gold in 1933, but they eventually realized how silly and stupid this was, so they decriminalized it!
When the Internet was being developed throughout the world, were you the kind of person who looked at it and envisioned that its censorship-resistant decentralized aspect could be used to facilitate the transmission of potentially illegal information (software, data, child porn, ideas, etc, especially in countries with no freedom of speech) and said "geesh I bet governments are going to make Internet illegal"?
"For one, the government doesn't care for 'startups springing up everywhere'"
I think my point was clear that these startups are potentially the start of a big new economy complementing the current one that could financially benefit the government with revenues from taxes. So, yes, the government would love to see a big economy pop up.
"Plus, if bitcoin is banned, its economic activity will just migrate to conventional money again, it wont be lost."
No. The world economy is not a zero-sum game. It is possible to create wealth (wealth is stuff we want, not money, see http://www.paulgraham.com/wealth.html ) and Bitcoin and its economy would certainly create extra wealth. Another example showing how silly your assumption that the economy is a zero-sum game is: since the start of e-commerce, do you think that it has stolen commerce from or mostly added to the brick-and-mortar industry? Obviously, sometimes stolen (journals, etc) but e-commerce has mostly added wealth and economic activity on top of the brick-and-mortar one. In other word the size and richness and wealth of the current economy far surpases the one of the economy pre-Internet.
Spoken like a person who has never tried to launder millions of dollars in gold. You don't just go down to the pawn shop and redeem millions of dollars in gold.
http://www.nytimes.com/2003/06/06/nyregion/drug-money-launde...
http://www.insightcrime.org/news-briefs/mexico-cartels-steal...
"Mexican authorities say that, since 2008, criminal gangs have robbed so many trucks carrying gold shipments that some mining companies have been forced to switch to aerial transportation"
For one, the US government has banned gold for decades. So it's not that "OK" with it. It also closely monitors gold deals for money laundering purposes. Not to mention that there are governments all over the world that still forbid the private gold ownership.
>Basically the US government is totally fine with side markets that they cannot control directly and that exist in parallel with the USD (whether it is EUR, gold, Bitcoin, whatever).
The US government is totally NOT-fine with anything it cannot control, especially side markets. Gold is a bad example: they already have banned it once in the past. EUR is also a bad example, because its a legitimate foreign currency (of 400 million people), not some "side market". And bitcoin is also a bad example, because it's insignificant at the time -- a very small niche. There are small software shops that make more money annually than bitcoin has at this point.
>You say it can be used for money laundering, but gold and cash can already be used for money laundering (and even more discreetly since trading gold or cash does not leave a trail like in the Bitcoin blockchain). The US govt does not make gold and cash illegal because they realize it is silly/unenforcable/pointless and would hurt the economy more than it would manage reducing illegal activity. Case in point: the US did attempt to criminalize possession of gold in 1933, but they eventually realized how silly and stupid this was, so they decriminalized it!
It's not that "eventually realized how silly and stupid it was". Like "oh, snap, why did we ever do such a thing? We are never to take the same decision again". It was just that another government, 4 decades removed from the one who took the original decision, and in different circumstances and economic climate, reverted the decision. We are 4 decades after that again, and things can change again if similar occasions to 1933 occur (which was in the "Great Depression" era).
Plus, the US still keeps very close tabs on gold, especially as it related to money laundering.
Something that they are willing to do for Bitcoin also. From the Wall Street Journal: "the U.S. is applying money-laundering rules to "virtual currencies," amid growing concern that new forms of cash bought on the Internet are being used to fund illicit activities. The move means that firms that issue or exchange the increasingly popular online cash will now be regulated in a similar manner as traditional money-order providers such as Western Union Co. They would have new bookkeeping requirements and mandatory reporting for transactions of more than $10,000. Moreover, firms that receive legal tender in exchange for online currencies or anyone conducting a transaction on someone else's behalf would be subject to new scrutiny, said proponents of Internet currencies".
>No. The world economy is not a zero-sum game. It is possible to create wealth (wealth is stuff we want, not money, see http://www.paulgraham.com/wealth.html ) and Bitcoin and its economy would certainly create extra wealth.
The economy might not be a "zero-sum game", but currency pretty much is. You kill a currency, activity and wealth migrates to another.
Plus, wealth is also destructed every day. A 0.0001% drop on Wall Street will destroy more wealth than all current bitcoins combined (which is a laughable amount, $150M, IIRC).
In my eyes, bitcoin is a geeky and early-adopter obsession slash fad, that attracts the wrong kind of people (the "gold-rush" types and techno-naive) and gives them false assurances.
You say euros and gold are "bad examples", but I could cite tons of other examples. For example the US perfectly allows holding and trading in all (virtually all?) foreign currencies including countries it has strained relationships with (Iranian rial, Burmese kyat, etc) and these countries have economies as large as, if not larger than Bitcoin. And because none of these foreign exchanges or currencies are illegal, I doubt Bitcoin will be made illegal.
I await your reply explaining in a convoluted way why each and every foreign currency or commodity is somehow a "bad example", and why the US would allow them but not Bitcoin.
My point being that governments will allow somethign up until the point that a group of politicians either see a threat or some votes in banning it.
The government is made for the people. Don't you forget that.
What exactly gave you the right to call me "paranoid"?
The fact that I said the US might ban the Bitcoin?
For one, the Bitcoin is NOT like the Euro or the Yen at all. It doesn't have any government to back it, and it has properties that make it not very likable to any large government.
Banning bitcoin wont be like banning Euro or the Yen, which are legitimate, sovereign national currencies.
It would be like banning or freezing assets in off-shore accounts (which governments have been known to do). Or like banning the private buying of gold (which the US had done, from 1933 to mid-seventies:
"Executive Order 6102 is an Executive Order signed on April 5, 1933, by U.S. President Franklin D. Roosevelt "forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States". The order criminalized the possession of monetary gold by any individual, partnership, association or corporation."
http://en.wikipedia.org/wiki/Executive_Order_6102
Private / alternative currencies have been banned in several cases all over the world. One example from Wikipedia:
In Australia, the Bank Notes Tax Act of 1910 practically shut down the circulation of private currencies by imposing a prohibitive tax on the practice. It was later repealed and a fine imposed for private currencies (Commonwealth Bank Act 1945). Many other nations have similar such policies to eliminate private sector competition.
Or:
The co-operative society Jord Arbejde Kapital was founded in Denmark during the Great Depression in 1931. The society issued a popular local currency which was subsequently outlawed by the Danish government in 1933.
Not to mention that the whole idea that the US doesn't care at all about Yen and Euros is flawed BS. The US would very much like to keep the dollar unthreatened as the "golden world standard". But those currencies belong to very large economies and countries for the US to be able to do anything about it. Not to mention that the Yen is tied to the dollar in intricate ways nowadays (Chinese own trillions of it).
Still, when any third world or developing country expresses a desire to do business in Euros (something that happened oftentimes before the Euro crisis), the US exerts as much political and diplomatic pressure as it can to have them revert course.
So, using the fact that the US does not ban the Yen and the Euro as an "argument" why it cannot ban bitcoin? Really, not the very best in informed thinking. To call one "paranoid" about arguing the possibility of the bitcoin ban? Even worse (and rude to top).
You might as well say that since the US hasn't entered a war with China or EU, it will never enter a war with a terrorist group operating outside any government. Seeing that China and EU are huge countries/unions, whereas the Bitcoin community is just an ad-hoc random assembly of people investing on an alternative monetary system.
...which proves my point! This was stupid and ultimately led to all sorts of negative economic consequences, therefore the US reverted the decision in the mid seventies. Now you are arguing that the US would somehow make the same mistake with Bitcoin?!
And the reason they dropped the gold ban was less that they found that "it was stupid and led to all sorts of negative economic consequences" and more to a changing political climate at the time and Nixon's monetary policy. Things that can easily change.
Btw, other governments still prohibit the private ownership of gold (except under special agreements and of course as jewelry).
The market for making politically sensitive transactions is huge. There's no need for Bitcoin to be the currency of choice for buying a Big Mac in New York.
Classic money laundering schemes use businesses which typically have large amounts of anonymous customers paying in cash - the dirty money flows in as cash purchases that didn't really happen from customers that didn't exist. The pseudonymous bitcoin doesn't seem to support this use - it will be obvious from an examinination of the block chain where that money came from.
Can anyone describe a workable money laundering scheme using bitcoin?
I don't particularly think that is what is happening though.
That said, the value of the ledger derives almost entirely from the value of the items transacted in the ledger. Therefore, I'd say that the ledger value is derivative of the market value and thus doesn't itself convey an intrinsic value to the coins.
Second, the US government doesn't give its word that dollars are usable for anything other than paying dollar-denominated debts to people inside its jurisdiction. If you owe somebody in the US €100, that's currently US$130.50. But if the dollar collapses tomorrow, you might need US$1300 to pay that debt, even to somebody in the US.
The US government has not given its word that you can exchange those US$130.50 for €100 tomorrow, or for anything else, except for debts already denominated in dollars. It doesn't even require that businesses allow you to buy things with any particular currency (this is a FAQ on the Fed's web site) — just that they accept payment for debts already contracted.
To say that the word of the United States is worthless is to ignore reality.
As for the word of the United States, I'm guessing you've never been to an Indian reservation.
Look at it this way if you must: the rich and the powerful, in the US, have vast amounts of wealth stored in USD and USD-demoninated instruments. It is therefore in their best interests to preserve the value of the USD, or at times slightly inflate it.
The risk of your second paragraph cuts both ways. If the euro collapses tomorrow, you might need only US$13 to pay that debt.
You're suggesting that US elites are systematically long dollars and have the power to control the value of the currency, including overcoming coordination problems. If that were true, we'd be seeing dollar deflation. Instead, we've seen about eight decades of uninterrupted inflation. This means one or both of your premises are wrong. I suspect both.
As for the "risk", I didn't mean to suggest that USD is particularly risky, certainly not more risky than EUR. I was just pointing out that the USG isn't "backing" USD even in the sense of Bretton Woods.
I disagree. There are a number of benefits to inflation - particularly to those who have large amounts of debt on the books. Mortgaged real estate benefits greatly. Interest rates go up. Who stands to gain the most by decreasing the real value of loans and increasing interest rates?
> I was just pointing out that the USG isn't "backing" USD
In the abstract, nobody can back anything, because all you're relying on is their word. You could back a currency with a precious metal, but even that assumes the metal is intrinsically worth something (which has compelling arguments both ways).
The USG backs the USD fundamentally because they have power over the USD. They could instantly crush the value of the dollar if they chose to. Personally, I believe that if/when that happened, we'd have a great deal more to worry about than our wallets.
Creditors compensate by increasing interest rates on new loans, but that's, properly speaking, a response to expectations of future inflation, not a cure for past inflation.
> nobody can back anything
I can't tell if you're actually unable to understand the distinction between reserve-backed currencies and fiat currencies like the current dollar, or if you're intentionally bringing up irrelevancies to try to confuse the discussion. Your unwarranted personal attack earlier in the thread makes me want to assume the latter. In either case, shut the fuck up, because whether your ignorance is faked or not, you're not contributing to the conversation. You're just being an asshole.
It is "backed" in the sense that people need it to pay taxes, but exactly how much value that gives it is completely uncertain and only determined by the supply and demand of people spending it/accepting it. If there were to be a major economic shift, the value could change to be literally anything relative to the value of other goods (without the supply and demand of those goods actually changing.) It could even completely collapse and be worth nothing under the right conditions.
If it was actually backed in the traditional sense it would be guaranteed to be worth some amount of some good or combination of goods, regardless what happens, regardless how many people are spending it or accepting it.
On that basis I would say that the word of the United States is far more intrinsically valuable than any physical object.
But US dollars aren't guaranteed to do anything for you either in such a situation. The currency could hyper-inflate tomorrow for all anyone knows, and it has no intrinsic value other than the requirement to pay taxes with it. It seems to work fine as a currency and maintain stable value, but the point is it really isn't backed by anything.
Nothing, neither gold nor grain, is backed by anything but power. Fiat currency is just the government accepting that responsibility de jure.
Ergo, a dollar today is guaranteed, on the average, to buy just under a today's dollar worth of things next year.
Ergo, a modern dollar is about the closest thing to a guaranteed exchange value that the world has ever seen.
Being stable in value, and being guaranteed to have value are two very different things.
Their fundamental value is derived from fiat.
It's similar, but not the same.
Without them, Bitcoin, the Internet, and most of the other aspects of their comfortable lives would exist.
- the financial system is a huge disappointment (worldwide financial crisis)
It's not that we love Bitcoin (sure, it is an interesting piece of technology, but it's money, and money is a dirty word), we just dislike the alternatives.
Democracy isn't promised to be perfect, just to be better than its predecessors.
Something can be the best-ever-made and still be disappointing.
Let the hive mind decide what is moral and worthy and what is not. Democracy must evolve and this will never happen as long as the old generation has power to stop it.
If you invest in bitcoin because you don't trust governments, but bitcoin relies upon the internet, and the internet requires governments to stay up; then there's a sad potential future where a government-skeptic bitcoin investor is exactly right but because of the prerequisites for bitcoin to maintain value ends up with nothing.
There is no guarantee that any item will be worth any amount of another item. You can make claims about the relative likelihood that some item will be exchangeable for some quantity of another item, but you cannot claim that in every future scenario your item will be exchangeable for any amount of another item.
Just because a transaction looks more like barter than commercial doesn't magically convert the ideas underpinning fundamental economics. At this level of understanding economics is more a study of sociological systems and less about banking, fiat currencies, and all the other modern mumbo-jumbo we go on about these days.
This is really key when discussing some utopian reality where we've untethered ourselves from any form of currency--an exchange of value is tied to the very earliest societal systems. Unless society shrinks back into nomadic wandering tribes some form of value exchange (aka: currency) will exist.
The value of the dollar is "guaranteed", in theory, by the law that states that anything for sale inside the borders of the united states can be bought for dollars, without exceptions.
As to how guaranteed that makes a dollar, that is a matter of opinion. It is a lot better than Bitcoin imho.
Who did yell this time?
>>the more people around the world who adopt it
Who shall be those people?
Are we, by any chance, thinking that we should count the people in mining bitcoins or adopting a currency based on algorithms(let alone the talk about encryption/bits/bytes/code) which they do not have an iota of idea about?
Or are we considering that "naah, it's not for them 'non-techies' anyway!"?
Well, in that case it's actually fine if bitcoin is to be restricted to paying for goods/services that we (the 'techies') shall buy and we'll buy from us (the 'techies'). But then, this will go nowhere.
But 'they' can buy the bitcoins at those exchanges, can't they? No, they shall not buy sth fluctuating in price(paid in dollars and rupees) which shames any share price fluctuation or currency value change except Zimbabwean dollar. And certainly not sth that they do not understand and sth where they have to remember a cryptic and random long string and if they misplace it, forget it or even change it accidentally - well, they just lost all their bitcoins!
There's no support number to call to, no branch manager to go to and tell "well, I just happened to have my id/pwd forgotten".
To me it doesn't even look like a currency. It just looks like, from an average person's point of view, another merchandise(if we do not call dollar a merchandise)/online-'stuff' that people(better say enthusiasts) are buying. Like some share which are generated by running more and more computers.
The whole banking system works hard to earn the customers' trust and any small mistake damages that. Bitcoin doesn't provide any assurances, support, etc...
Looks like another fad the computer industry created for its own amusement. Let's see how long it lasts. I'm sure all the revolutionaries out there fighting the man will come up with solutions for the trust issues.
You don't understand the power of frictionless micropayments and monetary privacy?
I wanted to buy $10k of btc last week @ ~$100, I didn't have any open accounts anywhere, so I used coinbase... which limited the amount I could buy. I ended up with 0.2 BTC, which didn't post in my account until late last night.
Looking at today's quotes, it probably for the best.
The naive souls who recently bought bitcoins to make a 'quick buck' are in for a rude surprise. In the short run, no one knows how Bitcoin's price will fluctuate.
In the long run, however, if Bitcoin continues to work as intended, the more people around the world who adopt it as a store of value and/or medium of exchange, the more demand there will be for it, and with supply being fixed, growing demand will be reflected in a rising price.[1]
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[1] My full thoughts on the matter: http://cs702.wordpress.com/2011/05/29/on-the-potential-adopt...