Is BitCoin the currency of the future?

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boniek replied on Fri, Jun 17 2011 7:47 AM

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Peter Šurda:

boniek:

I just said it in my previous post - constant inflation.

This is the monetarist approach. That does not necessarily mean it's incorrect, but it's not founded in praxeology either. Even if you have constant inflation, as the number of users increases, from the perspective of an individual user, the marginal return on investment still decreases. So there is still a reason to call it "unfair". Furthermore, in the current implementation the block size adjusts only once every four years anyway so there is plenty of time to hop on.

Inflation does not mater for bitcoin system, because it will ultimately stop. Distribution of inflation, as it is now, only matters to early adopters. I suggest dropping this topic as it is inconsequential to bitcoin success or failure in the long term.

Peter Šurda:

boniek:

How do you effectively ban USD in Poland? It is just a some paper. Are you going to ban paper? And how are you going to enforce it internationally? ^_^

As far as I know, USD is not banned in Poland. In fact I think a lot of Austrians misrepresent the legal tender laws. For a normal businessman, the direct effect of legal tender laws on his trades is largely non-existant, with the exception of countries suffering from hyperinflation, or communist ones, where governments explicitly ban it. If you're not a bank, you probably do not need to accept USD (or the local tender) in any trade you are conducting. The reason why fiat is regionally distributed is mostly due to indirect influence (e.g. you need to use the local currency as the main one in your bookkeeping, banks often treat it favourably, and various public services require it) and network effects.

It is not banned outright. It is banned as money.  Legal tender laws define and monopolize what money is - you cant get your paycheck for example in antyhing other than PLN. These laws force you tu use 'money' that is constantly devalued to fund government handouts and inefficiencies. You have to pay for converting from one currency to another - currency exchange is business not a charity.

Peter Šurda:

I'm not familiar with Poland in particular, but in general in communist countries, you were prohibited from owning a "harder" currency. That did not stop a flourishing black market and high prices for those currencies.

Poland has fairly standard legal tender laws AFAIK. Of course legal tender laws in times of crisis are ignored. You had black market in currencies in Poland because of hyperinflation - you couldn't get anything for PLN. Threat of violence from the state was nothing compared to danger of starvation.

Peter Šurda:

The problem in the US is that the government often attacks producers (rather than users) of competing currencies. But the production of Bitcoin is decentralised, and happens all over the world. So what's the government going to do? The computer that produces a Bitcoin does not need to store it. It could be stored in a different country. So even if somehow the government would claim that the mining rig is violating its monopoly on mint, confiscating the rig still does not confiscate the Bitcoins.

Think of Bitcoin as bittorrent. It's just data flowing on the internet. It's also comparatively smaller amount of data. So how do you stop it? You forbid people from renting servers in other countries, and connecting to services in other countries? Apart from having ridiculous restrictions of the internet, which affect almost all use of it whatsoever, there is no effective way of stopping it. Also, even if they somehow get to you and you get jailed, you can still manage to protect your bitcoins from being expropriated (and leave them to be used by your family, for example). Compare that to gold: government takes the gold and you're screwed.

Government takes your computer and you are screwed. With gold this is less likely because government has no idea who has physical gold in their homes. With bitcoin it is quite possible to know this.

Peter Šurda:

boniek:

what use will bitcoins have as money to me if I won't be able to spend them to buy anything

You can use it to buy stuff from countries that do not ban bitcoin, and you can trade them on black market. There might be a higher risk, but the market value of Bitcoins would also be higher.

Bitcoin is already banned as money worldwide - legal tender laws exist everywhere AFAIK. Value in high risk scenario would be higher only when demand keeps up.

Peter Šurda:

boniek:

But you can definitely distinguish fake from original for example by cutting it.

I'm not an expert, so I don't know to what extent this is correct or not (for a gold-plated tungsten probably yes, but that's hardly the only way to forge a gold coin). Nevertheless, it diminishes the value of the coin and its usability. Furthermore, there's the problem of physical contact and speed. If you're trading remotely or online, it is impractical to cut a coin that is stored somewhere else, so you'd need to substitute gold for a note, or a DGC (digital gold currency), which has its own range of problems.

Solution is simple - buy from trusted source with estabilished market position. They have incentive to sell you genuine gold.

Peter Šurda:

boniek:

Still better than nothing.

Unless, of course, someone invents replicators. Then gold would become worth next to nothing.

This is post scracity. Wouldn't money as a concept be useless then? Unless you would need some resource to make replication possible. Then this resource would become money IMO.

Peter Šurda:

My point is that there is no praxeological reason to why any specific type of medium of exchange should be dominant. The advantages and disadvantages of them (and therefore their ability to grasp this or that part of the market for medium of exchange) are heterogeneous variables, and their relative importance changes depending on the environment and the state of technological progress. While it's possible that on a free market, gold would be dominant for the time being, we do not have a free market. Furthermore, gold is much more in danger from government than Bitcoin. Even if they wanted, they can't do much about it.

Standards are very useful and sought after. It is the same with money, that is why if possible, only one money wins in the end.

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Peter Šurda replied on Fri, Jun 17 2011 8:06 AM

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Smiling Dave:

.. then the guys have refuted you, it seems to me.

I not only see no refutation, but I also do not see any coherent reaction to my posts. All of my arguments are ignored. In a way, the experience is mutual: we are ignoring each other's arguments. But whereas I provided a reason for my ignorance (such as the assumptions clearly not being met), none of my opponents provided a reason for their ignorance, other than someone in the past thought it makes sense.

The government's initiation of force does not invalidate the human action axiom, for example: people still act, just their decision processes assign different weight to individual variables. But it invalidates the conclusion that a small number of media of exchange emerges. Clearly, it does not. So, that's why I object to its usage.

Smiling Dave:

They are quoting Mises' regression theorem as evidence that a medium of exchange will not be accepted unless it fulfills a certain requirement which they say bitcoin lacks.

Let me repeat what I said at the very beginning in my first post: this only deductively follows if certain conditions are met, which currently are not met and probably won't be in a foreseeable future.

The government interference in money and its attacks on gold create a market gap and Bitcoin has features which allow it to fill this gap. If gold was able to fill this gap, it already would have. The fact that it did not is a big hint that there might be something wrong with the argument. Just like you can argue that Bitcoin lacks some properties, I can argue that gold lacks some properties.

Just like tax advisors would not exist on a free market because there would be no taxes, Bitcoin might not exist on a free market either (let's just assume this for simplicity so that we can stick to what we both agree on). Objecting to the usage of Bitcoins is, from this perspective, the equivalent of objecting to the usage of the services of tax advisors. I don't know any Austrian that raves how tax advisors are fraud and violate the non-aggression principle or any such irrelevant nonsense. Such reactions would be emotional and not rational. The emergence of tax advisors is the market's reaction to the force initiated by the state. Just like the emergence of Bitcoin is the market's reaction to the force initiated by state. If you love gold, turn your hatred towards the state, who is attacking gold owners, minters, digital gold currency issuers. Don't turn your hatred towards the free market. Bitcoin is not a threat to gold or to people obsessed with the term "money", rather it provides supplementary features which gold does not have and is able to diminish the state's power over the economy.

I'm not going to repeat myself again. I already explained my position several times. Am I going to get some meaningful replies or not?

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filc replied on Fri, Jun 17 2011 12:29 PM

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@ Peter Šurda

Youy have presented the discovery of absolutely no contradictions. Only confusions in your own understanding of the material. You fundamentally do not understand the regression theorem, do not understand the Austrian insight called "Economic Calculation" and as a consequence you stumble over foundational tenants like Exchange Ratio's, Money, and the formation of prices(More on Exchange Ratios).

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Peter Šurda replied on Fri, Jun 17 2011 12:50 PM

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boniek:

you cant get your paycheck for example in antyhing other than PLN.

This is incorrect. In a typical democracy nowadays, the force of legal tender is mostly indirect. Instead of prescribing what currency to use in a transaction, the government prescribes how you should do your bookkeeping and how banks should construct their services. That gives the legal tender a comparative advantage. There are situations where you are forced to accept legal tender, but they refer to specific situations like if you're a bank, when you're in a legal dispute with someone and when you're paying to the government. There is no requirement to use the zloty for salaries. During communism, of course, it was more strict, but that's been over for over 20 years.

boniek:

You have to pay for converting from one currency to another - currency exchange is business not a charity.

If you want, you can rearrange your business so that the only time you're using legal tender is when paying taxes and levies (and only pay the conversion fees at that time). You can conduct the whole business in any currencies you want, you just need to follow the bookkeeping rules prescribed by the government. You do not even have to have a bank account in Poland (apart from the purpose of paying taxes/levies).

boniek:

Government takes your computer and you are screwed.

In order for this to be effective, the government needs to first determine where all the copies of your wallet are, and if all of them are encrypted, how to decrypt at least one of them. I'm not even talking about a situation when the copy is stored outside of the jurisdiction of that country.  Taking a single computer has as much effect as shutting down a bittorrent peer. Furthermore, the centralisation has fatal consequences to gold-based currencies (digital or physical). Governments, especially the US one, like to raid their issuers. Once that happens, not only is the issuer screwed, but at least som of their customers too (for digital, all of them). If you have a digital gold certificate and the government shuts down the issuer's servers, the DGC loses backing as well as becomes unusable, since the infrastructure is gone. Other issuers do not have any obligation to redeem them (assuming even they were technically compatible), nor would it make much sense from a business point of view. Not so with Bitcoin: if a miner's rig is confiscated, all the Bitcoins he mined are still fully valid and perfectly usable. The standard is open source and the infrastructure is peer to peer.

boniek:

With gold this is less likely because government has no idea who has physical gold in their homes. With bitcoin it is quite possible to know this.

It is much easier to determine where gold is compared to where all copies of a file are. Gold is centralised, Bitcoin is decentralised. Furthermore, a third party (e.g. wife or a foreign business associate) or even an automated system can transfer the Bitcoins to a new address when you are in danger. In order to do this with gold, someone needs to physically move the gold from the old location to the new location. With Bitcoin, any single computer anywhere on the internet can do the transfer.

boniek:

Bitcoin is already banned as money worldwide - legal tender laws exist everywhere AFAIK.

As I said above, this is false. It may be banned in some obscure countries like Cuba, North Korea or Zimbambwe, but the vast majority of the world is not violating legal tender laws by trading in Bitcoins. Outright bans are uncommon, and usually accompanied by hyperinflation and/or communism.

boniek:

Solution is simple - buy from trusted source with estabilished market position.

This, however, runs counter to the requirement of universality: you need to choose between trust and using new opportunities. With Bitcoin, you can have both simultaneously, since the validity of a Bitcoin transfer can be verified very quickly at low cost.

boniek:

This is post scracity.

Such thing as "post scarcity" is, in my humble opinion, not possible. The impossibility follows from the action axiom. Replicators would "merely" make a lot of problems much easier, like computers and the internet did, but you'd still have scarcity. However, with replicators it would not make much sense to use commodities as money.

boniek:

Unless you would need some resource to make replication possible.

The replicators in Star Trek work on the basis of conversion between matter an energy. The decisive factor for a value of a physical asset would be then its weight: it would be roughly equally costly to produce a kilogram of dung as a kilogram of gold. That eliminates the advantage of gold, or any specific commodity for that matter. However, since you still have scarcity, there is still demand for production, trade and economic calculation. A currency that is based on mathematic rather then physical properties (such as Bitcoin) would be clearly at an advantage.

The replicator "problem" is, of course, only hypothetical, but my point is a reductio ad absurdum of the regression theorem.

boniek:

Standards are very useful and sought after.

Correct. And Bitcoin provides a well defined, decentralised and open standard to build services on. Gold is not necessarily a "bad" standard, but in the world of government intervention it simply might not be able to compete against fiat as effectively as Bitcoin can. If it could, Bitcoin wouldn't have emerged in the first place.

boniek:

It is the same with money, that is why if possible, only one money wins in the end.

As I said in other posts, this requires some assumptions, such as the non-interference by government and a homogeneity and stability of requirements for such a standard.

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Peter Šurda replied on Fri, Jun 17 2011 12:52 PM

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filc, you provide merely more assertions and no arguments. If I'm confused, why don't you correct me? If my understanding is lacking, why don't you explain?

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NidStyles replied on Fri, Jun 17 2011 1:14 PM

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What on earth do a few investors influencing factors have to do with economic calculation as a whole? Does a house wife use gold when taking inventory and budgeting the households supplies?

A few investor's? So you think the entire world investing market is only a few investor's? Please tell me you aren't a licensed broker, because that would just make your argument here that much worse. Even that house wife whom might have a 401K or a brokerage account is investing in PM's. BTW my wife does all of her investing and calculation's based on the fluctuation's of PM's. So your assumption that the everyday house wife doesn't do this, is more so of you opening mouth and inserting foot.

Your just making an unsubstantiated anecdotal claim here.  Why are you even bothering?

Where was there a claim? It was clearly stated as a question. Again that's the third time I have corrected your posting here. Twice in one thread.

As a very active investor in PM's this statement makes me Lul.

Ahh, how cute. Yes, and that provides context to the argument you made how? If anything it's a detraction from the point you were trying to make and counter's your argument that gold is not used for economic measures when even you use that very same basis if you are investing in PM's. Logical and rational consistency here is what I'm referring to filc. Either you have them, or you don't. At this point in time, you do not have either.

You are not addressing economic calculation, you are not addressing praxeology, you are not addressing exchage ratio's. I have no idea how the reasoning in your head is tangled together.

I asked you to define what sort of economic calculation you were looking for. I never mentioned praxeology, because I do not use it. I'm an investment adviser and engineer, not an economist. I clearly addressed how exchange ratio's are balanced when transfer of PM's is used. The PM's are always a measuring stick when trading paper.

Nice Ad-Hom, are you going to actually prove me right again in that few people here actually use rational argument's? By that statement it's apparent that you are not going to disprove my point there, rather you are going to try and drag this out into directed Ad-Hom territory with more emotive based reasoning. Praxeology has it's uses, but you are not apparently using it here. If so, you are making bold claim's that are apprently ignoring how Mutual's and 401K's generally operate, and assume that few people if any actually have invested any money whatsoever in their life time.

Remember that whole aarogant thing?

Yes, because I'm expected to read your mind and know that's what you were referring to in the first place. I would recommend you go back and read that again to understand what he was really trying to say. As it stand's now you are making the very same mistakes, and the using the same methodology that he was proving the failures of in that writing. If you are going to support what Mises was advocating, then I would recommend that you learn to speak and think in that manner.

This all goes back to my original statement that a large majority of the people that are claiming to be proponent's of the Austrian method here are truly failing at this task. Everything I have ever read from Mises, Hayek, and Rothnard states the same basic thing. Never assume anything on a large basis. The only true way to know what is actually going on in the economy, or even on the Individual basis is to simply do your research and look at the data, and then to formulate what you see as a basis of reasoning. In the Investing world it's called Fundamental Analysis. 

Simply running off and saying that gold is not being used for any measure of an economy is making a boldfaced discrediting of the Austrian Method itself. It's simply not true, as the numerical amount of borkerage firm's and mutual's that deal almost exclusively in PM's, and the Central Bank's themselves dealing with gold and the such prove this inaccurate at best. Bold claim's that fly in the face of the evidence are clearly more bold claim's that are simply not accurate much less true in any way shape or form. The size of the PM market's in the US is rather small, but this is not true in other countries such as China and India, which are the largest PM market's in the world. You can add Mexico up there soon as well. The US is not the only country in the world, and basing your assessment's of the economy on only the US is prone to being a falsification of reality. I can and have travelled all over Asia with nothing more than a suitcase of cloths and a suitcase of silver. I have in the same trip never once had to withdraw fiat once I was in a country and away from the airport. I won't even go into the PM market manipulation that we all know is going on.

I like the interest in Mises and Libertarian style philosophy, but I do not like the false representation that lead's people to gather the wrong impression from these two. Principles requires work, and if you are going to assume the position of being Primcipled you have to start changing the way you describe thing's and the inherent way you understand everything. This is not an attributation of the "Blank Slate" theory, rather it is a condemnation of it, and the methodology used of indoctrinating of how they wish to represent reality. Human's on the Individual scale can be trained to believe a lot of thing's, as well as being trained to think certain way's. You have to break that way of thinking before you can truly move onto thinking the way you are obviously wishing to. Just look at my bio information, and you will see that I understand how this training effects people. My own story is nothing but the realization of how the state has a directed motive of keeping people indoctrinated in the manner that it does. This truly is an argument of Man VS State on every level.

This is why I may seem arrogant, and like a prick. This is not meant as a directed Ad-Hom toward's anyone here, but rather constructive criticism. I do not hold any ill-will toward's anyone that does not attack me first. My posting here is sparse, because I do not have the time between work, the family, school and MTG. My goal is to point out the inconsistencies in thought, while helping to encourage free-thought. Filc, I am your friend, and only trying to help. 

/rant.... Read my edit tag for the horrible spelling. As for the Grammar, well I personally adhere to the school of thought that Latin Grammar rules on a Germanic language are foolish, and do nothing but water down the concept of the possessive.

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MoonShadow replied on Fri, Jun 17 2011 3:32 PM

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Peter Šurda:

Am I going to get some meaningful replies or not?