S**t Bitcoin Fanatics Say...

[Adeptus]

S**t Bitcoin Fanatics Say, Part 1

S**t Bitcoin Fanatics Say, Part 2

[Josh H]

Re: S**t Bitcoin Fanatics Say...

A few weeks ago I was attending Liberty Forum 2014, and there was a lot of Bitcoin talk. Needless to say, there were a few über-zealots that I heard most of those lines from.

Admittedly I did purchase $2 worth of BTC with the Bitcoin ATM. Just because.

[EJ]

Re: S**t Bitcoin Fanatics Say...

S**t Bitcoin Fanatics Say, Part 1

S**t Bitcoin Fanatics Say, Part 2

All of us know variations of this man, else the video doesn't work.

On a meta scale: The True Believer: Thoughts on the Nature of Mass Movements

[Milton Kuo]

Re: S**t Bitcoin Fanatics Say...

It'll be interesting to see the sequel to this video after the Bitcoin bubble crashes and wipes out a lot of people. I have a strange feeling that a lot of people, not bankers, are going to be jumping out of skyscrapers after the crash.

[Polish_Silver]

Real problem with Bitcoin!

All of us know variations of this man, else the video doesn't work.

On a meta scale: The True Believer: Thoughts on the Nature of Mass Movements

Many of the arguments have truth:

a) $USD system serving the interests of the 1%

b) little accountablity for federal reserve.

c) $USD not backed by any commodity.

Here's the fundamental problem with bitcoin:

The number of bitcoins is limited to 21 million or something. That is to keep each BC valuable.

The problem is that BC is a purely abstract and arbitrary construction. Someone could write software for
"Digicoin" which would be just like bitcoin, but more user friendly, or have more starting capital.

There is nothing to keep digicoin eating bitcoin, just as Facebook ate Myspace. Although there can only be 21 million bitcoins, there can be an infinite number of digital currencies.

Gold does not have this problem.

[Adeptus]

Re: Real problem with Bitcoin!

Polish Silver, Here's a few more things bitcoin fanatics say:

1) Bitcoins are nearly infinitely divisible, so that 21 million bitcoin limit is arbitrary. Bitcoins are divisible up to 8 decimal places i.e. (1.12345678 BTC), means you can have upwards of 1 quadrillion bitcoin units.

2) Digicoin already exists: http://digitalcoin.co/en/ (but it's not better, mostly just a clone with some tweaks)

3) You don't really need to "write" your own 'digicoin' alternative, Bitcoin is Opensource. Copy/Paste, make a few changes and launch your own currency. There's already something like 120+ Bitcoin clones yet the bitcoin price has continued to explode over the past couple of years when those clones started being created.

4) You are correct on the second to last point; however, bitcoin has first mover advantage so it might be a good for a little bit longer before something better comes along. Further, as I've said several times, the reason most of those clones don't really take off is because they lack significant innovation and most of the core developers of those clones don't come close to matching the skill level of bitcoin's core developers. Bitcoin is more like Linux. There's many dozens of Linux clones, yet only a few of them are really popular - because: innovation + core developers. Also there's only 1 satoshi nakamoto/Linus Trovalds

5) Bitcoin is gold 2.0 :P ... It's already better than gold, and there's no daily bitcoin price fixing, or tungsten filled bitcoins. Bitcoin is just software and it can be improved upon (BIPs=Bitcoin Improvement Proposals), gold can't. Try buying shoes made in Iran over the internet with gold. Germany can't repatriate their gold from the USA, but if they had that much wealth in bitcoin, it could done with a mere few clicks of a mouse and have it all transferred instantly and incur nearly zero storage fees and zero transaction fees. You can't carry a few million $USD worth of gold on your next trans-continental flight without getting it confiscated ($10,000 limit and all + you'd break your back with the weight), but if you did it with bitcoin, the TSA wouldn't have a clue, although they've already tried. You can't eat gold, but you can print your bitcoins using a chocolate printer and eat your Bitcoin's private keys....etc etc.

[Polish_Silver]

Re: Real problem with Bitcoin!

Polish Silver, Here's a few more things bitcoin fanatics say:

1) Bitcoins are nearly infinitely divisible, so that 21 million bitcoin limit is arbitrary. Bitcoins are divisible up to 8 decimal places i.e. (1.12345678 BTC), means you can have upwards of 1 quadrillion bitcoin units.
2) Digicoin already exists: http://digitalcoin.co/en/ (but it's not better, mostly just a clone with some tweaks)
3) You don't really need to "write" your own 'digicoin' alternative, Bitcoin is Opensource. Copy/Paste, make a few changes and launch your own currency. There's already something like 120+ Bitcoin clones yet the bitcoin price has continued to explode over the past couple of years when those clones started being created.
4) You are correct on the second to last point; however, bitcoin has first mover advantage so it might be a good for a little bit longer before something better comes along. Further, as I've said several times, the reason most of those clones don't really take off is because they lack significant innovation and most of the core developers of those clones don't come close to matching the skill level of bitcoin's core developers. Bitcoin is more like Linux. There's many dozens of Linux clones, yet only a few of them are really popular - because: innovation + core developers. Also there's only 1 satoshi nakamoto/Linus Trovalds
5) Bitcoin is gold 2.0 :P ... It's already better than gold, and there's no daily bitcoin price fixing, or tungsten filled bitcoins. Bitcoin can be improved upon, gold can't. Try buying shoes made in Iran over the internet with gold. Germany can't repatriate their gold from the USA, but if they had that much wealth in bitcoin, it could done with a mere few clicks of a mouse and have it all transferred instantly and incur nearly zero storage fees. You can't carry a few million $USD worth of gold on your next trans-continental flight without getting it confiscated ($10,000 limit and all + you'd break your back with the weight), but if you did it with bitcoin, the TSA wouldn't have a clue, although they've already tried. You can't eat gold, but you can print your bitcoins using a chocolate printer and eat your private keys....etc etc.

a) All currencies are infinitely divisible. But for paper currencies, the number of nominal units keeps increasing, diluting existing units. Dividing up the pie into small pieces does not reduce the number of calories in the pie. Baking more pies does reduce the value of the pie.

b) if a digital currency better than bitcoin appears, what will happen to the value of bitcoins?

[Adeptus]

Re: Real problem with Bitcoin!

a) All currencies are infinitely divisible. But for paper currencies, the number of nominal units keeps increasing, diluting existing units. Dividing up the pie into small pieces does not reduce the number of calories in the pie. Baking more pies does reduce the value of the pie.

The bitcoin pie is only aprox 12 Million bitcoins at the moment, it will take until the year 2140 to reach 21 Million bitcoins. The dilution of bitcoin occurs every 10 minutes through a process called bitcoin 'mining' wherein currently 25 brand new bitcoins are released into the market.

Note: This chart goes to year ~2040; however its a little misleading as it accounts for 98-99% of all bitcoins, the remaining ~1% will take another 100 years to mine until 2140.

b) if a digital currency better than bitcoin appears, what will happen to the value of bitcoins?

It would have to be a very significant improvement over bitcoin. Not impossible, but I guess this one is a wait and see. Given the number of clones and even a few made from scratch varients, people are definitely trying, after all it's already an 8 Billion dollar market with less than 0.1% global penetration rate.

I'm keeping one eye closely on such new potential innovations, but it won't crash bitcoin price overnight, just like google didn't crash Yahoo or AOL (webcrawler) overnight, so there should be time to transition your bitcoin wealth.

[don]

Re: Real problem with Bitcoin!

The U.S. government sees no evidence of “widespread” use of virtual currencies such as Bitcoin to evade sanctions or finance terrorism, the Treasury Department’s top official targeting money laundering said.

“Terrorists generally need ‘real’ currency, not virtual currency, to pay their expenses -– such as salaries, bribes, weapons, travel, and safe houses,’ David S. Cohen, the undersecretary for terrorism and financial intelligence.

‘‘The same is true for those seeking to evade sanctions,’’ Cohen said in a speech at the New York headquarters ofBloomberg News.

Governments around the world are grappling with how to classify or regulate virtual currencies such as Bitcoin. Authorities in Russia, China and Israel have sought to restrict the payment system, while Treasury Secretary Jacob J. Lew said in January the U.S. needed more time to assess the ‘‘phenomenon’’ to ensure it isn’t used for unlawful purposes.

Cohen rejected arguments that regulation would drive virtual currency innovation out of the U.S., saying ‘‘the opposite is true’’ in this new industry.

‘‘Financial transparency can help bring stability to the virtual currency market and security to its users and investors,’’ Cohen said. ‘‘And that is what we are trying to do through sensible, flexible and -– to use a word from the tech world -– scalable regulation.’’

At the same time, Cohen emphasized that the government would err on the side of squeezing innovation if necessary for law enforcement purposes.

Choosing Transparency

‘‘There may be situations where we need to choose between innovation and transparency,’’ Cohen said. ‘‘Let me be clear: When forced to choose between the two, we will err on the side of transparency.’’

Cohen said that some virtual currency companies haven’t registered with Treasury’s Financial Crimes Enforcement Network, a requirement established in March 2013, and aren’t following record keeping and reporting requirements.
‘‘Those that do not comply with these rules should understand that their actions will have consequences,” Cohen said.

The Treasury Department’s Bank Secrecy Act Advisory Group will include a member of the virtual-currency community to help make regulations “better informed and more effective,” Cohen said, without saying who it will be.
The department has urged industry leaders to devise ways to prevent criminal use of virtual currencies rather than develop technology that “further obscures financial trails,” he said.

Bitcoin Origins

Bitcoin, the most popular digital currency, emerged from a 2008 paper written by a programmer or group of programmers under the name Satoshi Nakamoto. It uses a public ledger to record transactions made under pseudonyms, an aspect of the system that has fed mistrust among law enforcement.

The price for Bitcoins soared in November, topping $1,000 for the first time, as merchants including Overstock.com began accepting the virtual currency and speculators anticipated broader use of digital money.

Prices dropped this year amid mounting U.S. prosecutions of Bitcoin-linked money laundering, concerns that governments would restrict the currency and market disruptions including hacker attacks on online exchanges.

Bitcoin prices declined about 1 percent today, and stood at $612.50 at 11:08 a.m. New Yorktime, according to the CoinDesk Bitcoin Price Index.

‘Grossly Inefficient’

The decline was “likely” connected to the outage at the website Blockchain.info, a popular Bitcoin wallet provider, said Jonathan Levin, a co-founder of Coinometrics, a research firm in Oxford, U.K. He also said that digital currency markets are “grossly inefficient.”

Cohen said that the Treasury Department places “real value” on financial innovation such as digital currencies.

“Advancements in technology that allow entrepreneurs and businesses to innovate, grow and hire are crucial to our country’s long-term success,” Cohen said.

Cohen has served as undersecretary since 2011. He first joined the Treasury in 1999 and, while working for its general counsel, helped draft part of the Patriot Act that granted the regulator new tools to thwart money laundering and terrorist financing after the Sept. 11 attacks.

The Treasury’s office for terrorism and financial intelligence seeks to prevent criminal networks from using the U.S. financial system and to cut off funding for terrorists. It includes the Office of Foreign Assets Control that helps enforce sanctions on nations, such as Iran, that have a history of providing support to terrorist groups.

Accepting Applications

New York financial regulators also have been working on a response to Bitcoin. Benjamin Lawsky, the state’s superintendent of financial services, announced last week that his office is accepting applications to operate exchanges for Bitcoin and other digital currencies. He plans to propose a set of rules for virtual-currency firms by mid-year.

Last month’s collapse of Tokyo-based Bitcoin exchange Mt. Gox, in which some customers lost their holdings, shows the need for “robust standards for consumer protection, cyber security and anti-money laundering compliance,” Lawsky said.
Federal authorities have been targeting misuse. Last year, they shut down Silk Road, an online drug and weapons bazaar where Bitcoin was the preferred medium of exchange. In January, they arrested Charlie Shrem, a Bitcoin entrepreneur, on charges of money laundering. He has denied the allegations.

To contact the reporters on this story: Carter Dougherty in Washington atcdougherty6@bloomberg.net; Greg Farrell in New York at gregfarrell@bloomberg.net