Bitcoin Primer

Could someone link me to a good primer on bitcoin, please. I can’t grok what they are trying to accomplish, because when I want to buy something, cash, check and credit cards work quite nicely. I understand paypal, but what is the point of bitcoin? And I definitively do not get the whole bitcoin mining, as if you can just make something out of nothing. Sounds like phlogiston.

And then when the Winklevi got involved, I just rolled my eyes and paid no attention to the whole mess, because it was clear if those two idiots were in it, the whole thing was going to end up a steaming mess.

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250 replies
  1. 1
    The Other Chuck says:

    It’s a libertarian shibboleth, that’s all. The rites and rituals and terms that bind them together as a tribe. It gives them something they can use to rant about fiat money and pretend to be the bootstrappiest bootstrappers who ever bootstrapped, and otherwise continue their tradition, because tradition.

    As far as the Winklevii are concerned, it’s a game.

  2. 2

    Seems to me, like a scheme to part fools from their money.

  3. 3
    dubo says:

    The “point” of bitcoin is to scam gullible libertarians and steal money from them.

    As for bitcoin USERS, they think the point is either to anonymously buy drugs (because they don’t know the difference between “anonymous” and “untraceable”), or to ride the Ponzi scheme to the top.

  4. 4
    pharniel says:

    Short answer – CCs & cash (to an extent) can be tracked. There’s a reason Bitcoin and it’s ilk are referred to as cryptocurrencies – they exist to provide a method of currency exchange without all the….imperial entanglements.

    Second – As with all good anachrocapitalist/anarchist/glibritarian principles bitcoin is a finite resource – there will eventually be no more coins to mint. So it’s Just Like Gold. or something.

    Third – It’s stacked towards the early adopters. Those that mined early were using 2k3 hardware and pumping out a few a day – now people are setting up multiple radeon workstation machines to mint one.

    And that’s it really. Greed + Ideology.

  5. 5
    pharniel says:

    And as others have said re my #1 – bitcoins are 100% traceable.

  6. 6
    Belafon says:

    Just start with wikipedia.

  7. 7
    sivapith says:

    …as if you can just make something out of nothing

    I hate to break it to you, but those dollars in your wallet? Same deal. Not that there’s anything wrong with that, but still.

  8. 8
    Soonergrunt says:

    Simply put, bitcoins are created by running a computer to repetitively solve an algorithm and report that solution in encrypted form to one of several central servers. After this process has completed enough times, a bitcoin of some value (I forget what exactly) is said to be ‘mined’.
    There will supposedly be a top limit to the total number of bitcoins that can be mined, something like 21 million or some such.
    The bitcoin can be stored in an electronic wallet and used in transactions in a system that is supposed to be anonymous and untraceable, and therefore unregulatable.
    Needless to say, the system has collapsed a couple of times because that is what happens when the economy has no regulation. The most recent collapse came about this week after one of the primary Bitcoin exchanges was supposedly robbed.

  9. 9
    pharniel says:

    Also too a note from Barry Ritholtz on the whole thing.

  10. 10
    cthulhu says:

    Try this:

    http://www.forbes.com/sites/in.....oin-works/

    In short, Bitcoin is favored by libertarians as a modern version of the gold standard (hence the “mining” which controls float and the finite amount), not centralized to particular banks and currency reserves.

  11. 11
    Bubblegum Tate says:

    Glibertarian bullshit. That’s all you need know.

  12. 12
    Calouste says:

    @dubo:

    It should teach libertarians something about the benefit of regulations in general and the FDIC in particular, but not likely that that is going to happy. After all, libertarianism can’t fail, it can only be failed. We’ll see the usual defenses along the lines of “it works in theory^, therefore the practice must be wrong”.

    ^) And “theory” here of course means “shit I made up with out any basis”, not something logically derived from that hasn’t been proven yet.

  13. 13
  14. 14
    mattH says:

    Goldbuggery+anonymity, plain and simple.

  15. 15
    cthulhu says:

    Also, while the bitcoin framework is essentially open source, I remain unclear as to whether this means there can be no back doors put in place by the creators of the system for theft once enough rubes have signed on.

  16. 16
    Another Holocene Human says:

    The point of bitcoin is enhanced profits for organized and freelance crime.

    Tax evasion, also, too.

  17. 17
    Calouste says:

    @sivapith:

    The dollars in my wallet are backed up by lead and depleted uranium faith in the US economy. Crypto currencies are backed up by faith in libertarian fantasies.

  18. 18
    Howard Beale IV says:

    Or, as Yves Smith has been calling Bitcoin, ‘Prosecution Futures’.

  19. 19

    The Wikipedia article on cryptocurrency of which Bitcoin is one is, for a wonder, pretty good.

    For the technical difficulties of running a Bitcoin exchange, see Charlie Stross. Sample snark: “C’mon, folks. Mt. Gox was a trading card swap mart set up by an amateur coder and implemented in PHP! And you expected NSA-levels of trusted computing security, so you trusted your money to it?”

    Me, I call it “troll’s gold.” Tell me again why unregulated banking is a good thing.

  20. 20
    Belafon says:

    @Calouste:

    not something logically derived from that hasn’t been proven yet

    Which is actually the definition of hypothesis. Theory means:
    1) Derived from axioms or other theories (mathematics)
    2) Satisfies enough testing (science).

  21. 21
    grumpy realist says:

    The best explanation I’ve ever heard is that it’s a Dada-ist conception about the identity of money, put together to show that what backs up money everywhere is….trust. And if you don’t have the checks and balances to create the trust, all the math and gee-whiz technology won’t save you. It’s a Proof by Demonstrating that even if you managed to create something that is so mind-boggingly perfect according to Libertarian standards, it’s going to still blow up and bust because humans are humans.

    In other words, the entire libertarian geek squad just got pwned and they don’t even realize it.

  22. 22
    Andrey says:

    Short version as I understand it:

    1. The process of generating Bitcoins – “mining” – involves validating the list of transactions to date. Essentially, the algorithm is supposed to pay people to do the work of checking that transactions are valid. This is supposed to prevent “bounced check”-style fraud.

    2. Since the algorithm is public knowledge, the availability of currency is not supposed to be subject to the control of various governments.

    3. Since the transactions operate on arbitrary numeric identifiers, it’s supposed to provide significant privacy protection – your only exposure is at the point where you convert your real-world money into Bitcoin and vice versa. Nothing else in the system needs to know who you are.

    4. Electronic transfers are built in to the currency’s algorithm; this means that rather than requiring a PayPal or similar service, anyone can perform transfers whenever they want. This is supposed to lower or eliminate middleman fees.

    (1) and (4) are arguably useful. (2) is only interesting for libertarians. (3) is interesting in some legitimate cases but also in a lot of illegal cases, like buying drugs. For those opposed to the War on Drugs, making it easier to buy drugs isn’t a big deal, of course.

  23. 23
    jl says:

    I’ve read incomprehensible ‘economic’ analyses of bitcoin. I’ve seen one claim several times that I don’t understand, which is that it is a zero transaction cost currency. I’ve never understood that.

    It is true that there is no fixed cost for transactions, like contracts, and exchanges and electronic networks and little reader machines (or somebody punching numbers into a machine). But bitcoin transactions are run by automatic software agents that toil away at verifying a transaction. It is true that often there is no transaction cost charged to parties involved in a transaction (the output verifying the transaction prints a zero on the transaction cost charge line). But there are resources used up in as these software programs churn away someplace in a computer. Right?

    I’ve heard the statement that bitcoin combines the advantages of electronic currency and credit with those of cash, and here cash is advertised as having no transaction cost. But there iare hidden transaction cost of a cash transaction: the risk that the payer is using counterfeit currency, and the resources involved in making change, and the very lack of an electronic record of the transaction produces the cost of recording transactions and accumulated balances.

    I tried to figure some of it out, but gave up. It was very confusing to me. Anyone here understand some of these issues, please let me know.

  24. 24
    SatanicPanic says:

    Phase one in the libertarians’ fool proof plan to live free. Phase two is seasteading. Phase three is something about Nike sneakers and a comet

  25. 25

    The smart cryptoanarchists took over the global banking system. It’s the wannabes that use Bitcoin.

  26. 26
    Glocksman says:

    @sivapith:

    To a point, true.
    However, real currency is backed by a government and the underlying strength of the currency is the faith people have in that government.

    Euros, US Dollars, UK Pounds, Australian Dollars, Yen, Won, etc., have a value that reflects the level of confidence people have in their respective countries’ government and underlying stability.

    Bitcoin and other cryptocurrencies have no such widespread confidence at this stage, and if Mt.Gox and the dubious characters involved in them are any indication, they never will.

  27. 27
    Calouste says:

    @Belafon:

    Thanks for the correction, I was rather sloppy with my wording there.

  28. 28
    Another Holocene Human says:

    @Howard Beale IV: Puts, I would think, since their value plummets as the risk of prosecution is perceived to increase.

  29. 29
    ET says:

    I really think is is good for glibtarians (to talk about but not to use), drug dealers, and arms dealers.

    one from IEEE

    one from Adam Sewer

  30. 30
    dubo says:

    @cthulhu:

    Well, as the bitcoiners will remind you, “bitcoin” is really just a transfer protocol, so there aren’t any backdoors in bitcoin itself, the fact that bitcoin EXCHANGES can be set up to allow their owners to steal every bitcoin that goes through them (and they invariably are set up this way) says NOTHING AT ALL about bitcoin “itself” shut up shut up shut up

  31. 31
    different-church-lady says:

    @randomworker:

    To understand the post, you need to be comfortable with public key cryptography, and with the closely related idea of digital signatures. I’ll also assume you’re familiar with cryptographic hashing. None of this is especially difficult. The basic ideas can be taught in freshman university mathematics or computer science classes. The ideas are beautiful, so if you’re not familiar with them, I recommend taking a few hours to get familiar.

    And there you have it: any form of money that relies on the average Joe understanding public key cryptography to trust it is doomed to failure.

    Lots of people keep harping on the libertarian angle, but nobody’s observed the geek angle — it’s money that you need advanced computing skills in order to play with. It’s the currency system version of, “Look, I can control all the lights in my house from my custom built Linux box!”

  32. 32
    Another Holocene Human says:

    @grumpy realist: Didn’t Disney ever teach you that the most important lesson in aviation is to believe you can fly?

  33. 33
    The Dangerman says:

    @Soonergrunt:

    Simply put, bitcoins are created by running a computer to repetitively solve an algorithm and report that solution in encrypted form to one of several central servers.

    Where’s the value added in that process? Does solving that algorithm produce it, in which case, is this something like SETI? I don’t get this mining through massive number crunching.

    ETA: BTW, Stossel on Fox News the other night had some expert singing the praises of bitcoin; oops!

  34. 34
    Belafon says:

    @Calouste: At times I wouldn’t have cared, but with the way wingers get away with trashing something because it’s a “theory”, I’ve gotten a bit edgy on that particular word.

  35. 35
    jl says:

    Thanks to commenters above for reading recommendations. Commenter Audrey suggests a link between bitcoin mining and providing resources to cover transaction costs. I had no seen that before.

  36. 36
    Trollhattan says:

    Speaking of libertarians, here’s a fine example of the disconnect they have WRT their innate conservatism. It’s all about their Principles, see? Personally, I think we should have a vote before every street repair. The people deserve to decide.

    http://www.sacbee.com/2014/02/.....ument.html

  37. 37
    Calouste says:

    @jl:

    To understand it you need a libertarian frame of mind, i.e. ignore all that inconvenient real world stuff you mentioned.

  38. 38
    dubo says:

    @The Dangerman: That’s one of the most hilarious parts… Bitcoin mining certainly COULD be set up to do something like SETI, but was specifically designed so that the calculations would be utterly worthless because that way the coins would have “””intrinsic value”””

  39. 39
    Alexandra says:

    Frantic rending of garments over at ZeroHedge. That’s all I need to know.

  40. 40
    Col. Klink says:

    If you have seen South Park’s Underpants Gnomes, you know all you need to know about Bitcoin.

  41. 41
    kindness says:

    Bitcoin seemed to me to go hand in hand with Tor. If you want off the grid but to be on the grid at the very same time, both Tor & Bitcoin allowed you as much annonominity as one could get. I never did get anything at The Silk Road but was curious about it. Glad I didn’t try at this point.

    The whole ‘mining’ of Bitcoin & the not being in possession of them left me thinking it was a nice idea but too close to a scam to participate. Kinda wish I had bought a couple hundred dollars of them when they were $20 each several years ago. But I don’t trust it.

  42. 42
    cthulhu says:

    @dubo: Hahaha!

  43. 43
    Andrey says:

    @The Dangerman: The mining algorithm does accomplish one important thing – it validates recent Bitcoin transactions throughout the network.

  44. 44
    monkeyfister says:

    Off Topic:

    I tried to tell folks, here, that the “revolutionaries” in Ukraine were bad people with neo-nazi bend. Via Billmon, here they are hanging the confederate flag, and a White Supremacist flag in Kiev city hall: http://t.co/oXvIAiTJ5M

    Nothing good will come of this.

    Back to the Bitcoin topic.

  45. 45
    Joel says:

    @pharniel: Everyone thinks they’re the Pharoah in a pyramid scheme…

  46. 46
    jl says:

    @Andrey: I’ve never heard that the work of bitcoin mining is what supports the transaction costs (if I understand your points 1 and 4 correctly).

    But as other commenters have noted, there is an asymptotic limit to the total amount of bitcoin that can be made.

    So to support the ever increasing cost of verifying the (whole history to date?) of transactions, then the value of each successive bitcoin must increase. Which fits with the idea that if bitcoin were the only money, it would become massively deflationary as the limit of bitcoin were reached, which is pretty easy to see.

  47. 47
    kc says:

    My only question is, how does one acquire one’s first Bitcoin? Do you have to pay for it with, like, real money?

  48. 48
    Roger Moore says:

    The thing about Bitcoin “mining” is that the “miners” are actually the thing that keeps the whole system going. The way the system works is that when people want to transfer bitcoins, they announce it to the world. The transaction then goes into a kind of limbo, where it’s been announced but not finally recorded. The bitcoin “miners” take a complete record of all bitcoin transactions and try to perform otherwise pointless mathematical manipulations until somebody comes up with a solution. When the solution is found, it finalizes all the transactions to that point.

    The idea is that the mathematical manipulations needed to solve this mathematical problem are hard to perform but easy to check. Doing all the pointless work to validate the transaction record helps to protect against various kinds of fraud involving spending the same bitcoin twice. The difficulty of the problem people need to solve is regularly adjusted so it is neither too easy (danger of fraud) nor too hard (takes too long to record transactions). To encourage people to do the otherwise pointless work of validating the transactions, the ones who succeed are granted newly created bitcoins as a reward and method of expanding the number in circulation. That’s what the “mining” is all about.

  49. 49
    Bill Arnold says:

    @The Raven on the Hill:

    Me, I call it “troll’s gold.”

    [edit grumpy realist said it in a more erudite way.]
    Or “a parody of gold”. Designed to entice libertarians, then collapse spectacularly in a pedagogical manner.
    (When the real creator(s) of bitcoin emerge and say I’m wrong, I’ll reject this theory. :-) )
    (I laughed at this from Stross: “Someone please take my bottomless bowl of popcorn? I’ve eaten so much I think I’m going to be sick.”)

  50. 50
    cthulhu says:

    @The Dangerman:

    Where’s the value added in that process? Does solving that algorithm produce it, in which case, is this something like SETI? I don’t get this mining through massive number crunching.

    The important thing to understand about the mining is that it is basically busy-work to so that the currency float increases at a predictable pace not controlled by a centralized entity. They might as well be looking for certain digit chains in pi. Despite this feature meant to add stability to the currency, the value of Bitcoin has fluctuated far more than precious metals have recently.

  51. 51

    To some specific questions: “I can’t grok what they are trying to accomplish, because when I want to buy something, cash, check and credit cards work quite nicely.”

    In theory no-one can spy on your Bitcoin transactions without cracking your computer directly. The original cryptoanarchists felt that this would end government regulation of banking and currency entirely, and this was a Good Thing. Since neo-liberal economics turns out to be wrong, it would in fact be a Bad Thing.

    “And I definitively do not get the whole bitcoin mining, as if you can just make something out of nothing.”

    Currency is like language; real, but not physical. What is any paper currency, after all? Paper currency (“fiat money”) is created by simply ordering it. The mining process just puts constraints on the creation of money in a Bitcoin system.

    Overall, I regard cryptocurrencies as yet one more attempt to automate what we do not know how to automate: the management of banking and finance.

  52. 52
    jl says:

    @Roger Moore:

    ” The difficulty of the problem people need to solve is regularly adjusted so it is neither too easy (danger of fraud) nor too hard (takes too long to record transactions). ”

    Who or what adjusts the difficulty, and how is this done? Is there a feedback loop implied by the collective work of all the agents that updates the difficulty, or what? There should be either an explicit, or implicitly defined objective function involved in the adjustment process, right? What is it?

    Edit: thanks to commenter above or using the term ‘float’ That is a term I almost used, but wasn’t sure I was understanding the process correctly. If bitcons have a upper limit, and the currency is deflationary, seems like the cost of float increases over time over time, and currency become more brittle.

  53. 53
    different-church-lady says:

    @jl:

    So to support the ever increasing cost of verifying the (whole history to date?) of transactions, then the value of each successive bitcoin must increase. Which fits with the idea that if bitcoin were the only money, it would become massively deflationary as the limit of bitcoin were reached, which is pretty easy to see.

    From a structural design point of view this would make perfect sense, as long as you were designing a system to reward the early adopters and then abandon the latter.

  54. 54
    Another Holocene Human says:

    @The Raven on the Hill: Reading the comments at Stross’ place it seems that the goldbuggery is strong in those who are obsessed with obtaining money and hoarding it. They “can’t trust” governments because governments like to run a slow hiss inflation policy because GEE IT WORKS WORLDS BETTER THAN THE OTHER SHIT THEY TRIED but, you know, it helps out the little people and who wants that? It’s all about having more than others, hoarding for the great deflation to come, then holing up in your fastness while others, who work in the real economy, lose everything. This is an utter obsession with such people. It’s like a psychological sickness. A confluence of pathological anxiety, unrealistic ideation, and severe social problems.

  55. 55
    The Dangerman says:

    @dubo:

    …so that the calculations would be utterly worthless because that way the coins would have “intrinsic value”

    I guess I need another cup of coffee; I don’t see the value added in creating something that has no value (oh, oh, I feel a dividing by zero catastrophe coming)

  56. 56
    Another Holocene Human says:

    @different-church-lady: Massive deflation = feature, not bug

    The bubble bandwagoners were fucking COUNTING on that, it is soooo funny (except to the extent they are hurting themselves now, see reddit) to see them lose their sure thing rip the suckers investment.

  57. 57
    different-church-lady says:

    @The Raven on the Hill:

    Overall, I regard cryptocurrencies as yet one more attempt to automate what we do not know how to automate: the management of banking and finance human nature.

    Crypto-fixed that for you.

  58. 58
    SpotWeld says:

    Step 1) If you can, find a copy and read “The Great Simoleon Caper” by Neal Stephenson

    The key concept of that story is a curreny that can be used to purchase anything that requires no goverment or large organization backing or oversite.

    Let’s say you and I both have Swiss Bank Accounts. I owe you some amount of currency. I tell the bank, after verifying my identity, to give you that specified amount. The Swiss Bank adjust my ledger down, and your ledger up.

    So why have a Swiss Bank at all. Why not just have my personal ledger? I tell you that I’ve reduced my tally, and you can increase your’s.

    Because someone will just fudge the numbers on that tally and cheat the system.

    That’s what bitcoin is. It’s a protocol where everyone who is part of it has their own encrypted ledger. And there is a hugely difficult crypto system that has all the participants checking each other to ensure that the tallies are being kept honest. By lending your processor to the system you get “paid”. There are other refinements that prevent inflation of the currency and other checks. But that’s pretty much it. (I am simplifying hugely)

    Instead of a currency that is kept honest by a precious metal, or the integrity of a goverment it’s held together by the fact everyone who uses it is also keeping it honest.

    It’s the “no goverment needed” part that Libertarians love.

  59. 59
    dubo says:

    @The Dangerman: Well it’s just like gold, gold is way better than fiat money because fiat money is fake while gold’s value is intrinsic and not linked to anything else, for example gold could never be used as a commodity, certainly not in electronics fro example. It’s just valuable because it is, so it’s better. Bitcoin works the same way.

    ;)

  60. 60
    Another Holocene Human says:

    @The Raven on the Hill: Market behavior can be understood using chaos theory and if you know anything about chaos theory, then you grok how blitheringly stupid the notion is to cast them free of regulations and central bank control and also to allow layer after layer of complexity in the form of GDP’s-multiples exotic derivatives to be introduced and that’s BEFORE we get into the vast potential to fraud.

    Yes, in a world of moral probity this shit would still be asking for the mother of all crashes!!

    That’s why I think those that want a bankster perp walk are missing the point–the executive branch and congress made that mess, with a little help from industry lobbyists. I don’t care how many slimey CDS salescreeps you threaten with prison time, only regulating the fuck out of this shit will prevent a repeat.

  61. 61
    SpotWeld says:

    As for the ultimate utility of bitcoin.
    http://xkcd.com/538/

  62. 62
    MikeJ says:

    @Roger Moore:

    The idea is that the mathematical manipulations needed to solve this mathematical problem are hard to perform but easy to check. Doing all the pointless work to validate the transaction record helps to protect against various kinds of fraud involving spending the same bitcoin twice.

    Which means you could ddos their entire financial system with two lines of perl. The system is self-ddosíng. If I were in the market for a new currency I’d want minimal friction to clear transactions and I wouldn’t want to have to wait around for somebody with no interest in it to ok it.

  63. 63
    max says:

    @jl: It is true that there is no fixed cost for transactions, like contracts, and exchanges and electronic networks and little reader machines (or somebody punching numbers into a machine). But bitcoin transactions are run by automatic software agents that toil away at verifying a transaction.

    In practice that means the transaction costs are whatever they are (that is, the cost of converting from currency to bitcoin, the cost the seller, charges, etc). When they say ‘no transaction costs’ what they’re referring to is transaction costs as the Coase Theorem identifies.

    The upshot is supposed to be that if The Man can’t interfere with your transactions, and there are no physical costs, WE’RE RICH! WE’RE RICH! To a first approximation. Along that line of thinking, paper dollars (or gold coins) have no transaction costs, excepting that they’re physical.

    It is true that often there is no transaction cost charged to parties involved in a transaction (the output verifying the transaction prints a zero on the transaction cost charge line). But there are resources used up in as these software programs churn away someplace in a computer. Right?

    Those ARE (some of the) transaction costs. Someone has to ‘buy’ bitcoins with the bitmining, which requires real world resources. Instead of there being no transaction costs, instead, new bitcoins are being taxed to cover the transaction costs. I’d be curious to see what happens when the bitcoin limit is reached and no one can mine anymore. Who will validate the coins? *POOF*.

    Bitcoin is the equivalent of Pets.com stock certificates. You could trade those too. As long as people wanted to buy them. When they stopped wanting to buy them, POOF.

    Never mind me, or anyone else in this thread – let a real economic genius explain to you:

    On Tuesday, and for the rest of the week, all hell will break lose in the media. It will be blamed on MtGox, it will be blamed on Bitcoin, it will be blamed on the “bug,” and it will, more than anything, be blamed on the “lack of regulation.” Pundits and “experts” of all types will weigh in on the calamity. It will be world news in a matter of hours.

    Get ready, because it will be an ugly week.

    For all of you who lost money, my heart goes out to you. Some people lost a little, some lost a fortune. It will make people sick, and depressed, and full of grief. Personally, I had over 550 BTC in Gox. I will never get any of that back. If misery loves company, then we’ll be enjoying a grand feast today. […]

    And finally, the lesson is not that we ought to seek out “regulation” to save us from the evils and incompetence of man. For the regulators are men too, and wield the very same evil and incompetence, only enshrined in an authority from which it can wreak amplified and far more insidious destruction. Let us not retreat from our rising platform only to cower back underneath the deranged machinations of Leviathan.

    The proper lesson, if I may suggest, is this: We are building a new financial order, and those of us building it, investing in it, and growing it, will pay the price of bringing it to the world. This is the harsh truth. We are building the channels, the bridges, and the towers of tomorrow’s finance, and we put ourselves at risk in doing so.

    Every time a stock crashed during the dot.boom, you see some letter like this from one sucker advising other suckers to put more money in. (James Glassman comes to mind.) Except we got the ‘Leviathan’ references as a bonus.

    max
    [‘So. BAHAHAHAHAHAHAHAHA!’]

  64. 64
    Another Holocene Human says:

    @dubo: Repeat after me: hoarded fiat money loses value
    hoarded fiat money loses value
    hoarded fiat money loses value

    goldbugs have a deep, psychological need to hoard money, and they want to be fucking rewarded for this

    modern governments do not the fuck want people hoarding money; they want it invested in the economy

    so the goldbugs want to get around the government to meet their needs … preshuss … preshuss … g’lUM GAllum

  65. 65
    Soonergrunt says:

    @The Dangerman: well, as others have pointed out, solving the algorithm essentially is verifying transactions made by others. Once one has done this enough times, a bitcoin springs into existence essentially and becomes the property of the ‘miner.’

    Note that video cards are much better for doing this repetitive math than CPUs are.
    For example, online computer parts retailer Newegg.com sells several different bitcoin mining kits (one motherboard, a low end CPU, and as many high end graphics cards as one can cram on the motherboard) such as this one for $4853.
    Of course, that’s $4853 of REAL money, and since bitcoin keeps collapsing in value, that’s an investment that will likely never recoup.

  66. 66
    cthulhu says:

    @Andrey:

    The mining algorithm does accomplish one important thing – it validates recent Bitcoin transactions throughout the network.

    It is my understanding that the mining does not validate Bitcoin transactions nor does it focus entirely upon existing Bitcoins. Mining “finds” new coins that match the rules of the system. But it is different from traditional mining in that rather than working in different mines around the world, everyone is in the same mine. Actually it is more like each miner gets one hit with the pick-axe and then when a Bitcoin pops out, everyone looks at it, agrees it’s a Bitcoin and not a shiny rock, and the miner who uncovered it gets a finders fee.

  67. 67
    Roger Moore says:

    @jl:

    I’ve seen one claim several times that I don’t understand, which is that it is a zero transaction cost currency. I’ve never understood that.

    It’s a pyramid scheme. The transaction costs are willingly borne by Bitcoin miners, who are rewarded with newly created Bitcoins for bearing the actual transaction costs. The problem, of course, is that if/when the value of Bitcoins drops, the value of supporting other people’s transaction costs by validating their transactions also drops, so miners will be tempted to get out of the business. The fewer miners there are, the easier various forms of fraud get. I’ve seen people argue that people will start offering rewards for successfully validating transactions, but since transactions are validated in bulk, there’s an obvious free-rider problem.

  68. 68
    different-church-lady says:

    @Roger Moore:

    The fewer miners there are, the easier various forms of fraud get.

    If I’m understanding it all correctly, it sounds like the fewer miners there are, the longer it take transactions to be approved too. The real danger would be so many people abandoning the mining that coins can no longer be exchanged with any efficiency, yes?

  69. 69
    Jay C says:

    @The Dangerman:

    Re the “mining” of Bitcoins: maybe someone WAY more savvy than myself can explain it, but I gather that it involves solving some sort of complex equation that will yield the “code” for a valid Bitcoin, which one then can take to the lack-of-bank and trade for stuff. Or sell for “real” money.

    I read an article in the NYT recently about some “smart” guys who had set up a server farm in Iceland (for its cheap geothermal electricity), and installed bank after bank of serious processors (hundreds of them?) – solely to run the algorithms to mine Bitcoins, Which struck me as being an enormous waste of time and money, now matter how cheap the geyser-juice; since someone has to pay (real money) for all that computer equipment and its maintenance; and, if I understand the process correctly, the BItcoin “code” gets ever-more-difficult to crack, so unless one “mines” enough of them quick enough to pay off the capital cost (a dubious proposition, and subject to fluctuations in the market value), you’re screwed.

    To me, it makes about as much sense as putting 200 chimps in a room with 200 keyboards, teach them to type, and have them bang away until one of them taps out

    GIVE ME A BITCOIN

    at which time you have the printout notarized, and take it to market. And then get the chimps working on the next project, i..e.

    GIVE ME A BITCOIN PLEASE

  70. 70
    Suffern ACE says:

    @Soonergrunt: What I found odd in the news report I read (I think it was the Times article linked to this morning) is that the exchange was robbed several years ago and no one noticed? Really? How was it robbed so that no one noticed?

  71. 71
    Howard Beale IV says:

    Wow-just, wow: Max Keiser:

    What’s happening to MtGox would have happened to JPM, GS, C, HSBC, RBS, BRK, in 2008 if we had free markets. This is Bitcoin’s finest hour
    Read more at http://www.maxkeiser.com/2014/.....jgBhgmi.99

  72. 72
    scav says:

    @max: a.k.a. the We’re not falling we’re flying! soundbite? Bless.

  73. 73
    marduk says:

    Dunning-Krugerrands

  74. 74
    Citizen_X says:

    @max:

    This is the harsh truth. We are building the channels, the bridges, and the towers of tomorrow’s finance

    Except, of course, that none of it is real.

  75. 75
    Liberty60 says:

    I know exactly jack and squat about bitcoins or computers in general.

    But there are still a few observations that anyone can make with assurance.

    1. There is no such thing as true anonymity/ cryptography. A powerful enough and determined enough snoop will find whatever person or information they seek. For every lock there is a lockpick.

    2. There is no such thing as an uncounterfeitable currency. Whatever you create, another person can create as well. Adding ever more amounts of machine-made complexity only assures that whoever can possess that identical machine can recreate the original.

    Given these realities, all we can really do is determine who controls the codes, locks, and machinery of producing things. Which is why its kind of nice that we have a Secret Service with enough power to punish counterfeiters and a regulatory apparatus that can provide banking security.

  76. 76
    Another Holocene Human says:

    @monkeyfister: That’s a video from December, 2013!

    Meanwhile, the Ukrainian Orthodox Church (the one aligned with the Russian Orthodox Patriarchy, not the Eastern Rite Catholics) released a statement yesterday urging Russian ethnics to stop calling Ukrainian ethnics “Banderivstki” (or “banderovski”), we might call them Banderistas if it were the Americas, that is slurring all Western Ukrainians/nationalists/Ukrainian speakers with Bandera’s organization’s mass-murder of Poles. They said “such words can kill.”

    Btw, there is still a Nathan Bedford Forrest High School in Jacksonville, Florida, while we’re busy denouncing everybody else. Time to start looking at our own country through the lens by which we judge others.

    Watching the US left dance like puppets for Kremlin psy-ops has been educational, I can tell you that.

  77. 77
    The Dangerman says:

    @dubo:

    Well it’s just like gold, gold is way better than fiat money because fiat money is fake while gold’s value is intrinsic and not linked to anything else,

    I think you are snarking me here, but gold has value only because of it’s scarcity; it’s the same thing that gives art (there’s only so many Picaso’s or Warhol’s out there) value. How could a bitcoin replicate gold in this “intrinsic value”? It’s like saying producing turds has value and people can get wealthy through eating more fiber.

    Very strange.

  78. 78
    Another Holocene Human says:

    @Howard Beale IV: A LOT of people were hoping for “the big crash” in 2008 and very disappointed–not to mention, lost a lot of money–when the government bailed out too big to fail.

  79. 79
    Andrey says:

    @cthulhu: Your understanding is incorrect. The specific purpose of mining is to validate Bitcoin transactions.

    That said, their definition of “validate” may be different from what “validation” would be in other contexts. Simplified: mining takes transactions from a “pending” to a “confirmed” state. A consensus is established by the fact that many different miners will “confirm” the same transaction; when enough confirmations are acquired, the transaction can be considered final. This is considered a validation process.

    Essentially, each successfully mined block is a “vote” to say “yes, this list of transactions is real.” When enough votes are received, the system as a whole agrees that the transaction is real.

    In theory, if enough miners colluded, they could make a fake consensus by saying “yes, this list of transactions is real” for a list that includes fake transactions – either transactions that never happened, or transactions that involve the same bitcoin being “spent” multiple times. This would require at least 30% of all the mining power in the world to be in collusion. It’s considered one of the major weaknesses of the algorithm (as opposed to weaknesses of the implementation, like the insecure exchanges).

  80. 80
    Roger Moore says:

    @jl:

    Who or what adjusts the difficulty, and how is this done?

    As I understand it, there’s an algorithm that “decides” how to adjust the difficulty. Something like once every two weeks, miners get together and feed the current difficulty and the average time to validate a transaction over that same two weeks into the algorithm, and it spits out the new difficulty. The new difficulty is announced- I think through the same process as transactions are announced- and validations from that point on have to meet the new difficulty standard. It seems to me that it’s a workable system, or at least not the biggest security hole in the whole thing.

  81. 81
    dubo says:

    @Roger Moore: From what I understand, we’ve been past the “profit” point for btc mining for a while, so the only miners not losing money (even by the fake btc values) aren’t paying for their electricity – they’re either living in their parents’ basement or stealing power.

  82. 82
    Gin & Tonic says:

    @monkeyfister: Two quick, related questions. Did you support a) none, b) some, c) most or d) all of the goals of the Occupy movement in the US a couple of years ago? Did you support a) none, b) some, c) most or d) all of the actions of every OWS protester in every city?

  83. 83
    SatanicPanic says:

    @Howard Beale IV: Is there something awesome about large companies going bankrupt? I don’t get this.

  84. 84
    sharl says:

    For a less conventional* take on alt-currencies (mostly on Bitcoin and Dogecoin), see Quinn Norton’s posts – Part 1 and Part 2 (with more to come, apparently).

    *Unconventional is kind of the author’s thing – it’s why I love reading her stuff, even though it occasionally appears to be missing what we more conventional types would call a ‘practical’ component.

  85. 85
    Glocksman says:

    @The Dangerman:

    Gold does have uses in industry, mainly electronics, so it does have an intrinsic value separate from speculation by goldbugs.
    Of course the price of gold is mostly reflective of speculation instead of its real world use in industry.

    Bitcoins on the other hand have no use whatsoever if trading were to immediately cease.

  86. 86
    Gex says:

    @max: I thought glibertarians were already intolerable. But this martyrdom attitude is so much worse.

  87. 87
    Roger Moore says:

    @MikeJ:

    Which means you could ddos their entire financial system with two lines of perl.

    Are you proposing spamming the world with wrong solutions?

  88. 88
    MikeJ says:

    @Liberty60:

    A powerful enough and determined enough snoop will find whatever person or information they seek. For every lock there is a lockpick.

    There really is unbreakable crypto, but as the xkcd above points out, you can ignore the frontal attack and use other ways in. I can’t tell you how many people I’ve seen use 2048 bit crypto and protect their keyring with a 10 char password.

    One time pads are as close to secure as you can get.

    On another note, football needs a mercy rule. PSG is killing these poor krauts.

  89. 89

    But but but all the libertarians I know swear that their ideas will work in the real world and I’m too statist to understand. :(

  90. 90
    David in NY says:

    My attitude toward bitcoin is like my attitude toward food. I follow Michael Pollan as to food, “Don’t eat anything that has an ingredient you can’t pronounce.” Similarly, I don’t put my money into anything that I can’t figure out, and that surely applies to bitcoin. And money things i don’t understand that might have “back doors”? Fugeddaboudit. I don’t even invest in hedge funds that guarantee a 12% return insured by third party, but I have to invest this afternoon or the deal’s off (which puts me ahead of a lot of the pension fund managers I read about today).

  91. 91
    Fair Economist says:

    @Suffern ACE:

    What I found odd in the news report I read (I think it was the Times article linked to this morning) is that the exchange was robbed several years ago and no one noticed? Really? How was it robbed so that no one noticed?

    Of course Mt. Gox knew. They hid it. Fortunately for bitcoin investers, the all-knowing power of the market defended them from fraud so they didn’t have to have any mooching regulators. Please disregard any claims that investors lost millions of dollars’ worth of bitcoins – it’s all statist propaganda.

  92. 92
    monkeyfister says:

    @Another Holocene Human: So, you think those neo-nazi rebels have had a huge change of heart over long two months?

    Crazy on its face, bubba.

  93. 93
    cthulhu says:

    @Andrey: I am a little confused there in that the pace of BItcoin transactions (by this I mean using a Bitcoin to purchase something) are supposed to be instantaneous while Bitcoin creation moves at a much slower pace.

    I do understand the algorithmic consensus part.

  94. 94
    jl says:

    @different-church-lady: that is what I am thinking too. If increases in transactions costs result in problems getting transactions verified and completed in a timely manner, then there goes liquidity.

    So, in econ 101, for a money, the three basic functions of money are that it can be used as a medium of exchange, a store/measure of value, and a unit of account. There are some others that you might add.

    So far, historically, bitcoin has flunked coming within a ten miles of beting a store/measure of value. Eurodollars the moneymarket funds started failing as monies during the 2007/8 panic with fluctuations that were far smaller. Bitcoin would never survive its recent fluctuations in value if it were anything but the plaything of the wealthy, speculators and ideologues with discretionary income. It experience fluctuations that would be intolerable to any person or business who needed to rely on a stable level of assets.

    Now, I see problems with it as a medium of exchange. The cost and timeliness of transactions seem to be tied up very closely with the marginal value of mining a new bitcoin.

    And now, with theft and fraud being a problem in reality (if not in theory), then the system is not robust to people who can break the algorithms and codes, so there goes unit of account.

  95. 95
    Temporarily Max McGee (soon enough to be Andy K again) says:

    @Glocksman:

    However, real currency is backed by a government and the underlying strength of the currency is the faith people have in that government.

    Not that government, but that economy. The most competent government in history couldn’t control the strength of the USD if a meteor wiped Manhattan off the map.

  96. 96
    RareSanity says:

    Good grief…I love laughing and pointing at libertarians and whatever their latest fetish is as much as the next person, but there are two separate issues being conflated here.

    There is the crypto-currency of bitcoin, which is nothing more than a set of mathematical algorithms that generate “tokens” (in the computer science definition of the word), and has an accompanying protocol under which those tokens can transferred between different repositories (called “wallets” in bitcoin parlance) .

    Then you have the broker and exchange networks whereby “real-money” is used to purchase these tokens, or fractional pieces of these tokens. Brokers will allow you to convert some amount of real money to bitcoin, and some amount of bitcoin to real money. The exchanges allow people to trade bitcoin, much like any other currency exchange.

    What has made the new recently is that poorly coded software on the part of exchanges allowed people to steal bitcoins that these exchanges were holding in escrow for transactions between other parties.

    The poor accounting and lax security of the exchange allowed thieves to take advantage of an exploit in the protocol that transfers bitcoin between repositories, redirecting the bitcoin to the thieves’ “wallet” instead of the intended recipient.

    Now, I don’t deal in bitcoin, I’ve never owned a bitcoin, don’t give a shit about libertarians and their fantasies of a “free” currency. But let’s at least make sure that we are laughing and pointing intelligently.

  97. 97
    Another Holocene Human says:

    @monkeyfister: Interesting, you are very, very concerned about the real Ukrainian racists who without a doubt formed a minority part of the popular coalition that just regained power in Ukraine, but you have no qualms about dropping “Bubba”, known in the South as the polite euphemism for “Nigra”?

    Explain to me why it’s okay for you to call people “Bubba”?

  98. 98
    Roger Moore says:

    @different-church-lady:

    If I’m understanding it all correctly, it sounds like the fewer miners there are, the longer it take transactions to be approved too.

    Only in the short term. In the longer term, the difficulty of validating transactions would be decreased to keep the time to validate a transaction relatively stable. But if you make the problem easier to solve, you increase the risk of fraud. As I understand it, if anyone can ever put together a substantial majority of the total computing power available to validate transactions, they get complete control over the transaction record, with all the potential for fraud that implies.

  99. 99
    catclub says:

    @Another Holocene Human: “modern governments do not the fuck want people hoarding money; they want it invested in the economy”

    The excess reserves banks are holding with the Fed, for example. The Fed is paying interest, and smarter people than I think that the setting the interest to zero would really make no difference.

    I can’t quite see it.

  100. 100
    dubo says:

    @The Dangerman: Lots of things are scarce but not valuable, though. I WAS snarking you, but the reason the goldbugs are obsessed with gold is because they (falsely) believe gold has value unto itself.

    Mainstream economics holds that currency and commodity only have value because society places value in them, and that furthermore, things can only have value in relation to other things. Goldbugs reject, philosophically, that there can’t be a “meter-stick” for value, and chose gold as their meter stick. They will claim that currency has value because the Government says it does, water has value because it has a use, a plumber has value because he provides a service, but they will insist that Gold has a value entirely seperate from any subjective perception or use it has.

    To bring this full circle, that’s why Bitcoin number crunching was designed not to perform SETI calculations or the like – because its creators rejected the idea that Bitcoin should have any value besides being Bitcoin itself, they think that to be a “real” currency creating a bitcoin must have no value that isn’t invested back into the Bitcoin “system.”

  101. 101
    ericblair says:

    @jl:

    Who or what adjusts the difficulty, and how is this done? Is there a feedback loop implied by the collective work of all the agents that updates the difficulty, or what? There should be either an explicit, or implicitly defined objective function involved in the adjustment process, right? What is it?

    The mining generates a hash number, which is what is used for digital signatures: a big number generated by using an algorithm on, say, an email message, that is easy(ish) to calculate and verify that it’s the correct one for the message, but extremely difficult to reverse engineer. The bitcoin hash uses the transaction data plus a random addition to it and calculates the hash, but the hash has to have a certain number of leading zeroes. So the miner keeps fiddling with the random number until it gets a hash with the correct number of zeroes on it. The more zeroes, the more difficult and time-consuming the mining is. This number of zeroes gets changed every couple of days by an algorithm based on how much time the last few thousand took.

    The whole process is called “proof of work” and is simply to ensure that the miner has had the transaction data for a minimum amount of time. If everyone was guaranteed to be honest about simply waiting for ten minutes or so with the transaction data, this mining process wouldn’t be necessary. It’s part of a solution to what’s called the Byzantine Generals problem, which is a problem in how to make a distributed decision with no central authority.

  102. 102
    David in NY says:

    @RareSanity: Thanks. Wondering how the “real money” got in. Brokers. Figures.

  103. 103
    Another Holocene Human says:

    Remember in the 1960s, Bob, when the Democratic Party was a coalition of “differently pigmented” urban and “ethnic” voters with stone-cold segregationist racist petty-bourgeois Potemkin democracies who mouthed populist platitudes but fought tooth and claw against any of the goods of good government reaching Black people?

    I’m waiting for your stern denunciation of the Democratic Party and Democratic voters and your deep, deep concern that they gained power in the 1960 election with the support of vile fascists and white supremacists.

    You have youtube burning JFK and RFK in effigy, right? To show us how you really feel.

  104. 104
    sharl says:

    Here’s a single image graphic – from the ‘Part 2’ link in my earlier comment, where Ms. Norton gets into technical details – that attempts to illustrate a Bitcoin transaction.

    In case that direct link doesn’t work, here’s the URL:
    http://spectrum.ieee.org/img/06Bitcoin-1338412974774.jpg

  105. 105
    Another Holocene Human says:

    @catclub: There were a bunch of years where return was effective negative on that; honestly, the government would have had to wield a pointier stick on that issue but they chose a positive program of stimulus instead.

    When the banks are all “no, we don’t wanna” that’s where the gov’t ends up being the lender of last resort, as with GM; worked out, didn’t it, although unlike a bank the government has a big arsenal of lawmaking sticks and carrots not to mention a taxing authority to raise cash that a bank could never dream of. Plus the incentives for the bank (profit motive) are all wrong to want to take such a risk.

  106. 106
    monkeyfister says:

    @Gin & Tonic: I never saw neo-nazi symbolism used at any of the OWS protests I watched. The anti-Bankster/1%-er Grifter message was clear with OWS, which I supported in general. I expect some sort of “gotcha! hardy har-har” in there from you, so I’ll stand-by.

    Oh, don’t bother with your trap preparations — google is our friend. The GW of KKK “endorsed” OWS. yadayadayada. Great way for Far-Right to denounce and diminish the OWS movement. Attach those monsters to OWS, and Public Opinion drops. So, don’t bother with your cleverness.

    In Ukraine, they are major players, not fringe/fake attachments.

    Bottom line is I am anti-Fascist and anti-nazi wherever I see it. I won’t apologize for my opinion that Fascism and neo-nazis pose a real and present danger to Humanity, and if any eliminationist rhetoric or action should be aimed anywhere, it should be aimed at those two conjoined factions.

  107. 107
    chopper says:

    given that a bitcoin represents a certain (very high) number of used CPU cycles in the mining process, it’s becoming my opinion that the whole thing was invented by the power companies as a way to get suckers to buy more electricity during off-peak hours.

    i have no idea really. the idea that you’d have a currency thats original value is based on a number of computer cycles burned in the past is ludicrous.

  108. 108
    Andrey says:

    @cthulhu: This is another aspect of Bitcoin where the proponents have been pushing something that’s not quite true. Bitcoin transactions are a lot like writing checks. Exchanging the check for something is effectively instantaneous – but it takes some additional time for the check to clear. So yes, technically transactions are instant, but in practice, you still have to wait if you want to be positive that the transaction was legit.

  109. 109
    monkeyfister says:

    @Another Holocene Human: As I live in the South, I can assure you that your translation is incorrect.

  110. 110
    RareSanity says:

    @David in NY:

    Since the invention of money, there have always been “money changers”, and there always will be.

  111. 111
    chopper says:

    @Alexandra:

    Frantic rending of garments over at ZeroHedge. That’s all I need to know.

    wow, i didn’t think this whole bitcoin implosion could get any sweeter.

  112. 112
    John Weiss says:

    Bitcoins? Fooey. A fantasy. A bad one at that. I’d rather waste my time talking about unicorns and drinking decent beer.

  113. 113
    jl says:

    @RareSanity: @ericblair: @sharl:
    @Roger Moore:

    Thanks for explanations and links.

  114. 114
    MikeJ says:

    @Gin & Tonic:

    Did you support a) none, b) some, c) most or d) all of the goals of the Occupy movement in the US a couple of years ago?

    I didn’t know they had any.

  115. 115
    NotMax says:

    Someone please correct me if I’m off base (am another one fuzzy on the operational concept/marketplace), but with the exchange gone poof, hasn’t any utility of the stolen bitcoins also gone poof (or been reduced to such a virtually entropic junk bond status as to be considered poofed)?

    If so, truly a byte in the asset, as it were.

  116. 116
    Another Holocene Human says:

    @monkeyfister: you haven’t answered my question, tsk tsk

    I have some more questions, of course: do you condemn the black bloc and other leftist domestic terrorist groups who were active during Occupy? The bridge bombers, the window smashers, the “negotiation is over” animal extremists? How do you separate the violent anarchist cells from the ‘good’ that you believe Occupy accomplished? Or did it?

    Do you support the anti-racist extremists who engage in violent clashes with racist skinhead groups? Why or why not?

  117. 117
    jl says:

    Thanks to commentera above for explanations and links, I put too many in so my previous comment is moderated.

  118. 118
    Andrey says:

    @Another Holocene Human: What are you talking about? There’s no racial connotation with “Bubba”. http://en.wikipedia.org/wiki/Bubba seems to agree.

  119. 119
    John Weiss says:

    @Another Holocene Human: Painfully obvious: 1) you’re not from the South. 2) You don’t have a clue to what you’re talking about.

    Bubba.

  120. 120
    Soonergrunt says:

    @Suffern ACE: because nobody was watching out for that?

  121. 121
    Another Holocene Human says:

    @NotMax: One assumes they quietly exchanged theirs for real money to investors eager to get in a good bubblescam while Mt Gox was conveniently hiding evidence of the theft.

  122. 122
    Missouri Buckeye says:

    @Andrey: Don’t forget the money that made been made designing and building computers specifically for mining BitCoins.

  123. 123
    Gin & Tonic says:

    @monkeyfister: My only point with the question is that a large popular movement, even one you agree with, is likely to have outliers, in either direction, with whom you are likely to disagree. If I had a nickel for every comment I read along the lines of “I basically agree with OWS, but man, I wish they didn’t include …” I’d be able to buy some nice things, maybe even Bitcoins. The Euromaidan movement has attracted some people that I think most participants wish had stayed home, but they do not represent the majority.

    I dropped this link in the thread below; you might find it interesting. http://www.interpretermag.com/.....-the-rise/

  124. 124
    Another Holocene Human says:

    @John Weiss: No, I’m not from here, but I live and work in and among the African-American community of North Central Florida and I do indeed know what I’m talking about.

    People tend to remember it when they’re called out of their name.

  125. 125
    jeffreyw says:

    Bitcoins are backed by the Full Faith and Credit of the Internet.

  126. 126
    Another Holocene Human says:

    @Andrey: Truly, an authoritative source.

    Why don’t you come down here to North Central Florida where there was a pogrom in the 20th century carried out by white residents against Blacks and take some oral histories and get back to me on what this or that means?

  127. 127
    dubo says:

    @Another Holocene Human:

    Remember in the 1960s, Bob, when the Democratic Party was a coalition of “differently pigmented” urban and “ethnic” voters with stone-cold segregationist racist petty-bourgeois Potemkin democracies who mouthed populist platitudes but fought tooth and claw against any of the goods of good government reaching Black people?

    I’m waiting for your stern denunciation of the Democratic Party and Democratic voters and your deep, deep concern that they gained power in the 1960 election with the support of vile fascists and white supremacists.

    Believe me, I do sternly, and frequently, denounce them, although in today’s political vocabulary 1960’s Democrats/Dixiecrats are called “Republicans”

  128. 128
    Citizen_X says:

    @monkeyfister: Max Blumenthal, here, says that one of the “big three” parties backing the movement is the fascist-connected/leaning/excusing Svoboda. So take that as you will.

    And yes, seeing them hanging confederate & neo-Nazi flags would not be a surprise.

  129. 129
    Trollhattan says:

    @chopper:

    Could the NSA assign a couple petaflop-class computers to “mine” and basically grab all the “new” bitcoins? Or perhaps an evil genius living in a hollow volcano. I’d pay to watch that.

  130. 130
    RareSanity says:

    @NotMax:

    They still exist, and they are still valid according to the rules (algorithms) governing bitcoins, so their transaction log (called block chain) will pass a validation.

    The problem is that the incompetence of the software used by the exchange, effectively allowed hackers to use a “man in the middle” exploit to make them the “valid” recipient of those bitcoins, instead of the person the exchange intended….but to the bitcoins themselves, the exchange was valid, therefore the bitcoins still valid.

  131. 131
    Missouri Buckeye says:

    @Roger Moore:

    Hey, you can cram a lot into two lines of perl. I know. I’ve done it.

  132. 132
    John Weiss says:

    @Another Holocene Human: “People tend to remember it when they’re called out of their name.”

    ?

    Here’s a bit of help oh transplanted Southerner: Bubba = ‘Brother’. And, here’s another bit: ‘Coonass’ doesn’t mean black guy. ‘Course Florida *is* south of most places in the country.

  133. 133
    Another Holocene Human says:

    There is a looooooooong history in the South of white landowners calling black men out of their names. “Boy”, “Uncle”, etcet. Even if Bubba’s etymology is innocent (hint: the etymology of “nigger” is innocent), it does not mean that it does not become a racially charged term in the 20th century when a white landowner is using it to address every Black male who comes on the property.

    Have you EVER heard somebody addressed as “Mister Bubba”?

    Of course not. QED.

  134. 134
    Andrey says:

    @Another Holocene Human: If you say that’s the common usage of the term in North Central Florida, sure, I’ll believe you. I don’t know why you would assume that anyone else would be aware with the specific usage of the term in North Central Florida.

  135. 135
    Another Holocene Human says:

    @John Weiss: You’re trying to school me and you don’t know what it means to be called out of your name?!?

    Weak.

    How can you lecture everyone about a culture whose language you don’t even understand?

  136. 136
    Trollhattan says:

    BTW.

    the Sacramento Kings announced they will become the first major professional sports franchise to accept Bitcoin, a popular online currency. The bitcoin purchases will be processed through BitPay – the world’s largest payment processor for virtual currencies.

    Since purchasing the Kings earlier this year, majority team owner Vivek Ranadivé has directed a business philosophy coined “NBA 3.0,” which focuses on investments in technology, globalization and deep community partnerships. The BitPay relationship marks another manifestation of the 3.0 philosophy in Sacramento.

    Tapping into a new and innovative digital currency community in which bitcoins can be earned and saved by users across the globe, the Kings have begun to accept bitcoins in the Kings Team Store through a simple checkout process, and will offer fans the ability to pay online for team merchandise and tickets by March 1. With this technology provided by BitPay, Kings fans will be able to purchase Kings merchandise and experiences in a faster and more secure way using bitcoin.

    http://www.nba.com/kings/news/.....cy-bitcoin

  137. 137
    Missouri Buckeye says:

    @Trollhattan: Sort of.

    The system was designed to only allow a certain number of BitCoins to be issued per month. If too many were issued, then the system would be tweaked to make it harder the next month.

    So it turns out the best way to acquire BitCoins is to have a massive network of computers at your disposal, which of course is most efficiently done by having a huge botnet of hijacked home computers.

    Something that both the NSA and Organized Crime are really good at.

  138. 138
    Andrey says:

    @Another Holocene Human: I’ve never heard of anyone named “Mister bro”, does that means “bro” – commonly used as a name-replacement – is a racially charged term?

    It’s not a matter of simple etymology, it’s a matter of common use. In every place I’ve been to or heard from, “bubba” is not applied with any racial predisposition or connotation. You’ve said that it’s used that way in a particular community. OK, I believe you. Again, why would you assume arbitrary Internet commenters are familiar with your particular community?

  139. 139
    different-church-lady says:

    @sharl: I wish Richard Scarry was still around…

  140. 140
    Walker says:

    This image from the comments at the Charlie Stross article is priceless:

    http://i.imgur.com/xMeW43a.jpg

  141. 141
    Felonius Monk says:

    The Bitcoin concept actually dates back to an idea put forth by the Brothers Grimm around 1812 in the tale of Rumpelstiltskin where an ugly little gnome who tried to remain anonymous spun straw into gold. This idea has just been reincarnated for the computer-age using a lot of techno-geek terms. Nonetheless, it remains a fairy tale.

  142. 142
    goblue72 says:

    @pharniel: I think Ritholz (whom I like as a econ blogger) elides too quickly over the political economy aspect of fiat money. Strip away the fractional reserve banking layer and what you are left with in large part is what Ritholz refers to as the “collective delusion” of the value of money being our willingness to trust it to have value.

    He notes in the article – but passes too quickly over – the guns & butter aspect (the political economy part). What at end of day gives the U.S. currency its value? The full faith and credit of the United States government. And what makes one trust that full faith & credit? A. Like the Lannisters, we always pay our debts. (God Bless, Alexander Hamilton) And B. We got all the guns and butter.

    Put more academically, our fiat money is backed by a sovereign. That is, an organized system of government that exercises exclusive control over the lands and people within its geographic territory – and the ability to exclude any competing sovereigns -, through – at the ultimate end of the day – force of arms. And within that territorial control, is the ability of the sovereign to tax its citizenry – that is, to seize by fiat the resources & property of the citizens, to make good, in part, on the debts of the sovereign.

    Put in digerati terms, real governments exist in the meatspace and are able to control the meatspace. Which, surprise, surprise, actually fricking matters when it comes to whether a currency has value.

    Meanwhile, the glibertarian bitcoiners control what exactly? A handful of computer servers?

  143. 143
    Another Holocene Human says:

    @Andrey: I’m aware of evidence of its use elsewhere in the Southern Gulf coast region with racial connotations but my information there is considerably less direct.

    Indeed, “How could anyone possibly be expected to know about the culture of a rural US pocket away from civilization”? But let’s blithely reuse terms we heard second-hand and then wave away any negative connotations. I’m sure nobody will notice the hypocrisy.

  144. 144
    John Weiss says:

    @Another Holocene Human: “How can you lecture everyone about a culture whose language you don’t even understand?”

    Oh stop it! My belly hurts! Well, I’ve got some fun things to do: bake a peach pie, plant some seeds, go to the grocery and so forth on this fine sunny day. Thank you for the laughs, see you around, JW.

  145. 145
    Roger Moore says:

    @David in NY:

    I follow Michael Pollan as to food, “Don’t eat anything that has an ingredient you can’t pronounce.” Similarly, I don’t put my money into anything that I can’t figure out, and that surely applies to bitcoin.

    You’re in good company, since Warren Buffett has said more or less the same thing. He famously refused to get involved in the Dot Com Bubble because he didn’t understand their business model. It turns out that their business model was to find greater fools, and he did very well by refusing to be one.

  146. 146
    monkeyfister says:

    @Another Holocene Human: On the Political Spectrum, Anarchists are the EXTREME Far Right. Beyond “small gubmint” to no gubmit at all– by force.

    Strange thing about an odd splinter of Anarchism is the old CRASS “peaceful Anarchy” movement that went down when I was a kid in ’70s-’80s. Bits and pieces of that strain are still around– They call themselves “Anarchists,” but are mainly non-affiliated Social Lefties planting community gardens and the like.

  147. 147
    different-church-lady says:

    @NotMax: Mt. Gox was not the only exchange, merely the largest.

  148. 148
    piratedan says:

    without bitcoins, there goes the funding for finding bigfoot, unicorns and reasonably sane Republicans…

  149. 149
    Gordon says:

    @Another Holocene Human: Which is why the authorities will shut it down if it becomes successful, as China did when people started using it to illegally export currency.

  150. 150
    monkeyfister says:

    @John Weiss: Yep.

  151. 151
    MikeJ says:

    @John Weiss:

    ‘Coonass’ doesn’t mean black guy.

    Don’t use it outside Louisiana if you don’t want misunderstandings though.

  152. 152
    SatanicPanic says:

    @Trollhattan: I wonder if the city of Sacramento will pay for their new arena in Bitcoins.

    ETA- spell edit

  153. 153
    David in NY says:

    @Roger Moore: Thanks for the additional support for my practice.

  154. 154
    Don says:

    I can’t grok what they are trying to accomplish, because when I want to buy something, cash, check and credit cards work quite nicely.

    Unless you want to send a donation to Wikileaks, say. That demonstrated that you don’t have to be trying to do anything illegal or trying to hide your movement (whether or not wikileaks was you can argue yourself; it was perfectly legal to send them $20) – if a few big operations want to lay the smackdown on you because they disapprove of you then they can essentially stop 90% of your intake. Or more recently you can look at the challenge that state-legal (but maybe not federal legal!) pot dispensaries were having.

    There’s a lot of douchery in the bitcoin world but there’s actual-law-abiding-citizen services to be had there. The idea of being able to do low-cost electronic money movement without (a) paying sizable transaction percentages and (b) some few people who control huge de facto chunks of the economic engine being able to just shut you down because they feel like it.

    The recent meltdowns of service providers like MtGox certainly point to problems with it, though they also do a good job of showing what you’re theoretically paying that 2-3% discount rate on your credit card transactions for – reversibility and accountability. Two things that bitcoin deliberately doesn’t have and which it turns out we really kind of WANT for a lot of our pedestrian transactions.

    But I don’t think you can just say “this is pointless.” You can say the majority of people interested are whackadoodles or jerks and maybe this isn’t a problem many people care about. But the fact that V/MC/Amex can just decide they don’t want your business and end your existance is, in my opinion, kind of fucking terrifying.

  155. 155
    different-church-lady says:

    @Trollhattan: Kinda beat me to it — I’m wondering who the first one is going to be to tie the Mt. Gox theft to the NSA in seriousness.

  156. 156
    Another Holocene Human says:

    @Andrey: I’m to believe you run around calling coworkers or subordinates “Bubba” in Washington State, or the Meadowlands? Perhaps in Kansas City, MO? Oh, do tell me how that went down.

    I know, I know–you call random people “Bubba” in Boston, then blog about getting punched in the nose! After all it is an insult in New England, though I doubt anyone could coherently explain to you why.

    The term of address “Mister” (or “Miss”) is not unique to North Central Florida, so don’t even try that crap. It’s a sign of respect, followed by the given name. Refusing to use someone’s name when you know their name is disrespectful from the Southern end of Virginia right down to Louisiana.

    Millions of Americans live in the South, speak Southern dialects, and were raised with Southern cultural customs and folkways. These kinds of things are just as socially significant to them as Northern cultural signifiers and social crap like orders of precedence in social interactions that you probably give little to no thought to daily. Plenty of research has been done on what happens when large Southern groups settle in Northern cities and then have to negotiate stuff on a community level with the Northern born, but, you know, what a waste of time; those dumb Southerners should just assimilate to Northern culture or shut up, right? Why waste your precious time learning about their language and culture?

  157. 157
    different-church-lady says:

    @goblue72:

    Put in digerati terms, real governments exist in the meatspace and are able to control the meatspace. Which, surprise, surprise, actually fricking matters when it comes to whether a currency has value.

    Meanwhile, the glibertarian bitcoiners control what exactly? A handful of computer servers?

    Here’s where the disconnect lies: computers and human beings exist in meatspace. They think they’ve created a purely virtual currency, but that’s useless unless it interacts with meatspace in some fashion.

  158. 158
    Another Holocene Human says:

    @monkeyfister: So by your own definition, Occupy was infiltrated by extremist rightists.

    Got it.

  159. 159
    mtraven says:

    I’m not a big bitcoin hyper, but to balance the naysayers, here is Marc Andreessen, who is putting a lot of money in into Bitcoin startups. According to him and others, Bitcoin is much more than a libertarian toy; it’s a platform for the creation of a whole new class of economic entities and transactions.

    I don’t buy into all this hype (yet) but I know an awful lot of smart people who do.

  160. 160
    Roger Moore says:

    @catclub:

    The excess reserves banks are holding with the Fed, for example. The Fed is paying interest, and smarter people than I think that the setting the interest to zero would really make no difference.

    I can’t quite see it.

    The tiny interest the Fed is paying is probably making a small difference in banks’ willingness to lend, but the underlying problem is that they don’t see enough good places to lend their money. The interest the Fed is paying above its usual nothing should have the effect of driving up bank interest rates by about the same amount, so dropping the rate from its current rate to nothing would lower safe loans by a fraction of a percent. Every bit would probably help, but that fraction of a percent is not the difference between our current economic malaise and prosperity.

  161. 161
    ericblair says:

    @Don:

    There’s a lot of douchery in the bitcoin world but there’s actual-law-abiding-citizen services to be had there. The idea of being able to do low-cost electronic money movement without (a) paying sizable transaction percentages and (b) some few people who control huge de facto chunks of the economic engine being able to just shut you down because they feel like it.

    True, although there are economic problems with bitcoin that people alluded to already: basically, there’s no monetary policy for bitcoin besides “guaranteed deflation”. The value of bitcoin relative to other currencies and goods and services is massively unstable, which makes it a bit of a problem to use in actual transactions and keep for any length of time without worrying about what you actually have as a medium of trade. The deflationary part is a problem, too, since on average bitcoin is going to get more valuable over time, which encourages hoarding instead of spending. So the whole system is geared to hoarding and speculation instead of trade.

  162. 162
    Roger Moore says:

    @jeffreyw:

    Bitcoins are backed by the Full Faith and Credit of the Internet.

    So they’re redeemable in cat videos?

  163. 163
    mclaren says:

    Simply put, the point of a cryptocurrency like Bitcoin is to insure that even if the Feds try to confiscate your Bitcoin holdings, they can’t do it.

    Example: the DEA put a freeze on Dread Pirate Roberts’ bitcoin holdings. But because the Bitcoin wallets are encrypted, the DEA and the U.S. federal government couldn’t remove the Bitcoins from his digital wallet. They don’t have the public key to do it.

    With normal money, the government can freeze your bank account and steal your money. With Bitcoins, they can’t.

    See the article “FBI can’t get its hands on Dread Pirate Roberts’ bitcoins.”

    The rest of the people commenting here don’t have a clue. As usual for the Balloon-Juice commentariat.

    Encryption is the sole benefit of a cryptocurrency. It prevents other people from grabbing your money — where “other people” can include national governments.

  164. 164
    sharl says:

    @different-church-lady:

    I wish Richard Scarry was still around…

    Haha, indeed.* Though I think the IEEE graphic probably does about as well as any graphic can in succinctly explaining this (IMO) complex topic in a manner that can reach at least a few of us who are not knowledgeable on the subject. Would love to discover any artists out there who understand the topic and have a great creative flair for rendering it accessible for non-geeks.

    (*full disclosure: I had to first look up that name.)

  165. 165
    Another Holocene Human says:

    Although, you know, when I said Louisiana I’m referring to a fairly small pocket of Louisiana; John Weiss is here to tell you about the rest.

    Since race relations have been so excellent there in recent years I’m sure he’d be willing to share his wisdom about how to show respect in the appropriate way to foster productive and peaceful intergroup interaction.

    Des conasses:

    “What I find odd is no one ever addresses the fact that a lot of the people that like to sling the word around are former dilettante Creoles. It’s really odd how many people became ~lowly~ genocide surviving Cajuns once the move was made to identify those of not only French and Spanish decent, but also African decent as Creoles. All of a sudden a lot of people abandoned one identity for another. Former slave owner decedents certainly didn’t want to share a cultural and ethnic heritage with their former slaves. All of a sudden being Cajun wasn’t so bad.

    So was the word really adopted and embraced by Acadians who made it to Louisiana OR is it that people can’t tell who came straight from France to make their home in Louisiana (Creoles) compared with those who came from France via Canada to Louisiana (Cajuns)? ”

    http://bayoutechedispatches.bl.....4393144196

  166. 166
    different-church-lady says:

    @mclaren:

    Encryption is the sole benefit of a cryptocurrency. It prevents other people from grabbing your money

    Except it doesn’t, apparently.

  167. 167
    Roger Moore says:

    @mtraven:

    I’m not a big bitcoin hyper, but to balance the naysayers, here is Marc Andreessen, who is putting a lot of money in into Bitcoin startups.

    Given that Andreessen got his money by being one of the big winners in the Dot Com bubble, I don’t find that especially reassuring.

  168. 168
    Temporarily Max McGee (soon enough to be Andy K again) says:

    @mclaren:

    Encryption is the sole benefit of a cryptocurrency. It prevents other people from grabbing your money — where “other people” can include national governments.

    Tell that to the schlubs who got their money swiped at Mt. Gox

  169. 169
    randomworker says:

    @different-church-lady:

    A lot of things are like that. As the old saying goes, when a man with money meets a man with experience, the man with experience leaves with the money and the man with money leaves with some experience.

    As a long time player of various MMORGs, I have experience with turning virtual currencies into cold hard cash that you can spend at the grocery store. This whole bitcoin thing shares some striking similarities to, say, Lineage II Adena farming. Which is not a good thing.

    People are greedy and they fear missing the scheme on the way up. Bitcoin will recover to suck more cold hard cash out of people you can be sure of that. In the meantime, some people with money got a little experience here.

    Regards.

  170. 170
    Another Holocene Human says:

    Actually, that commenter is a little confused about créoles, as it just means those who were born overseas, usually French West Indies. Because of intermarriage the Creoles came to be a mixed race French-speaking cultural group. After the invasion of Americans and their eventual wresting of political power following the sale of Louisiana, former slave-owning Creole wealthy educated people went to great lengths to attempt to whitewash their own family histories because the Americans (English-speaking Protestants) had a horror of race-mixing. Now the truth is coming out and there are a lot of racist folk in Louisiana highly invested in not being n******s.

    But it may also be just a debasement like “redneck”, which originally had a political significance that has been all but lost.

  171. 171
    SatanicPanic says:

    @mclaren: Is the inability of the government to confiscate money a good thing?

  172. 172
    different-church-lady says:

    @SatanicPanic: Wait wait wait, I gotta run down to the convenience and get more popcorn….

  173. 173

    1. Mine bitcoins
    2. ???
    3. Profit
    Hmm … reminds me of something but I can’t think of what exactly, something about underwear and teeny little men ….

  174. 174
    Gex says:

    @SatanicPanic: Just think. The Milwaukee Diocese could have put all their money in bitcoins instead of into the cemetery fund and then they would be forced to pony up settlements to raped children the way they are being forced to now.

  175. 175
    ericblair says:

    @SatanicPanic:

    Is the inability of the government to confiscate money a good thing?

    If you think that Government Is Always The Problem, I guess so.

    So if somebody steals your bitcoin and enough of the market agrees that your money has been properly stolen, that’s it and No Backsies. Good deal, huh?

  176. 176
    mtraven says:

    @Roger Moore: Yes, well the dotcom bubble was an economic bubble, but you may note that the technology continued its inexorable advance both before and after it popped, and the Internet is now much more woven into our lives then it was. Similarly (maybe) for Bitcoin — if it really is all the backers say, then it will start to transform economic life regardless of the short term boom and bust cycles (and I emphasize the if, I’m not a true believer). That is, yes, Andreessen is hoping to ride the hype cycle up and make another fortune, and others may be left holding the bag, but that doesn’t mean the underlying technology is not transformative.

  177. 177
    SatanicPanic says:

    @ericblair: That sounds great. Not unappealing in any way.

  178. 178
    Amir Khalid says:

    I wonder if this disaster in Bitcoin-land was a surprise to anyone not emotionally invested in Bitcoin from the outset. I had an intuition — I doubt that it came to me alone — that Bitcoin was going to end in something like this. It will be some time before we know for sure if it’s been killed stone dead, but near-enough stone dead might have the same effect.

    I wonder how the coming Dead-Bitcoin sketch will play out.

  179. 179
    Omnes Omnibus says:

    @mtraven: An inherently deflationary currency that is legal tender only among those who feel like accepting it is transformative technology in what way?

  180. 180
    pseudonymous in nc says:

    Quinn Norton’s piece is a decent way into understanding Bitcoin in terms of the ledger: “money is a way of remembering”. As she says, it creates a distributed record of transfers within an infrastructure built upon duplication rather than transfer.

    The implementation is interesting — mysteriously so, given its origins — and I think it has potential to be used in more interesting ways than libertarian scrip.

  181. 181
    Trollhattan says:

    @SatanicPanic:

    This would make a certain local libertarian tomato magnate very, very happy.

  182. 182
    NotMax says:

    @Roger Moore – @jeffreyw

    Ted Stevens (hat tip to Maxwell Smart) missed it by that much.

    The internet is a series of boobs.

  183. 183
    slag says:

    @The Raven on the Hill: OK. I LOLed at “Dunning-Krugerrands”.

  184. 184
    catclub says:

    @Trollhattan: I have thought about that, too.
    I think the actual compute resources wasted on Bitcoin are large enough that NSA would have to make a serious effort to corrupt it. (That 30+% of the total miners.)

  185. 185
    Belafon says:

    @mtraven: I read that particular Neil Stephenson book, and I can’t decide whether not having any daughters is a good thing or a bad thing.

  186. 186
    Andrey says:

    @different-church-lady: As I understand it, encryption didn’t fail at Mt. Gox. What failed was on another level entirely. Analogously speaking, the issue isn’t that the safe got cracked, the issue is that someone gave the keys to the safe over to the wrong person. That is how pretty much all Bitcoin thefts so far have occurred.

    Of course, a currency that requires you to never hand over the keys to anyone has big problems.

  187. 187
    RareSanity says:

    @Cathie from Canada:

    It’s not that simple…it’s more like:

    1.) Buy computer equipment containing extensive precessing power, with real money.
    2.) Set up that equipment to mine bitcoins.
    3.) Receive a fraction of each bitcoin your equipment successfully mines as compensation.
    4.) Hopefully profit. (depending on the value of bitcoin when you decide to convert to real money)

    If you haven’t gathered from reading the thread, there is nothing about bitcoin that simplifies down to nice bumper sticker quotes.

    There are actually people that make real money mining bitcoins…they’re aren’t many of them, but they do exist. Even with the recent bad news, the value of a bitcoin is still around about $500USD.

    Again, I laugh and point at libertarians too. Just make sure you know what you’re talking about as you’re laughing and pointing.

  188. 188
    les says:

    Personally, I love it. When civilization collapses and “fiat money” is worthless, these yahoos will be in the catbird seat; all they have to do is scoot over to Switzerland to pull their gold out of the vault, or survive dealing only with denizens of the no-doubt-still-operating worldfuckingwideweb. Sounds like a plan to me.

  189. 189
  190. 190
    RareSanity says:

    @different-church-lady:

    @Andrey is correct, the encryption wasn’t cracked, it was an exploit in the bitcoin transfer protocol, that the poorly coded and poorly audited website just exacerbated…then ignored to the tune of almost $500 million in bitcoins stolen.

    If the website had better security, accounting, and auditing policies in place, these fraudulent transactions would have shown up immediately. At that point, the exploit could have been patched, and the loses would have been minimal.

    This is not to say that bitcoin doesn’t have its own philosophical as well as economic weaknesses, but this case was entirely caused by…at best a combination of ignorance and negligence, and at worse, a concerted effort to defraud.

  191. 191
    jl says:

    @RareSanity: Thanks for your explanations.

    Bitcoin is interesting and glad to get some pointers on it that can be understood.
    Do you have a good link for more details on how the meatspace money and bitcoin interface exchange was robbed?

    From what I have read so far, I don’t see how a bitcoin system can ever function for meatspace people doing meat/metal/plant/animal/water space activities.

    What is the average length of time it takes for a transaction to be verified and recorded. In the real world, it is important that it happen very quickly an on a very regular schedules.

    In the real world, an event like the Mt. Gox failure would set off a panic that would swamp other exchanges almost instantaneously, but like bank panics in old school meatspace banking could start within a day. No one is going to wait around for computer agents to agree to whatever, or until next week to see if some mystery algorithm is going to decide how many bitcoins can be minted, how costly they will be, and how fast transactions will take to verify and settle.

    But, I suppose these people can afford to lose the money. Sounds like a system that works wonderfully until it doesn’t, and then the blow up is truly spctacular.

  192. 192
    mtraven says:

    @Omnes Omnibus: Read the links. Here’s another, shorter and encapsulates the case well. Like I keep saying, I don’t know yet if I buy it myself.

    One aspect that is not often mentioned, because it is less sexy than cryptography: the current payment systems (credit cards, Paypal) are not only centralized but horrifically expensive, exerting a drag of 1-3% on all transactions. Anything that makes that cheaper is a huge deal.

  193. 193
    mclaren says:

    @SatanicPanic:

    Is the inability of the government to confiscate money a good thing?

    It is to people doing things the government doesn’t like. That includes dope dealers, arms dealers, but might also include, for example, antiwar activists falsely classified as terrorists, whose anti-war organizations can have their accounts frozen and stolen by the U.S. government. PETA has been classified as a terrorist organization, among others.

    So it’s two-edged sword. Cryptocurrencies can be used for good or ill. Like all encryption technology.

  194. 194
    jl says:

    @RareSanity: in real world banking, this type of problem is resolved by regular settlement dates by every entity that has any outstanding balances that are debits or credits, rather than cash. In money banking this happens daily, first in a private settlement system called CHIPS, and then later in the day on the Fed Funds market. Those who cannot settle on the CHIPS with securities bought and sold on the private market use Fed Funds, and then a few hours later they have to settle on the Fed Funds market, borrowing from the Fed if necessary (which is very costly in terms of interest rate, and in terms of Mr. Fed keeping track of how many times you’ve had to come to the Fed well).

    Private exchanges like CHIPS work on a mutual insurance system. If a member cannot settle, the other members share the cost of the shortage equally. The defaulting member with the shortage is expelled from the exchange or the management has to be replaced. I guess bitcoin and the other cyber currencies haven’t figured out how to do something like that without violating the principle of anonymity?

  195. 195
    Jay C says:

    @mclaren:

    So, presumably, after they arrest the Dread Pirate Roberts, and sling his ass in the Federal Pen for his dread piracy, the fact that he’s invested a big percentage of his booty in Bitcoins is going to help him just how? At least with gold doubloons, when you buried them on a remote island somewhere, they’d still be there – eventually, for somebody – what happens to “buried” Bitcoins?

  196. 196
    jl says:

    @mtraven: Has anyone calculated the effective average transaction cost of bitcoin, in terms of real resources expended in verifying and settling a transaction?

    I’ll take a percent, or a real amount per transaction quoted in a totalitarian fiat currency, gold or the cybercurrency of your choice?

    Anyone know?

  197. 197
    slag says:

    @Andrey: I don’t think the point was that the encryption failed, per se. I think the point was that the encryption didn’t prevent other people from grabbing people’s money. Systems thinking FTW.

  198. 198
    catclub says:

    @mtraven: “exerting a drag of 1-3% on all transactions”

    and the interesting thing is that credit cards are more popular than cash – because the buyer will
    spend more at your store, and because there are non-zero costs of holding and securing large amounts of cash.

  199. 199
    Gex says:

    @jl: Boom and bust. That’s what conservative/libertarian polices lead to.

  200. 200
    mclaren says:

    @Omnes Omnibus:

    An inherently deflationary currency that is legal tender only among those who feel like accepting it is transformative technology in what way?

    As usual, your statements are factually incorrect on multiple counts.

    First, the bitcoin asset tends to deflate over time, but in order to become deflationary, an asset has to be operate economy-wide as the reserve currency. Inflation or deflation in an asset is not anything like economy-wide deflation or inflation. The two are completely separate issues.

    You’re making the same basic Econ 101 mistake that the liars paid to support our robber baron billionaires make when they assert that there’s plenty of economic growth today in the U.S. GDP because, wow! Looka here! The price of yachts and Bel Aire mansions and private jets is going through the roof!

    No, that’s asset inflation, which is not at all the same thing as general inflation economy-wide. The reason it’s not the same is obvious, unless you’re as stupid and ignorant as Omnes Omnibus — very few people own 300-foot yachts or Bel Aire mansions or private jets. So price increases in these assets does not equal general economy-wide growth, and certainly does not equal general economy-wide inflation.

    Likewise, very few people own bitcoins. So deflation in the bitcoin asset does not equal general economy-wide deflation.

    Calling bitcoins “deflationary” because they are designed to increase in price over time is as stupid and as economically illiterate as calling Stradivarius violins “deflationary” because they also increase in price over time. “Hey, we need to ban Stradivarius violins, because they’re deflationary! They’re gonna hurt the U.S. economy!”

    That’s so dumb it makes my head hurt.

    Further, Bitcoins are divisible (unlike other assets, like a Stradivarius violin) — the bitcoin system is designed so that you can subdivide a bitcoin into much smaller parts and buy or sell those. Bitcoins are divisible to 0.00000001, or one part in 100 million, so it will be a long long long long time before price increase in the cost of a single bitcoin has any deflationary impact on the market at a whole, let alone the U.S. economy. (The U.S. dollar, by comparison, is divisible only by 0.001.)

    So the entire issue of bitcoin’s alleged deflationary impact is irrelevant to the real economy in the real world for the foreseeable future. Perhaps if one bitcoin gets to a hundred trillion dollars, and everyone abandons the U.S. dollar for bitcoins, that might matter. What’s the likelihood of that happening?

    Lastly, bitcoins are not just limited in circulation to “those who feel like accepting it.” Bitcoins are fully interconvertible to other currencies. You can convert bitcoins or fractions thereof to U.S. dollars freely, at the current exchange rate. As with all currency exchange, the exchange rate fluctuates. This leads to one of the very few issues that seriously affect bitcoins — the volatility of the exchange rate, which does pose a potential issue.

    People have pointed out that the Mt. Gov hack stole lots of bitcoins. Yes, just as the hack at Target stole lots of money by skimming lots of credit card numbers. That has no connection with the security of a currency as a whole. No one is abandoning the U.S. dollar just because one chain of retail stores got hacked and thieves stole some money. In the same way, bitcoin is not going to be abandoned as a cryptocurrency just because one bitcoin exchange got hacked and some thieves stole some money.

  201. 201
    Chris T. says:

    @The Dangerman:

    gold has value only because of it’s scarcity

    That’s wrong.

    Some things have value based on scarcity, and that does include gold. “Wait!” I hear you saying, “doesn’t that mean gold has value because of its scarcity?” Yes. I object not to this, but to the word only.

    Gold also has value for other reasons. I’ll just name one, although there are many. Gold plating is highly corrosion-resistant and hence is used for connector edges in electronic equipment. Your iPod contains tiny amounts of gold. There are substitutes but they are not as good. The use for gold here places a floor on its value.

    (Exactly what that floor value is, I don’t know. Let’s posit that it’s roughly $150/oz, vs gold’s current price roughly ten times higher. That would imply that about 90% of the value of gold comes from scarcity, and 10% from usefulness.)

  202. 202
    Nerull says:

    @Andrey: Somewhat recently there was an announcement that a single group has in fact amassed enough of the bitcoin mining power to validate false transactions. The stories quoted the owners giving what was essentially a pinky swear that they wouldn’t use their power.

  203. 203
    mclaren says:

    @Jay C:

    What happens to buried bitcoins? When Dread Pirate Roberts gets out of prison, he can use his public key to access his Bitcoin wallet and collect his money.

    Alternatively, DPM can give the public key to someone he trusts, who can access his bitcoins and transfer thems anywhere on earth, to any bank, any numbered Swiss account, etc.

  204. 204
    jl says:

    @Jay C: Uploading ourselves into computers will solve the problem of what happens to the ‘meatspace’ Roberts. “Ha ha, come get me now, coppers!” You lack vision, Sir.

  205. 205
    mclaren says:

    @RareSanity:

    This is not to say that bitcoin doesn’t have its own philosophical as well as economic weaknesses, but this case was entirely caused by…at best a combination of ignorance and negligence, and at worse, a concerted effort to defraud.

    Exactly right.

    This is no different than any other website financial hack involving stolen credit card numbers, etc. It’s due to negligence and incompetence on the part of the website that acts as a financial clearing house. It’s not due to underlying flaws in the bitcoin cryptocurrency encryption system, as far as anyone can tell.

    Bitcoins themselves appear to be a secure cryptocurrency. Any given financial website might or might not be secure — it depends on the competence and attention to detail of the people who run the site. The Target hack did not affect the U.S. dollar’s credibility or reputation — it damaged the credibility and reputation of the Target stores.

    One of the biggest issues looming with digital transactions is a government’s ability to freeze assets and lock down websites. The U.S. government has arbitrarily frozen the assets of organizations like Wikileaks, which bodes ill for non-violent dissidents. Suppose the U.S. government deploys face recognition to identify and then freeze the assets of everyone at a future antiwar demonstration on the grounds that these people are suspected subversives?

    That would mean that attending a non-violent public anti-war protest would put you at risk of having your life savings legally stolen by the U.S. government under asset forfeiture laws.

    Bitcoin offers a possible way around that dilemma.

  206. 206
    Goblue72 says:

    @RareSanity: there are also people who make money off Amway.

  207. 207
    Nerull says:

    @mclaren: One exchange got hacked?

    Multiple exchanges have been emptied out completely or gone into hiding. Millions of dollars have gone ‘poof’. And no one will ever, ever, get any of that money back. There is no insurance, no FDIC. Law enforcement doesn’t give a shit, anywhere.

    The entire exchange system is built on absolute trust in people with no accountability. Bitcoin users are already moving on to the next fad currency, and its value will continue to plummet as its user base shrinks. That’s the danger with using an unbacked currency that subsists solely on name recognition. No one has any faith in the system anymore. The rats are abandoning ship and once they’re gone anyone still holding bitcoins is screwed.

  208. 208
    sharl says:

    @jl: Oooh, the Kill Switch episode of The X-Files! ‘Twas very entertaining.

  209. 209
    Bruce K says:

    The difference between the MtGOX hack and the Target hack is what happened to the depositors/consumers. In the Target case, if you can show that you didn’t undertake the fraudulent transactions, the charges get reversed and the end consumer is off the hook. In the MtGOX case, if one of the bitcoins that was stolen via the hack belonged to you, you’re SOL, or so I understand it – no anti-fraud or FDIC recourse…

  210. 210
    Goblue72 says:

    @mclaren: We’ll just make a law that refusal to provide one’s encryption key in connection with a legal asset forfeiture is itself a prosecuteable offense if it becomes a recurring problem.

    If DPR’s rear-end is locked up in the slammer long enough, his digital horde of gold won’t do him much good.

    You can’t escape the guys with all the guns forever.

  211. 211
    David Koch says:

    a couple of months ago, there were some long time dude bros in the threads arguing that bitcoins were solid investments.

    Good times.

  212. 212
    jl says:

    @Nerull: You got some links with (translated into English) technical details on that?

    In ‘meatspace’ banking, as I mentioned above, this type of problem is solved by centralized private settlement clearing houses, backed by mutual insurance policies all members of the exchange have to sign. No Big gummint, The Man, totalitarian statists, are required. Several huge private regional bank clearing houses performed this function from the late 19th century until the formation of the Federal Reserve, and they relied on hundreds of sub-regional clearing houses.

    Each member of the clearinghouse had skin in the game, as it were. JP Morgan had so much influence, not because he was particularly rich compared to Rockfellers, Carnegies and Robber Barons, but because he was the only one who could round up enough rich cronies to back up a clearinghouse that was about to go bust because there were such serious defaults at settlement that mutual insurance obligations of the other clearinghouse members would bankrupt them.

    Edit: It was this soft power of Morgan that infuriated Rockefeller. In Rockeffer’s eyes, Morgan did not have enough money to be considered really rich like him, and Rockefeller hated the idea that a relative sad sack like Morgan had such influence. This may have been before Carnegie sold out and Morgan ended up owning huge conglomerates.

    I wonder whether anything other than the requirement for anonymity prevented bitcoin from doing something similar,

  213. 213
    mclaren says:

    @RareSanity:

    There used to be people who made real money by mining bitcoins. But the bitcoin protocol is designed so that it gets harder to mine bitcoins as you go. So much computer power is now needed to mine bitcoins that it’s now necessary to use ASICs (specialized microprocessors) to get anywhere. A single 600 Ghz bitcoin mining card costs $2200.00 and typical setups use multiple cards. Running a rack of 6-card bitcoin mining servers can easily cost forty or eighty thousand dollars, with an expected return of perhaps one bitcoin every few weeks. Not a lot of return for that kind of investment.

    You can get a guaranteed 10% return on an investment of several hundred thousand dollars by buying a fast food restaurant franchise. That sounds like a lot better rate of return than bitcoin mining.

  214. 214
    Calouste says:

    @Missouri Buckeye:

    Don’t forget the money that made been made designing and building computers specifically for mining BitCoins.

    In any gold rush, the only people who reliably rake in large piles of dough are the ones selling the equipment.

  215. 215
    mclaren says:

    @Goblue72:

    It’s worth pointing out that Dread Pirate Roberts only got caught because he was horribly stupid. The guy posted under his real name on a public forum asking technical questions about securing a transaction server.

    If Dread Pirate Roberts hadn’t done that, he’d still be out there running the Silk Road, totally anonymous.

    See “Five stupid things Dread Pirate Roberts did to get arrested,” The Guardian, 3 October 2013.

    Cryptocurrencies theoretically allow a competent non-stupid criminal (or political activist, or whatever) to continue doing transactions online forever without getting identified or caught. As mentioned, this can be good or bad, depending on your point of view of the person’s activities.

    Personally, I predict that the main use for Bitcoin will be for U.S. “black ops” and assassination squads to pay for the murder and torture and kidnapping of foreign nationals without the crimes getting traced back to the U.S. government.

  216. 216
    Howard Beale IV says:

    @SatanicPanic: When Enron went tits up, and the Feds filed just ONE felony charge against Arthur Anderson, it spooked Mr Market big time.

    Fast Forward to 2007/2008, and when Bear and Lehman were going down, and AIG was about to get whacked, causing ripples throughout Wall Street, the Fed Stepped in and basically put the dollar gun to everyone’s heads and said: you WILL take this money, and you WILL start to unwind your positions.

    Imagine if they didn’t do that. Would GS, Citi, AIG, JPM still be around? Would GM and Chrysler still be around?

  217. 217
    Howard Beale IV says:

    @Another Holocene Human: The sad part is that those folks should have made out like bandits had the natural order of things been allowed to happen, instead of Helicopter Ben coming to the rescue.

  218. 218
    ffredpalakon says:

    Perhaps the best in-depth explanation I ever came across of the currency, and why it’s inherently (and fatally) deflationary is by Felix Salmon: “The Bitcoin Bubble and the Future of Currency”. Also helpful in terms of giving a practical sense of how things work is “I Bought a Bitcoin” and “I Sold a Bitcoin” by Kevin Roose.

  219. 219
    Howard Beale IV says:

    @RareSanity:

    Even with the recent bad news, the value of a bitcoin is still around about $500USD.

    Only if you can actually cash it out at that immediate instant at that value: otherwise, like stocks/bonds, it’s all a paper value at that given instant.

  220. 220
    Andrey says:

    @mclaren: The problem with statements about competent, non-stupid criminals is that everyone fucks up eventually. The most competent professional, in any field, will make a mistake at some point. And of course this is also true of political activists, and anyone else who happens to want to use a cryptocurrency.

    This is why failure recovery is as important as failure prevention. With regard to fraud and theft, for example, failure recovery comes in the form of FDIC, fraud insurance, and so forth. Bitcoin has a lot of failure prevention mechanisms. It has essentially zero failure recovery methods.

  221. 221
    SatanicPanic says:

    @mclaren: I’m skeptical that their value to a handful of organizations I might support that may or may not have their assets seized is worth allowing actual terrorists and criminals the ability to operate in the dark.

  222. 222
    randomworker says:

    Plus I think it is totally awesome that MT GOX stands for Magic the Gathering Online eXchange.

  223. 223
    mclaren says:

    @Andrey:

    Absolutely true. This is why being a criminal doesn’t pay in the long run. The police can screw up multiple times, but if the criminal screws up just once, it’s all over.

    It also explains why libertarian techno-solutions like cryptocurrencies ultimately don’t solve the problem of a corrupt unresponsive authoritarian American government. We as voters need to change our government so that it’s no longer corrupt or unresponsive to the needs to the middle class and no longer authoritarian, and we need to do it through the political process, not techno-fixes like bitcoin.

  224. 224
    Elie says:

    @SatanicPanic:

    LOL– love this

  225. 225
  226. 226
    pseudonymous in nc says:

    @mclaren:

    In the same way, bitcoin is not going to be abandoned as a cryptocurrency just because one bitcoin exchange got hacked and some thieves stole some money.

    What a surprise that maccers is a bitcoin cultist. I look forward to its impending penury.

  227. 227
    Keith G says:

    @Another Holocene Human:

    but you have no qualms about dropping “Bubba”, known in the South as the polite euphemism for “Nigra”?

    So the many 30-something dads I have witnessed on many occasions addressing their young sons and their son’s playmates as Bubba were meaning something quite different than what I thought.

    Thus, “Hey, what happened there, Bubba?” is actually, “Hey, what happened there, Nigra?”?

    Well, consider me gob-smacked.

  228. 228
    Liberty60 says:

    @RareSanity:

    If the website had better security, accounting, and auditing policies in place, these fraudulent transactions would have shown up immediately.

    So yeah, if there was transparency instead of anonymity, outside auditors to check the books, regulations so everyone could know what to expect, and maybe a central authority with the power of the gun to enforce the regulations, Bitcoin would be a terrific idea.

  229. 229
    sublime33 says:

    Words of advice I got years ago: If something just doesn’t seem to make sense to you, it might not be you. Sometimes things don’t make sense. The whole Bitcoin scheme doesn’t make logical sense. Don’t overthink it.

  230. 230
    aimai says:

    @Another Holocene Human: Bubba isn’t a euphemism for the N word at all–it is a short/regionalism for “brother” and is commonly associated with white southerners. In fact Clinton was called “bubba” quite publicly. Its associated with white good ‘ol boyness.

  231. 231
    aimai says:

    @aimai: To wit, from the wiki:

    In American usage, bubba is a relationship nickname formed from brother and given to boys, especially eldest male siblings, to indicate their role in a family. For some boys and men, bubba is used so pervasively that it replaces the given name. The nickname may also be used outside the family by friends as a term of endearment.
    Because of its association with the southern part of the United States, bubba is also often used outside the South as a pejorative to mean a person of low economic status and limited education. Bubba may also be taken to mean one who is a “good ol’ boy.” In the US Army and Marines, bubba can mean a lay soldier, similar to grunt but with connotations of endearment instead of derision (e.g., “Can you make that device easier to work with, ‘cus every bubba is gonna have to use it.”).
    At times it may be used as a term of endearment (or in an insulting sense) for a person, especially a man, who is either overweight or seemingly powerful large body frame.[1][2]
    In gun culture, Bubba is a term used for a person who permanently alters or modifies historic firearms, with no regard for its historical value.

    I’m from up north. If you call someone a “bubba” up here you will not be insulting them, exactly, or only as much as its considered an insult to associate someone with southern white maleness.

  232. 232
    muricafukyea says:

    Let me put it in terms wr0ng way doofus Cole might understand.

    Bitcoin is like a Griftwald or Taibbi story. It doesn’t really mean anything in the real world other than what their idiot readers want it to mean.

  233. 233
    David in NY says:

    The amount of disagreement here even about how this thing works pretty much means it’s got a very small audience.

  234. 234
    muricafukyea says:

    Let me revise and refine that.

    It more like how many idiots are sucked into the clickbait of a Griftwald or Taibbi story. The more people they can sucker into clicking on the story, the more the horseshit conspiracy they are trying to sell is worth.

  235. 235
    mclaren says:

    @muricafukyea:

    It more like how many idiots are sucked into the clickbait of a Griftwald or Taibbi story. The more people they can sucker into clicking on the story, the more the horseshit conspiracy they are trying to sell is worth.

    Perfect example of an NSA JTRIG operative using social media to destroy the reputation of an NSA target.

    A few weeks ago, Glenn Greenwald, while working with NBC News, revealed some details of a GCHQ presentation concerning how the surveillance organization had a “dirty tricks” group known as JTRIG — the Joint Threat Research Intelligence Group. Now, over at The Intercept, he’s revealed the entire presentation and highlighted more details about how JTRIG would seek to infiltrate different groups online and destroy people’s reputations — going way, way, way beyond just targeting terrorist groups and threats to national security.

    Among the core self-identified purposes of JTRIG are two tactics: (1) to inject all sorts of false material onto the internet in order to destroy the reputation of its targets; and (2) to use social sciences and other techniques to manipulate online discourse and activism to generate outcomes it considers desirable. To see how extremist these programs are, just consider the tactics they boast of using to achieve those ends: “false flag operations” (posting material to the internet and falsely attributing it to someone else), fake victim blog posts (pretending to be a victim of the individual whose reputation they want to destroy), and posting “negative information” on various forums.

    For years, people have said that the purpose of groups like the NSA and GCHQ were merely “signals intelligence,” which were about understanding and decoding signals, not about taking any sort of offensive standpoint. However, as the Snowden docs have repeatedly revealed, the mandate of these organizations has long been much more offensively based, and they seem to have little problem with using questionable tactics to destroy people’s lives.

    Source: “New Snowden Doc Reveals How GCHQ/NSA Use The Internet To ‘Manipulate, Deceive And Destroy Reputations,'” TechDirt site, 24 February 2014.

    Tell your JTRIG handler at the NSA that they’re not paying you enough. You just aren’t cutting it as a false flag operator and the people on this forum definitely aren’t falling for the “Greenwald is a grifter” smear talking points authored by your NSA superiors.

    Better tell your handlers to pull you out and re-insert you using another ip address and proxy and username, muricafuckyea. You’ve been outed. You’re finished on this forum as an NSA asset.

  236. 236
    mclaren says:

    @Liberty60:

    So yeah, if there was transparency instead of anonymity, outside auditors to check the books, regulations so everyone could know what to expect, and maybe a central authority with the power of the gun to enforce the regulations, Bitcoin would be a terrific idea.

    Not so much transparency. What’s needed is not transparency, but internal auditing and security controls and accounting controls. These bitcoin clearing house sites need to be on top of what’s going on in their own servers and fix problems toot suite.

    You also do not need a central authority with the power of the gun to enforce regulations. What’s needed is a large enough transaction volume of bitcoin transfers to support the kind of independent chargeback controls that’s typically done by the big online payment processors.

    Think about it: if someone uses a phony credit card in your name to buy some merch on the internet, does the U.S. government come in with the U.S. army to fix the problem? It does not. Problems like that get taken of by the individual payment processors, PayPal or Mastercard or Diners Club or whatever. Those payment processors typically examine the situation and issue a refund if they determine that credit card fraud has occurred. The payment processors like Mastercard or PayPal support paying for those refunds by charging a fixed transaction fee for processing payments, and the volume of payments is big enough for the payment processors to make a profit even after refunding for the chargebacks and fraudulent transactions.

    Right now, there’s no refund policy and no internal security controls on bitcoin clearing house sites because the volume of bitcoin transactions isn’t big enough to support giving refunds. When the transaction volume gets large enough, and the bitcoin clearing houses have a large enough transaction volume, the bitcoin clearning houses will be able to develop refund policies and institute strict fraud controls and internal audit systems to deal with situations like this.

    The early days of credit cards weren’t much different from bitcoin today. It took time to develop refund policies and set up internal systems for auditing credit card transactions. Read the book “Catch me if you can” for an insight into how crude things were in the early days of wire payment transactions. Basic audit systems and fraud controls were entirely lacking. It took decades after the introduction of credit cards (1967) for transaction volumes to grow large enough and auditing systems to get sophisticated enough to immediately spot problem transactions and flag them and issue a refund.

    The same thing will happen with bitcoin as transaction volume grows. It will take time, though. Rome wasn’t built in a day.

    It’s important to understand that refunds and security controls are not handled by the U.S. government. They’re handled by the individual transaction processors like Mastercard and American Express. So the claim that bitcoin can’t work because it isn’t backed by the full faith and credit of a national government just doesn’t fly.

  237. 237

    Bitcoin was, of course, created in part to cater to libertarian dreams – to provide a way to store your wealth where governments can’t steal it through taxation or currency debasement. And it’s true! Thanks to Bitcoin, you can instead have your wealth stolen by private hackers.

    Krugman fhtagn!

  238. 238
    Talentless Hack says:

    I know what Bitcoin is not – money. IT’S NOT MONEY! Everybody scream with me – IT’S NOT MONEY! IT’S NOT MONEY! IT’S NOT MONEY! IT’S NOT MONEY!

  239. 239
    Bill Arnold says:

    @mclaren:

    The same thing will happen with bitcoin as transaction volume grows. It will take time, though. Rome wasn’t built in a day.

    Here’s what I don’t get – very rough thoughts:
    Estimates of the worldwide underground economy vary. An article in Forbe’s (2011) places it at about $10 trillion. Do we really think that the governments of the world (assuming for the moment that none of them adopt cryptocurrencies) would tolerate even 10 percent of this gradually moving to bitcoin or something similar? (Currently bitcoin appears to be about $5-10 biilion depending on the exchange rate of the day/hour.)
    At least four forces would be at work; missed tax opportunities would be obvious enough to be noticed, the fixed money (asset) supply’s encouragement of hording would start to matter (or threaten to matter) at a macro level, the early adopters/horders would be absurdly rich, and kleptocrats would start stashing their thefts in cryptocurrencies. (I think those are right; haven’t thought about this much though.) Also the amounts of money involved would be used to justify more national-government-level expenditures on attacks.
    So, how does it play out over time?
    (BTW I agree that cryptocurrencies don’t solve the authoritarian governments problem.)

  240. 240
    Talentless Hack says:

    @Temporarily Max McGee (soon enough to be Andy K again): I’m willing to bet that the data generated on Wall Street is backed up somewhere far from Wall Street. I would be surprised, no, shocked, to find out otherwise.

  241. 241
    Talentless Hack says:

    @The Dangerman: I’m kind of surprised that there isn’t some kind of system where people of libertarian bent use Silver Eagles as money. I mean, they’re produced by the U.S. Mint, which certifies the amount of silver to be exactly one ounce .999 fine. They have a face value on them, which pretty much defines one silver dollar as one ounce of silver. So there would theoretically be no government objection to people using them as a medium of exchange. Except that people of libertarian bent prefer to be in conflict with the government, and using Silver Eagles as money undermines all of that.

  242. 242
    Bill Arnold says:

    Very slightly off topic, real gold coin horde ($10 million) found in Sierra Nevada.

  243. 243
    Avery Greynold says:

    @goblue72:Thank you for some clarity about the value of paper money. Paper money value is not based on faith.
    Simple version, the US government prints money (yes, very simple version). The US government promises to regulate the supply of paper money to keep the value within limits over the long term. If the value of money falls, the US government can force you to bring them some of that paper money (taxes), which they then destroy, making it more rare and more valued.
    And as the wingnuts so often remind us, the government can do it at the point of a gun.
    Bitcoin has no one promising to maintain any value.

  244. 244
    Goblue72 says:

    @mclaren: most criminals are stupid. That’s why they are criminals.

  245. 245
    muricafukyea says:

    @mclaren: BAHAHAHAHahahahahah, Jesus titty fuking christ. Nope, no tin foil hat idiots around here. Oh wait, maybe that my way of cleverly trying to deflect. You know the NSA only hires the best! Thanks for the compliment.

  246. 246
    Groucho48 says:

    @aimai:

    As a northerner, that was the impression I had of the meaning of bubba.

  247. 247
    PPOG Penguin says:

    Late to the party, but http://brokenlibrarian.org/bitcoin/ is a hilariously sceptical explanation of bitcoin.

  248. 248
    Temporarily Max McGee (soon enough to be Andy K again) says:

    @Talentless Hack:

    Okay, let’s say that Southern California gets hit by the big one and drops off into the ocean. There’s a helluva a lot more there than markets (as is Manhattan, we just tend not to think of anything being manufactured there). That’s people, markest, factories, some agriculture just gone. The strength of the dollar would surely take a hit.

  249. 249
    Sherlock Hound says:

    @Soonergrunt:
    That hasn’t been true in a while. A primer, from someone in IT who doesn’t hold any crypto:

    When the bitcoin protocol got started, the difficulty level was low enough so you could use CPU’s–your regular PC–to mine. Most of the early adopters did that, and most of their coins are still unspent; they are the 1% in the bitcoin ecosystem.

    Then it got harder, so GPU (video card) mining was a thing. No more.

    Then FPGA chips–these are a kind of programmable logic chip–were used for mining.

    Now, ASIC chips are used. These are not home items. They are custom designed, usually in an Indian or Chinese chip foundry. They have lead times. They’re expensive. And often backordered.

    Bitcoin mining is not really for the little guy any longer. There is a perverse economic cycle. The ASIC miner manufacturers work on a shoestring (compared to Intel or even smaller firms like Marvell). The difficulty of mining only goes up. There is an incentive for these vendors to build machines and burn them in themselves to mine coins for themselves.

    Any shipping delays, and your investment loses value in more ways than one. I’m not sure the vendors are actually doing this; inexperience and incompetence and immaturity are more likely.

    But in any event it means that Bitcoin mining is a good way to go broke.

  250. 250
    kfreed says:

    @schrodinger’s cat:

    Yes indeed, fools and their money:

    Economic Policy Journal: “BU Finance Professor: Bitcoin Is a Pump and Dump Scheme”

    “[A]ccording to Boston University Finance Professor Mark Williams the price [of Bitcoin] has really been driven by an influential few. Just 47 people own 29% of all outstanding Bitcoins; 930 own 50%. Another 10,000 folks bring the total owned by the largest coin holders to roughly 75%, leaving a sliver to be split among about 1 million small-change Bitcoiners.

    Williams, a former trader and bank examiner for the Federal Reserve, argues that in 2013 the 47 powers coordinated to push prices up. They counted on what economists call Greater Fools. Investors make money when someone is willing to pay a higher price for a security than you did — Greater Fool Theory states that there is always someone willing to pay a higher price…”
    http://www.economicpolicyjourn.....-pump.html

    Bitcoin: also good for setting up an online libertarian drug cartel, money laundering and tax evasion scheme: “Silk Road” busted by feds: http://arstechnica.com/tech-po.....e-roberts/

    There you go, libertarian “economic freedom”:) Oh, and you really shouldn’t miss this Business Insider article on the “Sheep Marketplace” Bitcoin theft (hysterical and aptly named):
    http://www.businessinsider.com.....se-2013-12

    Give you one guess as to who’s pushing this scam on the pretext of undercutting “The Fed” and “fiat currency”… (Google it).

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